<PAGE>
As filed with the Securities and Exchange Commission on March 22, 1995
Registration No. 033-58115
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------
Amendment No. 1
to
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 Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
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
Executive Vice President and General Counsel Copy to:
Norwest Corporation H. Bernt von Ohlen
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. [_]
________________________________________________________________________________
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GOLDENBANKS OF COLORADO, INC.
1301 Jackson Street
Golden, Colorado 80401
March 22, 1995
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Goldenbanks of Colorado, Inc. ("Goldenbanks") to be held at The Table Mountain
Inn, 1310 Washington Avenue, Golden, Colorado, on Wednesday, April 26, 1995,
at 2:00 p.m., local time. At the Special Meeting you will be asked to consider
and vote upon a proposal to approve the Agreement and Plan of Reorganization,
dated as of November 22, 1994, between Goldenbanks and Norwest Corporation
("Norwest"), and the related Agreement and Plan of Merger (together, the
"Merger Agreement"), providing for the merger of a wholly owned subsidiary of
Norwest into Goldenbanks (the "Merger").
Under the terms of the Merger Agreement, the Merger will result in the
conversion of each share of Goldenbanks Common Stock outstanding immediately
prior to the time the Merger becomes effective into 1.9876 shares of Norwest
Common Stock.
The enclosed Proxy Statement-Prospectus contains a more complete description
of the terms of the Merger. You are urged to read the Proxy Statement-
Prospectus carefully.
The Board of Directors has unanimously approved the Merger Agreement as being
in the best interests of Goldenbanks and its stockholders and recommends that
you vote in favor of the Merger. Goldenbanks has received an opinion from The
Wallach Company, Inc., an investment banking firm experienced in the valuation
of banking institutions, that as of the date thereof the consideration to be
received in the Merger is fair to the stockholders of Goldenbanks from a
financial point of view. Consummation of the Merger is subject to a number of
conditions including approval of the Merger Agreement by Goldenbanks's
stockholders and receipt by Goldenbanks of an opinion of counsel to the effect
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.
It is very important that your shares be represented at the Special Meeting,
regardless of whether you plan to attend in person. A failure to vote for
approval of the Merger Agreement will have the same effect as a vote against
the Merger Agreement. Therefore, 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.
On behalf of the Board of Directors, I recommend that you vote FOR approval of
the Merger Agreement.
William J. Fortune
Chairman and President
<PAGE>
GOLDENBANKS OF COLORADO, INC.
1301 Jackson Street
Golden, Colorado 80401
-----------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 1995
-----------------------------
NOTICE IS HEREBY GIVEN that a special meeting of the stockholders (the
"Special Meeting") of Goldenbanks of Colorado, Inc. ("Goldenbanks"), a
Delaware corporation, will be held at The Table Mountain Inn, 1310 Washington
Avenue, Golden, Colorado, on Wednesday, April 26, 1995, at 2:00 p.m., local
time, for the following purposes :
1. To consider and vote upon a proposal to approve the Agreement and
Plan of Reorganization, dated as of November 22, 1994, (including the
Agreement and Plan of Merger attached thereto) between Goldenbanks 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 (i) a wholly owned subsidiary of Norwest would be
merged with Goldenbanks (the "Merger"), with Goldenbanks as the surviving
corporation, and (ii) each outstanding share of Common Stock, par value
$0.05 per share, of Goldenbanks would be converted into 1.9876 shares of
common stock, par value $1 2/3 per share, of Norwest in accordance with
the provisions of the Agreement and Plan of Reorganization; and to
authorize such further action by the Board of Directors and officers of
Goldenbanks as may be necessary or appropriate to carry out the intent and
purposes of the 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 Goldenbanks at the close of
business on March 17, 1995, will be entitled to vote at the Special Meeting or
any adjournments thereof. A complete list of stockholders entitled to vote at
the Special Meeting will be open to the examination of stockholders during
ordinary business hours, for a period of ten days prior to the Special
Meeting, at the office of Goldenbanks, 1301 Jackson Street, Golden, Colorado.
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
Jack Brandt
Vice President and Secretary
March 22, 1995
THE BOARD OF DIRECTORS OF GOLDENBANKS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO
APPROVE THE PROPOSAL.
HOLDERS OF GOLDENBANKS 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>
PROXY STATEMENT OF
GOLDENBANKS OF COLORADO, INC.
FOR A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 26, 1995
---------------------
PROSPECTUS
OF
NORWEST CORPORATION
Common Stock
---------------------
This Proxy Statement-Prospectus relates to up to 2,900,000 shares of the
common stock ("Norwest Common Stock"), par value $1 2/3 per share, of Norwest
Corporation ("Norwest") issuable to the stockholders of Goldenbanks of
Colorado, Inc. ("Goldenbanks") upon consummation of the merger (the "Merger")
of a wholly owned subsidiary of Norwest ("Merger Co.") with Goldenbanks, with
Goldenbanks as the surviving corporation, pursuant to the terms of an
Agreement and Plan of Reorganization dated as of November 22, 1994, between
Goldenbanks and Norwest (together with the Agreement and Plan of Merger
attached thereto, the "Merger Agreement"). A copy of the Merger Agreement is
attached as Appendix A to this Proxy Statement-Prospectus and incorporated by
reference herein.
This Proxy Statement-Prospectus is being furnished to the stockholders of
Goldenbanks in connection with the solicitation of proxies by the Board of
Directors of Goldenbanks (the "Goldenbanks Board") for use at the special
meeting of stockholders of Goldenbanks to be held on April 26, 1995, and at
any adjournments or postponements thereof (the "Special Meeting").
At the Special Meeting, the holders of record of the common stock of
Goldenbanks on March 17, 1995, will consider and vote upon a proposal to
approve the Merger Agreement. Upon consummation of the Merger, each
outstanding share of Common Stock, par value $0.05 per share, of Goldenbanks
("Goldenbanks Common Stock") will be converted into 1.9876 shares of Norwest
Common Stock. For a more complete description of the Merger Agreement and the
terms of the Merger, see "THE MERGER."
The outstanding shares of Norwest Common Stock are, and the shares offered
hereby will be, listed on the New York Stock Exchange ("NYSE") and the Chicago
Stock Exchange ("CHX"). The closing price of Norwest Common Stock on the NYSE
on March 21, 1995, was $25.00 per share. The Goldenbanks Common Stock is
included for quotation on the National Association of Securities Dealers
Automated Quotation System/National Market System ("NASDAQ/NMS"). The closing
price of the Goldenbanks Common Stock on the NASDAQ/NMS on March 21, 1995, was
$49.00.
This Proxy Statement-Prospectus and the form of proxy are first being
mailed to stockholders of Goldenbanks on or about March 24, 1995.
---------------------
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 March 22, 1995.
<PAGE>
AVAILABLE INFORMATION
Norwest and Goldenbanks are subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, file reports, proxy statements, and other information
with the Securities and Exchange Commission (the "Commission").
The reports, proxy statements, and other information filed by Norwest and
Goldenbanks with the Commission 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 (i) 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, and
(ii) Goldenbanks also may be inspected at the offices of the National
Association of Securities Dealers Automoted Quotation System/National Market
System at 1735 K Street, N.W., Washington, D.C. 20006.
A copy of Goldenbanks's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1994, and Quarterly Report on Form 10-QSB for the quarter ended
December 31, 1994, are contained in Appendices C and D, respectively, to this
Proxy Statement-Prospectus.
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, Goldenbanks, and the securities offered
hereby.
---------------------
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 OR GOLDENBANKS SINCE THE DATE OF THIS PROXY
STATEMENT-PROSPECTUS.
2
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement-Prospectus incorporates by reference documents which
are not presented herein or delivered herewith. Such documents, excluding
exhibits, unless specifically incorporated therein, are available without
charge, upon written or oral request, in the case of documents relating to
Norwest, to Laurel A. Holschuh, Secretary, Norwest Corporation, Norwest
Center, Sixth and Marquette, Minneapolis, Minnesota 55479-1026, telephone
(612) 667-8655; or, in the case of documents relating to Goldenbanks, to Jack
Brandt, Vice President and Secretary, Goldenbanks of Colorado, Inc., 1301
Jackson Street, Golden, Colorado 80401. In order to ensure timely delivery of
the documents, any request should be made by April 19, 1995.
The following documents filed with the Commission by Norwest (File No. 1-
2979) and Goldenbanks (File No. 0-7463) pursuant to the Exchange Act are
incorporated by reference in this Proxy Statement-Prospectus:
1. Norwest's Annual Report on Form 10-K for the year ended December 31,
1994;
2. Norwest's Current Reports on Form 8-K dated January 9, 1995, January
27, 1995, and February 17, 1995;
3. Goldenbanks's Annual Report on Form 10-KSB for the year ended June 30,
1994;
4. Goldenbanks's Quarterly Reports on Form 10-QSB for the quarters ended
September 30, 1994, and December 31, 1994; and
5. Goldenbanks's Current Reports on Form 8-K dated September 28, 1994, and
December 2, 1994.
All documents filed by Norwest and Goldenbanks 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 Meeting 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.
3
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TABLE OF CONTENTS
Page
----
[S] [C]
AVAILABLE INFORMATION............................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................... 3
SUMMARY........................................................... 6
The Companies................................................. 6
Terms of the Merger........................................... 7
Special Meeting and Vote Required............................. 7
Reasons for the Merger; Recommendation of the Board
of Directors of Goldenbanks.................................. 8
Opinion of Goldenbanks Financial Advisor...................... 8
Effective Date and Time of the Merger......................... 8
Conditions and Termination.................................... 8
Regulatory Approvals.......................................... 9
Accounting Treatment.......................................... 9
Management and Operations After the Merger.................... 9
Interests of Certain Persons in the Merger.................... 9
Appraisal Rights.............................................. 9
Stock Option Agreement Between Norwest and Goldenbanks........ 9
Certain Federal Income Tax Consequences....................... 10
Market Information............................................ 10
Certain Differences in Rights of Stockholders................. 11
Comparative Unaudited Per Share Data.......................... 12
Selected Financial Data....................................... 14
MEETING INFORMATION............................................... 18
General....................................................... 18
Date, Place, and Time......................................... 18
Record Date; Vote Required.................................... 18
Principal Stockholders and Security Ownership of
Management of Goldenbanks.................................... 19
Voting and Revocation of Proxies.............................. 21
Solicitation of Proxies....................................... 21
THE MERGER........................................................ 22
Background of and Reasons for the Merger...................... 22
Terms of the Merger........................................... 24
Opinion of Goldenbanks Financial Advisor...................... 25
Effective Date and Time of the Merger......................... 29
Surrender of Certificates..................................... 29
Conditions to the Merger...................................... 30
Regulatory Approvals.......................................... 31
Conduct of Business Pending the Merger........................ 31
Certain Covenants............................................. 31
No Solicitation............................................... 32
Waiver, Amendment, and Termination............................ 32
Effect on Employee Benefit Plans.............................. 33
Interests of Certain Persons in the Merger.................... 34
Management and Operations After the Merger.................... 35
Stock Option Agreement Between Norwest and Goldenbanks........ 35
Certain Differences in Rights of Stockholders................. 38
4
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Appraisal Rights.............................................. 47
Certain Federal Income Tax Consequences....................... 47
Resale of Norwest Common Stock................................ 49
Stock Exchange Listing........................................ 49
Dividend Reinvestment and Optional Cash Payment Plan.......... 49
Accounting Treatment.......................................... 50
Expenses...................................................... 50
CERTAIN INFORMATION CONCERNING GOLDENBANKS........................ 51
CERTAIN REGULATORY CONSIDERATIONS................................. 52
General...................................................... 52
Dividend Restrictions........................................ 52
Holding Company Structure.................................... 52
Capital Requirements......................................... 53
Federal Deposit Insurance Corporation Improvement
Act of 1991................................................. 54
FDIC Insurance............................................... 55
EXPERTS........................................................... 57
LEGAL OPINIONS.................................................... 57
MANAGEMENT OF NORWEST AND ADDITIONAL INFORMATION.................. 57
FUTURE STOCKHOLDER PROPOSALS...................................... 57
APPENDIX A AGREEMENT AND PLAN OF REORGANIZATION, AND AGREEMENT
AND PLAN OF MERGER
APPENDIX B OPINION OF THE WALLACH COMPANY, INC.
APPENDIX C GOLDENBANKS'S ANNUAL REPORT ON FORM 10-KSB FOR THE
FISCAL YEAR ENDED JUNE 30, 1994
APPENDIX D GOLDENBANKS'S QUARTERLY REPORT ON FORM 10-QSB FOR
THE QUARTER ENDED DECEMBER 31, 1994
5
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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 " Goldenbanks" 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 for inclusion or incorporation herein, and all
information concerning Goldenbanks included in this Proxy Statement-Prospectus
has been furnished by Goldenbanks to Norwest for inclusion herein.
The Companies
Norwest Corporation
Norwest Corporation is a diversified financial services company which was
organized under the laws of Delaware in 1929 and is 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 agency services,
computer and data processing services, trust services, and venture capital
investment.
At December 31, 1994, Norwest had consolidated total assets of $59.3
billion, total deposits of $36.4 billion, and total stockholders' equity of
$3.8 billion. Based on total assets at December 31, 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 Goldenbanks,
having aggregate total assets at December 31, 1994, of $4.2 billion. Certain
of these acquisitions were consummated subsequent to December 31, 1994, and
the others remain subject to regulatory approval and are expected to be
completed by the end of the second 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."
6
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Goldenbanks of Colorado, Inc.
Goldenbanks, headquartered in Golden, Colorado, is a registered bank
holding company. Goldenbanks is the controlling shareholder for its four
commercial banking subsidiaries, which have a total of six banking offices
located in Golden, Wheat Ridge, Arvada, Gilpin County, Englewood, and
Westminster, Colorado. Goldenbanks has no significant nonbank subsidiaries.
Goldenbanks was incorporated in 1973 under the laws of the State of Delaware.
Goldenbanks and its consolidated subsidiaries had total assets of $376.4
million, total deposits of $325.6 million, and stockholders' equity of $29.2
million, at December 31, 1994. On December 31, 1994, Goldenbanks was the
third largest bank holding company headquartered in Colorado. Through its
subsidiary banks, Goldenbanks is engaged in the general banking business,
offering individuals and businesses a variety of deposit accounts, safe
deposit facilities, access cards, and other specialized services. In
addition, the subsidiary banks offer consumer, commercial, real estate, and
mortgage loans at all locations. At December 31, 1994, Goldenbanks and its
subsidiaries employed 222 full-time equivalent employees. See "CERTAIN
INFORMATION CONCERNING GOLDENBANKS."
Terms of the Merger
The Merger Agreement provides for the merger of Merger Co., a wholly
owned subsidiary of Norwest, with Goldenbanks, with Goldenbanks as the
surviving corporation. Upon consummation of the Merger, each outstanding
share of Goldenbanks Common Stock will be converted into 1.9876 shares of
Norwest Common Stock (the "Exchange Ratio") in accordance with the provisions
of the Merger Agreement. Cash will be paid in lieu of issuing fractional
shares of Norwest Common Stock. See "THE MERGER--Terms of the Merger."
Special Meeting and Vote Required
Special Meeting
The special meeting of Goldenbanks stockholders to consider and vote on a
proposal to approve the Merger Agreement will be held on Wednesday, April 26,
1995, at 2:00 p.m., local time, at The Table Mountain Inn, 1310 Washington
Avenue, Golden, Colorado. Only holders of record of Goldenbanks Common Stock
at the close of business on March 17, 1995, will be entitled to receive notice
of and to vote at the Special Meeting. At such date, there were 1,366,932
shares of Goldenbanks Common Stock outstanding. Each share of Goldenbanks
Common Stock is entitled to one vote. For additional information relating to
the Special Meeting, see "MEETING INFORMATION."
Vote Required
Approval of the Merger Agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of Goldenbanks Common Stock.
As of the record date for the Special Meeting, directors and executive
officers of Goldenbanks and their affiliates owned beneficially an aggregate
of 107,446 shares, or approximately 7.9%, of the Goldenbanks Common Stock
outstanding on that date. At the record date, directors and executive
officers of Norwest did not own beneficially any shares of Goldenbanks Common
Stock. See "MEETING INFORMATION--Record Date; Vote Required" and "--Principal
Stockholders and Security Ownership of Management of Goldenbanks."
7
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Reasons for the Merger; Recommendation of the Board of Directors of
Goldenbanks
The Goldenbanks Board has unanimously approved the Merger Agreement and
has determined that the Merger is fair to, and in the best interests of
Goldenbanks and its stockholders. The Goldenbanks Board therefore recommends
that Goldenbanks stockholders vote FOR approval of the Merger Agreement. See
"THE MERGER--Background of and Reasons for the Merger" and "--Opinion of
Goldenbanks Financial Advisor."
For information on the interests of certain officers and directors of
Goldenbanks in the Merger, see "THE MERGER--Interests of Certain Persons in
the Merger."
Opinion of Goldenbanks Financial Advisor
The Wallach Company, Inc., Denver, Colorado, ("Wallach") has served as
financial advisor to Goldenbanks in connection with the Merger and has
rendered an opinion to the Goldenbanks Board that the exchange ratio in the
Merger is fair to Goldenbanks stockholders from a financial point of view.
The opinion of Wallach is attached as Appendix B to this Proxy Statement--
Prospectus. Stockholders are urged to read such opinion in its entirety for a
description of the procedures followed, matters considered, and limitations on
the reviews undertaken in connection therewith. For additional information,
see "THE MERGER--Opinion of Goldenbanks Financial Advisor."
Effective Date and Time of the Merger
Subject to the terms and conditions of the Merger 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 Delaware (the "Effective Date") at 11:59
p.m., Denver, Colorado time (the "Effective Time"). Such filing will be made
five business days following the satisfaction or waiver of all conditions set
forth in the Merger Agreement or on such other date upon which the parties may
agree. The closing of the Merger will occur on the Effective Date (the
"Closing Date"). See "THE MERGER--Effective Date and Time of the Merger" and
"--Conditions to the Merger."
Conditions and Termination
The respective obligations of Norwest and Goldenbanks to consummate the
Merger are subject to certain conditions, including the receipt of regulatory
approvals, approval of the Merger Agreement by the stockholders of
Goldenbanks, receipt by Goldenbanks of an opinion regarding the tax
consequences to Goldenbanks stockholders of the Merger, receipt by Norwest and
Goldenbanks of opinions that the Merger qualifies for pooling-of-interests
accounting treatment, and certain other conditions customary in transactions
of this nature. See "THE MERGER--Conditions to the Merger," "--Regulatory
Approvals," and "--Certain Federal Income Tax Consequences."
The Merger Agreement may be terminated at any time prior to the time at
which the appropriate filing is made with the Secretary of State of the State
of Delaware, whether prior to or after approval by the Goldenbanks
stockholders, by either party under specified conditions, including if the
Merger shall not have been consummated by October 1, 1995, unless failure to
consummate is due to the failure of the party seeking termination to perform
its respective covenants and agreements under the Merger Agreement. In
addition, Goldenbanks may
8
<PAGE>
terminate the Merger Agreement if the average price per share of Norwest
Common Stock over a specified period falls below $21.00. See "THE MERGER--
Waiver, Amendment, and Termination."
Regulatory Approvals
The Merger is subject to the approval of both the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") and the Colorado
State Banking Board. Both approvals have been received. See "THE MERGER--
Regulatory Approvals."
Accounting Treatment
It is anticipated that the Merger will be accounted for as a "pooling of
interests" by Norwest under generally accepted accounting principles. The
Merger Agreement provides that a condition to consummation of the Merger is
the receipt of letters from both KPMG Peat Marwick LLP, Norwest's independent
auditors, and Deloitte & Touche LLP, Goldenbanks's independent auditors, to
the effect that the Merger qualifies for pooling of interests accounting
treatment. See "THE MERGER--Conditions to the Merger" and "--Accounting
Treatment."
Management and Operations After the Merger
Following the Merger, Norwest intends to operate at Goldenbanks's present
locations and to offer products and services offered by Norwest affiliates.
See "THE MERGER--Management and Operations After the Merger."
Interests of Certain Persons in the Merger
Certain executive officers of Goldenbanks and members of the Goldenbanks
Board have certain interests in the Merger in addition to their interests as
stockholders of Goldenbanks generally. The interests include provisions in
the Merger Agreement relating to indemnification of such parties and the
continuation of certain employee benefits, and also certain employment
agreements that become effective at the Effective Time. See "THE MERGER--
Interests of Certain Persons in the Merger."
Appraisal Rights
Delaware law provides a stockholder of a Delaware corporation who
dissents from a merger is generally entitled to receive payment of the
appraised value of his stock. Such appraisal rights are not, however,
generally available for shares, such as those of Goldenbanks Common Stock,
which are traded on the NASDAQ-NMS. See "THE MERGER--Appraisal Rights."
Stock Option Agreement Between Norwest and Goldenbanks
Simultaneously with and as a condition to Norwest's execution of the
Merger Agreement, Goldenbanks entered into a stock option agreement with
Norwest (the "Option Agreement"), pursuant to which Goldenbanks granted
Norwest an option (the "Option") to purchase up to 272,019 authorized and
unissued shares of Goldenbanks Common Stock at a price of $40.50 per share.
The Option is exercisable only upon the occurrence of certain events, none of
which has occurred as of the date hereof. The Option Agreement is intended to
increase the likelihood that the
9
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Merger will be consummated in accordance with the terms set forth in the
Merger Agreement. Consequently, certain aspects of the Option Agreement may
have the effect of discouraging persons who might now or prior to the
Effective Time be interested in acquiring all of or a significant interest in
Goldenbanks from considering or proposing such an acquisition, even if such
persons were prepared to pay a higher price per share for Goldenbanks Common
Stock than the price per share contemplated by the Merger Agreement. See "THE
MERGER--Stock Option Agreement Between Norwest and Goldenbanks."
Certain Federal Income Tax Consequences
It is intended that for federal income tax purposes, the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and that, accordingly,
(i) no gain or loss will be recognized by Goldenbanks, Norwest, or Merger Co.
as a result of the Merger and (ii) no gain or loss will be recognized by the
stockholders of Goldenbanks who exchange all of their shares of Goldenbanks
Common Stock solely for shares of Norwest Common Stock in the Merger, except
with respect to any cash received in lieu of a fractional share interest in
Norwest Common Stock. Consummation of the Merger is dependent upon, among
other conditions, receipt by Goldenbanks of an opinion of counsel,
substantially to the effect set forth above. See "THE MERGER--Certain Federal
Income Tax Consequences."
Market Information
Norwest Common Stock is listed on the NYSE and the CHX. Goldenbanks
Common Stock is quoted on the NASDAQ/NMS. The following table sets forth the
high and low sales prices of Norwest Stock as reported on the NYSE Composite
Transactions Tape, the high and low sales prices of Goldenbanks Common Stock
as reported on the NASDAQ/NMS, and the cash dividends declared, for the
calendar-year periods indicated.
<TABLE>
<CAPTION>
Norwest Goldenbanks
Common Stock Common Stock
--------------------------- -------------------------
High Low Dividends High Low Dividends
------- ------- --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1993
First Quarter............... $ 26.00 $20.625 $.145 $24.75 $21.50 $.10
Second Quarter.............. 28.375 22.875 .165 28.25 23.00 .20
Third Quarter............... 28.00 25.625 .165 27.25 23.00 .10
Fourth Quarter.............. 29.00 22.50 .165 32.50 26.25 .10
1994
First Quarter............... $27.375 $ 22.25 $.185 $32.00 $27.50 $.15
Second Quarter.............. 28.25 23.125 .185 33.00 28.00 .30
Third Quarter............... 27.50 24.75 .185 45.00 30.25 .15
Fourth Quarter.............. 25.00 21.00 .210 44.50 38.00 .15
1995
First Quarter............... $ 26.00 $22.875 $.210 $49.00 40.50 $.20
(through March 21, 1995)
</TABLE>
10
<PAGE>
The following table sets forth the closing prices per share of Norwest
Common Stock and of Goldenbanks Common Stock on (i) September 26, 1994, the
last trading day preceding public announcement of the signing of letter of
intent with respect to the Merger, (ii) November 22, 1994, the day on which
the Merger Agreement was signed, and (iii) March 21, 1995. The table also
sets forth the equivalent per share prices for Goldenbanks Common Stock, based
on the Exchange Ratio of 1.9876.
<TABLE>
<CAPTION>
Norwest Goldenbanks Equivalent
Common Stock Common Stock Per Share Price
------------ ------------- ---------------
<S> <C> <C> <C>
Market Value Per Share:
September 26, 1994..... $25.625 $40.50 (1) $50.93
November 21, 1994...... $21.75 $38.00 (2) $43.23
March 21, 1995......... $25.00 $49.00 $49.69
- -----------
</TABLE>
(1) Based on the last trade, which was on September 23, 1994, in
Goldenbanks Common Stock prior to public announcement of the letter
of intent.
(2) Based on the last trade, which was on November 10, 1994, in
Goldenbanks Common Stock prior to signing of Merger Agreement.
Goldenbanks stockholders 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
Effective Date, which may be a period of several weeks or more. As a result,
the market value per share of the Norwest Common Stock that Goldenbanks
stockholders ultimately receive in the Merger 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 Effective Date. See "CERTAIN INFORMATION CONCERNING GOLDENBANKS."
Certain Differences in Rights of Stockholders
Upon consummation of the Merger, stockholders of Goldenbanks will become
stockholders of Norwest. As a result, such stockholders' rights will change
to some extent. See "THE MERGER--Certain Differences in Rights of
Stockholders."
11
<PAGE>
Comparative Unaudited Per Share Data
The following table presents selected comparative unaudited per share
data for Norwest Common Stock on a historical and a pro forma combined basis
and for Goldenbanks Common Stock on a historical and a pro forma equivalent
basis giving effect to the Merger using the pooling-of-interests method of
accounting. For a description of the pooling-of-interests method of
accounting with respect to the Merger and the related effects on the
historical financial statements of Norwest, see "THE MERGER--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 Goldenbanks, including the
notes thereto, appearing elsewhere in this Proxy Statement-Prospectus. This
information should be read in conjunction with such consolidated historical
financial statements and the related notes thereto. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE" and Appendices C and D.
The pro forma 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 Merger been consummated prior to the periods indicated.
Goldenbanks's financial statements are based on a fiscal year ending
June 30. For the following table, the financial information for Goldenbanks
has been converted to a calendar year basis to conform to the financial
presentation of Norwest. See footnote (4) to the table.
12
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
<TABLE>
<CAPTION>
Goldenbanks
Norwest Common Stock Common Stock
------------------------ -------------------------
Pro Forma Pro Forma
Historical Combined Historical Equivalent
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
BOOK VALUE (1):
December 31, 1994 $10.79 10.79 21.35 21.44
DIVIDENDS DECLARED (2)(4):
Year Ended
December 31, 1994 0.765 0.765 0.750 1.521
December 31, 1993 0.640 0.640 0.500 1.272
December 31, 1992 0.540 0.540 0.250 1.073
NET INCOME (3)(4):
Year Ended
December 31, 1994 2.41 2.40 3.69 4.77
December 31, 1993 1.86 1.86 3.70 3.69
December 31, 1992 1.19 1.19 2.97 2.36
</TABLE>
(1) The pro forma combined book value per share of Norwest Common Stock is based
upon the historical total combined common stockholders' equity for Norwest and
Goldenbanks divided by total pro forma common shares of the combined entities
assuming conversion of the outstanding Goldenbanks Common Stock at the Exchange
Ratio of 1.9876. The pro forma equivalent book value per share of Goldenbanks
represents the pro forma combined amount multiplied by the Exchange Ratio. The
Exchange Ratio is based on an assumed aggregate number of shares of Norwest
Common Stock to be issued in the Merger of 2,716,914. See "THE MERGER--Terms of
the Merger."
(2) Assumes no changes in cash dividends per share. The pro forma equivalent
dividends per share of Goldenbanks Common Stock represent cash dividends
declared per share of Norwest Common Stock multiplied by the Exchange Ratio of
1.9876.
(3) The pro forma combined net income per share of Norwest Common Stock (based
on fully diluted net income and weighted average shares outstanding) is based
upon the combined historical net income for Norwest and Goldenbanks divided by
the average pro forma common shares of the combined entities. The pro forma
equivalent net income per share of Goldenbanks Common Stock represents the pro
forma combined net income per share multiplied by the Exchange Ratio of 1.9876.
(4) The following table presents a reconciliation of Goldenbanks's historical
net income and dividends per share data on a calendar year basis, as presented
above, to its reported June 30 fiscal year-end per share data:
<TABLE>
<CAPTION>
For Calendar Six Months Ended Six Months Ended For Fiscal
Year Ended December 31 December 31 Year Ended
Year December 31 of the Preceding Year of the Current Year June 30
---- ------------ --------------------- ------------------- ----------
<S> <C> <C> <C> <C>
Net Income:
1994 $3.69 2.41 (2.00) 4.10
1993 3.70 1.56 (2.41) 2.85
1992 2.97 1.13 (1.56) 2.54
Dividends:
1994 $0.750 0.200 (0.300) 0.650
1993 0.500 0.100 (0.200) 0.400
1992 0.250 -- (0.100) 1.150
</TABLE>
13
<PAGE>
Selected Financial Data
The following table sets forth certain selected historical consolidated
financial information for Norwest and Goldenbanks. The income statement and
balance sheet data included in the selected financial data for the five years
ended December 31, 1994, in the case of Norwest, and June 30, 1994, in the
case of Goldenbanks, are derived from audited consolidated financial
statements of Norwest and Goldenbanks for such five-year periods. The
selected financial data of Goldenbanks for the six-month periods ended
December 31, 1994 and 1993, is derived from the unaudited historical financial
statements of Goldenbanks. All financial information derived from unaudited
financial statements reflects, in the opinion of management of Goldenbanks,
all adjustments (consisting only of normal recurring adjustments) necessary
for a fair presentation of such data. Results for the six months ended
December 31, 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 the consolidated
financial statements of Goldenbanks, including the notes thereto, appearing
elsewhere in this Proxy Statement-Prospectus. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and Appendices C and D.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
NORWEST CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------
1994 1993(1) 1992(2) 1991 1990(3)
--------- -------- -------- -------- --------
(In millions except per share amounts)
INCOME STATEMENT DATA
- ---------------------
<S> <C> <C> <C> <C> <C>
Interest income $ 4,393.7 3,946.3 3,806.4 4,025.9 3,885.8
Interest expense 1,590.1 1,442.9 1,610.6 2,150.3 2,320.1
-------- -------- -------- -------- --------
Net interest income 2,803.6 2,503.4 2,195.8 1,875.6 1,565.7
Provision for credit losses 164.9 158.2 270.8 406.4 433.0
Non-interest income 1,638.3 1,585.0 1,273.7 1,064.0 896.3
Non-interest expense 3,096.4 3,050.4 2,553.1 2,041.5 1,744.5
-------- -------- -------- -------- --------
Income before income taxes 1,180.6 879.8 645.6 491.7 284.5
Income tax expense 380.2 266.7 175.6 73.4 115.1
-------- -------- -------- -------- --------
Income before cumulative effect
of a change in accounting method 800.4 613.1 470.0 418.3 169.4
Cumulative effect on years prior to
1992 of change in accounting method - - (76.0) - -
-------- -------- -------- -------- --------
Net income $ 800.4 613.1 394.0 418.3 169.4
======== ======== ======== ======== ========
<CAPTION>
PER SHARE DATA
- --------------
<S> <C> <C> <C> <C> <C>
Net income per share:
Primary:
Before cumulative effect of a
change in accounting method $ 2.45 1.89 1.44 1.33 0.59
Cumulative effect on years prior
to 1992 of change in accounting
method - - (0.25) - -
-------- -------- -------- -------- --------
Net income $ 2.45 1.89 1.19 1.33 0.59
======== ======== ======== ======== ========
Fully diluted:
Before cumulative effect of a
change in accounting method $ 2.41 1.86 1.42 1.32 0.59
Cumulative effect on years prior
to 1992 of change in accounting
method - - (0.23) - -
-------- -------- -------- -------- --------
Net income $ 2.41 1.86 1.19 1.32 0.59
======== ======== ======== ======== ========
Dividends declared per common share $ 0.765 0.640 0.540 0.470 0.423
<CAPTION>
BALANCE SHEET DATA
- ------------------
<S> <C> <C> <C> <C> <C>
At period end:
Total assets $59,315.9 54,665.0 50,037.0 45,974.5 43,523.0
Long-term debt 9,186.3 6,850.9 4,553.2 3,686.6 3,066.0
Total stockholders' equity 3,846.4 3,760.9 3,371.8 3,192.3 2,434.0
</TABLE>
15
<PAGE>
(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.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
GOLDENBANKS OF COLORADO, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Six Months Ended
December 31 Year Ended June 30
----------------- -----------------------------------------------
1994 1993 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- ------- -------
(In thousands except per share amounts)
INCOME STATEMENT DATA
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 12,718 10,053 21,651 19,262 20,322 20,223 20,693
Interest expense 3,593 3,110 6,495 6,638 8,996 10,727 11,470
------- ------- ------- ------- ------- ------- -------
New interest income 9,125 6,943 15,156 12,624 11,326 9,496 9,223
Provision for credit losses 49 (475) (437) 431 1,061 1,299 2,014
Non-interest income 1,555 1,535 3,024 2,648 2,434 2,288 1,936
Non-interest expense 6,716 5,712 12,116 9,931 9,198 9,387 8,889
------- ------- ------- ------- ------- ------- -------
Income before income taxes 3,915 3,241 6,501 4,910 3,501 1,098 256
Income tax expense 1,182 978 1,925 1,015 36 (4) 29
------- ------- ------- ------- ------- ------- -------
Income before cumulative effect
of a change in accounting method 2,733 2,263 4,576 3,895 3,465 1,102 227
Cumulative effect of a change in
accounting method - 1,035 1,035 - - - -
------- ------- ------- ------- ------- ------- -------
Net income $ 2,733 3,298 5,611 3,895 3,465 1,102 227
======= ======= ======= ======= ======= ======= =======
<CAPTION>
PER SHARE DATA
- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income before cumulative effect of
a change in accounting method $ 2.00 1.65 3.34 2.85 2.54 0.81 0.17
Cumulative effect of a change in
accounting method - 0.76 0.76 - - - -
------- ------- ------- ------- ------- ------- -------
Net income $ 2.00 2.41 4.10 2.85 2.54 0.81 0.17
======= ======= ======= ======= ======= ======= =======
Dividends $ 0.30 0.20 0.65 0.40 0.15 - -
<CAPTION>
BALANCE SHEET DATA
- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
At period end:
Total assets $376,417 359,323 380,170 280,310 261,353 233,504 219,038
Long-term debt 2,711 3,490 2,946 1,379 3,101 3,969 4,276
Total stockholders' equity 29,190 25,534 27,231 22,509 19,161 15,900 14,798
</TABLE>
17
<PAGE>
MEETING INFORMATION
General
This Proxy Statement-Prospectus is being furnished to holders of
Goldenbanks Common Stock in connection with the solicitation of proxies by the
Goldenbanks Board for use at the Special Meeting, to be held on Wednesday,
April 26, 1995, and any adjournments or postponements thereof, to consider and
take action upon a proposal to approve the Merger Agreement and such other
business as may properly come before the Special Meeting or any adjournments
thereof. Each copy of this Proxy Statement-Prospectus mailed to holders of
Goldenbanks Common Stock is accompanied by a form of proxy for use at the
Special Meeting.
This Proxy Statement-Prospectus is also being furnished by Norwest to the
stockholders of Goldenbanks as a prospectus in connection with the issuance by
Norwest of shares of Norwest Common Stock upon consummation of the Merger.
This Proxy Statement-Prospectus, the attached Notice of Special Meeting,
and the form of proxy for Goldenbanks stockholders enclosed herewith are first
being mailed to stockholders of Goldenbanks on or about March 24, 1995.
Date, Place, and Time
The Special Meeting will be held at The Table Mountain Inn, 1310
Washington Avenue, Golden, Colorado, on Wednesday, April 26, 1995, at 2:00
p.m., local time.
Record Date; Vote Required
The Goldenbanks Board has fixed the close of business on March 17, 1995,
as the record date for the determination of stockholders of Goldenbanks
entitled to receive notice of, and to vote at, the Special Meeting. On the
record date there were 1,366,932 shares of Goldenbanks Common Stock
outstanding and entitled to vote at the Special Meeting. Approval of the
Merger Agreement requires the affirmative vote of the holders of a majority of
the outstanding shares of Goldenbanks Common Stock. The Merger cannot be
consummated without the requisite approval of the Merger Agreement by the
holders of Goldenbanks Common Stock.
As of the record date for the Special Meeting, directors and officers of
Goldenbanks and their affiliates owned beneficially an aggregate of 107,446
shares, or approximately 7.9%, of the Goldenbanks Common Stock outstanding on
that date. Information regarding the shares of Goldenbanks Common Stock
beneficially owned, directly or indirectly, by certain stockholders, by each
director and executive officer of Goldenbanks, 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 Goldenbanks" below.
At the record date, directors and executive officers of Norwest did not
own beneficially any shares of Goldenbanks Common Stock.
18
<PAGE>
Principal Stockholders and Security Ownership of Management of Goldenbanks
Principal Stockholders
The following persons are known to be beneficial owners of more than 5%
of the outstanding shares of Goldenbanks Common Stock as of March 17, 1995:
<TABLE>
<CAPTION>
Number of Shares
Beneficially Percent of
Name and Address Owned Total Shares
---------------- -------------------- ------------
<S> <C> <C>
John L. Tracy 217,797.5 (1)(3) 15.93%
230 North Bay Drive
Bullard, TX 75757
Mary M. Tracy 217,797.5 (2)(3) 15.93%
230 North Bay Drive
Bullard, TX 75757
William J. Fortune 95,516 6.99%
1301 Jackson Street
Golden, CO 80401
Lindner Fund, Inc. 136,374 (4) 9.98%
7711 Carondelet Ave.
Box 16900
St. Louis, MO 63105
The Midwest Bank Fund, 75,800 (5) 5.55%
L.P., et al.
c/o Charles J. Moore
208 S. La Salle St., Suite 200
Chicago, IL 60604
</TABLE>
________________________________
(1) These shares are held by a trust of which Mr. Tracy is beneficiary and
his wife, Mary M. Tracy, is trustee. Mary M. Tracy disclaims beneficial
ownership of these shares.
(2) These shares are held by a trust of which Mrs. Tracy is beneficiary and
her husband, John L. Tracy, is trustee. John L. Tracy disclaims
beneficial ownership of these shares.
(3) The number of shares shown does not include 1,071 shares held by Mr.
Tracy as trustee for a relative. Mr. and Mrs. Tracy disclaim beneficial
ownership of these 1,071 shares. Mr. Tracy is also attorney-in-fact
under revocable powers of attorney for relatives owning 4,095 shares.
Mr. and Mrs. Tracy disclaim beneficial ownership of these 4,095 shares.
(4) The number of shares shown is based upon a Schedule 13G filed by Lindner
Management Corporation with the Commission on February 4, 1994.
(5) The number of shares shown is based upon a Schedule 13D filed by The
Midwest Bank Fund L.P., et al., with the Commission on July 1, 1993.
19
<PAGE>
To the best knowledge of the management of Goldenbanks and the
Goldenbanks Board, no person other than those described above owns
beneficially more than 5% of the outstanding shares of common stock of
Goldenbanks as of March 17, 1995.
Management
The following table shows the number of shares of Goldenbanks Common
Stock beneficially owned by (i) each director of Goldenbanks, (ii) the two
executive officers of Goldenbanks whose total annual salary and bonus exceeded
$100,000 in the fiscal year ended June 30, 1994, and (iii) the directors and
officers of Goldenbanks as a group on March 17, 1995:
<TABLE>
<CAPTION>
Number of Shares
Beneficially Percent of
Name and Address Owned Total Shares
------------------ ----------------- -------------
<S> <C> <C>
David C. Beck (1) 1,500 .11%
William J. Fortune (2) 95,516 6.99%
Dan A. Gabrielson (3) 4,087 .30%
G. Scott Gagon (4) 3,943 (5) .29%
Michael J. Hall (6) 500 .04%
Directors and Officers of 107,446 7.86%
Goldenbanks as a Group (7 individuals)
</TABLE>
__________________________________
(1) Mr. Beck is a director of Goldenbanks.
(2) Mr. Fortune is Chairman of the Board, President, and a director of
Goldenbanks.
(3) Mr. Gabrielson is a director of Goldenbanks.
(4) Mr. Gagon is Executive Vice President, Treasurer, and a director of
Goldenbanks.
(5) The shares shown for Mr. Gagon include 1,302 shares held by Mr. Gagon and
2,641 shares in the name of G. Scott Gagon, Self-Directed IRA.
(6) Mr. Hall is a director of Goldenbanks.
20
<PAGE>
Voting and Revocation of Proxies
Shares of Goldenbanks Common Stock represented by a proxy properly signed
and received at, or prior to, the Special Meeting, unless subsequently
revoked, will be voted at the Special Meeting in accordance with the
instructions thereon. If a proxy is signed and returned without indicating
any voting instructions, shares of Goldenbanks Common Stock represented by
such proxy will be voted FOR approval of the Merger 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
Goldenbanks prior to or at the Special Meeting or by voting the shares subject
to the proxy in person at the Special Meeting. Attendance at the 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 Merger Agreement must be approved by the holders of a
majority of the outstanding Goldenbanks 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 Goldenbanks Board is not aware of any business to be acted upon at
the Special Meeting other than the business described herein. If, however,
other matters are properly brought before the Special Meeting, or any
adjournments or postponements thereof, the persons appointed as proxies will
have discretion to vote or act on such matters according to their best
judgment.
Solicitation of Proxies
In addition to solicitation by mail, directors, officers, and employees
of Goldenbanks may solicit proxies from the stockholders of Goldenbanks,
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. Goldenbanks will bear its own expenses in
connection with any solicitation of proxies for the Special Meeting. See "THE
MERGER--Expenses."
ALL STOCKHOLDERS OF GOLDENBANKS ARE REQUESTED TO COMPLETE, DATE, AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO GOLDENBANKS IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
21
<PAGE>
THE MERGER
This section of the Proxy Statement-Prospectus describes certain aspects
of the Merger. The following description does not purport to be complete and
is qualified in its entirety by reference to the Merger Agreement, which is
attached as Appendix A to this Proxy Statement-Prospectus and is incorporated
by reference herein. All stockholders are urged to read the Merger Agreement
in its entirety.
Background of and Reasons for the Merger
Background
From time to time in the last few years, William J. Fortune, Chairman and
President of Goldenbanks, received informal inquiries from certain large
regional bank holding companies concerning a possible acquisition of
Goldenbanks. No formal offers were received as a result of such inquiries.
During this period, several stockholders of Goldenbanks expressed the view
that Goldenbanks should consider a possible sale. While periodic
presentations were made during this period to the Goldenbanks Board by Wallach
regarding the bank merger and acquisition market in Colorado, no action was
taken concerning a possible sale of Goldenbanks.
In August, October, and November 1993, after considering the improved
financial performance of Goldenbanks and the strong bank merger and
acquisition market in Colorado, and the continuing interest of several
stockholders in a possible sale, the Goldenbanks Board requested additional
presentations by Wallach regarding the bank acquisition market in Colorado,
the valuation of Goldenbanks, and a review of its strategic options regarding
a possible sale. In February 1994, the Goldenbanks Board approved the
engagement of Wallach to act as exclusive representative for Goldenbanks to
explore the market and contact potential acquirors to determine the
feasibility and economics of a merger of Goldenbanks with a major bank holding
company. Any transaction was to take the form of a tax-free exchange of
stock. On June 14, 1994, the Goldenbanks Board, with assistance from Wallach,
identified the four companies believed to be most likely to acquire
Goldenbanks in a tax-free exchange of stock at a price acceptable to
Goldenbanks. Wallach was authorized to contact these four potential
acquirors.
Wallach contacted the four potential acquirors to determine their
interest in Goldenbanks and based on discussions with Wallach, three parties
elected to receive additional information about Goldenbanks and submit written
indications of interest. An analysis of their proposals was presented by
Wallach and Goldenbanks's legal advisors to the Goldenbanks Board on September
20, 1994.
After a comprehensive discussion, the Goldenbanks Board authorized
Goldenbanks's management and Wallach to negotiate a letter of intent with
Norwest. On September 26, 1994, a letter of intent was executed by
Goldenbanks and Norwest providing for the proposed acquisition of Goldenbanks
by Norwest in a stock-for-stock, tax-free reorganization.
After signing the letter of intent, Norwest conducted detailed due
diligence of Goldenbanks. Upon completion of the due diligence, Norwest and
Goldenbanks entered into negotiations relating to the Merger Agreement and the
Option Agreement. At a meeting of the Board held on November 15, 1994, the
Board reviewed with Wallach, Goldenbanks's legal advisors, and management of
Goldenbanks, the proposed terms of the Merger Agreement and the Option
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Agreement. Based upon that review and after receiving the opinion of Wallach
that the consideration to be received by the Goldenbanks stockholders in the
Merger was fair to them from a financial point of view, the Goldenbanks Board
unanimously approved and authorized the execution of the Merger Agreement and
the Option Agreement.
Goldenbanks's Reasons for the Merger
The Board believes that the Merger is fair to, and in the best interests
of, Goldenbanks and its stockholders. Accordingly, the Board has unanimously
approved the Merger Agreement and recommends that Goldenbanks stockholders
vote FOR the approval and adoption of the Merger Agreement.
In reaching its determination that the Merger is fair to, and in the best
interests of, Goldenbanks and its stockholders, the Board considered a number
of factors, including without limitation, the following:
(a) the current condition and growth prospects of Goldenbanks and its
subsidiary banks, including historical and prospective results of
operation, financial conditions, and capital conditions, were
Goldenbanks to remain independent;
(b) the economic, banking, and competitive climate in Colorado, with
special consideration given to recent transactions that have
increased the competitive environment in the financial services and
banking industry, including the adoption by Congress of interstate
branch banking;
(c) the monetary value of the stock offered to Goldenbanks stockholders
by Norwest (i) in absolute terms, (ii) as compared to the value of
two other stock-for-stock offers received by Goldenbanks by
qualified and informed potential acquirors, whose offers were each
less than Norwest's offer, and (iii) as compared to recent merger
and acquisition transactions involving other banks and financial
institutions in the Colorado and Rocky Mountain region;
(d) the price obtainable for Goldenbanks Common Stock at this time
compared with the risk involved and possible price available at a
later time;
(e) the potential market value, liquidity, and dividend yield of
Goldenbanks Common Stock if Goldenbanks were to remain independent;
(f) the benefits of a merger with Norwest, including access to Norwest's
financial and management resources and customer products, which
could increase Goldenbanks's competitiveness and its ability to
serve depositors, customers, and communities;
(g) the increased liquidity and dividend yield represented by Norwest
Common Stock;
(h) the results of operations and financial condition of Norwest;
(i) the future growth prospects of Norwest following the Merger;
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(j) Norwest's significant long-term experience and success in the
acquisition of additional banking locations;
(k) the expectation that the Merger will be a tax-free reorganization to
Goldenbanks stockholders for federal income tax purposes;
(l) the expectation that Norwest would assimilate Goldenbanks's
employees to the fullest extent possible;
(m) the belief that Norwest's banking philosophy more nearly equates to
the philosophy of Goldenbanks than that of the other acquirors; and
(n) the presentation of Wallach and their opinion that the consideration
to be received in the Merger by Goldenbanks stockholders was fair to
such holders from a financial point of view.
THE BOARD OF DIRECTORS OF GOLDENBANKS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE MERGER.
---
Terms of the Merger
At the Effective Time, a wholly owned subsidiary of Norwest to be
organized as a corporation under Delaware law ("Merger Co.") will merge into
Goldenbanks, with Goldenbanks as the surviving corporation, and each
outstanding share of Goldenbanks Common Stock will be converted into 1.9876
shares of Norwest Common Stock.
The market price for Norwest Common Stock will fluctuate between the date
of this Proxy Statement-Prospectus and the Effective Date, which may be a
period of several weeks or more. As a result, the market value of each share
of Norwest Common Stock that stockholders of Goldenbanks ultimately receive in
the Merger could be more or less than its market value on the date of this
Proxy Statement-Prospectus.
The Merger Agreement provides that if, between the date of the Merger
Agreement and the Effective Time, 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, readjustment, or
similar transaction, or if a stock dividend thereon is declared with a record
date within the same period, the Exchange Ratio will be adjusted
appropriately.
No fractional shares of Norwest Common Stock will be issued in the
Merger. Instead, Norwest will pay to each holder of Goldenbanks 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 stockholder of
Goldenbanks would otherwise be entitled multiplied by the average of the
closing prices of a share of Norwest Common Stock on the NYSE for each of the
five trading days ending on the day immediately preceding the Special Meeting.
As of the Effective Time, each share of the common stock of Merger Co.
outstanding will be converted into and exchanged for one share of Goldenbanks
Common Stock. Thereafter, Goldenbanks will be a wholly owned subsidiary of
Norwest.
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Shares of Norwest Common Stock issued and outstanding immediately prior
to the Effective Time will remain issued and outstanding.
Opinion of Goldenbanks Financial Advisor
Goldenbanks has received an opinion from Wallach that, as of November 22,
1994, the consideration to be received from Norwest was fair to the
Goldenbanks stockholders from a financial point of view. Goldenbanks also
received, as of the date of this Proxy Statement-Prospectus, an opinion from
Wallach that the consideration to be received for the Goldenbanks Common Stock
is fair to the Goldenbanks stockholders from a financial point of view. The
full text of the opinion of Wallach dated as of the date of this Proxy
Statement-Prospectus, which sets forth matters considered in connection with
such opinion, is attached hereto as Appendix B and should be read in its
entirety by Goldenbanks stockholders. This summary of the opinion is
qualified in its entirety by reference to the full text of the opinion.
The Goldenbanks Board retained Wallach as its financial advisor on the
basis of the firm's experience and expertise with the financial services and
banking industry and with transactions similar to the Merger.
In connection with delivering its fairness opinion, Wallach, among other
things, reviewed and considered the following:
(a) Reviewed certain publicly available financial statements and other
financial information not publicly available for Goldenbanks;
(b) Reviewed the current condition and growth prospects for Goldenbanks
and its subsidiary banks, including financial projections prepared
by the Goldenbanks's management;
(c) Discussed the past and current operations and financial conditions
and the prospects of Goldenbanks with its management;
(d) Reviewed Goldenbanks's historical stock trading activity and
considered the prospect for value, liquidity, dividend yield, and
appreciation if Goldenbanks were to remain independent;
(e) Evaluated the economic, banking, and competitive climate in
Colorado, with special consideration given to recent transactions
that may have increased the competitive environment of the financial
services and banking industry;
(f) Reviewed the process used in marketing Goldenbanks, including a
review of potential acquirors contacted and their responses relative
to a potential acquisition of Goldenbanks;
(g) Compared the various offers received from interested parties and
determined that the Norwest offer represented the highest value in
absolute terms;
(h) Compared the Norwest offer to recent transactions involving other
institutions of similar size in Colorado, and in the Rocky Mountain
and Great Plains region;
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(i) Examined the price and trading activity for Norwest;
(j) Analyzed the price obtainable for Goldenbanks Common Stock at the
time the opinion was delivered compared with the risks involved and
possible price available at a later time;
(k) Reviewed the implications for Goldenbanks stockholders of receiving
stock of Norwest with regard to prospects for value, liquidity,
dividend yield, and appreciation;
(l) Reviewed certain publicly available financial statements of Norwest,
visited certain Norwest facilities in Minneapolis, and discussed the
prospects of Norwest with Norwest management; and
(m) Reviewed the Merger Agreement.
Wallach relied without independent verification upon the accuracy and
completeness of all the financial and other information reviewed by it for
purposes of the fairness opinion. The fairness opinion is necessarily based
on information as of the date thereof. The fairness opinion is directed only
to the consideration to be received by Goldenbanks stockholders for their
shares if the Merger is consummated and does not constitute a recommendation
to any Goldenbanks stockholder as to how such stockholder should vote at the
Special Meeting.
Following is a brief summary of the material analyses utilized by Wallach
in arriving at its fairness opinion. This summary does not purport to be a
complete description of the analyses performed by Wallach.
Initial Evaluation of Norwest Offer as of September 26, 1994
Implied Norwest Offer Price. The closing stock price of Norwest was
$25.625 on September 26, 1994, the date on which the execution of the letter
of intent with respect to the Merger was announced. The resulting offer price
for each share of Goldenbanks Common Stock, based upon an exchange ratio of
1.9876, was $50.93. The implied multiple of trailing 12-month earnings,
excluding the cumulative effect of an accounting change, of Goldenbanks for
the year ended June 30, 1994, was 15.25. The implied multiple of book value
at June 30, 1994, was 255.7%.
Comparison with the Other Two Offers. Wallach compared the Norwest offer
to the other two offers received from major bank holding companies. Both of
those offers involved a stock-for-stock merger, pursuant to which Goldenbanks
stockholders would receive stock of the offeror having a value of less than
Norwest's offer based on the then stock prices of the offerors. Wallach's
examination of the offers included, but was not limited to, a comparison of
pricing, the underlying security, and the implications for tax and liquidity.
Analysis of Selected Bank Mergers. Wallach reviewed publicly available
information on the six bank merger and acquisition transactions known by
Wallach to have occurred since October 1, 1993, in Colorado, Arizona, and Iowa
which Wallach believed were similar to Goldenbanks in size, market, and
financial performance. Wallach compared certain percentages and multiples
implied by the Norwest offer with comparable percentages and multiples for
these
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transactions. The average price offered in the six transactions as a
multiple of trailing earnings was 15.26 as compared to 15.25 associated with
the Norwest offer. The average multiple of book value in these transactions
was 230.6% as compared to 255.7% associated with the Norwest offer.
Wallach is not aware of any merger or acquisition transactions involving
the sale of commercial banks which it believes are comparable to Goldenbanks
and for which information is publicly available since September 26, 1994.
Comparison with Selected Companies. Wallach also compared selected
financial figures, percentages and multiples for Goldenbanks to the
corresponding statistics for four publicly-traded, Colorado-based financial
institutions believed to be comparable. These were Aspen Bancshares, Inc.,
Mountain Parks Financial Corporation, Union Bankshares, Ltd. and Vectra
Banking Corporation. While these bank holding companies are publicly traded,
they have not been acquired. For purposes of comparing the theoretical
transactions involving these public bank holding companies to the Norwest
offer, Wallach therefore increased the price to earnings and book value ratios
of the public bank holding companies by 40.0% to reflect a control premium
paid for 100% conveyance of a bank's common stock. The control premium is the
average premium paid nationwide for acquisitions in the banking and finance
industry during the period January 1, 1989, through December 31, 1993. These
adjustments resulted in a theoretical average price to trailing earnings
multiple of 15.15 as compared to a multiple of 15.25 associated with the
Norwest offer and a theoretical average percentage of book value of 236.6% as
compared to a percentage of 255.7% associated with the Norwest offer.
Stock Trading History and Valuation. Wallach examined the history of
trading prices for Norwest compared to a selected group of six other large
regional bank holding companies who are active in acquisitions in the Rocky
Mountain region. The "Index Group" is comprised of Banc One Corporation,
Boatmen's Bancshares, Inc., First Bank System, Inc., First Security
Corporation, FirsTier Financial, Inc., and KeyCorp. Wallach also examined the
valuation of Norwest relative to the Index Group in relation to earnings, book
value, dividend yield, and other factors. In this analysis Wallach placed
greater emphasis on the more recent period and projected data in evaluating
market valuation. The analysis showed, among other things, that for the
trailing 12-month period and year projected 1994 and 1995, the price to
earnings ratio for Norwest was 11.35, 10.60, and 9.24 respectively, compared
to 10.93, 10.60, and 9.22 for the Index Group, respectively. The price to book
value for Norwest was 233.7% compared to 185.0% for the Index Group. The
common dividend yield for Norwest was 2.9% compared to 3.6% for the Index
Group. The consensus of research analysts' projections of five years earnings
growth rate was 12.0% for Norwest compared to 10.3% for the Index Group. The
return on average equity for Norwest was 21.6% compared to 17.4% for the Index
Group. The ratio of equity to assets for Norwest was 6.9% compared to 8.1%
for the Index Group.
Subsequent Evaluation of the Norwest Offer
Prior to signing the Merger Agreement, the Goldenbanks Board met on
November 15, 1994, to discuss the Norwest offer. At this meeting, Wallach
noted that the trading price of Norwest Common Stock had declined 10.2% from
$25.625 on September 26, 1994, the date of signing the letter of intent with
Norwest, to $23.00 at the time of the November 15, 1994, board meeting.
Consequently, the total value of the offer had declined 10.2% over this same
period.
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Subsequent Evaluation of the Norwest Offer
Prior to signing the Merger Agreement, the Goldenbanks Board met on
November 15, 1994, to discuss the Norwest offer. At this meeting, Wallach
noted that the trading price of Norwest Common Stock had declined 10.2% from
$25.625 on September 26, 1994, the date of signing the letter of intent with
Norwest, to $23.00 at the time of the November 15, 1994, board meeting.
Consequently, the total value of the offer had declined 10.2% over this same
period.
At this meeting, Wallach also discussed the general decline in public
bank stock prices since early September 1994 and presented data comparing the
decline in Norwest stock with an index of active bank acquirors in the Rocky
Mountain area. During the same period Norwest declined 10.2%, the index
declined 7.9%. The index included Banc One Corporation, Boatmen's Bancshares,
Inc., First Bank System, Inc., First Security Corporation, FirsTier Financial,
Inc., and KeyCorp.
At this meeting Wallach also noted that the prices for the common stocks
of the other two companies which had made stock-for-stock offers to acquire
Goldenbanks had declined on average by 13.6%. Thus, based on closing prices
on November 15, 1994, and assuming no change in the exchange ratios offered by
the other two companies in September 1994, the theoretical value of the offers
made by the other two companies was less than the value of Norwest's offer.
Wallach estimated the value of the Norwest offer at the November 15,
1994, meeting of the Goldenbanks Board at $45.71 per share. Based upon this
value, the estimated multiple of 12-month earnings for Goldenbanks for the
period ended June 30, 1994, had declined from 15.25 on September 26, 1994, to
13.69 at November 15, 1994. The multiple of book value at June 30, 1994, had
declined from 255.7% to 229.5%. While recognizing the price decline in
Norwest Common Stock from September 26, 1994, to November 15, 1994, Wallach
advised the Board that it was still of the opinion that the Norwest offer was
fair to the Goldenbanks stockholders from a financial point of view and
rendered its opinion to that effect on November 22, 1994.
Recent Norwest Offer Price
Based on the closing price of Norwest Common Stock on March 21, 1995, of
$25.00 and the Norwest exchange ratio of 1.9876, the resulting exchange offer
price for Goldenbanks was $49.69. The implied multiple of trailing 12-month
earnings (excluding cumulative effect of accounting change) for the period
ended June 30, 1994, was 14.88. The implied multiple of book value per share
at June 30, 1994, was 249.4%. Wallach is of the opinion that the Exchange
Ratio is fair to Goldenbanks stockholders from a financial point of view.
Wallach believes that its analyses and the summary set forth above must
be considered as a whole and that selecting portions of its analyses and the
factors considered by them could create an incomplete view of the process
underlying the preparation of its fairness opinion. No company or transaction
used in the company comparable transaction analysis is identical to
Goldenbanks, Norwest, or the Merger. Accordingly, in its analysis, Wallach
used complex considerations and judgments concerning differences in financial
and operating characteristics
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of the companies and other factors that could affect the public trading value
or the acquisition value of the companies to which they are being compared.
The terms of the engagement of Wallach were set forth in an engagement
letter dated February 8, 1994. Pursuant to that letter, if the Merger is
consummated, Goldenbanks will pay a transaction fee of 1.15% of the purchase
price. Wallach has received a monthly retainer of $7,500 since February 1994,
which amount shall be credited against the transaction fee if the Merger is
consummated. Goldenbanks has also agreed to reimburse Wallach for its out-of-
pocket expenses and to indemnify Wallach against certain liabilities under the
federal securities laws.
Effective Date and Time of the Merger
Subject to the terms and conditions of the Merger Agreement, the
Effective Date will be the date on which a Certificate of Merger is filed with
the Secretary of State of the State of Delaware. The filing will be made
within five business days following the satisfaction or waiver of all
conditions of the Merger 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 will be 11:59 p.m.,
Denver, Colorado time, on the Effective Date. Norwest and Goldenbanks
anticipate that the closing will occur as soon as practicable following the
Special Meeting. See "Terms of the Merger," "Conditions to the Merger," and
"Regulatory Approvals."
Surrender of Certificates
As soon as practicable after the Effective Time, 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
Goldenbanks 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.
STOCKHOLDERS OF GOLDENBANKS 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
Goldenbanks 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 Merger will be deemed
issued as of the Effective Time. No dividends in respect of the Norwest Common
Stock with a record date after the Effective Time will be paid to the former
stockholders of Goldenbanks entitled to receive certificates for shares of
Norwest Common Stock until such stockholders surrender their certificates
representing shares of Goldenbanks Common Stock. Upon such surrender, there
shall be paid to the stockholder 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 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, 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.
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Conditions to the Merger
The Merger will occur only if the Merger Agreement is approved by the
requisite vote of the holders of Goldenbanks Common Stock. Consummation of
the Merger is subject to the satisfaction of certain conditions, most of which
are customary in transactions such as the Merger. Such conditions may be
waived by the parties to the extent that waiver is permitted by applicable
law. Conditions to the obligations of both parties to consummate the Merger
include, but are not limited to, (i) approval of the Merger Agreement by the
requisite vote of stockholders of Goldenbanks, (ii) the receipt of all
necessary regulatory approvals, including the approval of the Merger by the
Federal Reserve Board, and the expiration of all applicable waiting and appeal
periods, and (iii) the absence of any order of a court or agency of competent
jurisdiction restraining, enjoining, or otherwise prohibiting consummation of
the transactions contemplated by the Merger Agreement.
Goldenbanks's obligation to consummate the Merger is also subject, among
other things, to (i) the receipt of an opinion of counsel for Goldenbanks to
the effect that for federal income tax purposes the Merger will be a tax-free
reorganization and (ii) the receipt of an opinion of Wallach, dated effective
as of the date of mailing of this Proxy Statement-Prospectus, that the
consideration to be received by the Goldenbanks stockholders in the Merger is
fair from a financial point of view.
Norwest's obligation to consummate the Merger is also subject, among
other things, to (i) the qualification of the Merger as a pooling-of-interests
for accounting purposes and the receipt from KPMG Peat Marwick LLP and
Deloitte & Touche LLP, Norwest's and Goldenbanks's respective independent
auditors, of letters to that effect; (ii) the total number of shares of
Goldenbanks Common Stock (including phantom shares and other share
equivalents) outstanding and subject to issuance upon exercise of all
warrants, options, conversion rights, phantom shares, or other share
equivalents not having exceeded 1,366,932; (iii) the receipt of a certificate
from the Goldenbanks's Chief Executive Officer and Goldenbanks's Chief
Financial Officer concerning the financial information of Goldenbanks included
in this Proxy Statement-Prospectus and the absence of any material changes in
such information since the date of Goldenbanks most recent interim financial
statements; (iv) the absence of any reasonable basis for any proceeding,
claim, or action seeking to impose, or that could reasonably be expected to
result in the imposition, on Goldenbanks 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 on
Goldenbanks and its subsidiaries taken as a whole; (v) the requirement that
Goldenbanks and its subsidiaries taken as a whole shall not have sustained
since June 30, 1994, any material loss or interference with its business from
any civil disturbance or any fire, explosion, flood, or other calamity,
whether or not covered by insurance; (vi) the absence, since June 30, 1994, of
any change, other than changes in banking laws or regulations that affect the
banking industry generally or changes in the general level of interest rates,
or any circumstance 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 Goldenbanks and its subsidiaries taken as a whole;
and (vii) the repayment in full, as of the Effective Time, of certain long-
term debt of Goldenbanks, payable to Boatmen's First National Bank of Oklahoma
(the "Boatmen's Debt").
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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 February 23, 1995, the Federal
Reserve Board informed Norwest that it had approved the Merger.
In addition, the Merger is subject to the approval of the Colorado State
Banking Board under the Colorado Bank Holding Company Act (the "CBHCA"), which
regulates the acquisition of banks in Colorado by out-of-state bank holding
companies. The Colorado State Banking Board has issued a Certificate of
Authority, dated February 16, 1995, certifying that the Merger complies with
the provisions of the CBHCA.
The approval of any application merely implies satisfaction of regulatory
criteria for approval, which do not include review of the Merger from the
standpoint of the adequacy of the consideration to be received by, or fairness
to, stockholders. Regulatory approvals do not constitute an endorsement or
recommendation of the proposed Merger.
Norwest and Goldenbanks are not aware of any governmental approvals or
compliance with banking laws and regulations that are required for
consummation of the Merger 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. The
Merger cannot proceed in the absence of all requisite regulatory approvals.
See "Conditions to the Merger," "Effective Date and Time of the Merger," and
"Waiver, Amendment, and Termination."
Conduct of Business Pending the Merger
Under the Merger Agreement, each of Goldenbanks and its subsidiaries is
obligated to maintain the general character of its business and conduct its
business in the ordinary and usual manner; and Norwest is obligated to conduct
and to cause its subsidiaries to conduct their respective businesses in
compliance with all material obligations and duties imposed by laws,
regulations, rules, and ordinances, and by judicial orders, judgments, and
decrees applicable to them, their businesses, or their properties.
Certain Covenants
The Merger Agreement includes a number of covenants which are customary
in transactions such as the Merger. The Merger Agreement provides, among
other things, that, prior to the Closing Date, Goldenbanks will (i) not pay
dividends or make any other distribution with respect to its capital stock
except as specifically permitted by the Merger Agreement; (ii) establish such
additional accruals and reserves as may be necessary to conform Goldenbanks's
accounting and credit loss practices to those of Norwest and Norwest's plans
with respect to the conduct of Goldenbanks's business following the Merger and
to provide for costs and expenses related to the consummation of the
transactions contemplated by the Merger Agreement; (iii) obtain and deliver
environmental assessment reports (the "Environmental Reports") on certain
properties and pay the
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amount by which the aggregate cost of such reports exceeds $50,000; (iv)
obtain, where necessary, and deliver title commitments and boundary surveys
(the "Commitments and Surveys") for each of its bank facilities; and (v) amend
certain of the change in control, termination, and health coverage provisions
of the Goldenbanks of Colorado, Inc. Salary Continuation Plan (the "Salary
Plan") dated November 16, 1993, as amended through December 14, 1993,
effective immediately prior to the Effective Time, as provided in the Merger
Agreement.
Goldenbanks has also agreed, without the prior written consent of
Norwest, not to (i) make any new loan or modify, restructure, or renew any
existing loan, if the resulting loan, when aggregated with all other
extensions of credit to such borrower, would exceed $400,000; (ii) authorize
or incur any long-term debt, except in the ordinary course of business; (iii)
amend or terminate, or make any contributions to Goldenbanks's employee
benefit plans, except as permitted by the Merger Agreement; (iv) enter into
any material contracts in excess of $10,000 except in the ordinary course of
business and in accordance with existing policies and procedures; and (v) make
any investments except investments by banking subsidiaries in the ordinary
course of business for terms of up to one year and in amounts of $100,000 or
less.
The Merger Agreement also includes a number of covenants of Norwest which
are customary in transactions such as the Merger. The Merger Agreement
provides, among other things, that, prior to the Closing Date, Norwest will
(i) give Goldenbanks written notice of the receipt of all regulatory
approvals; (ii) permit Goldenbanks and its representatives to examine
Norwest's books, records, and properties, and to interview Norwest's officers,
employees, and agents, for a period of up to 15 days prior to the Closing
Date; and (iii) pay the first $50,000 of the cost of the Environmental Reports
and the entire cost of the Commitments and Surveys.
No Solicitation
Goldenbanks has agreed in the Merger Agreement that neither it nor any of
its subsidiaries, nor any director, officer, representative, or agent of
Goldenbanks or any of its subsidiaries, will solicit, authorize the
solicitation of, or, except to the extent, based on advice of counsel, legally
advisable for the discharge of the fiduciary duties of the Goldenbanks Board,
enter into any discussions with any party 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 common stock, or any other equity security of Goldenbanks
or any of its subsidiaries; (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 Goldenbanks or any of its
subsidiaries except in the ordinary course of business; or (iv) to merge,
consolidate, or otherwise combine with Goldenbanks or any of its subsidiaries.
Waiver, Amendment, and Termination
The parties may, in writing, give any consent, take any action with
respect to termination of the Merger Agreement, or 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 Merger Agreement.
At any time before the Time of Filing the parties may amend the Merger
Agreement by action of their respective Boards of Directors or pursuant to
authority delegated by their respective Boards of Directors; provided,
however, that the Goldenbanks Board does not intend to make any
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such amendment after approval of the Merger by Goldenbanks stockholders which
might adversely affect the consideration to be received by Goldenbanks
stockholders.
The Merger 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 Merger shall not have been
consummated by October 1, 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 Merger Agreement; (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 Merger Agreement; or (iv)
by Goldenbanks, within five business days after the Special Meeting, if the
Norwest Measurement Price is less than $21.00. The "Norwest Measurement
Price" is the average of the closing prices of a share of Norwest Common Stock
as reported on the consolidated tape of the New York Stock Exchange during the
period of 15 trading days ending on the day immediately preceding the day of
the Special Meeting.
Effect on Employee Benefit Plans
The Merger Agreement provides that, following the Effective Time, subject
to any eligibility requirements applicable to such plans, employees of
Goldenbanks shall be entitled to participate in those Norwest employee benefit
and welfare plans specified in the Merger Agreement. The eligible employees
of Goldenbanks shall enter each of such plans no later than the first day of
the calendar quarter which begins at least 32 days after the Effective Date.
It is Norwest's intent that Goldenbanks employees continue to participate in
Goldenbanks's employee benefit plans until entering the Norwest plans to avoid
gaps in coverage.
Messrs. Fortune and Gagon and certain other executive officers and
employees of Goldenbanks participate in the Salary Plan. After the sale of
one or more of Goldenbanks's banking subsidiaries or the occurrence of a
change in control of Goldenbanks and upon termination of employment, the
participants will receive certain benefits. Each of Messrs. Fortune and Gagon
will receive the following three benefits:
(a) A lump sum payment of 2.95 times his base amount (the average of his
annualized includable compensation pursuant to Section 280G of the
Internal Revenue Code for the most recent five tax years);
(b) The transfer to him of the company-owned vehicle being driven by him
at the date of the sale or change in control; and
(c) Payment of the premiums for health and accident insurance on the
coverage then in effect for him for a period of three years.
A change in control is defined as a change in voting stock ownership in the
amount of 50% or more. Termination means termination for any reason.
Goldenbanks has agreed in the Merger Agreement to amend certain of the change
in control, termination, and health coverage provisions of the Salary Plan
effective immediately prior to the Effective Time.
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No employee of Goldenbanks who is a participant in the Salary Plan shall
be eligible to participate in the Norwest Severance Pay Plan unless such
Goldenbanks employee expressly waives all rights under the Salary Plan.
Eligible Goldenbanks employees shall receive credit for past service for
the purpose of determining certain benefits under Norwest's benefit plans.
Interests of Certain Persons in the Merger
Certain members of Goldenbanks's management and the Goldenbanks Board may
be deemed to have interests in the Merger in addition to their interests, if
any, as stockholders of Goldenbanks generally. The Goldenbanks Board was
aware of these interests and considered them, among other matters, in
unanimously approving the Merger Agreement and the transactions contemplated
thereby.
Employment Agreements
Messrs. William J. Fortune, President and Chief Executive Officer of
Goldenbanks, and G. Scott Gagon, Executive Vice President of Goldenbanks, have
entered into employment agreements with Goldenbanks and Norwest. These
agreements become effective upon the Effective Time and end at the completion
of 50 weeks. Messrs. Fortune and Gagon will each receive base salaries of
$135,000 per year and be eligible for an annual bonus under the Norwest
Incentive Compensation Plan of a minimum of 25% and up to a maximum of 37.5%
of base compensation. Messrs. Fortune and Gagon are each to be granted options
to purchase 8,000 shares of Norwest Common Stock, 50% of which will become
first exercisable on the first anniversary of the Effective Date with the
balance to become exercisable on the second anniversary of the Effective Date
(assuming they are still employed by Norwest or its affiliates). Messrs.
Fortune and Gagon have each agreed, for a period of one year following the
term of his respective employment agreement or the date on which he terminates
his employment with Goldenbanks or a Norwest affiliate, not to engage in the
business of banking in Jefferson and Gilpin Counties, Colorado. For these
agreements not to compete, Messrs, Fortune and Gagon are each to receive a
lump sum payment equal to his annual base compensation.
Indemnification, Insurance
In the Merger Agreement, Norwest has agreed that all rights to
indemnification and all limitations of liability in the Goldenbanks
Certificate of Incorporation or By-Laws, existing in favor of any person who
is, has been or becomes prior to the Effective Date, a director or officer of
Goldenbanks or any Goldenbanks subsidiary, shall survive the Merger and
continue in full force and effect. These rights to indemnification and
limitations of liability are to survive with respect to all claims arising
from (i) facts or events that occurred before the Effective Date, or (ii) the
Merger Agreement or the transaction contemplated thereby.
Norwest has also agreed, for a period of three years after the Effective
Date, to use its best efforts to cause to be maintained in effect the current
policies of directors and officers liability insurance maintained by
Goldenbanks (provided that Norwest may substitute therefor policies of at
least the same coverage and amounts, containing terms and conditions which are
substantially no less advantageous) with respect to claims arising from facts
or events which occurred before the Effective Date. However, Norwest is not
obligated to expend, in order to maintain such insurance
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coverage, an amount per year in excess of 125% of the amount of the annual
premiums paid as of the date hereof by Goldenbanks (the "Maximum Amount"). If
the amount of the annual premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, Norwest is obligated to use
reasonable efforts to obtain as much comparable insurance as can be obtained
for the Maximum Amount.
Management and Operations After the Merger
As of the Effective Time, Goldenbanks will become a subsidiary of Norwest
and the banking subsidiaries of Goldenbanks will become indirect subsidiaries
of Norwest. After the Closing, the banking subsidiaries of Goldenbanks will
continue to operate at their present locations, providing products and
services offered by Norwest affiliates. See "Terms of the Merger."
Stock Option Agreement Between Norwest and Goldenbanks
As an inducement and a condition to Norwest's entering into the Merger
Agreement, Goldenbanks and Norwest entered into a Stock Option Agreement,
dated as of November 22, 1994, pursuant to which Goldenbanks granted Norwest
an option (the "Option") entitling Norwest to purchase up to 272,019 shares of
Goldenbanks Common Stock (the "Option Shares") at a price of $40.50 per share,
subject to adjustment under certain circumstances. Norwest may exercise the
Option at any time after the occurrence of a Purchase Event. For purposes of
the Option Agreement a "Purchase Event" occurs when (i) any person (other than
Norwest or any of its subsidiaries) acquires 20% or more of the outstanding
shares of Goldenbanks Common Stock, provided, however, that this clause does
not apply to any stockholder of Goldenbanks who had, on November 22, 1994,
beneficial ownership of at least 20% of the outstanding shares of Goldenbanks
Common Stock unless such stockholder acquires beneficial ownership or the
right to acquire beneficial ownership of an additional 10% or more of the
outstanding shares of Goldenbanks Common Stock after November 22, 1994; (ii)
Goldenbanks or any of its subsidiaries, without Norwest's prior written
consent, shall have entered into an agreement with a third party to effect a
(x) merger or consolidation involving Goldenbanks or any of its subsidiaries,
(y) a purchase, lease, or other acquisition of all or substantially all of the
assets of Goldenbanks or any of its subsidiaries, or (z) a purchase or other
acquisition, other than in connection with an internal merger or
consolidation, of securities representing 20% or more of the voting power of
Goldenbanks or any of its subsidiaries; or (iii) the Goldenbanks Board shall
have recommended that the stockholders of Goldenbanks approve any of the
transactions described in clause (ii) above with a third party.
The Option Agreement will terminate at the earliest to occur of (i) the
time immediately prior to the Effective Time, (ii) six months after the first
occurrence of a Purchase Event, (iii) 18 months after the termination of the
Merger Agreement following the occurrence of a Preliminary Purchase Event,
(iv) termination of the Merger Agreement prior to the occurrence of a Purchase
Event or a Preliminary Purchase Event (other than termination by Norwest in
certain circumstances), or (v) 12 months after the termination of the Merger
Agreement by Norwest due to Goldenbanks's failure to perform or observe in all
material respects its covenants and obligations thereunder.
"Preliminary Purchase Event" means certain events involving Goldenbanks,
occurring after November 22, 1994, that are inconsistent with Goldenbanks's
intent to consummate the Merger or
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actions by third parties evidencing an intent to acquire control of
Goldenbanks: (i) Goldenbanks or any of its subsidiaries, without Norwest's
prior written consent, shall have entered into an agreement to engage in an
Acquisition Transaction with a party other than Norwest or any of its
subsidiaries or the Goldenbanks Board shall have recommended that the
stockholders of Goldenbanks approve an Acquisition Transaction with a third
party, (ii) any party (other than Norwest or any of its subsidiaries, or a
stockholder of Goldenbanks who had, on November 22, 1994, beneficial ownership
of at least 9.9% of the outstanding shares of Goldenbanks Common Stock unless
such stockholder acquires beneficial ownership, or the right thereto, of an
additional 10% or more of the outstanding shares of Goldenbanks Common Stock
after November 22, 1994) shall have acquired beneficial ownership, or the
right thereto, of 10% or more of the outstanding shares of Goldenbanks Common
Stock; (iii) any party other than Norwest or any of its subsidiaries shall
have made publicly a proposal to Goldenbanks or its stockholders to engage in
an Acquisition Transaction or shall have filed a registration statement under
the Securities Act of 1933 (the "Securities Act") relating to a tender officer
or exchange offer that could result in such party's owning or controlling 10%
or more of the then outstanding shares of Goldenbanks Common Stock; (iv) after
a proposal is made by a third party to Goldenbanks or its stockholders to
engage in an Acquisition Transaction, (x) Goldenbanks shall have breached any
of its covenants or obligations in the Merger Agreement and such breach would
entitle Norwest to terminate the Merger Agreement or (y) the stockholders of
Goldenbanks shall not have approved the Merger Agreement, the stockholder
meeting for the purpose of voting on such approval shall not have been held or
shall have been canceled prior to termination of the Merger Agreement, or the
Goldenbanks Board shall have withdrawn or modified in a manner adverse to
Norwest its recommendation to the stockholders of Goldenbanks; (v) any party
other than Norwest or any of its subsidiaries, without Norwest's prior written
approval, shall have filed an application with any governmental authority or
regulatory or administrative body for approval to engage in an Acquisition
Transaction; or (vi) the Goldenbanks Board does not recommend that the
stockholders of Goldenbanks approve the Merger Agreement, unless such failure
shall be due to the receipt by such Board of an unfavorable opinion from
Wallach concerning the fairness of the Exchange Ratio and such unfavorable
opinion was not given in anticipation of a Preliminary Purchase Event.
"Acquisition Transaction" means (i) merger or consolidation involving
Goldenbanks or any of its subsidiaries, (ii) a purchase, lease or other
acquisition of all or substantially all of the assets of Goldenbanks or any of
its subsidiaries or (iii) a purchase or other acquisition, other than in
connection with an internal merger or consolidation, of securities
representing 10% or more of the voting power of Goldenbanks or any of its
subsidiaries.
Under the BHC Act, Norwest may not acquire 5% or more of the outstanding
shares of Goldenbanks without the prior approval of the Federal Reserve Board.
Certain other regulatory approvals may also be required before any acquisition
under the Option Agreement could be completed.
The Option may not be assigned by Norwest or by Goldenbanks without the
express written consent of the other party to the Option Agreement, except
that Norwest may assign its rights under the Option Agreement in whole or in
part after the occurrence of certain events and, in certain cases, after
Norwest gives Goldenbanks the right of first refusal to purchase the rights on
the same terms and price which Norwest proposes to transfer such rights to a
third party. Goldenbanks's right of first refusal does not apply to the
following dispositions by Norwest: (i) a widely dispersed public distribution,
(ii) a private placement in which no party acquires the right to purchase in
excess of 2% of the outstanding Goldenbanks Common Stock, or (iii) an
assignment to a broker or investment banker for the purpose of conducting a
widely dispersed public distribution
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on Norwest's behalf. After a Purchase Event, Norwest (on behalf of itself or
any subsequent holder) may require Goldenbanks to prepare and keep current for
up to 180 days a registration statement under the Securities Act in form and
substance appropriate and customary under the circumstances covering the
Option Shares and to use its best efforts to cause such registration statement
to remain current for up to 180 days in order to facilitate the disposition of
the Option Shares. Upon such demand, Goldenbanks must effect such registration
statement promptly, subject to certain exceptions. Norwest is entitled to two
such registration statements. Upon the occurrence of a Purchase Event, subject
to certain exceptions, and prior to termination of the Option, at the request
of Norwest, Goldenbanks will be obligated (i) to repurchase the Option and any
Option Shares theretofore purchased pursuant to the Option at prices
determined as set forth in the Option Agreement and (ii) to reimburse up to
$500,000 in fees and expenses incurred by Norwest in connection with the
Merger. In the event that Norwest exercises the repurchase rights described
above, Goldenbanks will thereafter be required to pay the required amount or
the portion thereof that Goldenbanks is not then prohibited from so paying
under applicable law and regulation or as a consequence of administrative
policy.
In the event that prior to termination of the Option, Goldenbanks enters
into an agreement (i) to consolidate with or merge into any party, other than
Norwest or any of its subsidiaries, and is not the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any party, other
than Norwest or any of its subsidiaries, to merge into Goldenbanks and
Goldenbanks is the surviving corporation, but, in connection with such merger,
the then outstanding shares of Goldenbanks Common Stock are changed into or
exchanged for stock or other securities of any other party or cash or any
other property, or the then outstanding shares of Goldenbanks Common Stock
will after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company; or (iii) to sell or otherwise
transfer all or substantially all of its or any material subsidiary's assets
to any party, other than Norwest or any of its subsidiaries, then the
agreement governing such transaction must make proper provision so that the
Option, upon consummation of such transaction, will be converted into, or
exchanged for, an option (a "Substitute Option"), at the election of Norwest,
to acquire stock of either (x) the acquiring corporation or (y) any party that
controls the acquiring corporation. The Substitute Option will be exercisable
for shares of the Substitute Option issuer's common stock in such number and
at such exercise price as determined by the Option Agreement and will
otherwise have the same terms as the Option to the extent permitted by law.
To the best of Goldenbanks's and Norwest's knowledge, no Preliminary
Purchase Event or Purchase Event has occurred as of the date hereof.
The Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Merger
Agreement and may discourage persons from proposing a competing offer to
acquire Goldenbanks, even if such offer involves a higher price per share of
Goldenbanks Common Stock than the consideration contemplated by the Merger
Agreement. The existence of the Option could significantly increase the cost
to a potential acquiror of acquiring Goldenbanks compared to its cost had
Goldenbanks not entered into the Option Agreement. Goldenbanks believes that
the exercise of the Option would likely prohibit any acquiror from accounting
for an acquisition of, or merger with, Goldenbanks using the pooling-of-
interests accounting method for a period of up to two years. This could
discourage or preclude an acquisition of Goldenbanks by other organizations.
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Certain Differences in Rights of Stockholders
If the holders of Goldenbanks Common Stock approve the Merger Agreement
and the Merger is subsequently consummated, all stockholders of Goldenbanks
will become stockholders of Norwest. Each of Norwest and Goldenbanks is a
corporation organized under and governed by the Delaware General Corporation
Law (the "DGCL"). The following summary describes certain differences between
holding Norwest Common Stock and Goldenbanks Common Stock to the extent such
differences arise because of differences between Norwest's Certificate of
Incorporation (the "Norwest Certificate"), By-Laws, and rights plan and
Goldenbanks's Certificate of Incorporation (the "Goldenbanks Certificate") and
By-Laws. This summary is qualified in its entirety by reference to the DGCL,
the Norwest Certificate, Norwest's By-Laws and rights plan, and the
Goldenbanks Certificate and By-Laws.
Authorized Stock
Goldenbanks. The Goldenbanks Certificate authorizes the issuance of
3,000,000 shares of common stock, par value $.05 per share, and 300,000 shares
of preferred stock. As of December 31, 1994, there were 1,366,932 shares of
Goldenbanks Common Stock issued and outstanding. The Goldenbanks Board is
authorized to issue preferred stock in one or more series without stockholder
action and to fix various terms with respect to each series, including voting
powers, designations, preferences, dividend rates, conversion and exchange
provisions, and the amounts which holders are entitled to receive upon any
liquidation, dissolution, or winding up of Goldenbanks. There are no
outstanding shares of preferred stock.
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 December 31, 1994, 323,084,474 shares of Common Stock were issued, of which
309,144,857 were outstanding, and 13,939,617 were held as treasury shares, and
3,265,065 shares of Preferred Stock were outstanding, consisting of 1,127,125
shares of 10.24% Cumulative Preferred Stock, 980,000 shares of Cumulative
Tracking Preferred Stock (of which 125,000 shares are held by a subsidiary of
Norwest), 1,143,675 shares of Cumulative Convertible Preferred Stock, Series
B, and 14,265 shares of ESOP Cumulative Convertible Preferred Stock. In
addition, 1,250,000 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 or filed for
registration with the SEC, pursuant to two universal shelf registration
statements, an indeterminate number of securities (the "Shelf Securities")
with an aggregate initial offering price, as of December 31, 1994, not to
exceed $1,825,000,000. 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.
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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 Norwest has no current plans for the issuance of
any shares of Preferred 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 are, and the shares offered hereby will be,
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 Plans--Norwest" 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.
Election and Removal of Directors
The DGCL provides that directors are elected by a plurality of the votes
of the shares entitled to vote on such election present in person or by proxy
at the meeting at which directors are elected. In addition, stockholders of a
Delaware corporation, unless the corporation's Certificate of Incorporation
otherwise provides, are entitled to one vote for each share of capital stock
held, and are also entitled to exercise cumulative voting rights for
directors, if the corporation's Certificate of Incorporation permits such
cumulative voting. The DGCL also permits removal of any director or all
directors of a Delaware corporation by the holders of a majority of the shares
entitled to vote for directors and permits vacancies on the board of directors
to be filled by a majority of the directors then in office.
Goldenbanks. Goldenbanks currently has 5 directors, divided into three
classes. The members of each class serve for three-year terms. The
Goldenbanks Certificate provides for cumulative voting in the election of
directors to the Goldenbanks Board. Each holder of Goldenbanks Common Stock is
entitled to one vote per share multiplied by the number of directors to be
elected and may cast all of such votes for a single candidate or distribute
them among two or more candidates as such stockholder deems fit.
Under the Goldenbanks Certificate, any director, the directors in any
class of directors, or the entire Board of Directors may be removed by the
affirmative vote of the holders of not less than
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two-thirds of the voting power of the outstanding shares entitled to vote at
an annual election of directors. If less than the entire Board is to be
removed, no director may be removed without cause if the votes cast against
such director's removal would be sufficient to elect such director if then
cumulatively voted at an election of the class of directors of which such
director is a member.
Vacancies on the Goldenbanks Board may be filled by a majority vote of
the directors then in office, provided the number of directors then in office
is not less than a quorum of the whole Board. Vacancies resulting from
removal by a vote of the stockholders may be filled by the stockholders at the
same meeting at which removal occurs.
Norwest. Norwest currently has 17 directors who serve for one-year
terms. Norwest's Certificate does not permit cumulative voting in the election
of directors to the Norwest Board, and each shareholder of Norwest may cast
one vote in the election of directors for each share held of record by such
shareholder. Under Norwest's By-Laws, any or all directors may be removed,
with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors. Vacancies on the Norwest Board
may be filled by a majority vote of the directors then in office.
Rights Plans
Goldenbanks. Unlike Norwest, Goldenbanks has not adopted any shareholder
rights plan or issued any similar rights to the holders of Goldenbanks Common
Stock. One Norwest Right (as defined below) will be attached to each share of
Norwest Common Stock issued in the Merger to Goldenbanks stockholders.
Norwest. On November 22, 1988, the Norwest Board declared a dividend of
one preferred share purchase right (collectively, the "Norwest 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 the Merger, receive the Norwest Rights with their shares. The
Norwest Rights trade automatically with shares of Norwest Common Stock and
become exercisable only under certain circumstances. The Norwest Rights are
designed to protect the interests of Norwest and its stockholders against
coercive takeover tactics. The purpose of the Norwest Rights is to encourage
potential acquirors to negotiate with Norwest's Board of Directors prior to
attempting a takeover and to give the Norwest Board leverage in negotiating on
behalf of all stockholders the terms of any proposed takeover. The Norwest
Rights may, but are not intended to, deter takeover proposals.
Until exercised, the Norwest Rights, in and of themselves, do not confer
any rights on their holders as stockholders of Norwest including, without
limitation, the right to vote or receive dividends. Upon becoming
exercisable, each Norwest 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 purchase price for each one four-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 Norwest Rights outstanding and the
number of Junior Preferred Shares issuable upon exercise of the Norwest Rights
are subject to adjustment in the event of a stock split of, or a stock
dividend on, Norwest Common Stock.
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The Norwest 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 Norwest Board prior to the time the Norwest Rights
become exercisable. The Norwest 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 Norwest Rights permit holders of the Norwest
Rights, other than such person or group, to acquire shares of Norwest
Common Stock at 50% of such shares' 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 Norwest
Right, other than Norwest Rights owned by such acquiror, for one share of
Norwest Common Stock or one two-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
Norwest Rights permit holders of the Norwest Rights to purchase the stock
of the acquiror at 50% of such shares' 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 merger, consolidation or other transaction 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 Norwest Rights in whole, but not
in part, at a price of $.0025 per Norwest Right (the "Redemption Price"). The
redemption of the Norwest 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 Norwest
Rights, the right to exercise such Rights will terminate and the only
remaining right of the holders of Norwest Rights will be to receive the
Redemption Price.
The Norwest Rights will expire on November 23, 1998, unless extended or
earlier redeemed by Norwest. Generally, the terms of the Norwest Rights may
be amended by the Board of Directors without the consent of the holders of the
Norwest Rights.
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Required Vote for Authorization of Certain Actions
Under the DGCL, the vote of a majority of the outstanding shares of the
capital stock of a Delaware corporation entitled to vote thereon generally is
required to approve certain fundamental changes to the corporation, including
a merger or consolidation (except in certain limited circumstances described
below), the sale, lease, or exchange of all or substantially all of the
corporation's assets, a dissolution, or an amendment to the corporation's
Certificate of Incorporation, unless such certificate requires the vote of a
greater percentage of the corporation's outstanding capital stock entitled to
vote on such matters. With respect to a merger, no vote of the stockholders
of a Delaware corporation is required if such corporation is the surviving
corporation in the merger and (1) the related agreement of merger does not
amend the corporation's Certificate of Incorporation, (2) each share of
capital stock outstanding immediately before the merger is to be an identical
outstanding or treasury share of the corporation after the merger, and (3) the
number of shares of capital 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 such corporation's capital stock
outstanding immediately before the merger. Set forth below is a summary of
the voting rights of stockholders of Goldenbanks and Norwest, respectively,
and of the required vote for authorization of the foregoing actions and other
matters, pursuant to the DGCL, the Goldenbanks Certificate and the Norwest
Certificate.
In addition to being subject to the laws of Delaware, both Goldenbanks
and Norwest, as bank holding companies, are subject to various provisions of
federal law with respect to mergers, consolidations and certain other
corporate transactions. See "CERTAIN REGULATORY CONSIDERATIONS."
Goldenbanks. Under Delaware law, the vote of a majority of the
outstanding shares of Goldenbanks Common Stock entitled to vote thereon is
required to approve a merger or consolidation involving Goldenbanks, the sale,
lease, or exchange of substantially all of Goldenbanks' corporate assets or an
amendment to the Goldenbanks Certificate.
The Goldenbanks Certificate requires that any business combination (which
includes mergers, consolidations, and certain sales of assets) between
Goldenbanks and any interested stockholder (generally the beneficial owner of
10% or more of Goldenbanks Common Stock) must be approved by the vote of 80%
or more of the outstanding capital stock entitled to vote thereon. This
higher vote is not required if the proposed business combination has been
approved by a majority of Goldenbanks's disinterested directors. The Merger
has been so approved and the higher vote requirement does not apply to the
Merger.
Norwest. As described above with respect to Delaware law, the vote of a
majority of the outstanding shares of Norwest Common Stock entitled to vote
thereon is required to approve a merger or consolidation involving Norwest,
the sale, lease, or exchange of substantially all of Norwest's corporate
assets, or an amendment to Norwest's Certificate of Incorporation.
Furthermore, no vote of the stockholders of Norwest is required in connection
with a merger if Norwest is the survivor and the conditions stated above are
met.
Appraisal Rights
Pursuant to section 262 of the DGCL, a holder of capital stock of a
Delaware corporation is generally entitled to receive payment of the appraised
value of his or her shares if such
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stockholder dissents from a merger or consolidation and complies with the
procedures set forth in Section 262 of the DGCL for exercising such rights.
However, appraisal rights are not available in merger or consolidation
transactions to holders of (a) shares either listed on a national stock
exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or
held of record by more than 2,000 persons, or (b) shares of the corporation
surviving a merger unless, in either case, holders of such stock are required
by the terms of the merger or consolidation to accept anything other than (i)
shares of the surviving or resulting corporation; (ii) shares of stock of
another corporation so listed or held of record by not fewer than 2,000
persons; and/or (iii) cash in lieu of fractional shares of such corporations.
Appraisal rights are not available for a sale of assets or an amendment to the
certificate.
Goldenbanks. Because Goldenbanks Common Stock is traded on the
NASDAQ/NMS, holders of Goldenbanks Common Stock are not, subject to such
express exceptions, entitled to appraisal rights.
Norwest. Similarly, shares of Norwest Common stock are listed on the
NYSE and the CHX (both of which are national securities exchanges), and
Norwest currently has more than 2,000 stockholders of record. Accordingly,
holders of Norwest Common Stock are not, subject to the express exceptions
noted above, currently entitled to any rights of appraisal in connection with
proposed mergers or consolidations involving Norwest.
Special Meetings
The DGCL provides that special meetings of stockholders may be called by
the Board of Directors of the corporation, or by the person or persons
authorized by the corporation's certificate of incorporation or by-laws.
Goldenbanks. The By-Laws of Goldenbanks provide that a special meeting
of stockholders shall be called by the President or the Secretary, upon the
written request of a majority of the Board of Directors. Thus stockholders of
Goldenbanks do not have the right to call a special meeting.
Norwest. The By-Laws of Norwest provide that 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. Accordingly, holders
of Norwest Common stock do not have the right to call a special meeting.
Limitation of Director Liability and Indemnification
The DGCL provides that directors, officers and other employees and
individuals may be indemnified against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement in connection with specified
actions, suits, or proceedings, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the corporation, a
"derivative action") if they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, regarding any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification
extends only to expenses (including attorneys' fees) incurred in connection
with the defense or settlement of such actions. In
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the case of derivative actions, the DGCL requires court approval before there
can be any indemnification where the person seeking indemnification has been
found liable to the corporation. To the extent that a person otherwise
eligible to be indemnified is successful on the merits of any claim or defense
described above, indemnification for expenses (including attorneys' fees)
actually and reasonably incurred is mandated by the DGCL. Both Goldenbanks and
Norwest have provisions in their respective Certificates of Incorporation
limiting the liability of directors for monetary damages for breach of their
fiduciary duty and providing for indemnification of such director in certain
circumstances. Descriptions of these provisions in the Goldenbanks Certificate
and the Norwest Certificate are set forth below.
Goldenbanks. The Goldenbanks Certificate provides that a director shall
not be personally liable to Goldenbanks or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability
arising out of (a) any breach of a director's duty of loyalty to Goldenbanks
or its stockholders, (b) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) payment of a
dividend or approval of a stock repurchase in violation of Section 174 of the
DGCL, or (d) any transaction from which the director derived an improper
personal benefit. This provision protects Goldenbanks directors against
personal liability for monetary damages for breaches of their duty of care.
However, it does not eliminate the directors' duty of care. This provision of
the Goldenbanks Certificate has no effect on the availability of equitable
remedies, such as an injunction or a rescission, based on a director's breach
of his or her duty of care.
The Goldenbanks Certificate provides that Goldenbanks possesses and may
exercise all powers of indemnification, including the power to advance
expenses and to maintain insurance, provided from time to time in the DGCL,
including the powers that existed under Section 145 of the DGCL as of the date
of incorporation of Goldenbanks. Under the Goldenbanks By-Laws, Goldenbanks
must indemnify each person who was or is made a party to any threatened,
pending, or completed action, suit, or proceeding because he or she is or was
a director, officer, employee, or agent of Goldenbanks (or was serving at the
request of Goldenbanks as a director, officer, employee, or agent of another
entity) while serving in such capacity against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of Goldenbanks, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The Goldenbanks By-Laws also provide that Goldenbanks
shall indemnify any person who was or is a party to any threatened, pending,
or completed action by or in the right of Goldenbanks by reason of the fact
such person is or was a director, officer, employee, or agent of Goldenbanks,
or is or was serving at the request of Goldenbanks as a director, officer,
employee, or agent of another entity, against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit, if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of Goldenbanks. No indemnification may be made in respect of
any matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to Goldenbanks unless
and only to the extent the court in which such action or suit was brought
shall determine upon application that such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
The Goldenbanks By-Laws also provide that Goldenbanks may pay expenses in
defending the proceedings specified above in advance of their final
disposition, if the director or officer
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undertakes to repay all amounts so advanced if it is ultimately determined
that the person receiving such payments is not entitled to be indemnified.
Pursuant to Goldenbanks By-Laws and the Goldenbanks Certificate,
Goldenbanks may maintain insurance, at its expense, to protect itself and any
directors, officers, employees, or agents of Goldenbanks or any other entity,
against expense, liability, or loss, regardless of whether Goldenbanks has the
power or obligation to indemnify that person against such expense, liability
or loss under the DGCL.
The right to indemnification is not inclusive of any other right which
any person may have or acquire under any statute, provision of the Goldenbanks
Certificate or By-Laws, agreement, vote of stockholders, or disinterested
directors, or otherwise.
Norwest. The Norwest Certificate provides that a director (including an
officer who is also a director) of Norwest shall not be liable personally to
Norwest or its stockholders for monetary damages for breach of fiduciary duty
as a director, except for liability arising out of (a) any breach of the
director's duty of loyalty to Norwest or its stockholders, (b) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) payment of a dividend or approval of a stock
repurchase in violation of Section 174 of the DGCL, or (d) any transaction
from which the director derived an improper personal benefit. This provision
protects Norwest directors against personal liability for monetary damages
from breaches of their duty of care. However, it does not eliminate the
director's duty of care. For example, this provision in the Norwest
Certificate has no effect on the availability of equitable remedies, such as
an injunction or rescission, based upon a director's breach of his duty of
care.
The Norwest Certificate further provides that Norwest must indemnify, to
the fullest extent authorized by the DGCL, each person who was or is made a
party to, is threatened to be made a party to, or is involved in, any action,
suit, or proceeding because he is or was a director or officer of Norwest (or
was serving at the request of Norwest as a director, trustee, officer,
employee, or agent of another entity) while serving in such capacity against
all expenses, liabilities, or loss incurred by such person in connection
therewith, provided that indemnification in connection with a proceeding
brought by such person will be permitted only if the proceeding was authorized
by the Norwest Board. The Norwest Certificate also provides that Norwest must
pay expenses incurred in defending the proceedings specified above in advance
of their final disposition, provided that if so required by the DGCL, such
advance payments for expenses incurred by a director or officer may be made
only if he undertakes to repay all amounts so advanced if it is ultimately
determined that the person receiving such payments is not entitled to be
indemnified.
The Norwest Certificate authorizes Norwest to provide similar
indemnification to employees or agents of Norwest.
Pursuant to the Norwest Certificate, Norwest may maintain insurance, at
its expense, to protect itself and any directors, officers, employees, or
agents of Norwest or another entity against any expense, liability, or loss,
regardless of whether Norwest has the power or obligation to indemnify that
person against such expense, liability, or loss under the DGCL.
The right to indemnification is not exclusive of any other right which
any person may have or acquire under any statute, provision of the Norwest
Certificate or By-Laws, agreement, vote of stockholders, or disinterested
directors, or otherwise.
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Action Without a Meeting--Goldenbanks and Norwest
Section 228 of the DGCL permits any action required or permitted to be
taken at a stockholders' meeting to be taken by written consent signed by the
holders of the number of shares that would have been required to effect the
action at an actual meeting of the stockholders. The DGCL also provides that
a corporation's certificate of incorporation may restrict or even prohibit
stockholders' action without a meeting. Neither the Goldenbanks Certificate
nor the Norwest Certificate restricts or prohibits stockholders' action
without a meeting.
By-Laws
Section 109 of the DGCL places the power to adopt, amend, or repeal by-
laws in the corporation's stockholders, but permits the corporation, in its
certificate of incorporation, also to vest such power with the Board of
Directors. A summary of the provisions in the by-laws of Goldenbanks and
Norwest, respectively, as to adoption, amendment, and repeal of such by-laws
is set forth below.
Goldenbanks. Under the Goldenbanks Certificate and By-Laws, the Board
may make, amend, or repeal the by-laws, without action on the part of the
stockholders. Goldenbanks stockholders retain the authority, under the
Goldenbanks Certificate, to amend, alter, or repeal by-laws adopted or amended
by the Goldenbanks Board.
Norwest. The Norwest Certificate also contains provisions empowering the
Norwest Board to adopt, amend, and repeal by-laws. Although the Norwest Board
has been vested with such authority, Norwest's stockholders' power to adopt,
amend, or repeal by-laws remains unrestricted.
Preemptive Rights--Goldenbanks and Norwest
Under Section 102 of the DGCL, stockholders have no statutory preemptive
rights, unless a corporation's certificate of incorporation specifies
otherwise. Neither the Norwest Certificate nor the Goldenbanks Certificate
provides for any such preemptive rights.
Dividends--Goldenbanks and Norwest
Delaware corporations may pay dividends out of surplus or, if there is no
surplus, out of net profits for the fiscal year in which declared and for the
preceding fiscal year. Section 170 of the DGCL also provides that dividends
may not be paid out of net profits if, after the payment of the dividend,
capital is less than the capital represented by the outstanding stock of all
classes having a preference upon the distribution of assets.
Norwest and Goldenbanks are subject to the same Federal Reserve Board
policies regarding payment of dividends, which generally limit dividends to
operating earnings. See "CERTAIN REGULATORY CONSIDERATIONS."
Proposal of Business, Nomination of Directors--Goldenbanks and Norwest
The Norwest By-Laws contain detailed advance notice and informational
procedures which must be complied with in order for a stockholder to nominate
a person to serve as a director.
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The Norwest By-Laws generally require a stockholder to give notice of a
proposed nominee in advance of the stockholder meeting at which directors will
be elected. In addition, the Norwest By-Laws contain detailed advance notice
and informational procedures which must be followed in order for a Norwest
stockholder to propose an item of business for consideration at a meeting of
Norwest stockholders. There are no similar provisions in the Goldenbanks
By-Laws.
Appraisal Rights
Section 262 of the Delaware General Corporation Law provides that a
stockholder of a Delaware corporation is generally entitled to receive payment
of the appraised value of his stock if such stockholder dissents from a merger
or consolidation. The statute does not, however, generally afford such
appraisal rights to stockholders whose shares have been designated as a
"national market system security" on an interdealer quotation system by the
National Association of Securities Dealers, Inc. with respect to a merger or
plan of share exchange involving that corporation. Because Goldenbanks Common
Stock is traded on the NASDAQ/NMS, stockholders of Goldenbanks will not be
entitled to appraisal rights with respect to their shares and cannot dissent
from the Merger. See "THE MERGER--Certain Differences in Rights of
Stockholders--Appraisal Rights."
Certain Federal Income Tax Consequences
Scope of Opinion of Special Counsel
Subject to the assumptions and conditions set forth below, Holland &
Hart, special counsel to Goldenbanks, will render a tax opinion regarding the
material federal income tax aspects of the Merger. However, the opinion will
be limited in its scope. Among other items, it will not cover the special tax
consequences, if any, that might apply to Goldenbanks stockholders who (1) may
be entitled to special treatment under the Code such as foreign persons, tax-
exempt organizations, retirement plans, life insurance companies, regulated
investment companies, dealers in securities, financial institutions, and
S corporations, (2) acquired their shares as compensation or through the
exercise of options acquired as compensation, or (3) do not hold their shares
of Goldenbanks Common Stock as a capital asset. Moreover, the opinion will not
address any state or local tax aspects of the Merger.
Assumptions and Conditions to Opinion
The opinion will be subject to and based on a number of assumptions and
factual representations. If any of these representations or assumptions is
not true or accurate, the opinion could be different. The material
assumptions and representations will be:
(1) the Merger and related transactions will take place as described in
the Merger Agreement and in this Proxy Statement-Prospectus, and the
facts described in those documents are accurate, complete, and will not
materially change, and the conduct of the parties is and will be
materially consistent with those facts;
(2) the Merger will be a valid merger under applicable state law;
(3) the representations to be made to Holland & Hart by Norwest and by
Goldenbanks in their respective representation letters that will be
delivered to Hollard & Hart, which
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will not be independently verified, will be true, complete, and accurate
in all material respects;
(4) Norwest will not exercise its option under the Option Agreement
between Norwest and Goldenbanks, dated November 22, 1994.
The opinion will also be subject to the condition that as a result of the
Merger, the former owners of the Goldenbanks Common Stock will have a
continuing interest in Norwest through the ownership of Norwest Common Stock
that is equal in value to at least 50% of the value of all of the Goldenbanks
Common Stock immediately prior to the Merger. Goldenbanks will represent
that, to the best of its knowledge, this condition will be satisfied.
However, whether this condition is in fact satisfied will depend on actual
Norwest stock dispositions made by the Goldenbanks stockholders.
The failure to satisfy any of these assumptions and conditions including
delivery of the representation letters to Holland & Hart, could result in a
change in, or failure to issue the opinion.
Description of Opinion
Subject to the assumptions, conditions and qualifications described
above, and based on existing federal income tax law, Holland & Hart will
render an opinion that for federal income tax purposes:
(1) the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code, and Norwest, Goldenbanks and Merger Co.
will each be a party to the reorganization within the meaning of Section
368(b) of the Code;
(2) no gain or loss will be recognized by Goldenbanks, Norwest, or
Merger Co. as a result of the Merger;
(3) no gain or loss will be recognized by the stockholders of
Goldenbanks upon their receipt of Norwest Common Stock in exchange for
their Goldenbanks Common Stock; however, the payment of cash in lieu of
fractional share interests in Norwest Common Stock will be treated as if
the fractional shares were distributed as part of the Merger and then
were redeemed by Norwest, and Goldenbanks stockholders who receive these
cash proceeds will be treated as having received a distribution in full
payment in exchange for the fractional shares redeemed as provided in
Section 302(a) of the Code;
(4) the tax basis of the shares of Norwest Common Stock (including
the fractional share interests) received by the stockholders of
Goldenbanks will be the same as the tax basis of their Goldenbanks Common
Stock exchanged therefor; and
(5) the holding period of Norwest Common Stock in the hands of the
Goldenbanks stockholders will include the holding period of their
Goldenbanks Common Stock exchanged therefor, provided such Goldenbanks
Common Stock is held as a capital asset at the Effective Time.
THE OPINION WILL BE BASED ON THE EXISTING PROVISIONS OF THE CODE, THE
APPLICABLE TREASURY REGULATIONS ISSUED THEREUNDER,
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AND THE OFFICIAL PUBLISHED INTERPRETATION OF THOSE PROVISIONS BY THE INTERNAL
REVENUE SERVICE AND THE COURTS, ALL OF WHICH ARE SUBJECT TO CHANGE, WHICH
CHANGES COULD BE APPLIED RETROACTIVELY. IF THE APPLICABLE LAW CHANGES, THE
OPINION COULD BE DIFFERENT. FURTHER, THE OPINION WILL NOT CONSIDER THE
PARTICULAR FACTS OR CIRCUMSTANCES OF ANY STOCKHOLDER. STOCKHOLDERS ARE URGED
TO CONSULT WITH THEIR OWN TAX ADVISORS WITH RESPECT TO THE FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER IN THEIR PARTICULAR SITUATIONS, AS WELL AS
CONSEQUENCES UNDER ANY APPLICABLE STATE, LOCAL, OR FOREIGN TAX LAWS.
Resale of Norwest Common Stock
The shares of Norwest Common Stock issuable to stockholders of
Goldenbanks upon consummation of the Merger have been registered under the
Securities Act. Such shares may be traded freely and without restriction by
those stockholders not deemed to be "affiliates" of Goldenbanks or Norwest as
that term is defined in the rules under the Securities Act. Norwest Common
Stock received by those stockholders of Goldenbanks who are deemed to be
"affiliates" of Goldenbanks may be resold without registration as provided for
by Rule 145, or as otherwise permitted under the Securities Act. Persons who
may be deemed to be affiliates of Goldenbanks generally include individuals or
entities that control, are controlled by or are under common control with,
Goldenbanks, and may include the executive officers and directors of
Goldenbanks as well as certain principal stockholders of Goldenbanks. In the
Merger Agreement, Goldenbanks has agreed to use its best efforts to cause each
Goldenbanks stockholder who is an executive officer or director of Goldenbanks
or who may otherwise reasonably be deemed to be an affiliate of Goldenbanks 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 (i) except in compliance with the
applicable provisions of the Securities Act and the rules and regulations
promulgated thereunder, and (ii) during the periods when any such sale,
transfer, or other disposition would, under generally accepted accounting
principles or the rules, regulations, or interpretations of the Commission,
disqualify the Merger from pooling-of-interests accounting treatment. See
"THE MERGER--Accounting Treatment." In general, such periods encompass the
period commencing 30 days prior to the Merger and ending at the time of the
publication of financial results covering at least 30 days of combined
operations of Norwest and Goldenbanks. This Proxy Statement-Prospectus does
not cover any resales of Norwest Common Stock received by affiliates of
Goldenbanks.
Stock Exchange Listing
The Merger 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 Merger. It is a condition to the
consummation of the Merger that such shares of Norwest Common Stock shall have
been authorized for listing on the NYSE and the CHX.
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
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(as defined in the plan). 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 in the plan) of
such stock at the time of purchase. It is anticipated that after the Effective
Time of the Merger, Norwest will continue to offer its Dividend Reinvestment
and Optional Cash Payment Plan and that stockholders of Goldenbanks who
receive Norwest Common Stock in the Merger will have the right to participate
therein.
Accounting Treatment
It is anticipated that the Merger will be accounted for as a "pooling of
interests" transaction in accordance with generally accepted accounting
principles.
Under the pooling-of-interests method of accounting, the historical basis
of the assets and liabilities of Norwest and Goldenbanks will be combined at
the Effective Time and carried forward at their previously recorded amounts,
and the stockholders' equity accounts of Goldenbanks will be combined with
Norwest's on Norwest's consolidated balance sheet. Income and other financial
statements of Norwest will not be restated retroactively because the Merger is
not material to the financial statements of Norwest.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, among other things, substantially all (90% or more) of the
outstanding Goldenbanks Common Stock must be exchanged for Norwest Common
Stock. Goldenbanks has agreed not to take any action (other than actions
required under the Merger Agreement or requested by Norwest) that would
disqualify the Merger from pooling-of-interests treatment by Norwest.
The unaudited per share data contained in this Proxy Statement-Prospectus
has been prepared using the pooling-of-interests method of accounting to
account for the Merger. See "SUMMARY--Comparative Unaudited Per Share Data."
Expenses
Except as otherwise provided in the Merger Agreement, Norwest and
Goldenbanks will each pay their own expenses in connection with the Merger,
including fees and expenses of their respective accountants and counsel.
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CERTAIN INFORMATION CONCERNING GOLDENBANKS
As of December 31, 1994, Goldenbanks, a registered bank holding company
headquartered in Golden, Colorado, serves as the controlling shareholder for
its subsidiaries, Goldenbank, N.A., its branches in Arvada and Gilpin County,
Goldenbank, N.A., Westminster, Goldenbank, N.A., Englewood, and Goldenbank,
Applewood (collectively called the "Banks"), and Goldenbanks Service Corp.
Goldenbanks was incorporated in 1973 under the laws of the State of Delaware.
Goldenbank, N.A., which was nationally chartered on May 27, 1937, is the
anchor bank of Goldenbanks. Deposits as of December 31, 1994, for Goldenbank,
N.A. and its branches totaled $235,046,663. Goldenbank, N.A. is located in
Golden, Colorado, with a population of 13,700. Golden is also the county seat
of Jefferson County, as well as the corporate headquarters of the Adolph Coors
Company and home to the Colorado School of Mines. Jefferson County's
population is 474,500.
Colorado banks may, under the Colorado Branch Banking Statutes, operate
branch banks. Goldenbank, N.A. operates two branches: Gilpin County, located
in Black Hawk, Colorado, one of three locations in the state that has limited
stakes gambling, and Arvada, a major western suburb of Denver.
Goldenbank, N.A. Westminster, is located in north Jefferson County in the
city of Westminster, and opened in October 1984. Deposits as of December 31,
1994, were $14,315,732.
Goldenbank, N.A. Englewood, which was acquired from the FDIC in May 1986,
is located in Englewood, Colorado, a southwestern suburb of Denver. On
December 31, 1994, deposits were $26,422,657.
Goldenbank, Applewood (formerly Citywide Bank of Applewood), located in
the city of Wheat Ridge, was acquired in November 1993. This acquisition
added approximately $45 million in assets and expanded Goldenbanks's market
share in the west Denver metro area. As of December 31, 1994, deposits were
$49,838,027.
The Banks are engaged in the general business of banking, offering
individuals and businesses a variety of checking and savings accounts,
investment accounts, safe deposit facilities, access cards, and other
specialized services. In addition, the Banks offer consumer, commercial, real
estate, and mortgage loans at all locations.
Goldenbanks Service Corp. provides credit life and health and accident
insurance on loans made by the Banks. Goldenbanks Service Corp. was also
established to serve as an advertising agency for Goldenbanks and its
subsidiaries.
Additional information concerning the business, financial results, and
directors and officers of Goldenbanks is contained in Goldenbanks's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1994, and Quarterly
Report on Form 10-QSB for the quarter ended December 31, 1994, copies of which
are included in Appendices C and D, respectively, to this Proxy Statement-
Prospectus.
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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 December 31, 1994, aggregate dividends of at least $361.4 million without
obtaining prior regulatory approval and without reducing the capital of the
banks below minimum regulatory 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.
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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 nonbank subsidiaries, whether in the form of loans, extensions of credit,
investments, or asset purchases. Such transfers by any subsidiary bank to
Norwest or any nonbank subsidiary are limited in amount to 10% of the bank's
capital and surplus and, with respect to Norwest and all such nonbank
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. (S)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 most
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 the allowance for credit losses. In addition, the Federal Reserve
Board's 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 are required to maintain a leverage ratio of
3% plus an additional cushion of 1% to 2%. The guidelines also provide that
banking
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organizations experiencing internal growth or making acquisitions are 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 subsidiaries
is also subject to capital requirements adopted by applicable regulatory
agencies which are substantially similar to the foregoing. At December 31,
1994, Norwest's Tier 1 and total capital (the sum of Tier 1 and Tier 2
capital) to risk-adjusted assets ratios were 9.89% and 12.23%, respectively,
and Norwest's leverage ratio was 6.94%. 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
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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.
FDICIA, as amended by the Reigle Community Development and Regulatory
Improvement Act of 1994 enacted on August 22, 1994, directs that each federal
banking agency prescribe standards, by regulation or guideline, for depository
institutions relating to internal controls, information systems, internal
audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, compensation, asset quality, earnings, stock
valuation, and such other operational and managerial 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 internal and
external 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. Regulations or
guidelines relating to the other management and operational standards have not
been issued. The impact of such regulations or guidelines on Norwest cannot
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 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 December 31, 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
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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 23 cents per $100 of domestic deposits (for well capitalized Subgroup A
institutions) to 31 cents (for undercapitalized Subgroup C institutions).
Adequately capitalized institutions will be assigned assessment rates ranging
from 26 cents to 30 cents. The FDIC has proposed regulations that would assign
an annual FDIC assessment rate for BIF member institutions ranging from 4
cents per $100 of domestic deposits (for well capitalized Subgroup A
institutions) to 31 cents (for undercapitalized Subgroup C institutions).
Norwest incurred $79.2 million of FDIC insurance expense in 1994.
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EXPERTS
The consolidated financial statements of Norwest and subsidiaries as of
December 31, 1994 and 1993, and for each of the years in the three-year period
ended December 31, 1994, 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 Goldenbanks and subsidiaries as
of June 30, 1994 and 1993, and for each of the years in the three-year period
ended June 30, 1994, included in Appendix C to this Proxy Statement-Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein, and have been so included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
LEGAL OPINIONS
A legal opinion to the effect that the shares of Norwest Common Stock
offered hereby, when issued in accordance with the Merger 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 December 31, 1994, Mr. Stroup was the beneficial owner of
108,607 shares and held options to acquire 207,410 additional shares of
Norwest Common Stock.
A member of the firm of Holland & Hart, which will opine to Goldenbanks
upon certain of the federal income tax consequences of the Merger, owns 9,030
shares of Goldenbanks Common Stock.
MANAGEMENT OF NORWEST 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, 1994, which are incorporated in this Proxy Statement-
Prospectus by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE." Shareholders of Goldenbanks desiring copies of such documents may
contact Norwest at its address or phone number indicated under "AVAILABLE
INFORMATION" above.
FUTURE STOCKHOLDER PROPOSALS
Any proposals of stockholders intended to be presented at the 1995 annual
meeting of Goldenbanks stockholders (if such a meeting is held) must have been
received by Goldenbanks for inclusion in its proxy statement by May 4, 1995.
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APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION,
AND
AGREEMENT AND PLAN OF MERGER
<PAGE>
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as of
the 22nd day of November, 1994, by and between GOLDENBANKS OF COLORADO, INC.
("Goldenbanks"), a Delaware corporation, and NORWEST CORPORATION ("Norwest"), a
Delaware corporation.
WHEREAS, the parties hereto desire to effect a reorganization whereby a
wholly-owned subsidiary of Norwest will merge with and into Goldenbanks (the
"Merger") pursuant to an agreement and plan 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
Goldenbanks of the par value of $0.05 per share ("Goldenbanks Common Stock")
outstanding immediately prior to the time the Merger becomes effective in
accordance with the provisions of the Merger Agreement into shares of voting
Common Stock of Norwest of the par value of $1-2/3 per share ("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, a
------
wholly-owned subsidiary of Norwest (the "Merger Co.") will be merged by
statutory merger with and into Goldenbanks pursuant to the Merger Agreement,
with Goldenbanks as the surviving corporation, in which merger each share of
Goldenbanks Common Stock outstanding immediately prior to the Effective Time of
the Merger (as defined below)(other than shares as to which statutory
dissenters' appraisal rights have been exercised) will be converted into and
exchanged for 1.9876 shares of Norwest Common Stock.
(b) 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 "Common Stock Adjustment"), then (i) the
number of shares of Norwest Common Stock into which a share of Goldenbanks
Common Stock shall be converted pursuant to subparagraph (a), above, will be
appropriately and proportionately adjusted so that the number of such shares of
Norwest Common Stock into which a share of Goldenbanks Common Stock shall be
converted will equal the number of shares of Norwest Common Stock which the
holder of a share of Goldenbanks Common Stock would have received pursuant to
such Common Stock Adjustment 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
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Common Stock is used for purposes of this Agreement or the 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/or 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.
(c) 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 ending on the day immediately
preceding the meeting of stockholders required by paragraph 4(c) of this
Agreement.
(d) Mechanics of Closing Merger. Subject to the terms and conditions set
---------------------------
forth herein, the Merger Agreement shall be executed and a Certificate of Merger
shall be filed with the Secretary of State of the State of Delaware within five
(5) 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
referred to as the "Effective Date of the Merger". The "Effective Time of the
Merger" shall be 11:59 p.m. Denver, Colorado 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 Goldenbanks pursuant to the 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 Goldenbanks. Goldenbanks represents
and warrants to Norwest as follows:
(a) Organization and Authority. Goldenbanks 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 the business, financial condition or results
of operations of Goldenbanks and the Goldenbanks Subsidiaries taken as a whole
(a "Material Adverse Effect") and has corporate power and authority to own its
properties and assets and to carry on its business as it is now being conducted.
Goldenbanks 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").
Goldenbanks has furnished Norwest true and correct copies of its articles of
incorporation and by-laws, as amended.
(b) Goldenbanks' Subsidiaries. Schedule 2(b) sets forth a complete and
-------------------------
correct list of all of Goldenbanks' subsidiaries as of the date hereof
(individually a "Goldenbanks Subsidiary" and collectively the "Goldenbanks
Subsidiaries"), all shares of the outstanding capital stock of each of
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which, except as set forth on Schedule 2(b), are owned directly or indirectly by
Goldenbanks. No equity security of any Goldenbanks Subsidiary is or may be
required to be issued by reason of any option, warrant, scrip, preemptive right,
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 Goldenbanks 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. (S) 55
(1982) and the Delaware General Corporation Law, all of such shares so owned by
Goldenbanks are fully paid and nonassessable and, except as set forth in
Schedule 2(b), are owned by it free and clear of any lien, claim, charge,
option, encumbrance or agreement with respect thereto. Each Goldenbanks
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), Goldenbanks 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 Goldenbanks consists
--------------
of 300,000 shares of preferred stock, $10.00 par value, of which no shares are
outstanding and 3,000,000 shares of common stock, $0.05 par value, of which as
of the close of business on June 30, 1994, 1,366,932 shares were outstanding and
no shares were held in the treasury. The maximum number of shares of
Goldenbanks Common Stock (assuming for this purpose that phantom shares and
other share-equivalents constitute Goldenbanks 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, except the option to
purchase Goldenbanks Common Stock granted pursuant to the Stock Option Agreement
dated the date hereof between Goldenbanks and Norwest (the "Stock Option
Agreement"), were exercised is 1,366,932. All of the outstanding shares of
capital stock of Goldenbanks have been duly and validly authorized and issued
and are fully paid and nonassessable. Except as set forth in Schedule 2(c) and
except for the option granted pursuant to the Stock Option Agreement, there are
no outstanding subscriptions, contracts, conversion privileges, options,
warrants, calls, preemptive rights or other rights obligating Goldenbanks or any
Goldenbanks Subsidiary to issue, sell or otherwise dispose of, or to purchase,
redeem or otherwise acquire, any shares of capital stock of Goldenbanks or any
Goldenbanks Subsidiary. Since June 30, 1994 no shares of Goldenbanks capital
stock have been purchased, redeemed or otherwise acquired, directly or
indirectly, by Goldenbanks or any Goldenbanks Subsidiary and, except as set
forth in Schedule 2(c) and except as permitted by this Agreement, no dividends
or other distributions have been declared, set aside, made or paid to the
stockholders of Goldenbanks.
(d) Authorization. Goldenbanks has the corporate power and authority to
-------------
enter into this Agreement and the Merger Agreement and, subject to any required
approvals of its stockholders, to carry out its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Merger Agreement by Goldenbanks and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Goldenbanks. Subject to such approvals of stockholders and of
government agencies and other governing boards having regulatory authority over
Goldenbanks as may be required by statute or regulation, this Agreement and the
Merger Agreement are valid and binding obligations of Goldenbanks enforceable
against Goldenbanks in accordance with their respective terms, except as
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enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors and
contracting parties generally and except as enforceability may be subject to
general principles of equity.
Except as set forth on Schedule 2(d), neither the execution, delivery and
performance by Goldenbanks of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor compliance
by Goldenbanks 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 Goldenbanks or any Goldenbanks
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 Goldenbanks or any Goldenbanks Subsidiary is a party or by which it may be
bound, or to which Goldenbanks or any Goldenbanks Subsidiary or any of the
properties or assets of Goldenbanks or any Goldenbanks 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 Goldenbanks, violate
any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to Goldenbanks or any Goldenbanks Subsidiary or any of
their respective material 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 under Delaware
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 Goldenbanks of the transactions contemplated by this Agreement
and the Merger Agreement.
(e) Goldenbanks Financial Statements. The consolidated balance sheets of
--------------------------------
Goldenbanks and Goldenbanks' Subsidiaries as of June 30, 1994 and 1993 and
related consolidated statements of income, stockholders' equity and cash flows
for the three years ended June 30, 1994, together with the notes thereto,
certified by Deloitte & Touche, LLP and included in Goldenbanks' Annual Report
on Form 10-KSB for the fiscal year ended June 30, 1994 (the "Goldenbanks
10-KSB") as filed with the Securities and Exchange Commission (the "SEC")
(collectively, the "Goldenbanks Financial Statements"), have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis and present fairly the consolidated financial position of Goldenbanks and
Goldenbanks' Subsidiaries at the dates and the consolidated results of
operations and cash flows of Goldenbanks and Goldenbanks' Subsidiaries for the
periods stated therein.
(f) Reports. Since June 30, 1988, Goldenbanks and each Goldenbanks
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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-KSB, Forms 10-QSB 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
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with any such regulatory body or authority are collectively referred to herein
as the "Goldenbanks Reports". As of their respective dates, the Goldenbanks
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 as
of their respective dates, the Goldenbanks Reports filed with the SEC 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 Goldenbanks Reports have been made available to
Norwest by Goldenbanks.
(g) Properties and Leases. Except as set forth in Schedule 2(g), except as
---------------------
may be reflected in the Goldenbanks Financial Statements and except for any lien
for current taxes not yet delinquent, Goldenbanks and each Goldenbanks
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 Goldenbanks' consolidated balance sheet as of
June 30, 1994 included in Goldenbanks' Annual Report on Form 10-KSB for the
period then ended, 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 Goldenbanks or any Goldenbanks Subsidiary pursuant to which Goldenbanks or
such Goldenbanks 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 Goldenbanks or such Goldenbanks Subsidiary or any
event which, with notice or lapse of time or both, would constitute such a
material default. Substantially all Goldenbanks' and each Goldenbanks
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 Goldenbanks and the Goldenbanks Subsidiaries has filed
-----
all 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 Goldenbanks and the Goldenbanks Subsidiaries for the fiscal year
ended June 30, 1988, 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 Goldenbanks
nor any Goldenbanks 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 Goldenbanks or any Goldenbanks Subsidiary
which has not been settled, resolved and fully satisfied. Each of Goldenbanks
and the Goldenbanks 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 June 30, 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 Goldenbanks and the Goldenbanks Subsidiaries with respect to all
periods through the date thereof.
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(i) Absence of Certain Changes. Since June 30, 1994 there has been no
--------------------------
change in the business, financial condition or results of operations of
Goldenbanks or any Goldenbanks Subsidiary, which has had, or may reasonably be
expected to have, a Material Adverse Effect.
(j) Commitments and Contracts. Except as set forth on Schedule 2(j),
-------------------------
neither Goldenbanks nor any Goldenbanks 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 Goldenbanks or such Goldenbanks 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 Goldenbanks or any
Goldenbanks 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, Goldenbanks or any Goldenbanks 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-B; or
(vi) any lease with annual rental payments aggregating $10,000 or
more.
(k) Litigation and Other Proceedings. Goldenbanks has furnished Norwest
--------------------------------
copies of (i) all attorney responses to the request of the independent auditors
for Goldenbanks with respect to loss contingencies as of June 30, 1994 in
connection with the Goldenbanks financial statements included in the Goldenbanks
10-KSB, and (ii) a written list of legal and regulatory proceedings filed
against Goldenbanks or any Goldenbanks Subsidiary since said date. Neither
Goldenbanks nor any Goldenbanks Subsidiary is a party to any pending or, to the
best knowledge of Goldenbanks, 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.
(l) Insurance. Goldenbanks and each Goldenbanks Subsidiary is presently
---------
insured, and during each of the past five calendar years (or during such lesser
period of time as Goldenbanks has owned such Goldenbanks 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.
A-6
<PAGE>
(m) Compliance with Laws. Goldenbanks and each Goldenbanks 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 Goldenbanks or such
Goldenbanks Subsidiary; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the best knowledge of
Goldenbanks, no suspension or cancellation of any of them is threatened; and all
such filings, applications and registrations are current. The conduct by
Goldenbanks and each Goldenbanks 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 Goldenbanks nor
any Goldenbanks 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
Goldenbanks or any Goldenbanks Subsidiary which reasonably could be expected to
have a Material Adverse Effect.
(n) Labor. No work stoppage involving Goldenbanks or any Goldenbanks
-----
Subsidiary is pending or, to the best knowledge of Goldenbanks, threatened.
Neither Goldenbanks nor any Goldenbanks 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
Goldenbanks or such Goldenbanks Subsidiary. Employees of Goldenbanks and the
Goldenbanks 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 Goldenbanks no officer or director of Goldenbanks
or any Goldenbanks 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 Goldenbanks or any
Goldenbanks Subsidiary.
Schedule 2(o) sets forth a correct and complete list of any loan from
Goldenbanks or any Goldenbanks 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 Goldenbanks' or such Goldenbanks Subsidiary's Board of Directors.
(p) Goldenbanks Benefit Plans.
-------------------------
(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 Goldenbanks or any Goldenbanks 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
Goldenbanks or any Goldenbanks 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.
A-7
<PAGE>
(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), Goldenbanks or the Goldenbanks 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. Goldenbanks 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 as of the end of the most
recent Plan year 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 Goldenbanks, 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
Goldenbanks, 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 Goldenbanks and the Goldenbanks
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.
(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 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 Goldenbanks or any Goldenbanks 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.
A-8
<PAGE>
(q) Proxy Statement, etc. None of the information regarding Goldenbanks and
--------------------
the Goldenbanks Subsidiaries supplied or to be supplied by Goldenbanks 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 Goldenbanks Common Stock pursuant to the provisions
of the Merger Agreement (the "Registration Statement"), (ii) the proxy statement
to be mailed to Goldenbanks' stockholders in connection with the meeting to be
called to consider the 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 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 stockholders 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 Goldenbanks
and the Goldenbanks Subsidiaries are responsible for filing with the SEC and any
other regulatory authority in connection with the 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
------------------------
Goldenbanks nor any Goldenbanks 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. Except for The Wallach Company, neither Goldenbanks
-------------------
nor any Goldenbanks 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 Goldenbanks or any
Goldenbanks Subsidiary in connection with this Agreement and the Merger
Agreement or the transactions contemplated hereby and thereby.
(t) Fiduciary Activities. Neither Goldenbanks nor any Goldenbanks Subsidiary
--------------------
has ever had any accounts for which it has acted as a fiduciary including but
not limited to accounts for which it has served as trustee, agent, custodian,
personal representative, guardian, conservator or investment advisor; provided,
however, that the Goldenbanks Subsidiaries have acted in a fiduciary capacity
with respect to individual retirement accounts and Keogh accounts.
(u) No Defaults. Neither Goldenbanks nor any Goldenbanks 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. To the best of Goldenbanks' knowledge, all parties
with whom Goldenbanks or any Goldenbanks Subsidiary has material leases,
agreements or contracts or who owe to Goldenbanks or any Goldenbanks Subsidiary
material obligations other than with respect to those arising in the ordinary
course of the banking business of the Goldenbanks Subsidiaries are in compliance
therewith in all material respects.
A-9
<PAGE>
(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 Goldenbanks or any
Goldenbanks Subsidiary, any liability relating to the release of hazardous
substances as defined 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 Goldenbanks' knowledge, threatened against Goldenbanks
or any Goldenbanks Subsidiary the result of which has had or could reasonably be
expected to have a Material Adverse Effect; to the best of Goldenbanks'
knowledge there is no reasonable basis for any such proceeding, claim or action;
and to the best of Goldenbanks' knowledge neither Goldenbanks nor any
Goldenbanks 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. Goldenbanks has provided Norwest with copies of all
environmental assessments, reports, studies and other related information in its
possession with respect to each bank facility and each non-residential OREO
property.
3. Representations and Warranties of Norwest. Norwest represents and
warrants to Goldenbanks 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. (S) 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 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 June 30, 1994, 1,127,125 shares of 10.24% Cumulative
Preferred Stock at $100 stated value and 1,143,675 shares of Cumulative
Convertible Preferred Stock, Series B, at $200 stated value and
A-10
<PAGE>
22,471 shares of ESOP Cumulative Convertible Preferred Stock, at $1,000 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 June 30, 1994, 313,005,575 shares
were outstanding and 10,078,899 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 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
or the 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 under Delaware 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 and the Merger Agreement.
(e) Norwest Financial Statements. The consolidated balance sheets 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 L.L.P. and included in Norwest's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 as amended by Form 10-K/A dated 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 June 30, 1994
and the related unaudited consolidated statements of income and cash flows for
the 6 months then ended included in Norwest's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994, as filed with
A-11
<PAGE>
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 June 30, 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, 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
A-12
<PAGE>
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
-------------------------
June 30, 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 or
---------
self 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
A-13
<PAGE>
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 September 1, 1994, 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 as of the end of
the most recent Plan year, 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
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<PAGE>
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 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 and the 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 and the
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 stockholders 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 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 transactions contemplated hereby and
thereby.
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<PAGE>
(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 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
result in the imposition, on Norwest or any Norwest Subsidiary of any liability
relating to the release of hazardous substances as defined 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.
4. Covenants of Goldenbanks. Goldenbanks covenants and agrees with Norwest
as follows:
(a) Except as otherwise permitted or required by this Agreement, from the
date hereof until the Effective Time of the Merger, Goldenbanks, and each
Goldenbanks Subsidiary will: maintain its corporate existence in good standing;
maintain the general character of its business and conduct its business in its
ordinary and usual manner; extend credit in accordance with existing lending
policies, except that it shall not, without the prior written consent of Norwest
(which consent requirement shall be deemed to be waived as to any loan approval
request to which Norwest has made no response by the second business day
following receipt of the request), 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 $400,000; 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 good will and the good will 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 Merger; comply in all material respects
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<PAGE>
with all laws, regulations, ordinances, codes, orders, licenses and permits
applicable to the properties and operations of Goldenbanks and each Goldenbanks
Subsidiary the non-compliance with which reasonably could be expected to have a
Material Adverse Effect; and furnish monthly financial reports, in the form
submitted by Goldenbanks and the Goldenbanks Subsidiaries to their respective
boards of directors, to Norwest; and permit Norwest and its representatives
(including KPMG Peat Marwick L.L.P.) 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 Goldenbanks herein expressed.
(b) Except as otherwise contemplated or required by this Agreement, from the
date hereof until the Effective Time of the Merger, Goldenbanks and each
Goldenbanks Subsidiary will not (without the prior written consent of Norwest):
amend or otherwise change its articles of incorporation or association or by-
laws; 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, except that Goldenbanks may issue shares of Goldenbanks
Common Stock upon the exercise of the option granted under the Stock Option
Agreement; authorize or incur any long-term debt (other than deposit
liabilities); mortgage, pledge or subject to lien or other encumbrance any of
its properties, except in the ordinary course of business; enter into any
material agreement, contract or commitment in excess of $10,000 except
transactions in the ordinary course of business and in accordance with policies
and procedures in effect on the date hereof; 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; amend or terminate
any Plan except as required by law; make any contributions to any Plan except as
required by the terms of such Plan in effect as of the date hereof except
discretionary contributions made in the ordinary course of business in
accordance with past practices; 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, provided, however, that between the date hereof and the
Effective Date of the Merger, Goldenbanks may declare and pay cash dividends on
Goldenbanks Common Stock in an amount not to exceed $0.15 per share for the
quarter ending December 31, 1994, and $0.20 per share payable on each of March
1, 1995 and June 1, 1995 (to shareholders of record on February 3, 1995 and
March 5, 1995, respectively), provided, further, that if the Effective Date of
the Merger is after August 1, 1995, Goldenbanks may declare and pay cash
dividends on Goldenbanks Common Stock in an amount equal to the amount, if any,
payable to holders of 2,708,575 shares of Norwest Common Stock between August 1,
1995 and the Effective Date of the Merger; redeem, purchase or otherwise
acquire, directly or indirectly, any of the capital stock of Goldenbanks;
increase the compensation of any officers, directors or executive employees,
except pursuant to existing compensation plans and practices; sell or otherwise
dispose of any shares of the capital stock of any Goldenbanks Subsidiary; or
sell or otherwise dispose of any of its assets or properties other than in the
ordinary course of business.
(c) The Board of Directors of Goldenbanks will duly call, and will cause to
be held not later than twenty-five (25) business days following the effective
date of the Registration Statement referred to in paragraph 5(c) hereof, a
meeting of its stockholders and will direct that this Agreement and the Merger
Agreement be submitted to a vote at such meeting. The Board of Directors of
Goldenbanks will (i) cause proper notice of such meeting to be given to its
stockholders in compliance with the Delaware General Corporation Law and other
applicable law
A-17
<PAGE>
and regulation, and (ii) except to the extent, based on the advice of counsel,
legally advisable for the discharge of the fiduciary duties of the Board of
Directors of Goldenbanks, (A) recommend by the affirmative vote of the Board of
Directors a vote in favor of approval of this Agreement and the Merger
Agreement, and (B) use its best efforts to solicit from its stockholders proxies
in favor thereof.
(d) Goldenbanks will furnish or cause to be furnished to Norwest all the
information concerning Goldenbanks and its subsidiaries required for inclusion
in the Registration Statement referred to in paragraph 5(c) hereof, 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 Deloitte & Touche, LLP to use such opinion in such
Registration Statement.
(e) Goldenbanks 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 Goldenbanks 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) Goldenbanks 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) Goldenbanks will hold in confidence all documents and information
concerning Norwest and its subsidiaries furnished to Goldenbanks 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 Goldenbanks' 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 Goldenbanks, in the public
domain, or later acquired by Goldenbanks 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 Goldenbanks, nor any Goldenbanks Subsidiary, nor any director,
officer, representative or agent thereof, will, directly or indirectly, solicit,
authorize the solicitation of or, except to the extent, based on the advice of
counsel, legally advisable for the discharge of the fiduciary duties of the
Board of Directors of Goldenbanks, 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 Goldenbanks or any Goldenbanks 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 Goldenbanks or any
Goldenbanks Subsidiary except in the ordinary course of business, or (iv) to
merge, consolidate or otherwise combine with Goldenbanks or any Goldenbanks
Subsidiary. If any corporation, partnership, person or other entity or group
makes an offer or inquiry to Goldenbanks or any Goldenbanks Subsidiary
concerning any of the foregoing, Goldenbanks or such Goldenbanks Subsidiary will
promptly disclose such offer or inquiry, including the terms thereof, to
Norwest.
A-18
<PAGE>
(i) Goldenbanks shall consult with Norwest as to the form and substance of
any proposed press release or other proposed public disclosure, by Goldenbanks
or any of its representatives (including but not limited to The Wallach
Company), of matters related to this Agreement or any of the transactions
contemplated hereby.
(j) Goldenbanks and each Goldenbanks Subsidiary will take all action
necessary or required (i) to terminate or amend, if requested by Norwest, all
qualified pension and welfare benefit plans to faciliate the merger of such
plans with Norwest plans without gaps in coverage for participants in the plans
and without duplication of costs caused by the continuation of such plans after
coverage is available under Norwest plans, and all non-qualified benefit plans
and compensation arrangements as of the Effective Date of the Merger; provided,
however, that the amendments set forth in paragraph 4(p) below are the only
amendments which Goldenbanks shall be required to make to the Goldenbanks Salary
Continuation Plan (as defined below) and no termination of that plan may be
required, (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.
(k) Neither Goldenbanks nor any Goldenbanks Subsidiary shall take any action
which with respect to Goldenbanks would disqualify the Merger as a "pooling of
interests" for accounting purposes.
(l) Goldenbanks 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 B to Norwest by each
executive officer, director or stockholder of Goldenbanks who may reasonably be
deemed an "affiliate" of Goldenbanks within the meaning of such term as used in
Rule 145 under the Securities Act.
(m) Goldenbanks shall establish such additional accruals and reserves as may
be necessary to conform Goldenbanks' accounting and credit loss reserve
practices and methods to those of Norwest and Norwest's plans with respect to
the conduct of Goldenbanks' business following the Merger and to provide for the
costs and expenses relating to the consummation by Goldenbanks of the Merger and
the other transactions contemplated by this Agreement.
(n) Goldenbanks shall obtain Phase I environmental assessments for each bank
facility and each non-residential OREO property. Oral reports of such
environmental assessments shall be delivered to Norwest no later than four (4)
weeks and written reports shall be delivered to Norwest no later than eight (8)
weeks from the date of this Agreement. Goldenbanks shall obtain Phase II
environmental assessments for properties identified by Norwest on the basis of
the results of such Phase I environmental assessments. Goldenbanks shall pay
the amount, if any, by which the aggregate cost of such Phase I and Phase II
environmental assessments exceeds $50,000.
(o) Goldenbanks shall deliver any existing title insurance policies and
boundary surveys for each bank facility owned by Goldenbanks or any Goldenbanks
Subsidiary and, where necessary, assist Norwest in obtaining commitments for
title insurance and boundary surveys for each such bank facility, all of which
commitments and surveys shall be delivered to Norwest no later than four (4)
weeks from the date of this Agreement.
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<PAGE>
(p) Goldenbanks shall amend the Goldenbanks of Colorado, Inc. Salary
Continuation Plan dated November 16, 1993, as amended through December 14, 1993
(the "Goldenbanks Salary Continuation Plan"), effective immediately prior to the
Effective Time of the Merger, to:
(i) amend paragraph 2(b) thereof to read in its entirety as follows:
"(b) A change in control of this corporation is defined as (i) a merger,
consolidation or similar transaction involving a third party and the
corporation or any of its subsidiaries, (ii) a purchase by or other
transfer to a third party of all or substantially all of the assets of the
corporation or any of its subsidiaries, or (iii) the acquisition by
purchase or otherwise by a third party of securities representing 50% or
more of the voting power of the corporation or any of its subsidiaries."
(ii) amend paragraph 2(c) thereof to read in its entirety as follows:
"(c) "Termination" shall mean termination for any of the following reasons:
involutary termination, resignation, reduction in pay of 5% or more, or
death."; and
(iii) amend the first sentence of paragraph 3(b) thereof to read as
follows:
"Each Participant shall be given health coverage substantially comparable
to the coverage in effect for such Participant at the date of his or her
termination."
5. Covenants of Norwest. Norwest covenants and agrees with Goldenbanks 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 Financial Statements,
except for changes in such principles and practices required under generally
accepted accounting principles.
(b) Norwest will furnish to Goldenbanks all the information concerning
Norwest required for inclusion in a proxy statement or statements to be sent to
the stockholders of Goldenbanks, or in any statement or application made by
Goldenbanks 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
stockholders of Goldenbanks pursuant to the Merger Agreement, and will use its
best efforts to cause the Registration Statement to become effective as soon as
practicable following the receipt of the approvals required by paragraph 7(e)
hereof. 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
Goldenbanks stockholders, at the time of the Goldenbanks stockholders' meeting
referred to in paragraph 4(c) hereof and at the Effective Time
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<PAGE>
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
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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 Goldenbanks or any Goldenbanks
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 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 to the
stockholders of Goldenbanks pursuant to this Agreement and the Merger Agreement
will, upon such issuance and delivery to said stockholders pursuant to the
Merger Agreement, be duly authorized, validly issued, fully paid and
nonassessable. The shares of Norwest Common Stock to be delivered to the
stockholders of Goldenbanks pursuant to the 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 Goldenbanks to obtain all such approvals and consents required by
Goldenbanks.
(h) Norwest will hold in confidence all documents and information
concerning Goldenbanks and Goldenbanks' 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 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 Goldenbanks (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 Goldenbanks.
(i) Norwest will file any documents or agreements required to be filed in
connection with the Merger under the Delaware General Corporation Law.
(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.
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<PAGE>
(k) Norwest shall consult with Goldenbanks 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 Goldenbanks written notice of receipt of the
regulatory approvals referred to in paragraph 7(e).
(m) Neither Norwest nor any Norwest Subsidiary shall take any action which
with respect to Norwest would disqualify the Merger as a "pooling of interests"
for accounting purposes or, except as required by law, disqualify the Merger as
a reorganization under Section 368(a) of the Code. Norwest shall use its best
efforts to obtain and deliver to Goldenbanks, prior to the Effective Date of the
Merger, signed representations from the directors and executive officers of
Norwest to the effect that, except for de minimus dispositions which will not
disqualify the Merger as a pooling of interests, they will not dispose of shares
of Norwest or Goldenbanks during the period commencing 30 days prior to the
Effective Date and ending upon publication by Norwest of financial results
including at least 30 days of combined operations of Goldenbanks and Norwest.
(n) For a period not exceeding fifteen days prior to the Closing Date,
Norwest will permit Goldenbanks 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
Goldenbanks or its representatives shall in any way affect, diminish or
terminate any of the representations, warranties or covenants of Norwest herein
expressed.
(o) Norwest shall pay the first $50,000 of the cost of the environmental
assessments required by paragraph 4(n) hereof and shall pay the entire cost of
the commitments and surveys required by paragraph 4(o) hereof.
(p) With respect to the indemnification of officers and directors and
officers' and directors' insurance, Norwest agrees as follows:
(i) Norwest shall ensure that all rights to indemnification and all
limitations of liability existing in favor of any person who is now, or has
been at any time prior to the date hereof, or who becomes prior to the
Effective Time of the Merger, a director or officer of Goldenbanks or any
Goldenbanks Subsidiary, (an "Indemnified Party" and, collectively, the
"Indemnified Parties") in Goldenbanks's Certificate of Incorporation or By-
laws or similar governing documents of any Goldenbanks Subsidiary, as
applicable in the particular case and as in effect on the date hereof,
shall, with respect to claims arising from (A) facts or events that
occurred before the Effective Time of the Merger, or (B) this Agreement or
any of the transactions contemplated by this Agreement, whether in any case
asserted or arising before or after the Effective Time of the Merger,
survive the Merger and shall continue in full force and effect. Nothing
contained in this paragraph 5(p)(i) shall be deemed to preclude the
liquidation, consolidation or merger of Goldenbanks or any Goldenbanks
Subsidiary, in which case all of such rights to indemnification and
limitations on liability shall be deemed to survive and continue as
contractual rights notwithstanding any such liquidation or consolidation or
merger; provided, however, that in the event of liquidation or sale of
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substantially all of the assets of Goldenbanks, Norwest shall guarantee, to
the extent of the net asset value of Goldenbanks or any Goldenbanks
Subsidiary as of the Effective Date of the Merger, the indemnification
obligations of Goldenbanks or any Goldenbanks Subsidiary to the extent of
indemnification obligations
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of Goldenbanks and the Goldenbanks Subsidiaries described above.
Notwithstanding anything to the contrary contained in this paragraph
5(p)(i), nothing contained herein shall require Norwest to indemnify any
person who was a director or officer of Goldenbanks or any Goldenbanks
Subsidiary to a greater extent than Goldenbanks or any Goldenbanks
Subsidiary is, as of the date of this Agreement, required to indemnify any
such person.
(ii) any Indemnified Party wishing to claim indemnification under
paragraph 5(p)(i), upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Norwest thereof, but the
failure to so notify shall not relieve Norwest of any liability it may have
to such Indemnified Party. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time of the Merger), (A) Norwest shall have the right to assume the defense
thereof and Norwest shall not be liable to any Indemnified Party for any
legal expenses of other counsel or any other expenses subsequently incurred
by such Indemnified Party in connection with the defense thereof, except
that if Norwest elects not to assume such defense or counsel for the
Indemnified Party advises that there are issues which raise conflicts of
interest between Norwest and the Indemnified Party, the Indemnified Party
may retain counsel satisfactory to them, and Norwest shall pay the
reasonable fees and expenses of such counsel for the Indemnified Party
promptly as statements therefor are received; provided, however, that
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Norwest shall be obligated pursuant to this subparagraph (ii) to pay for
only one firm of counsel for all Indemnified Parties in any jurisdiction
unless the use of one counsel for such Indemnified Parties would present
such counsel with a conflict of interest and (B) such Indemnified Party
shall cooperate in the defense of any such matter.
(iii) for a period of three years after the Effective Time of the
Merger, Norwest shall use its best efforts to cause to be maintained in
effect the current policies of directors' and officers' liability insurance
maintained by Goldenbanks (provided that Norwest may substitute therefor
policies of at least the same coverage and amount containing terms and
conditions which are substantially no less advantageous) with respect to
claims arising from facts or events which occurred before the Effective
Time of the Merger; provided, however, that in no event shall Norwest be
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obligated to expend, in order to maintain or provide insurance coverage
pursuant to this paragraph 5(p)(iii), any amount per annum in excess of
125% of the amount of the annual premiums paid as of the date hereof by
Goldenbanks for such insurance (the "Maximum Amount") and provided further
that, prior to the Effective Time of the Merger, Goldenbanks shall notify
the appropriate directors' and officers' liability insurers of the Merger
and of all pending or threatened claims, actions, suits, proceedings or
investigations asserted or claimed against any Indemnified Party, or
circumstances likely to give rise thereto, in accordance with terms and
conditions of the applicable policies. If the amount of the annual
premiums necessary to maintain or procure such insurance coverage exceeds
the Maximum Amount, Norwest shall use reasonable efforts to maintain the
most advantageous policies of directors' and officers' insurance obtainable
for an annual premium equal to the Maximum Amount.
(iv) if Norwest or any of its successors or assigns (A) shall
consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such
consolidation or merger or (B) shall transfer all or substantially all of
its properties and assets to any individual, corporation or other entity,
then and in each such case, proper provision shall be made so that the
successors and assigns of Norwest shall assume the obligations set forth in
this paragraph 5(p).
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(v) the provisions of this paragraph 5(p) are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
6. Conditions Precedent to Obligation of Goldenbanks. The obligation of
Goldenbanks 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 Goldenbanks:
(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 and Merger Co. at or before the Time of Filing.
(c) Goldenbanks 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 shall have been approved by
the affirmative vote of the holders of the percentage of the outstanding shares
of Goldenbanks required for approval of a plan of merger in accordance with the
provisions of Goldenbanks' Articles of Incorporation and the Delaware General
Corporation Law.
(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 and the 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 Goldenbanks pursuant to this Agreement and the Merger Agreement shall have
been authorized for listing on the New York Stock Exchange and the Chicago Stock
Exchange.
(h) Goldenbanks shall have received an opinion, dated the Closing Date, of
counsel to Goldenbanks, substantially to the effect that, for federal income tax
purposes: (i) the Merger will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code; (ii) no gain or loss will be
recognized by the holders of Goldenbanks 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 stockholders of Goldenbanks
will be the same as the basis of Goldenbanks Common Stock exchanged therefor;
and (iv) the holding period of the shares of Norwest Common Stock received by
the stockholders of Goldenbanks will include the
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holding period of the Goldenbanks Common Stock, provided such shares of
Goldenbanks 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.
(j) Prior to the mailing of the Proxy Statement referred to in paragraph
4(c), Goldenbanks and the Board of Directors of Goldenbanks shall have received
an opinion of The Wallach Company addressed to Goldenbanks and the Board of
Directors of Goldenbanks, and for their exclusive benefit, for inclusion in said
Proxy Statement and dated effective as of the date of mailing of such Proxy
Statement, based on such matters as The Wallach Company deems appropriate or
necessary, to the effect that the consideration to be received by stockholders
of Goldenbanks pursuant to the Merger is fair from a financial point of view.
Goldenbanks shall promptly provide a copy of such opinion to Norwest upon
receipt.
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 Goldenbanks and the Goldenbanks Subsidiaries taken as a
whole as if made at the Time of Filing.
(b) Goldenbanks 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) This Agreement and the Merger Agreement shall have been approved by
the affirmative vote of the holders of the percentage of the outstanding shares
of Goldenbanks required for approval of a plan of merger in accordance with the
provisions of Goldenbanks' Articles of Incorporation and the Delaware General
Corporation Law.
(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 Goldenbanks, 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 and
the 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
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requirement relating to Goldenbanks or any Goldenbanks Subsidiary that, in the
good faith judgment of Norwest, is unreasonably burdensome to Norwest.
(f) Goldenbanks and each Goldenbanks Subsidiary shall have obtained any
and all material consents or waivers from other parties to loan agreements,
leases or other contracts material to Goldenbanks' or such subsidiary's business
required for the consummation of the Merger, and Goldenbanks and each
Goldenbanks Subsidiary shall have obtained any and all material permits,
authorizations, consents, waivers and approvals required for the lawful
consummation by it of the 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) The Merger shall qualify as a "pooling of interests" for accounting
purposes and Norwest shall have received opinions to that effect from (i) KPMG
Peat Marwick L.L.P. as to Norwest, and (ii) Deloitte & Touche, LLP as to
Goldenbanks.
(i) At any time since the date hereof the total number of shares of
Goldenbanks Common Stock outstanding and subject to issuance upon exercise
(assuming for this purpose that phantom shares and other share-equivalents
constitute Goldenbanks Common Stock) of all warrants, options, conversion
rights, phantom shares or other share-equivalents, other than any option held by
Norwest, shall not have exceeded 1,366,932.
(j) 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.
(k) Norwest shall have received from the Chief Executive Officer and Chief
Financial Officer of Goldenbanks 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 Goldenbanks
included or incorporated by reference in the Registration Statement are
prepared in accordance with generally accepted accounting principles
applied on a basis consistent with the audited financial statements of
Goldenbanks;
(ii) the amounts reported in the interim quarterly financial
statements of Goldenbanks agree with the general ledger of Goldenbanks;
(iii) the annual and quarterly financial statements of Goldenbanks
and the Goldenbanks 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;
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(iv) from June 30, 1994 (or, if later, since the date of the most
recent unaudited consolidated financial statements of Goldenbanks and the
Goldenbanks 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
Goldenbanks and the Goldenbanks 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 Goldenbanks and the Goldenbanks 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 Goldenbanks and the Goldenbanks 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 Goldenbanks and the Goldenbanks Subsidiaries and have found them to be
in agreement with financial records and analyses prepared by Goldenbanks
included in the annual and quarterly financial statements, except as
disclosed in such letters.
(l) Goldenbanks and the Goldenbanks Subsidiaries considered as a whole
shall not have sustained since June 30, 1994 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.
(m) There shall be no reasonable basis for any proceeding, claim or action
of any nature seeking to impose, or that could result in the imposition on
Goldenbanks or any Goldenbanks Subsidiary of, any liability relating to the
release of hazardous substances as defined 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.
(n) Since June 30, 1994, 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 Goldenbanks and the Goldenbanks 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).
(o) Goldenbanks shall have established the accruals and reserves described
in paragraph 4(m) hereof.
(p) The long-term debt of Goldenbanks, which is payable to Boatmen's Bank
of Oklahoma with a principal balance of $2,946,429 on June 30, 1994, shall have
been paid in full as of the Effective Time of the Merger.
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(q) Goldenbanks shall own all of the outstanding capital stock of the
Goldenbanks Subsidiaries free and clear of any lien, claim, charge, option,
encumbrance or agreement with respect thereto as of the Effective Time of the
Merger.
8. Employee Benefit Plans. Each person who is an employee of Goldenbanks
or any Goldenbanks Subsidiary as of the Effective Date of the Merger
("Goldenbanks Employees") shall be eligible for participation in the employee
welfare and retirement plans of Norwest, as in effect from time to time, as
follows:
(a) Employee Welfare Benefit Plans. Each Goldenbanks 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 (provided,
however, that it is Norwest's intent that the transition from the Goldenbanks
plans to the Norwest plans be facilitated without gaps in coverage for
participants in the plans and without duplication of costs caused by the
continuation of such plans after coverage is available under Norwest plans):
Medical Plan
Dental Plan
Vision Plan
Short Term Disability Plan
Long Term Disability Plan
Long Term Care Plan
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 (except as provided below)
Vacation Program
For the purpose of determining each Goldenbanks Employee's benefit for the year
in which the Merger occurs under the Norwest vacation program, vacation taken by
an Goldenbanks Employee in the year in which the Merger occurs will be deducted
from the total Norwest benefit. Goldenbanks Employees shall receive past
service credit for the purpose of determining benefits under the Norwest
vacation program.
No Goldenbanks Employee who is a participant in the Goldenbanks Salary
Continuation Plan on the date of this Agreement shall be eligible to participate
in the Norwest Severance Pay Plan unless such Goldenbanks Employee expressly
waives all rights under the Goldenbanks Salary Continuation Plan. Goldenbanks
Employees who participate in the Norwest Severance Pay Plan shall receive past
service credit for the purpose of determining benefits under such plan.
(b) Employee Retirement Benefit Plans.
----------------------------------
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Each Goldenbanks 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 Goldenbanks
and the Goldenbanks 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 Goldenbanks 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 October 1, 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 Goldenbanks 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; or
(iv) by Goldenbanks, within five business days after the meeting of
the stockholders of Goldenbanks held to vote on this Agreement and the
Merger Agreement, if the Norwest Measurement Price is less than $21. The
"Norwest Measurement Price" is defined as the average of the closing prices
of a share of Norwest Common Stock as reported on the consolidated tape of
the New York Stock Exchange during the period of 15 trading days ending on
the day immediately preceding such meeting of stockholders. If a Common
Stock Adjustment occurs with respect to the shares of Norwest Common Stock
between the date of this Agreement and the Goldenbanks stockholder meeting
date, the closing prices for Norwest Common Stock shall be appropriately
and proportionately adjusted for the purposes of the definitions above so
as to be comparable to what the price would have been if the record date of
the Common Stock Adjustment had been immediately following the Effective
Time of the Merger.
(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. Except as otherwise provided in paragraphs 4(n) and 5(o)
hereof, all expenses in connection with this Agreement and the transactions
contemplated hereby, including
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without limitation legal and accounting fees, incurred by Goldenbanks and
Goldenbanks Subsidiaries shall be borne by Goldenbanks, and all such expenses
incurred by Norwest and Merger Co. 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 except as
otherwise expressly provided herein, 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 Goldenbanks:
Goldenbanks of Colorado, Inc.
1301 Jackson Street
Golden, CO 80401
Attention: William J. Fortune
With a copy to:
Holland & Hart
555 Seventeenth Street - Suite 2900
Denver, CO 80201
Attention: Dennis M. Jackson
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.
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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.
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 stockholders of
Goldenbanks shall be made which changes in a manner adverse to such stockholders
the consideration to be provided to said stockholders pursuant to this Agreement
and the 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 or the Merger Agreement shall survive the
Merger or except as set forth in paragraph 9(b), the termination of this
Agreement. Paragraph 10 shall survive the Merger. This paragraph shall not
apply to covenants and agreements which by their terms are intended to be
performed after the Effective Time of 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 GOLDENBANKS OF COLORADO, INC.
By: /s/ Kenneth R. Murray By: /s/ J. William Fortune
------------------------ -------------------------
Its: Executive Vice President Its: President and Chairman
------------------------ -------------------------
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<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
Between
GOLDENBANKS OF COLORADO, INC.
a Delaware corporation
(the surviving corporation)
and
MERGER CO.
a Delaware corporation
(the merged corporation)
This Agreement and Plan of Merger dated as of __________, 19__, between
GOLDENBANKS OF COLORADO, INC., a Delaware corporation (hereinafter sometimes
called "Goldenbanks" and sometimes called the "surviving corporation") and
MERGER CO., a Delaware corporation ("Merger Co.")(said corporations being
hereinafter sometimes referred to as the "constituent corporations"),
WHEREAS, Merger Co., a wholly-owned subsidiary of Norwest Corporation,
was incorporated by Articles of Incorporation filed in the office of the
Secretary of State of the State of Delaware on _______, 19__, and said
corporation is now a corporation subject to and governed by the provisions of
the Delaware General Corporation Law. Merger Co. has authorized capital stock
of ________ shares of common stock having a par value of $_____ per share
("Merger Co. Common Stock"), of which _________ shares were outstanding as of
the date hereof; and
WHEREAS, Goldenbanks was incorporated by Articles of Incorporation filed
in the office of the Secretary of State of the State of Delaware on ________,
19__ and said corporation is now a corporation subject to and governed by the
provisions of the Delaware General Corporation Law. Goldenbanks has authorized
capital stock of ________ shares of Common Stock, par value $_____ per share
("Goldenbanks Common Stock") of which _______ shares were outstanding and no
shares were held in the treasury as of ___________ , 19__; and
WHEREAS, Norwest Corporation and Goldenbanks are parties to an Agreement
and Plan of Reorganization dated as of __________ , 19__ (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 corporations 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 Goldenbanks, with Goldenbanks continuing as the surviving
corporation, on the terms and conditions hereinafter set forth in accordance
with the provisions of the Delaware General Corporation Law, 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 Sections 368(a)(1)(A) and
368(a)(2)(E) of the Internal Revenue Code;
NOW, THEREFORE, the parties hereto, subject to the approval of the
shareholders of Merger Co., in consideration of the premises and of the mutual
covenants and agreements
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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
Goldenbanks pursuant to the laws of the State of Delaware, and do hereby agree
upon, prescribe and set forth the terms and conditions of the merger of Merger
Co. with and into Goldenbanks, the mode of carrying said merger into effect, the
manner and basis of converting the shares of Goldenbanks Common Stock into
shares of common stock of Norwest of the par value of $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
Goldenbanks, 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 ________________.
SECOND: The Articles of Incorporation of Goldenbanks 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 further amended
according to law:
[Amend to change name, number of directors, etc.]
THIRD: The By-Laws of Goldenbanks 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: The directors of Merger Co. at the time of merger shall be and
remain 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 Goldenbanks
Common Stock into cash or shares of shares of Norwest Common Stock shall be as
follows:
1. Each of the shares of Goldenbanks 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 1.9876 shares of
Norwest Common Stock.
2. As soon as practicable after the merger becomes effective, each holder
of a certificate for shares of Goldenbanks 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 set forth in paragraph 1 above. Until so
surrendered each certificate which, immediately prior to the time of
merger, represented shares of Goldenbanks Common Stock shall not be
transferable on the books of the surviving corporation but
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shall be deemed to evidence the right to receive (except for the payment of
dividends as provided below) ownership of the number of whole shares of
Norwest Common Stock into which such shares of Goldenbanks Common Stock
have been converted on the basis above set forth; provided, however, until
the holder of such certificate for Goldenbanks Common Stock 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, if any, 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 or readjustment, or if a stock dividend thereon shall be declared
with a record date within such period (a "Common Stock Adjustment"), then
(i) the number of shares of Norwest Common Stock, if any, into which a
share of Goldenbanks 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
Goldenbanks Common Stock shall be converted will equal the number of shares
of Norwest Common Stock which the the holders of a share of Goldenbanks
Common Stock would have received pursuant to such Common Stock Adjustment
had the record date therefor been immediately following the time of merger
and (ii) if a Norwest Common Stock Adjustment occurs between the date of
the Reorganization Agreemnet and any date that the closing price of a share
of Norwest Common Stock is used for purposes of the Reorganization
Agreement or 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/or 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 tape of the New York Stock Exchange for each of the five (5)
trading days immediately preceding the meeting of shareholders held to vote
on the 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:
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1. The effective date of merger shall be the date on which 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 Delaware;
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 Goldenbanks in accordance with the Delaware General
Corporation Law; and
b. Articles of merger (with this Agreement attached as part thereof)
with respect to the merger, setting forth the information required by
the Delaware General Corporation Law, 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 Goldenbanks and by the Secretary or an Assistant
Secretary of Goldenbanks, and shall be filed in the office of the
Secretary of State of the State of Delaware in accordance with the
Delaware General Corporation Law.
2. The merger shall become effective as of 11:59 p.m., Denver, Colorado
time (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 Goldenbanks shall continue as the surviving
corporation.
2. The merger shall have the other effects prescribed by Section _______
of the Delaware General Corporation Law.
NINTH: The following provisions shall apply with respect to the merger
provided for by this Agreement:
1. The surviving corporation shall (i) file with the Secretary of State of
the State of Delaware an agreement that it may be served with process
within or without the State of Delaware in the courts of the State of
Delaware in any proceeding for the enforcement of any obligation of Merger
Co. and in any proceeding for the enforcement of the rights of a dissenting
shareholder of Merger Co. against Goldenbanks, and (ii) file with said
Secretary of State an agreement that it will promptly pay to the dissenting
shareholders of Merger Co. the amount, if any, to which such dissenting
shareholders will be entitled under the provisions of the Delaware General
Corporation Law with respect to the rights of dissenting shareholders.
2. The registered office of the surviving corporation in the State of
Delaware shall be _______________, and the name of the registered agent of
Goldenbanks at such address is The Corporation Trust Company.
3. If at any time the surviving corporation 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 the surviving
corporation 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
A-35
<PAGE>
officers and directors of Goldenbanks 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 the surviving corporation and otherwise carry out
the purposes of this Agreement.
4. 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.
5. 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
Delaware.
6. This Agreement cannot be altered or amended except pursuant to an
instrument in writing signed by both of the parties hereto.
7. At any time prior to the filing of Articles of Merger with the
Secretary of State of the State of Delaware, subject to the provisions of
the Reorganization Agreement this Agreement may be terminated upon approval
by the Boards of Directors of either of the constituent corporations
notwithstanding the approval of the shareholders of either constituent
corporation.
A-36
<PAGE>
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.
GOLDENBANKS OF COLORADO, INC.
By: _________________________________
Its: _________________________________
(Corporate Seal)
Attest:
__________________________
Secretary
MERGER CO.
By: ________________________________
Its: ________________________________
(Corporate Seal)
Attest:
___________________________
Secretary
A-37
<PAGE>
EXHIBIT B
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
Goldenbanks of Colorado, Inc., a Delaware corporation ("Goldenbanks").
Pursuant to an Agreement and Plan of Reorganization, dated as of ________,
1994, (the "Reorganization Agreement"), between Goldenbanks and Norwest
Corporation, a Delaware corporation ("Norwest") it is contemplated that a
wholly-owned subsidiary of Norwest will merge with and into Goldenbanks (the
"Merger") and as a result, I will receive in exchange for each share of Common
Stock, par value $0.05 per share, of Goldenbanks ("Goldenbanks 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 Goldenbanks 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 Goldenbanks 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, 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
A-38
<PAGE>
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
Goldenbanks.
Sincerely,
_________________________
A-39
<PAGE>
APPENDIX B
OPINION OF THE WALLACH COMPANY, INC.
<PAGE>
[LETTERHEAD OF THE WALLACH COMPANY APPEARS HERE]
March 22, 1995
The Board of Directors
Goldenbanks of Colorado, Inc.
1301 Jackson Street
Golden, CO 80401
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the common stockholders of Goldenbanks of Colorado, Inc.
("Goldenbanks") of the consideration in the proposed merger (the "Merger") of
Goldenbanks with and into Norwest Corporation ("Norwest") pursuant to the
Agreement and Plan of Reorganization dated November 22, 1994 (the "Agreement").
Under the terms of the Agreement, each outstanding share of Goldenbanks common
stock, $0.05 par value, will be exchanged for 1.9876 shares of Norwest common
stock, $1 2/3 par value (the "Consideration").
In arriving at our opinion, we have, among other things:
i. reviewed certain publicly available financial statements and
other financial information not publicly available for
Goldenbanks;
ii. reviewed the current condition and growth prospects for
Goldenbanks and its subsidiary banks, including financial
projections prepared by Goldenbanks' management;
iii. discussed the past and current operations and financial
conditions and the prospects of Goldenbanks with Goldenbanks
management;
iv. reviewed Goldenbanks' historical stock trading activity and
considered the prospect for value, liquidity, dividend yield and
appreciation if Goldenbanks were to remain independent;
v. evaluated the economic, banking and competitive climate in
Colorado, with special consideration given to recent transactions
that may have increased the competitive environment in the
financial services and banking industry;
vi. reviewed the process used in marketing Goldenbanks, including a
review of the potential acquirors contacted and their responses
relative to a potential acquisition of Goldenbanks;
- B-1 -
<PAGE>
vii. compared the various offers received from interested parties and
determined that the Norwest offer represented the highest value
in absolute terms;
viii. compared the Norwest offer to recent transactions involving
other institutions of similar size in Colorado and the Rocky
Mountain region;
ix. examined the price and trading activity for Norwest;
x. analyzed the price obtainable for Goldenbanks' shares at this
time compared with the risks involved and possible price
available at a later time;
xi. reviewed the implications for Goldenbanks shareholders receiving
Norwest stock with regards to prospects for value, liquidity,
dividend yield and appreciation;
xii. reviewed certain publicly available financial statements of
Norwest, visited certain Norwest facilities in Minneapolis and
discussed the prospects of Norwest with Norwest management; and
xiii. reviewed the Agreement.
We have assumed without independent verification the accuracy and
completeness of the financial and other information regarding Goldenbanks that
was provided to us or obtained from publicly available sources. We have not
prepared or acquired an independent valuation or appraisal of any of the assets
of Goldenbanks and we have assumed without independent verification that the
aggregate allowance for loan losses of Goldenbanks is adequate to cover such
losses. With respect to business plans and forecasts, we have assumed that they
have been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of Goldenbanks as to the future
performance of Goldenbanks, its subsidiaries and business units. Furthermore, we
have assumed that the Merger will be consummated on a timely basis in accordance
with its terms and pursuant to the Agreement. We have also taken into account
our assessment of general economic, market and financial conditions as they
exist, as well as our experience in connection with similar transactions and
securities valuations generally. Our opinion necessarily is based upon
conditions as they exist and can be evaluated as of the date of this opinion.
The Wallach Company is an investment banking firm engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
private placements, and valuations for corporate and other purposes. The Wallach
Company, as the Company's financial adviser, assisted with the marketing and
negotiations leading to the Agreement for which it has and will receive
compensation.
- B-2 -
[LETTERHEAD OF THE WALLACH COMPANY APPEARS HERE]
<PAGE>
Based on our analysis of the foregoing, the assumptions described above and
upon such other factors we deem relevant, it is our opinion that, as of the date
hereof, the Consideration is fair to Goldenbanks' shareholders from a financial
point of view.
- B-3 -
[LETTERHEAD OF THE WALLACH COMPANY APPEARS HERE]
<PAGE>
APPENDIX C
GOLDENBANKS'S ANNUAL REPORT ON FORM 10-KSB
FOR THE FISCAL YEAR ENDED JUNE 30, 1994
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1994. Commission File No. 0-7463
GOLDENBANKS OF COLORADO, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-0632356
------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
1301 Jackson Street, Golden, Colorado 80401
--------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 279-4563
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
The Registrant has no securities which are registered pursuant
to Section 12(b) of the Act.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Title of each class
-------------------
Common Stock with a par value of $.05 per share
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
State the issuer's revenues for most recent fiscal year.
$24,675,500
State the aggregate market value of the voting stock held
by non-affiliates of the Registrant as of August 16, 1994.
Common Stock, $.05 Par Value - $26,982,430
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.05 Par Value
1,366,932 shares outstanding on August 16, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual Proxy Statement for the year ended
June 30, 1994, are incorporated by reference into Part III.
Transitional small business disclosure format (check one):
Yes No X
--- ---
1
<PAGE>
GOLDENBANKS OF COLORADO, INC.
ANNUAL REPORT FOR THE YEAR ENDED
JUNE 30, 1994
PART I
ITEM 1. BUSINESS
As of June 30, 1994, Goldenbanks of Colorado, Inc., a registered bank holding
company (the Company), had no business other than serving as the controlling
shareholder for its subsidiaries, Goldenbank, N.A., its branches in Arvada and
Gilpin County, Goldenbank, N.A. Westminster, Goldenbank, N.A. Englewood, and
Goldenbank, Applewood (collectively called the Banks), and Goldenbanks Service
Corp.
Goldenbank, Applewood (formerly Citywide Bank of Applewood), located in the city
of Wheat Ridge, was acquired in November, 1993. This acquisition added
approximately $45 million in assets and expanded our market share in the west
Denver metro area.
Goldenbank, N.A., as of June 30, 1994, employs 137 full-time and 23 part-time
employees. Goldenbank, N.A., which was nationally chartered on May 27, 1937,
continues to hold a position of leadership and stability in the Denver metro
area. Deposits as of June 30, 1994, for Goldenbank and its branches total
$254,719,533.
Goldenbank, N.A. is located in Golden, Colorado, with a population of 13,700.
Golden is also the county seat of Jefferson County. Jefferson County's present
population is 474,500 according to the Jefferson County Planning and Zoning
Office.
Several major employers are located in Golden, including the Coors Brewing
Company, National Renewable Energy Laboratory, and the Colorado School of Mines.
The Adolph Coors Company (Coors) was founded in 1873 and is America's third
largest brewer and one of the 265 largest publicly traded industrial
corporations in the United States. Coors employs 6,200 employees.
Colorado School of Mines (CSM) is a world renowned school of engineering and
applied sciences with a special focus on the Earth's resources. CSM offers
undergraduate degrees in 11 fields, and graduate degrees in 16 disciplines.
Research at the School focuses on the environment, fuels and energy, materials,
robotics, and exploration, extraction and production of the world's resources.
The National Renewable Energy Laboratory (NREL) was established by the Solar
Energy Research, Development, and Demonstration Act of 1974, as a national
center for federally sponsored solar energy research and development. Located in
Golden, NREL employs 1,000 and is expected to grow to 1,130 employees in the
near future.
As a result of changes in banking laws, Colorado banks can now, under the
Colorado Branch Banking Statutes, operate branch banks. Goldenbank, N.A.
operates two branches: Gilpin County, which converted to a branch on August 1,
1991, and the Arvada location, which became a branch on April 1, 1992.
The Arvada branch, located in Jefferson County and in the city of Arvada, opened
August, 1986. The staff numbers 12 full-time employees and 5 part-time
employees.
The Gilpin County branch, located in the city of Black Hawk, was acquired from
2
<PAGE>
the FDIC in July, 1985. It has a staff of 5 full-time employees and 1 part-time
employee.
Goldenbank, N.A. Westminster, which is located in north Jefferson County and in
the city of Westminster, opened in October, 1984. Current staff is 10 full-time
employees and 7 part-time employees. Deposits as of June 30, 1994, were
$13,869,022.
Goldenbank, N.A. Englewood, which was acquired from the FDIC in May, 1986, is
located in Arapahoe County. The bank currently operates with 17 full-time
employees and 2 part-time employees. On June 30, 1994, deposits were
$26,891,450.
The newly acquired Goldenbank, Applewood has 26 full-time employees and 3 part-
time employees. Deposits as of June 30, 1994, were $47,007,804.
The Banks are engaged in the general banking business offering individuals and
businesses a variety of checking and savings accounts, investment accounts, safe
deposit facilities, access cards, and other specialized services. In addition,
the Banks offer consumer, commercial, real estate, and mortgage loans at all
locations.
The Banks are located in the Denver Metropolitan area. The Banks must compete
with 252 other commercial banks for market share as well as over 200 savings and
loans and credit unions. In addition, competition comes from mortgage,
insurance, and finance companies, brokerage houses, and other large corporations
(including AT&T, GMAC and G.E.).
Goldenbanks Service Corp. provides credit life and health and accident insurance
on loans made by the Banks. Goldenbanks Service Corp. was also established to
serve as an advertising agency for the Company and its subsidiaries.
3
<PAGE>
ITEM 1. BUSINESS - (Continued)
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY:
INTEREST RATES AND INTEREST DIFFERENTIAL
The Consolidated Average Balance Sheets and table of Consolidated Net
Interest Earnings for the years ended June 30, 1994, 1993, and 1992, follow:
<TABLE>
<CAPTION>
June 30
-------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
ASSETS (In Thousands)
Cash and due from banks $ 19,439 $ 13,973 $ 12,668
Interest bearing deposits 317
Federal funds sold 11,589 13,569 15,803
Investment securities:
United States Government obligations 75,462 52,399 43,867
Obligations of states and political subdivisions 23,481 20,043 15,704
Other investments 68,303 66,382 56,001
Federal Reserve Bank stock 301 301 301
Loans, net of unearned discount 133,570 103,407 97,018
Less: Allowance for loan losses (4,960) (4,063) (3,736)
-------- -------- --------
Net loans 128,610 99,344 93,282
Premises and equipment, net 3,509 1,763 1,767
Cost of businesses acquired in excess
of net assets 1,389 792 792
Other assets 4,685 3,855 5,452
-------- -------- --------
TOTAL ASSETS $336,768 $272,421 $245,954
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 72,785 $ 47,294 $ 37,854
Interest bearing:
Money market accounts 52,993 43,515 40,505
NOW accounts 64,560 52,297 47,530
Savings 53,049 40,092 27,631
Time certificates of $100,000 or more 11,701 10,679 12,381
Time certificates of less than $100,000 47,279 50,030 55,322
-------- -------- --------
Total deposits 302,367 243,907 221,223
Short-term borrowings 3,830 3,048 2,125
Accrued expenses and other liabilities 3,318 2,695 2,159
Long-term debt 2,632 2,443 3,676
-------- -------- --------
TOTAL LIABILITIES 312,147 252,093 229,183
-------- -------- --------
Stockholders' equity:
Common stock 68 68 68
Capital surplus 886 886 886
Retained earnings 23,667 19,374 15,817
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY 24,621 20,328 16,771
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $336,768 $272,421 $245,954
======== ======== ========
</TABLE>
4
<PAGE>
ITEM 1. BUSINESS - (Continued)
<TABLE>
CONSOLIDATED NET INTEREST EARNINGS
<CAPTION>
Years Ended June 30
---------------------------------------------------------------------------------
1994 1993 1992
------------------------- ------------------------- -------------------------
Daily Daily Daily
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ---- ------- -------- ----
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST EARNING
ASSETS
Interest bearing
deposits $ 0 $ 0 .0% $ 0 $ 0 .0% $ 317 $ 26 8.20%
Loans (1)(2) 133,570 13,125 9.83 103,407 10,428 10.08 97,018 10,496 10.82
Taxable investment
securities 152,699 7,398 4.84 126,812 7,701 6.07 105,726 8,375 7.92
Nontaxable investment
securities (2) 14,848 1,300 8.76 12,313 1,277 10.37 10,147 1,321 13.02
Federal funds sold 11,589 363 3.13 13,569 402 2.96 15,803 689 4.36
-------- ------- -------- ------- -------- -------
TOTAL $312,706 22,186 7.09 $256,101 19,808 7.73 $229,011 20,907 9.13
======== ------- ======== ------- ======== -------
INTEREST BEARING
LIABILITIES
Money market accounts $ 52,993 1,315 2.48 $ 43,515 1,264 2.90 $ 40,505 1,711 4.22
NOW accounts 64,560 1,168 1.81 52,297 1,114 2.13 47,530 1,701 3.58
Savings 53,049 1,418 2.67 40,092 1,261 3.15 27,631 1,207 4.37
Time certificates of
deposit under $100,000 47,279 1,950 4.12 50,030 2,271 4.54 55,322 3,301 5.97
Time certificates of
deposit $100,000 or more 11,701 344 2.94 10,679 385 3.61 12,381 603 4.87
Short-term borrowings 3,830 114 2.98 3,048 105 3.44 2,125 129 6.07
Long-term debt 2,632 186 7.07 2,443 238 9.74 3,676 344 9.36
-------- ------- -------- ------- -------- -------
TOTAL $236,044 6,495 2.75 $202,104 6,638 3.28 $189,170 8,996 4.76
======== ------- ======== ------- ======== -------
NET INTEREST SPREAD 4.34% 4.45% 4.37%
==== ==== ====
NET INTEREST INCOME $15,691 $13,170 $11,911
======= ======= =======
NET YIELD ON INTEREST
EARNING ASSETS 5.02% 5.14% 5.20%
==== ==== ====
</TABLE>
(1) Loans are net of unearned discount. Nonaccrual loans are included in
average amounts outstanding. Loan fees are included in interest income as
follows: 1994 - $1,109,830; 1993 - $597,182; 1992 - $476,807.
(2) Interest income on tax-exempt loans and securities includes the effect of
taxable equivalent adjustments in adjusting interest to a fully taxable
basis. A 34% tax rate was used.
5
<PAGE>
ITEM 1. BUSINESS - (Continued)
The following table sets forth for the years ended June 30, 1994, and 1993, a
summary of the changes in interest earned and interest paid resulting from
changes in volume and rates.
<TABLE>
<CAPTION>
1994 Compared 1993 Compared
to 1993 to 1992
----------------------------- --------------------------------
Increase(Decrease) Due to (1)
---------------------------------------------------------------
Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- ---
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Interest bearing deposits $ 0 $ 0 $ 0 $ (26) $ 0 $ (26)
Loans (2)(3) 2,970 (273) 2,697 668 (736) (68)
Taxable investment securities 1,412 (1,715) (303) 1,491 (2,165) (674)
Non-taxable investment
securities (2) 240 (217) 23 253 (297) (44)
Federal funds sold (61) 22 (39) (88) (199) (287)
------ ------- ------ ------ ------- -------
TOTAL 4,561 (2,183) 2,378 2,298 (3,397) (1,099)
------ ------- ------ ------ ------- -------
Interest expense:
Money market accounts 251 (200) 51 120 (567) (447)
NOW accounts 237 (183) 54 157 (744) (587)
Savings 366 (209) 157 450 (396) 54
Time certificates of
deposit under $100,000 (121) (200) (321) (294) (736) (1,030)
Time certificates of
deposit $100,000 or more 35 (76) (41) (75) (143) (218)
Short-term borrowings 25 (16) 9 44 (68) (24)
Long-term debt 17 (69) (52) (120) 14 (106)
------ ------- ------ ------ ------- -------
TOTAL 810 (953) (143) 282 (2,640) (2,358)
------ ------- ------ ------ ------- -------
NET INTEREST INCOME $3,751 $(1,230) $2,521 $2,016 $ (757) $ 1,259
====== ======= ====== ====== ======= =======
</TABLE>
(1) The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of change in each.
(2) Interest income on tax-exempt loans and securities includes the effect of
taxable equivalent adjustments in adjusting interest to a fully taxable
basis. A 34% tax rate was used.
(3) Loans are net of unearned discount. Nonaccrual loans are included in
average amounts outstanding. Loan fees are included in interest income as
follows: 1994 - $1,109,830; 1993 - $597,182; 1992 - $476,807.
6
<PAGE>
ITEM 1. BUSINESS - (Continued)
INVESTMENT PORTFOLIO
The carrying amounts of investment securities at the dates indicated are
summarized as follows:
<TABLE>
<CAPTION>
June 30
-------------------------------
1994 1993 1992
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
U.S. Government obligations $ 83,977 $ 59,659 $ 44,241
Obligations of states and
political subdivisions 22,738 26,414 16,321
Other investments 66,530 62,312 61,891
Federal Reserve Bank stock 301 301 301
-------- -------- --------
Total $173,546 $148,686 $122,754
======== ======== ========
</TABLE>
The following table shows the projected cash flow of investment securities,
except for Federal Reserve Bank stock, at June 30, 1994, and the weighted
average yields (for tax-exempt obligations on a fully taxable basis assuming a
34% tax rate) of such securities.
An analysis of historical securities payments on Collateralized Mortgage
Obligations, Asset Backed Securities, and certain U.S. Agency Securities was
used to project the cash flow of these securities. The payment schedule as
projected in each security's prospectus was reviewed, analyzed, and compared to
actual payments received. In the opinion of management, this cash flow table is
a better reflection of the maturities of these securities than the contractual
maturities.
<TABLE>
<CAPTION>
Investment Securities
-----------------------------------------
Obliga-
U.S. tions of
Govern- States and
ment Political Other
Obliga- Sub- Invest-
tions Divisions ments Total
----- --------- ----- -----
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C>
Within one year:
Amount $36,135 $ 9,054 $28,669 $ 73,858
Yield 5.87% 8.09% 4.65% 5.67%
After one but within five years:
Amount 47,754 11,010 35,659 94,423
Yield 5.11% 5.99% 4.68% 5.05%
After five but within ten years:
Amount 88 787 2,181 3,056
Yield 8.17% 7.22% 4.70% 5.45%
After ten years:
Amount 0 1,887 21 1,908
Yield 0% 10.42% 0.0% 10.31%
------- ------- ------- --------
Total:
Amount $83,977 $22,738 $66,530 $173,245
======= ======= ======= ========
Yield 5.44% 7.23% 4.67% 5.38%
==== ==== ==== ====
</TABLE>
7
<PAGE>
ITEM 1. BUSINESS - (Continued)
The following table shows contractual maturities of investment securities,
except for Federal Reserve Bank stock, at June 30, 1994, and the weighted
average yields (for tax-exempt obligations on a fully taxable basis assuming
a 34% tax rate) of such securities.
<TABLE>
<CAPTION>
Investment Securities
----------------------------------------------
Obliga-
U.S. tions of
Govern- States and
ment Political Other
Obliga- Sub- Invest-
tions Divisions ments Total
----- --------- ----- -----
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C>
Within one year:
Amount $35,660 $ 9,054 $ 0 $ 44,714
Yield 4.87% 8.34% 0% 5.57%
After one but within five years:
Amount 46,882 11,010 22,800 80,692
Yield 3.83% 5.99% 4.34% 4.26%
After five but within ten years:
Amount 619 787 24,575 25,981
Yield 8.69% 7.22% 4.59% 4.77%
After ten years:
Amount 816 1,887 19,155 21,858
Yield 8.17% 10.42% 4.89% 5.49%
------- ------- ------- --------
Total:
Amount $83,977 $22,738 $66,530 $173,245
======= ======= ======= ========
Yield 4.35% 7.23% 4.59% 4.83%
==== ==== ==== ====
</TABLE>
At June 30, 1994, the following table lists securities held whose book value as
to any single issuer exceeded 10 percent of stockholders' equity.
<TABLE>
<CAPTION>
Book Value Market Value
---- ----- ------ -----
<S> <C> <C>
Collateralized mortgage obligations:
FHLMC 1679A $2,917,491 $2,766,721
FHLMC 1604B 2,752,769 2,656,339
---------- ----------
TOTAL $5,670,260 $5,423,060
========== ==========
</TABLE>
8
<PAGE>
ITEM 1. BUSINESS - (Continued)
LOAN PORTFOLIO
The amounts of loans outstanding at the indicated dates are shown in the
following table according to type of loan.
<TABLE>
<CAPTION>
June 30
---- --
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial, industrial,
and agricultural (1) $ 63,341,987 $ 38,596,854 $30,085,148 $33,113,337 $36,466,556
Real estate -
construction 20,927,863 10,374,385 7,812,745 3,622,222 4,096,537
Real estate - mortgage 27,013,281 23,079,507 25,117,718 27,090,117 28,204,002
Instalment (1) 46,940,323 34,893,467 31,834,758 29,747,469 26,367,074
Industrial revenue and
municipal loans 2,452,164 2,675,878 3,753,848 3,721,086 4,079,032
------------ ------------ ----------- ----------- -----------
TOTAL $160,675,618 $109,620,091 $98,604,217 $97,294,231 $99,213,201
============ ============ =========== =========== ===========
</TABLE>
(1) Net of unearned discount.
The following table shows the amounts of loans (excluding real estate mortgage
loans and instalment loans) outstanding as of June 30, 1994, according to
loan maturity dates. Also, the amounts due after one year are classified
according to the sensitivity to changes in interest rates.
<TABLE>
<CAPTION>
Maturity
----------------------------------------------------------
After One But After
(In Thousands) Within One Year Within Five Years Five Years Total
----------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial, industrial,
and agricultural $41,758 $21,360 $ 224 $63,342
Real estate-construction 17,648 3,280 -- 20,928
Industrial revenue and
municipal loans 36 263 2,153 2,452
------- ------- ------ -------
TOTAL $59,442 $24,903 $2,377 $86,722
======= ======= ====== =======
<CAPTION>
Interest Sensitivity
---------------------------------
(In Thousands) Fixed Rate Variable Rate
---------------------------------
<S> <C> <C>
Due after one but within five years $16,084 $8,819
Due after five years 2,357 20
------- ------
TOTAL $18,441 $8,839
======= ======
</TABLE>
9
<PAGE>
ITEM 1. BUSINESS - (Continued)
The following table presents information concerning nonperforming loans.
<TABLE>
<CAPTION>
June 30
-------
(In Thousands) 1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $1,442 $1,095 $1,535 $2,963 $2,576
Accruing loans contractually past due
ninety days or more 7 23 5 7 58
Loans whose terms have been renegotiated to
provide a reduction or deferral of interest
or principal because of a deterioration in
the financial position of the borrower 100 716 885 899 1,198
Interest that would have been recorded if
the nonaccrual loans had been current
throughout the year 79 92 203 397 295
Interest actually recorded 24 2 8 243 182
</TABLE>
The loan portfolio is internally reviewed and classified by management based
upon all available information. Loans with identified credit weaknesses are
reviewed by the Banks' Loan Committees monthly. If there is a serious doubt
regarding a borrower's ability to comply with present loan repayment terms, the
loan is immediately placed on nonaccrual. The accrual of interest income is
generally discontinued when a loan becomes ninety days past due as to principal
and interest.
A loan is listed as past due if it is not listed as nonaccrual and the interest
and/or principal is past due 90 days, regardless of the reason. Management
considers the collectibility of these loans to be reasonably possible.
Loans are renegotiated in some instances to provide a reduction or deferral of
interest or principal because of a deterioration in the financial condition of a
borrower. Once a loan is placed in this category, it remains until the terms are
no longer more favorable than those of other customers. The effect on earnings
of interest lost on renegotiated loans is not material.
10
<PAGE>
ITEM 1. BUSINESS - (Continued)
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes average loan balances; changes in the allowance
for possible loan losses arising from loans charged off, by loan category; and
additions to the allowance which have been charged to expense.
<TABLE>
<CAPTION>
June 30
----------------------------------------------
1994 1993 1992 1991 1990
(Dollars Amounts in Thousands) ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average amount of loans outstanding (1) $133,570 $103,407 $97,018 $98,888 $100,648
======= ======= ====== ====== =======
Allowance for loan losses at beginning
of period $4,302 $3,738 $3,406 $3,279 $3,013
Applewood allowance for loan losses (2) 1,258
Loans charged off:
Commercial, industrial, and agricultural (330) (1) (381) (995) (1,212)
Real estate-construction 0 0 0 0 0
Real estate-mortgage (17) (16) (464) (301) (418)
Industrial revenue and municipal loans 0 0 0 0 (50)
Instalment (143) (185) (185) (230) (317)
------- ------- ------ ------ -------
TOTAL LOANS CHARGED OFF (490) (202) (1,030) (1,526) (1,997)
======= ======= ====== ====== =======
Recoveries of loans previously charged off:
Commercial, industrial, and agricultural 338 245 222 210 133
Real estate-construction 0 0 0 0 3
Real estate-mortgage 130 13 8 66 8
Industrial revenue and municipal loans 0 0 0 0 0
Instalment 72 77 71 78 105
--- --- --- --- ---
TOTAL RECOVERIES 540 335 301 354 249
--- --- --- --- ---
Net loans recovered (charged off) 50 133 (729) (1,172) (1,748)
Additions to allowance charged to operating
expense (436) 431 1,061 1,299 2,014
------- ------- ------ ------ -------
Allowance for loan losses at end of
period $5,174 $4,302 $3,738 $3,406 $3,279
======= ======= ====== ====== =======
Ratio of net recoveries (charge-offs)
during the year to average loans
outstanding .04% .13% (.75)% (1.19)% (1.74)%
=== === === ==== ====
</TABLE>
(1) Net of unearned discount.
(2) Applewood allowance for loan losses at date of acquisition.
The allowance for loan losses is established through a provision for loan losses
charged to operations. The allowance is determined based on management's
evaluation of the loan portfolio in light of economic conditions, changes in the
nature and volume of the loan portfolio, loan loss experience of prior years,
and other relevant factors. The provision for loan losses which is charged
to operations is, therefore, based upon the size of the loan portfolio, the
amount of loans charged off (net of recoveries), and upon management's
estimation of potential future losses.
11
<PAGE>
ITEM 1. BUSINESS - (Continued)
The allowance for loan losses has been allocated according to the amount deemed
to be reasonably necessary to provide for the possibility of losses within the
following categories of loans at the dates indicated.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, industrial,
and agricultural $2,098 40.5% $1,751 40.7% $1,665 44.6% $2,098 61.6% $1,608 49.0%
Real estate-construction 531 10.3 320 7.4 50 1.3 23 .7 45 1.4
Real estate-mortgage 1,505 29.1 1,553 36.1 1,392 37.2 636 18.7 1,031 31.4
Industrial revenue
and municipal loans 291 5.6 50 1.2 165 4.4 201 5.9 226 6.9
Instalment 749 14.5 628 14.6 466 12.5 448 13.1 369 11.3
--------------------------------------------------------------------------------
Total Allowance $5,174 100.0% $4,302 100.0% $3,738 100.0% $3,406 100.0% $3,279 100.0%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
DEPOSITS
The average amount of deposits and rates paid on those deposits are summarized
below.
<TABLE>
<CAPTION>
June 30
----------------------------------------------------
1994 1993 1992
---- ---- ----
Amount Rate Amount Rate Amount Rate
----------------------------------------------------
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing
demand deposits $ 72,785 - $ 47,294 - $ 37,854 -
Money market accounts 52,993 2.48% 43,515 2.90% 40,505 4.22%
NOW accounts 64,560 1.81 52,297 2.13 47,530 3.58
Savings accounts 53,049 2.67 40,092 3.15 27,631 4.37
Time certificates of deposit
of less than $100,000 47,279 4.12 50,030 4.54 55,322 5.97
Time certificates of deposit
of $100,000 or more 11,701 2.94 10,679 3.61 12,381 4.87
-------- -------- --------
TOTAL DEPOSITS $302,367 $243,907 $221,223
======== ======== ========
</TABLE>
At June 30, 1994, outstanding time certificates of deposit of $100,000 or more
totaled $11,386,193 with a maturity distribution as follows:
<TABLE>
<S> <C>
Under 3 months $3,412,119
3 to 6 months 2,877,012
6 to 12 months 2,219,313
Over 12 months 2,877,749
</TABLE>
12
<PAGE>
ITEM 1. BUSINESS - (Continued)
RETURN ON EQUITY AND ASSETS
The ratios of net income to average stockholders' equity and average total
assets, and certain other ratios are presented below.
<TABLE>
<CAPTION>
Years Ended June 30
---------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Percentage of net income to:
Average stockholders' equity 22.79% 19.16% 20.66%
Average total assets 1.67 1.43 1.41
Percentage of average stockholders'
equity to average total assets 7.31 7.46 6.82
Percentage of dividends per common share
to net income per common share 15.85 14.04 5.91
</TABLE>
ITEM 2. DESCRIPTION OF PROPERTY
The Company has six banking offices. The two branches of Goldenbank, N.A.,
located in Arvada, Colorado and Black Hawk, Colorado are both leased sites. In
addition, the Company leases the site of Goldenbank, N.A. Englewood, in
Englewood, Colorado. The Company has ownership interests in the banking offices
of Goldenbank, N.A., (Golden Bank), Goldenbank, N.A. Westminster (Westminster
Bank), and Goldenbank, Applewood (Applewood Bank).
The largest of the Company's facilities is the Golden Bank building located at
13th and Jackson Streets in downtown Golden. This facility is owned jointly by
Goldenbanks of Colorado, Inc. and the Golden Bank. The Golden Bank owns and
occupies 100% of the approximately 20,000 square foot, two story building. The
Company owns the outer drive-up facility and parking lots which it leases to the
Golden Bank. In addition to this building, the Golden Bank leases a one-story
building across the street from its principal offices. The leased building
contains approximately 15,000 square feet and has been leased to accommodate the
Golden Bank's space requirements.
At the Westminster Bank location, at 100th and Wadsworth, in Westminster,
Colorado, a permanent building with 5,000 square feet was recently completed.
The Westminster banking operation was previously housed in a temporary
building. The Westminster Bank owns the building, and leases the land from the
Company.
The Applewood Bank is located at 32nd and Youngfield, in Wheat Ridge, Colorado.
The Applewood Bank owns its banking facility, a detached drive-up facility, and
the land upon which the drive-up is located. The land under the main building
is leased from an outside party. The main Applewood building is approximately
18,000 square feet and the drive-up facility is 1,200 square feet.
Notes G and L to the Consolidated Financial Statements included in this report
contain further information on the Registrant's properties and lease
commitments.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings pending against the Registrant or the Banks other
than routine litigation incidental to the Company's business.
To the knowledge of the Registrant's management, there are no proceedings of a
material nature presently contemplated by governmental authorities.
13
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the quarter ended June 30, 1994, to a vote of
security holders, through the solicitation of proxies or otherwise.
UNNUMBERED ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant operates through its officers and directors. The names of the
executive officers, their respective ages, positions and lengths of service with
the Company are as follows:
William J. Fortune, 47, With Organization Since July 1983
Chairman of the Board, President, and Director of Goldenbanks of Colorado,
Inc. (GBC). He was appointed Chairman and President in September, 1989; in July,
1989 he became Executive Vice President of the Golden Bank. From May, 1986 to
July, 1989, he was President of the Englewood Bank. He is also Chairman of the
Goldenbanks Service Corp., and a Director of the Golden, Westminster, Englewood
and Applewood Banks.
G. Scott Gagon, 48, With Organization Since August 1975
Chairman of the Board, President, and a Director of the Golden Bank. He was
appointed President in September 1989. Prior to this appointment, he served as
Executive Vice President of the Golden Bank. He is also Executive Vice
President, Secretary, and a Director of Goldenbanks Service Corp. and a Director
and Officer of the Westminster, Englewood, and Applewood Banks. He is Executive
Vice President, Treasurer, and a Director of GBC.
Jack Brandt, 50, With Organization Since January 1986
Senior Vice President of the Golden Bank since December, 1989. During the period
between July, 1989, and December, 1989, he served as President of the Arvada
Bank. From May, 1986 through December, 1989, he was President of the Westminster
Bank. Mr. Brandt was previously with the organization from July, 1967 to
September, 1984. In addition to serving as President and Treasurer of
Goldenbanks Service Corp., he is also Vice President and Secretary of GBC and a
Director of the Westminster, Englewood, and Applewood Banks.
Debra Mulcahy, 40, With Organization Since September 1978
Senior Vice President of the Golden Bank. She became Senior Vice President in
July, 1990. From July, 1984 to July, 1990, she was Vice President of the Golden
Bank. She is also Assistant Secretary and Treasurer of the Goldenbanks Service
Corp. and GBC, and a Director of the Westminster, Englewood, and Applewood
Banks.
No family relationships exist between any director, executive officer or person
nominated or chosen by the Registrant to become a director or executive officer.
14
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The approximate number of holders of record of each class of equity securities
of the Registrant on August 16, 1994, was as follows:
Title of Class Approximate Number of Stockholders
- -------------- ----------------------------------
Common stock, par value of
$.05 per share 515
On May 27, 1987, the Common Stock of Goldenbanks of Colorado, Inc. began trading
in the National Association of Securities Dealers Automated Quotation System
(NASDAQ) under the symbol FGBC. As of June 1993, the symbol was changed to
GOLD. The market stock prices for the fiscal years ended June 30, 1994, and
1993, were as follows:
<TABLE>
<CAPTION>
Market Prices
-----------------
Low High
--- ----
<S> <C> <C>
Fiscal year ended June 30, 1994
First Quarter 23 27 1/4
Second Quarter 26 1/4 32 1/2
Third Quarter 27 1/2 32
Fourth Quarter 28 33
Fiscal year ended June 30, 1993
First Quarter 17 19
Second Quarter 16 1/2 20 3/4
Third Quarter 12 1/2 20 3/4
Fourth Quarter 23 28 1/4
<CAPTION>
Per Share
Dividends Declared
-------------------
<S> <C>
Fiscal year ended June 30, 1994
First Quarter $.10
Second Quarter .10
Third Quarter .15
Fourth Quarter .30
----
Total Per Share $.65
====
Fiscal year ended June 30, 1993
First Quarter $.05
Second Quarter .05
Third Quarter .10
Fourth Quarter .20
----
Total Per Share $.40
====
</TABLE>
Dividends declared by the Registrant are restricted as to amount by long-term
debt covenants and by permissible dividends payable by the Banks to the
Registrant. See Notes I and M to the Consolidated Financial Statements, filed
in response to Item 7, Part II of this Form 10-KSB, for full disclosure of the
restrictions.
15
<PAGE>
ITEM 5. (Continued)
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
CONSOLIDATED SELECTED FINANCIAL DATA
GOLDENBANKS OF COLORADO, INC. AND SUBSIDIARIES
Years Ended June 30
-----------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(In Thousands, Except Per Share Data and Ratios)
<S> <C> <C> <C> <C> <C>
Interest income $ 21,651 $ 19,262 $ 20,322 $ 20,223 $ 20,693
Interest expense 6,495 6,638 8,996 10,727 11,470
Net interest income 15,156 12,624 11,326 9,496 9,223
Provision for loan losses (436) 431 1,061 1,299 2,014
Securities gains 61 39 2 13 9
Net income before accounting
change 4,576 3,895 3,465 1,102 227
Cumulative effect of
accounting change 1,035 0 0 0 0
Net income 5,611 3,895 3,465 1,102 227
Per share data:
Net income per common share:
Before cumulative effect of
accounting change 3.34 2.85 2.54 .81 .17
Cumulative effect of
accounting change .76 -- -- -- --
Net income per common share 4.10 2.85 2.54 .81 .17
Dividends declared .65 .40 .15 -- --
Average balances:
Long-term debt 2,632 2,443 3,676 4,331 4,120
Stockholders' equity 24,621 20,328 16,771 15,325 14,803
Total deposits 302,367 243,907 221,223 201,792 197,810
Total assets 336,768 272,421 245,954 224,742 219,373
Ratios: (1)
Stockholders' equity
to assets 7.31% 7.46% 6.82% 6.82% 6.75%
Return on equity 22.79 19.16 20.66 7.19 1.53
Return on assets 1.67 1.43 1.41 .49 .10
</TABLE>
(1) Based upon average balances.
ITEM 6. MANAGEMENT'S DISCUSSION AND FINANCIAL REVIEW
The following commentary presents management's discussion and analysis of
Goldenbanks of Colorado, Inc.'s (the Company) financial condition and financial
performance. The discussion is presented in order to provide a more complete
understanding of the Consolidated Financial Statements and other statistical
data presented in this report.
Financial Condition
The Consolidated Balance Sheets presented in this report summarize the various
sources of funds generated by the Company and the manner in which those funds
were invested. Total assets have increased by $99.9 million or 35.6% at June 30,
1994, when compared to June 30, 1993.
16
<PAGE>
Management's Discussion
Page 2
Financial Condition - (Continued)
The significant growth in the Company's assets is attributable in a large part
to a new banking subsidiary, Goldenbank, Applewood (Applewood). To obtain the
new subsidiary, the Company acquired the assets and deposit liabilities, along
with certain other liabilities of the Bank of Applewood, d/b/a Citywide Bank of
Applewood, located in Wheat Ridge, Colorado. Management believes that the
Applewood purchase provides the Company with a bank in a strong market, with an
excellent location that is contiguous to two of our present markets. The
acquisition was completed on November 19, 1993. At the time of purchase,
Applewood had assets of $45 million, and as of June 30, 1994, its assets totaled
$52.5 million.
Without the addition of the new banking subsidiary, the Company's total assets
increased $47.4 million or 16.9% since June 30, 1993. Management believes that
the high growth rate for fiscal 1994 is greatly attributable to the Company's
name change and establishment of a local Colorado banking identity.
In order to illustrate trends in the Company's sources and uses of funds, the
reader is directed to the Consolidated Average Balance Sheets for fiscal 1994,
1993, and 1992 which are presented on page 3 of this report.
While the Applewood acquisition had a profound impact on the Company's balance
sheet, deposit increases were another important source of growth. Total average
deposits grew $58.5 million or 24% from fiscal 1993 to fiscal 1994. Without the
addition of the deposits attributable to Applewood, the Company realized average
deposit growth of $30.5 million or 12.5% from fiscal 1993 to fiscal 1994.
Average deposit growth of $22.7 million or 10.3% was realized from fiscal 1992
to fiscal 1993.
All of the deposit growth was in core deposits. Core deposits are considered a
highly stable source of funds and consist of demand, NOW, savings, money market
deposits, and small denomination certificates of deposit. Growth in core
deposits is one of the Company's primary goals.
Increases were noted in four of the five core deposit categories; money market,
NOW, demand, and savings accounts. A decline of $5.3 million or 9.6% was
realized in small denomination certificates of deposit from fiscal 1992 to
fiscal 1993, and a decrease of $2.8 million or 5.5% was realized from fiscal
1993 to fiscal 1994. The decline in these certificates of deposit is
attributable in a large part to the movement of funds to other types of
investments or deposit categories by customers seeking different investment
opportunities or waiting for an increase in interest rates.
The Company's second largest source of funds is Stockholders' Equity consisting
of capital contributed by stockholders and retained earnings. Average
Stockholders' Equity increased $3.6 million or 21.2% from fiscal 1992 to fiscal
1993, and $4.3 million or 21.1% from fiscal 1993 to fiscal 1994. The change in
equity is attributable to the Company's earnings less dividends paid to
shareholders.
The Company's average long-term debt decreased $1.2 million or 33.5% from fiscal
1992 to fiscal 1993, and increased $189 thousand or 7.7% from fiscal 1993 to
fiscal 1994. In addition to regular debt service, the Company made an $835
thousand prepayment on its mortgage debt in fiscal 1993, and paid a bank note
with a balance of $240 thousand. In fiscal 1994, the mortgage was paid in full
and offset by additional debt incurred to purchase Applewood.
17
<PAGE>
Management's Discussion
Page 3
Financial Condition - (Continued)
To acquire Applewood, the Company borrowed $2.4 million from a correspondent
bank. The debt was combined with a debt currently payable to the correspondent.
The new note will be amortized over seven years, at one half percent over the
correspondent's base interest rate (7.75% at June 30, 1994). The loan is secured
by the Company's ownership interest in Goldenbank, N.A. and Goldenbank,
Applewood. With a balance of $2.9 million at June 30, 1994, this note is the
Company's only outstanding long-term debt.
Short-term borrowings, consisting of repurchase agreements and federal funds
purchased by some of the Company's subsidiary banks, provided approximately one
percent of funds from fiscal 1992 through fiscal 1994. Average short-term
borrowings totaled $2.1 million in fiscal 1992, $3 million in fiscal 1993, and
$3.8 million in fiscal 1994.
The average loan portfolio grew $6.4 million or 6.6% from fiscal 1992 to fiscal
1993, and rose $30.2 million or 29.2% from fiscal 1993 to fiscal 1994. The loan
growth is attributable to the acquisition of Applewood and additional loan
growth generated by the Company's other banking subsidiaries.
In reviewing the five year history of outstanding loans appearing on page 9 of
this report, a decrease in the loan portfolio is noted from June 30, 1990 to
June 30, 1991. Increases are noted through the remaining years presented in the
table. From June 30, 1991, to June 30, 1992, loan growth of $1.3 million or 1.3%
was realized. A more notable growth of $11 million or 11.2% occurred from June
30, 1992, to June 30, 1993. Loan growth totaled $51.1 million or 46.6% from
June 30, 1993, to June 30, 1994.
The acquisition of the Applewood Bank accounted for a significant portion of the
loan growth from June 30, 1993, to June 30, 1994. The Applewood Bank's loan
portfolio totaled $20.5 million at June 30, 1994. Without the Applewood loans,
the Company still successfully increased the loan portfolio $30.6 million or
27.8% from the end of fiscal 1993 to the end of fiscal 1994. The growth during
fiscal 1994, as well as the growth from June 30, 1991, to June 30, 1993, is
attributable to efforts by the Company to grow its portfolio through increased
business development and the addition of quality lenders. Also positively
affecting the growth in the loan portfolio is a strong Colorado economy, and the
Company's identification as a local bank with local decision making
capabilities.
Additional funds from the Company's growth have been placed into the investment
portfolio. The average investment portfolio increased $23.3 million or 20.1%
from fiscal 1992 to fiscal 1993 and $28.4 million or 20.4% from fiscal 1993 to
fiscal 1994. The acquisition of Applewood increased the average investment total
by $14.2 million. The Company's investments are a major component of its earning
assets. During fiscal 1992, investments represented 47.1% of total average
assets, and totaled 51.1% of total average assets in fiscal 1993, and 49.8% in
fiscal 1994.
The Company will adopt Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities",
effective July 1, 1994, which will change the way the Company accounts for
investment securities. Under SFAS No. 115, a portion of the Company's investment
securities will be classified as "available for sale". These securities will be
reported at current market value with both unrealized gains and losses, which
primarily result from period-to-period interest rate changes, credited or
charged, net of the related tax effect, directly to a separate component of
stockholders' equity. This accounting will add volatility to the Company's
capital, but net income will not be impacted unless the securities are sold.
18
<PAGE>
Management's Discussion
Page 4
Financial Condition - (Continued)
Securities available for sale include securities, considered part of the
Company's asset/liability management, that may be sold in response to changes in
interest rates or for general liquidity purposes. In connection with the
adoption of this new accounting standard, on July 1, 1994, the Company
reclassified as "available for sale" securities with an amortized cost of $38.3
million representing approximately 10% of the Company's total assets. Equity
capital decreased by $280 thousand to recognize an unrealized loss in the
reclassified securities market value, net of taxes.
As members of the Federal Reserve System, the Company's subsidiary banks must
maintain required levels of cash on hand or on deposit with the Federal Reserve
Bank or other financial institutions. Each subsidiary bank is responsible for
the maintenance of its "cash position" and to meet these requirements on a con-
tinuous basis. In addition to these regulatory requirements, the Company keeps
a portion of its funds available as cash or as amounts on deposit with the
Federal Reserve Bank or other depository institutions, in order to satisfy its
operational and liquidity requirements. An average of 5.8% of the Company's
funds were held as cash and due from banks in fiscal 1994, and approximately 5%
of the Company's funds were held in this manner during fiscal 1993 and fiscal
1992.
Earnings Performance
Net income for fiscal 1994 totaled a record $5.6 million, a 44% increase from
the $3.9 million earned in fiscal 1993, which in turn was 12.4% greater than the
$3.5 million earned in fiscal 1992. Net income per share was $4.10 for fiscal
1994, compared with $2.85 in fiscal 1993, and $2.54 in fiscal 1992.
The Company's 1994 earnings performance produced a return on average
stockholders' equity of 22.79% and a return on average assets of 1.67%. This
compares to a return on average equity of 19.16% and a return on average assets
of 1.43% in fiscal 1993, and returns of 20.66% and 1.41% in fiscal 1992.
The Company's increased year-to-date earnings reflect the significant impact of
the cumulative effect of an accounting change attributable to the adoption of
Statement of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting
for Income Taxes". The Company adopted SFAS No. 109, in July, 1993. This new ac-
counting standard was adopted through a one-time cumulative adjustment to
earnings in the amount of $1,035,070 or $.76 per share. The Company's net
income before the accounting change was $4.6 million which was $680 thousand or
17.5% greater than fiscal 1993 net income.
The Company's earnings have also been positively affected by increases in net
interest income and other income, and a decrease in the provision for loan
losses. Negatively impacting earnings over the three years presented in the
Consolidated Statements of Income were the accrual of income taxes and increases
in other expenses.
Net interest income is defined as the total of interest income and amortized
fees on loans less interest expense on deposits and borrowed funds. Earning
assets are funded by interest bearing liabilities including deposits, short-term
borrowings and long-term debt. Earning assets are also funded by net noninterest
related funds consisting of demand deposits and stockholders' equity.
A strong net yield, plus growth in earning assets, produced net interest income
on a fully taxable equivalent basis (FTE) for fiscal 1994 of $15.7 million, up
19.1% from $13.2 million in fiscal 1993. Net interest income on a FTE basis in
fiscal 1992 was $11.9 million. To arrive at income on a fully taxable equivalent
19
<PAGE>
Management's Discussion
Page 5
Earnings Performance - (Continued)
basis, adjustments were made to present yields on certain tax exempt municipal
securities and loans as if such income were fully taxable. The table on page 6
of this report presents the Company's net interest income as if such income were
fully taxable.
The Company's net yield on interest earning assets on a FTE basis was 5.02% for
fiscal 1994, compared to 5.14% for fiscal 1993, and 5.20% for fiscal 1992. The
net yield on interest earning assets is determined by expressing net interest
income as a percentage of earning assets. The Company's net yield on interest
earning assets is attributable to a combination of two factors which include the
percentage of interest earning assets funded by interest bearing liabilities,
and the difference between the yield on earning assets and the rate paid on
interest bearing liabilities.
During fiscal 1994, 75.5% of the Company's interest bearing assets were funded
by interest bearing liabilities. During fiscal 1993, and fiscal 1992,
respectively, 78.9%, and 82.6% of the Company's interest bearing assets were
funded by interest bearing liabilities. The Company's ability to attract and
maintain noninterest bearing deposits, and the decrease in the level of interest
bearing assets funded by interest bearing liabilities, has enhanced the
Company's net interest income over the last three years.
Interest rates on both assets and liabilities have declined over the past three
fiscal years. The Company's yield on interest bearing assets declined 140 basis
points to 7.73% from 9.13% when fiscal 1993 is compared to fiscal 1992. The
yield on interest bearing assets declined to 7.09% or an additional 64 basis
points from fiscal 1993 to fiscal 1994. The Company's cost of funds declined
148 basis points to 3.28% from 4.76% when fiscal 1993 is compared to fiscal
1992, and dropped an additional 53 basis points to 2.75% in fiscal 1994.
The larger reduction in the cost of funds as compared to the reduction in rates
on interest bearing assets resulted in an improvement of 8 basis points in the
net interest spread from fiscal 1992 to fiscal 1993. The greater reduction in
the yield on interest bearing assets compared to the reduction in the cost of
funds, resulted in a reduction in the net interest spread of 11 basis points
from fiscal 1993 to fiscal 1994. While the increase in the net interest spread
was fairly minimal from fiscal 1992 to fiscal 1993, and a reduction in net
interest spread from fiscal 1993 to fiscal 1994 was realized, net interest
earnings continues to be bolstered by volume increases and the reduction in the
portion of earning assets funded by interest bearing liabilities.
A detailed analysis of the changes in the Company's net interest margin
attributable to changes in volumes and rates appears in the table on page 6 of
this report. Volume increases contributed $2 million to the increase in net
interest income when fiscal 1993 is compared to fiscal 1992, and rate changes
negatively impacted the net interest margin by $757 thousand. From fiscal 1993
to fiscal 1994, volume changes increased the net interest margin by $3.8 million
while rate changes reduced the net interest margin by $1.2 million.
The Company's noninterest income is reflected in the Other Income section of the
Consolidated Statements of Income. The Company's other income is categorized
into three components. The most significant of these is fees on deposit
accounts, followed by other fee income, and investment security gains. Other
income for fiscal 1994 rose $376 thousand or 14.2%, compared with fiscal 1993,
and increased $214 thousand or 8.8% from fiscal 1992 to fiscal 1993.
Service charges on both deposits and other services provided by the Company's
20
<PAGE>
Management's Discussion
Page 6
Earnings Performance - (Continued)
banking subsidiaries have long been an important source of revenue. The other
income category has been positively impacted from fiscal 1992, through fiscal
1994, by the establishment of a mortgage loan operation. Fees realized from
mortgage loan operations totaled $42 thousand in fiscal 1992, increased to $228
thousand in fiscal 1993, and rose to $300 thousand in fiscal 1994. The Company
currently is expanding its mortgage loan operations, by placing mortgage loan
originators at the Company's various banking offices.
During fiscal 1994, the Company realized a $61 thousand investment security gain
attributable to gains realized on municipal securities held by the Company which
were called at a premium. The $39 thousand investment security gain for fiscal
1993, consists of two factors. First, gains of $21 thousand were realized on
municipal and asset backed securities called at a premium. Second, an additional
gain of $18 thousand was realized on the sale of asset backed securities, sold
to avoid a concentration of credit from a single issuer. The $2 thousand
security gain, in fiscal 1992, is also attributable to gains realized on
municipal securities called at a premium.
A reduction in the provision for loan losses has positively impacted earnings
over the three years presented in the Consolidated Statements of Income. The
provision for loan losses for fiscal 1994, reflects a credit balance of $436
thousand compared to $431 thousand in expense for fiscal 1993, and $1.1 million
in expense for fiscal 1992. The credit balance in fiscal 1994 is attributable
to a $500 thousand reduction in the Allowance for Loan Losses balance, taken
during the second quarter of the fiscal year, by the Company's lead bank in
Golden. The credit was offset by provision expenses of $64 thousand at other
subsidiary banks. The reduction in the Allowance for Loan Losses balance at the
Golden Bank is due to the fact that the bank has improved the quality of its
loan portfolio and reduced the level of problem loans.
During fiscal 1992, the Company had net charge offs of $729 thousand. In fiscal
1993, the Company realized net recoveries on previously charged off loans of
$133 thousand. In fiscal 1994, the Company had net recoveries totaling $50
thousand. The positive trend in charge offs is attributable to stronger
underwriting standards, early identification and workouts on problem credits,
and a strengthening Colorado economy.
Management believes it has thoroughly reviewed its loan portfolio, and has
identified and allowed for problem loans. The allowance for loan losses was 3.9%
of total loans at June 30, 1993. Due to the quality of the loan portfolio, the
allowance for loan losses was reduced to 3.2% of total loans at June 30, 1994.
Management feels that the Company has adequately positioned itself against
future credit risk at the current allowance level.
In May 1993, the Financial Accounting Standards Board issued Statement No. 114
(SFAS 114) "Accounting by Creditors for Impairment of a Loan", which addresses
the accounting for impairment of certain loans in the Company's loan portfolio.
The Company is required to adopt SFAS 114 by the year ending June 30, 1996.
Management is unable to estimate the impact SFAS 114 will have on the reporting
and disclosures in its balance sheet; however, management believes the statement
will not have a material effect on the results of operations.
Other expenses for fiscal 1994 totaled $12.1 million which is an increase of
$2.2 million or 22% compared to fiscal 1993. An increase of $733 thousand or 8%
was realized in other expenses from fiscal 1992 to fiscal 1993. A notable
factor in the large increase in other expenses, from fiscal 1993 to fiscal 1994,
is the
21
<PAGE>
Management's Discussion
Page 7
Earnings Performance - (Continued)
acquisition of the Company's new subsidiary bank, Goldenbank, Applewood.
Without the Applewood Bank the other expenses would have increased $1.1 million
or 11.1% when fiscal 1994 is compared to fiscal 1993.
Salaries and employee benefits, which represents 50.4% of total other expenses
in fiscal 1994, increased $959 thousand or 18.6% compared to the same period a
year ago. An increase of $466 thousand or 10% was realized when fiscal 1993 is
compared to fiscal 1992. The expense increase reflects annual cost increases and
additional staffing attributable to the Company's growth and the Applewood
acquisition. The Company's total number of full-time equivalent employees
increased from 178 at June 30, 1993, to 207 at June 30, 1994.
The change in other real estate (OREO) expenses had the effect of increasing
other expenses for the last three years. These expenses are the costs associated
with properties obtained through foreclosure, and include the costs of
administering and operating these properties, any write downs in the value of
the properties prior to their disposition, and the effect of gains and losses on
the subsequent sale of these properties. Other real estate expenses also reflect
rental income realized on these properties as a reduction to other real estate
expenses.
The Company's other expenses have been positively affected in all three years
presented in the Consolidated Statements of Income because income from OREO
properties exceeded expenses in all three years. A reduction in OREO properties
held by the Company over the three year period has reduced OREO income, however,
and has had the effect of increasing the Company's other expenses as OREO income
offsets expense in this portion of the income statement. The reduction in OREO
income from $201 thousand in fiscal 1992, to $196 thousand in fiscal 1993, had
the effect of increasing other expenses by $5 thousand, and the reduction in
OREO income to $19 thousand in fiscal 1994, increased other expenses from the
preceding fiscal year by $177 thousand.
The Company's other operating expenses increased from $3.8 million in fiscal
1992, to $3.9 million in fiscal 1993, and rose to $4.7 million in fiscal 1994.
The significant increase in fiscal 1994 includes expenses from the Applewood
Bank and costs associated with the Company's name change.
Income tax expense was $36 thousand and had little impact on earnings in fiscal
1992. In fiscal 1992 the Company was able to offset regular taxable income, and
90% of alternative minimum taxable income, with net operating losses carried
forward from prior years.
Because of the net operating loss carryforward available to offset regular
taxable income in fiscal 1993, the Company incurred both a regular tax liability
and alternative minimum tax for the fiscal 1993. The Company had substantially
exhausted its net operating loss carryforwards, which could be used to offset
alternative minimum tax, by the end of the fiscal 1992. Accordingly, income tax
expense for fiscal 1993, reflects the accrual of alternative minimum tax of $314
thousand and regular tax of $701 thousand.
Alternative minimum taxes paid by the Company in fiscal 1993, as well as
alternative minimum taxes paid in prior periods, in excess of regular income
taxes, totaled $429 thousand, and were realized as tax credits in fiscal 1994.
The tax benefits of the alternative minimum taxes was reflected in the
cumulative adjustment attributable to the adoption of the Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109).
22
<PAGE>
Management's Discussion
Page 8
Earnings Performance - (Continued)
SFAS 109 was issued in February, 1992, and superseded the Statement of Financial
Accounting Standards Management's Discussion No. 96 (SFAS 96). The Company was
required to adopt SFAS 109 in July, 1993. As noted earlier in this discussion
the Company adopted this new accounting change with a one time cumulative
adjustment of $1 million dollars.
Income tax expense, before the cumulative effect of accounting change, totaled
$1.9 million for fiscal 1994, an increase of $910 thousand or 89.6% over fiscal
1993. An increase in earnings, combined with the fact that at June 30, 1992, the
Company had an unused net operating loss carryforward of $2.4 million, which was
carried forward to offset regular taxable income for fiscal 1993, were key
factors in the increase noted from fiscal 1993 to fiscal 1994 in income tax
expense.
ASSET QUALITY
Loans of $160.7 million and investment securities totaling $173.5 million are
the principal assets of the Company. These two asset categories combined make up
87.9% of total assets at June 30, 1994.
The quality of the Company's loan portfolio is monitored on an ongoing basis.
All of the Company's subsidiary banks have written loan policies which help
provide for consistent loan underwriting and the basis for prudent loan
decisions. Credit decisions are based on the ability of the borrowers to repay
the loan and the value and liquidity of underlying collateral. Loan officers are
charged with the responsibility of reviewing existing loans on an ongoing basis,
identifying potential problem credits, and developing action plans to collect
and reduce problem loans. In addition, loans are subject to review by the
Company's internal loan review officer, the Company's independent auditors, and
bank regulatory agencies.
The Company's internal loan review is performed by a loan review officer who
operates independently of the lending department and reports directly to the
banking subsidiaries' Boards of Directors. Loan review encompasses examinations
of the subsidiary banks' loans for credit quality, documentation, and adherence
to loan policy. The Company also strives to avoid undue credit risk in its loan
portfolio by monitoring concentrations of loans by collateral, purpose, and
industry. The Company has no significant exposure to highly leveraged
transactions and has no foreign credits in its loan portfolio.
The Company's level of problem assets increased from $1.2 million at June 30,
1993, to $1.9 million at June 30, 1994. Problem assets consist of other real
estate (OREO), nonaccrual loans, and loans 90 days past due. The Applewood
Bank's problem assets totaled $1.1 million at June 30, 1994, and accounted for
the rise noted in problem assets.
At June 30, 1994, the Company had OREO of $414 thousand compared to $60 thousand
at June 30, 1993. Applewood's OREO totaled $394 thousand at June 30, 1994.
Appraisals on OREO properties generally are obtained annually. Any reduction in
the fair market value of the property is recorded immediately. The OREO balance
reflected in the balance sheets is the estimated amount expected to be realized
on the sale of the property, net of sales expense.
Nonaccrual loans at June 30, 1994, were $1.4 million compared to $1.1 million at
June 30, 1993. Applewood's nonaccrual loans were $720 thousand at June 30,
1994. The Company's 90 day past due loans totaled $7 thousand at June 30, 1994.
The Company is addressing the problem loans at the Applewood Bank and is
implementing
23
<PAGE>
Management's Discussion
Page 9
Asset Quality - (Continued)
the same monitoring and review standards which are in place at its other
subsidiary banks.
The quality of the investment portfolio is a primary concern of management. The
Company's investment portfolio is structured to provide profitability, and is
managed to monitor the quality of investments, and provide acceptable levels of
liquidity.
U.S. government securities make up $84 million or 48.4% of the investment
portfolio at June 30, 1994. Obligations of states and political subdivisions
(municipal securities), comprise $22.7 million or 13.1% of the portfolio.
Currently, 68.3% of the municipal securities are Colorado bonds and 89.9% are
rated A or higher.
The Company also invests in mortgage backed securities and asset backed
securities. The mortgage backed securities consist of bonds secured by pools of
pass-through mortgage securities, primarily of U.S. Agencies. The asset backed
securities are secured by pools of automobile loans, home equity loans, and
letters of credit. The mortgage backed securities are high quality securities
and consequently provide a good credit risk. All of the mortgage backed
securities are rated AAA. All of the asset backed securities are rated at least
A and 96.7% are rated AAA.
Liquidity
One of the principal functions of asset/liability management is to provide for
adequate liquidity. Liquidity is the ability to ensure that sufficient funds are
available to satisfy contractual liabilities, to meet fluctuating loan demand
and withdrawal requirements of depositors, and to fund operations. The Company
depends on its financial strength, asset quality, and the stability of its
deposit base to ensure adequate liquidity. In the ordinary course of business,
cash flows needed to meet liquidity requirements are generated from the
Company's interest and fee income, repayments of loan balances, and the
regularly scheduled maturities and cash flows of other earning assets.
Projected cash flows and maturities of the Company's investment portfolio, due
within one year, total $73.9 million, at June 30, 1994, and represent 42.6% of
the portfolio. Maturities in the loan portfolio also provide a steady flow of
funds. As of June 30, 1994, $59.4 million in commercial and real estate loans,
representing 37% of the total loan portfolio, mature within one year. Loan
maturities as well as regularly scheduled loan payments provide a source of
liquidity.
The overall liquidity of the Company is also enhanced by its federal funds sold
position. In addition, the Company has the ability to purchase federal funds
through established correspondent banking relationships should the need arise.
The parent company's cash requirements consist primarily of dividends to
shareholders and principal and interest payments on debt. The long-term debt of
the parent is relatively moderate compared to its peers. The principal source
of funds for the parent is dividends from its subsidiary banks. Based on the
strong capital levels and current earnings of the subsidiary banks, projected
cash flows of the parent are adequate to service the debt and provide for its
operational needs.
24
<PAGE>
Management's Discussion
Page 10
Capital Resources
Company's capital adequacy is important for a number of reasons. The strength
of the Company can be determined by a review of its underlying capital. A strong
capital base is necessary to support the volume, type, and character of
the Company's business and to provide for the absorption of adverse operating
results. In addition, the capital position of the Company lends itself to
promote public confidence in the Company and its subsidiary banks, and furnishes
a safeguard for depositors and other creditors.
Equity of the Company increased $4.7 million or 21% from June 30, 1993, to June
30, 1994. The increase is attributable to earnings less shareholder dividends.
Annual dividends of $.65 per share, for fiscal 1994, represent an increase of
$.25 per share or 62.5%, when compared to fiscal 1993.
The Federal Reserve's final guidelines pertaining to risk-based capital became
effective December 31, 1992. The guidelines require the calculation of
risk-based capital ratios which provide a more consistent system for comparing
capital positions of banking organizations and to consider the different degrees
of credit risk among an organization's assets and off-balance sheet items in
assessing capital adequacy. Under these final guidelines, the Company's Tier 1
capital was 12.47%, and the total capital was 13.72%, of risk-based assets at
June 30, 1994. These risk-based capital ratios are well above the minimum
requirements of 4% for Tier 1 capital and 8% for total risk-based capital.
In addition, the Federal Reserve Board has introduced the leverage ratio, which
measures Tier 1 capital against quarterly average assets, net of goodwill. A
leverage ratio of 3% is the minimum requirement for the most highly rated
banking organizations and most banking organizations would be expected to
maintain a leverage ratio between 4% and 5%. The Company's leverage ratio at
June 30, 1994, is 6.95%.
The Company's subsidiary banks must also comply with the risk-based capital
guidelines and the leverage ratio requirements. At June 30, 1994, all of the
subsidiary banks exceed the regulatory minimums.
The Federal Deposit Insurance Corporation (FDIC) has published the conditions
for banks to qualify as a "well capitalized" bank for the purpose of assignment
of FDIC insurance premium rates. To qualify as a "well capitalized" bank, an
institution must have a Tier 1 risk-based capital ratio of at least 6%, a total
risk-based capital ratio of at least 10%, and a leverage ratio of at least 5%.
If a bank meets these capital standards, and has a sufficiently high supervisory
rating, it will be assessed the lowest FDIC insurance premium rate of $.23 per
$100. All of the Company's subsidiary banks currently meet the criteria of a
"well capitalized" bank.
Interest Rate Sensitivity
Interest sensitivity risk is the risk that future changes in interest rates will
decrease net interest income. Net interest income is affected by fluctuations in
market interest rates as a result of mismatches in the repricing of its assets
and liabilities. These mismatches are quantified in specific time intervals and
are referred to as interest rate sensitivity gaps. An asset sensitive gap
position, indicates that the net interest margin will move in the same direction
as interest rates (i.e., as rates increase the net interest margin will
increase). A liability sensitive gap position would cause net interest margin to
move in the opposite direction from interest rates.
The following table presents the Company's gap profile at June 30, 1994. To take
25
<PAGE>
Management's Discussion
Page 11
Interest Rate Sensitivity - (Continued)
into account such factors as prepayments of certain types of loans and
investments the analysis focuses on the expected repricing of these assets (the
"managerial gap") rather than on contractual terms. For deposits without defined
maturities - savings, NOW, and money market accounts - the estimated life is
based on maximum stated lives as provided by the guidelines in the proposed
Section 305 of the Federal Deposit Insurance Corporation Improvement Act.
Interest Rate Sensitivity Table
<TABLE>
<CAPTION>
Cumulative Sensitivity Period
-----------------------------
Three Six One One to Over Five
(Dollar Amounts in Thousands) Months Months Year Five Years Years
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest earning assets:
Short-term investments $16,300 $ 16,300 $ 16,300 $ 16,300 $ 16,300
Securities 13,656 35,310 71,992 166,391 173,546
Loans 61,013 66,124 74,576 136,475 160,676
------- -------- -------- -------- --------
Total 90,969 117,734 162,868 319,166 350,522
Interest bearing liab.:
Savings and NOW accounts 0 0 0 128,486 128,486
Money market accounts 0 13,103 39,310 65,516 65,516
Time deposits 20,982 32,357 45,333 59,041 59,160
Short-term borrowings 4,800 4,800 4,800 4,800 4,800
Long-term debt 2,946 2,946 2,946 2,946 2,946
------- -------- -------- -------- --------
Total 28,728 53,206 92,389 260,789 260,908
------- -------- -------- -------- --------
Interest sensitivity gap $62,241 $ 64,528 $ 70,479 $ 58,377 $ 89,614
======= ======== ======== ======== ========
Percent of earning assets 17.76% 18.41% 20.11% 16.65% 25.57%
</TABLE>
This table shows that the Company is asset sensitive, and is in a favorable
position, as management believes we are currently in a rising rate environment.
Gap analysis provides a static view of the Company's rate sensitivity at a
specific point in time. Further, this type of analysis assumes that rate
sensitive assets and liabilities are equally sensitive to rate changes within
the periods shown. In reality, however, there are varying degrees of rate
sensitivity.
Due to the limitations of gap reports, the Company uses a simulation model as
its primary method of measuring interest rate risk. The model simulates the
Company's interest margin over a variety of interest rate scenarios and time
horizons. Because of the model's dynamic nature it can capture the effects of
different patterns of rate movements and the changing relationships between
rates. In addition, the model can take into account the effects of interest rate
ceilings and floors. At June 30, 1994, the Company's simulation modeling
indicates that net interest income would not fluctuate by more than 7.2% due to
a change in interest rates of 200 basis points. If interest rates rise, the
change would be positive, and as previously stated, management believes that the
Company is in a favorable position to take advantage of a rising rate
environment.
26
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF MANAGEMENT
The accompanying consolidated balance sheets of Goldenbanks of Colorado, Inc.
and its subsidiaries at June 30, 1994, and 1993, and the consolidated statements
of income, cash flows and stockholders' equity for each of the three years in
the period ended June 30, 1994, have been prepared by management in accordance
with generally accepted accounting principles appropriate in the circumstances.
Where amounts must be based on estimates and judgments, they represent the best
estimates of management. Management is responsible for the integrity,
objectivity, consistency and fair presentation of the financial statements.
The Company maintains a system of internal accounting controls intended to
provide reasonable assurance that transactions are properly recorded in order
to facilitate preparation of the financial statements. The system is also
designed to provide reasonable assurance that transactions are executed in
accordance with management's authorizations and that assets are adequately
safeguarded.
The Company employs an organizational structure which supports the system of
internal accounting control by providing effective division of responsibilities
and the development and dissemination of policies and procedures.
Management believes that the audits conducted by the internal and independent
auditors provide reasonable assurance of the adequacy of the internal accounting
controls. The Board of Directors and the Audit Committee meet with both the
internal and external auditors to review the scope of audits, findings and
actions to be taken by management.
The report of the Company's independent auditors, Deloitte & Touche LLP,
follows. The report states that the Company's financial statements present
fairly, in all material respects, the financial position of the Company and its
subsidiaries at June 30, 1994, and 1993, and the results of their operations and
their cash flows for the three years in the period ended June 30, 1994.
William J. Fortune G. Scott Gagon
President, Chairman of the Executive Vice President,
Board, and Chief Executive Treasurer, Director and
Officer Principal Financial
Officer
27
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and the Board of Directors of
Goldenbanks of Colorado, Inc.:
We have audited the accompanying consolidated balance sheets of Goldenbanks of
Colorado, Inc. and its subsidiaries as of June 30, 1994 and 1993, and the
related consolidated statements of income, cash flows and stockholders' equity
for each of the three years in the period ended June 30, 1994. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Goldenbanks of Colorado, Inc. and
its subsidiaries at June 30, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
1994 in conformity with generally accepted accounting principles.
As discussed in Note J to the consolidated financial statements, the Corporation
changed its method of accounting for income taxes effective July 1, 1993.
Deloitte & Touche LLP
Denver, Colorado
August 5, 1994
28
<PAGE>
GOLDENBANKS OF COLORADO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30
-----------------------------
1994 1993
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks - Note C $ 23,006,093 $ 15,551,142
Federal funds sold 16,300,000 5,520,000
------------ ------------
Cash and cash equivalents 39,306,093 21,071,142
Investment securities (market value, 1994,
- $170,964,426; 1993 - $150,312,547) - Notes D and H 173,546,273 148,685,874
Loans - Notes E and F 160,675,618 109,620,091
Less: Allowance for loan losses (5,173,781) (4,302,212)
------------ ------------
Net loans 155,501,837 105,317,879
Premises and equipment - Note G 5,716,391 2,078,633
Cost of businesses acquired in excess of
net assets - Notes A and B 1,641,602 792,339
Other real estate 414,000 60,000
Other assets 4,043,692 2,304,335
------------ ------------
TOTAL ASSETS $380,169,888 $280,310,202
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 89,151,849 $ 55,737,272
Interest bearing:
Money market accounts 65,516,229 43,413,874
NOW accounts 68,231,739 51,936,167
Savings 60,254,257 44,403,393
Time certificates of $100,000 or more 11,386,193 9,791,674
Time certificates of less than $100,000 47,773,571 46,036,995
------------ ------------
Total deposits 342,313,838 251,319,375
Short-term borrowings - Note H 4,799,885 3,364,374
Accrued expenses and other liabilities 2,878,579 1,738,301
Long-term debt - Note I 2,946,429 1,379,064
------------ ------------
TOTAL LIABILITIES 352,938,731 257,801,114
COMMITMENTS AND CONTINGENCIES - Notes L and N
Stockholders' equity - Note M:
Preferred stock, par value $10.00 a share -
300,000 shares authorized, none outstanding
Common stock, par value $.05 a share -
3,000,000 shares authorized, 1,366,932
shares issued and outstanding 68,347 68,347
Capital surplus 885,778 885,778
Retained earnings 26,277,032 21,554,963
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 27,231,157 22,509,088
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $380,169,888 $280,310,202
============ ============
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
GOLDENBANKS OF COLORADO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended June 30
---------------------------------------------
1994 1993 1992
---------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans, including fees $13,031,907 $10,315,617 $10,359,978
Taxable investment securities 7,397,585 7,701,491 8,374,893
Investment securities exempt from
federal income taxes 858,056 842,914 872,291
Federal funds sold 363,490 402,216 688,784
Interest bearing deposits 0 0 25,833
----------- ----------- -----------
Total interest income 21,651,038 19,262,238 20,321,779
----------- ----------- -----------
Interest expense:
Deposits 6,195,423 6,294,972 8,523,005
Short-term borrowings 114,411 105,298 129,085
Long-term debt 185,655 238,117 343,892
----------- ----------- -----------
Total interest expense 6,495,489 6,638,387 8,995,982
----------- ----------- -----------
NET INTEREST INCOME 15,155,549 12,623,851 11,325,797
Provision for loan losses (436,500) 431,000 1,061,000
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 15,592,049 12,192,851 10,264,797
----------- ----------- -----------
Other income:
Fees on deposit accounts 2,004,900 1,846,064 1,960,863
Investment security gains 60,618 38,987 2,000
Other 958,944 763,271 470,974
----------- ----------- -----------
Total other income 3,024,462 2,648,322 2,433,837
----------- ----------- -----------
Other expense:
Salaries and employee benefits - Note O 6,103,836 5,145,086 4,679,039
Occupancy expense, net 857,744 711,374 643,724
Equipment expense 429,452 342,689 271,077
Other real estate expense(income), net (18,685) (196,012) (201,462)
Other - Note K 4,743,507 3,927,385 3,805,381
----------- ----------- -----------
Total other expense 12,115,854 9,930,522 9,197,759
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 6,500,657 4,910,651 3,500,875
Income tax provision - Note J 1,925,151 1,015,339 35,526
----------- ----------- -----------
NET INCOME BEFORE ACCOUNTING CHANGE 4,575,506 3,895,312 3,465,349
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE - Note J 1,035,070 0 0
----------- ----------- -----------
NET INCOME $ 5,610,576 $ 3,895,312 $ 3,465,349
=========== =========== ===========
NET INCOME PER COMMON SHARE BEFORE
CUMULATIVE EFFECT OF ACCOUNTING CHANGE $3.34 $2.85 $2.54
CUMULATIVE EFFECT OF ACCOUNTING CHANGE .76 0 0
----- ----- -----
NET INCOME PER COMMON SHARE $4.10 $2.85 $2.54
===== ===== =====
DIVIDENDS DECLARED PER COMMON SHARE $.65 $.40 $.15
==== ==== ====
AVERAGE SHARES OUTSTANDING 1,366,932 1,366,932 1,366,932
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
30
<PAGE>
<TABLE>
<CAPTION>
GOLDENBANKS OF COLORADO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30
---------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,610,576 $ 3,895,312 $ 3,465,349
----------- ----------- -----------
Adjustments:
Provision for loan losses (436,500) 431,000 1,061,000
Depreciation and amortization 470,022 223,973 247,170
Write downs of other real estate owned 6,598 25,000 100,000
Accretion/amortization of discount/premium
on investments 671,492 678,975 (12,323)
Gain on sale of other real estate owned (45,450) (60,246) (148,299)
(Gain) loss on disposal of fixed assets 9,649 (290) 1,200
Gain on early call/sale of
investment securities (60,618) (38,987) (2,000)
Deferred taxes 438,443 -- --
Cumulative effect of accounting change (1,035,070) -- --
Change in other assets (831,973) 107,143 221,168
Change in accrued expenses and other
liabilities 733,924 (224,245) 272,079
----------- ----------- -----------
Total adjustments (79,483) 1,142,323 1,739,995
----------- ----------- -----------
Net cash provided by operating
activities 5,531,093 5,037,635 5,205,344
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment
securities -- 2,134,644 --
Proceeds from maturities of investment
securities 72,738,953 79,689,505 43,210,665
Purchase of investment securities (87,087,472) (108,396,014) (59,056,000)
Change in interest bearing deposits -- -- 746,824
Change in loans (31,044,960) (9,390,112) (1,310,386)
Proceeds from sale of other real estate
owned 570,351 193,763 1,324,060
Purchase Applewood - Net of cash equivalents
received* 9,060,534 -- --
Proceeds from sale of premises and
equipment -- 1,958 9,313
Purchase of premises and equipment (1,835,726) (560,734) (205,283)
----------- ----------- -----------
Net cash applied to investing
activities (37,598,320) (36,326,990) (15,280,807)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in deposits 48,051,116 16,761,035 24,661,182
Proceeds from long-term debt 2,359,992 -- --
Repayments of long-term debt (792,627) (1,721,660) (868,419)
Change in short-term borrowed funds 1,435,510 656,907 387,281
Dividends paid (751,813) (410,080) (68,346)
----------- ----------- -----------
Net cash provided by financing
activities 50,302,178 15,286,202 24,111,698
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 18,234,951 (16,003,153) 14,036,235
CASH AND CASH EQUIVALENTS, AT
BEGINNING OF PERIOD 21,071,142 37,074,295 23,038,060
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, AT END
OF PERIOD $39,306,093 $21,071,142 $37,074,295
=========== =========== ===========
</TABLE>
31
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
<C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash received (paid) during
the year for:
Interest income $21,201,788 $19,437,454 $20,544,156
Interest expense (6,499,865) (6,726,801) (9,075,508)
Income taxes (1,190,000) (1,088,000) (10,606)
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Transfers of loans to other real estate owned $444,794 $ -- $130,950
Transfers of other real estate owned to loans -- -- 859,655
Dividends declared not yet paid 410,080 273,386 136,693
</TABLE>
* On November 19, 1993, the company acquired the assets and deposits and
certain liabilities of Bank of Applewood d/b/a Citywide Bank of Applewood as
follows:
<TABLE>
<CAPTION>
Fair Value of Assets Acquired and Liabilities Assumed:
<S> <C>
Cash and Cash Equivalents $ 11,560,534
Investment Securities 11,122,753
Loans, Net 19,034,851
Property and Equipment 2,219,550
Deposits (42,943,347)
Other, Net 1,505,659
-----------
Cash Paid $ 2,500,000
-----------
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
GOLDENBANKS OF COLORADO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock
------------ Retained Stockholders'
Shares Amount Surplus Earnings Equity
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1991 1,366,932 $68,347 $885,778 $14,946,114 $15,900,239
Net income 3,465,349 3,465,349
Dividends declared - $.15 per share (205,039) (205,039)
--------------------------------------------------------
BALANCE AT JUNE 30, 1992 1,366,932 68,347 885,778 18,206,424 19,160,549
Net income 3,895,312 3,895,312
Dividends declared - $.40 per share (546,773) (546,773)
--------------------------------------------------------
BALANCE AT JUNE 30, 1993 1,366,932 68,347 885,778 21,554,963 22,509,088
Net income 5,610,576 5,610,576
Dividends declared - $.65 per share (888,507) (888,507)
--------------------------------------------------------
BALANCE AT JUNE 30, 1994 1,366,932 $68,347 $885,778 $26,277,032 $27,231,157
========================================================
</TABLE>
See notes to consolidated financial statements.
32
<PAGE>
GOLDENBANKS OF COLORADO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ACCOUNTING POLICIES
Consolidation - The consolidated financial statements include the accounts of
Goldenbanks of Colorado, Inc. (the Company) and its wholly owned subsidiaries,
Goldenbank, N.A., Goldenbank, N.A. Westminster, Goldenbank, N.A. Englewood,
Goldenbank, Applewood (the Banks), and Goldenbanks Service Corp. All material
intercompany accounts and transactions have been eliminated.
Statement of Cash Flows - For purposes of reporting cash flows, cash and cash
equivalents include cash on hand, demand balances due from banks, and federal
funds sold. Generally, federal funds are purchased and sold for one-day periods.
Investment Securities - Prior to July 1, 1994, the Company acquired investment
securities with the intent to hold the securities to maturity. Accordingly, such
securities were carried at amortized cost.
On July 1, 1994, the Company adopted Financial Accounting Standards Board
Statement No. 115 "Accounting for Certain Investments in Debt and Equity
Securities," and a portion of the Company's investment securities were
classified as "available for sale." Securities classified as "available for
sale" are measured at fair value. Unrealized holding gains and losses are
excluded from earnings and are reported as a separate component of stockholders'
equity until realized. Securities with a book value of $38.3 million were
transferred to "available for sale" and a charge of $280 thousand, which is net
of income tax, was recorded in equity to recognize the difference between the
carrying value and the fair value of these securities.
The adjusted cost of specific investment securities is used to compute gains and
losses upon disposition, and net gains/losses are shown separately as a
component of Other Income.
Revenue Recognition - Interest on loans is accrued and credited to operations
based upon the principal amount outstanding. The accrual of interest income is
generally discontinued when a loan becomes 90 days past due as to principal or
interest. Management may elect to continue the accrual of interest when the
estimated realizable value of collateral is sufficient to cover the principal
balance and accrued interest and the loan is in process of collection.
Loan fees which represent an adjustment to interest yield are deferred and
amortized over the estimated life of the loan.
Allowance for Loan Losses - The allowance for loan losses is established through
a provision for loan losses charged to operations. The allowance is determined
based on management's evaluation of the loan portfolio in light of economic
conditions, changes in the nature and volume of the loan portfolio, loan loss
experience of prior years, and other relevant factors. Management reviews the
allowance on a monthly basis to determine whether additional provisions should
be made to the allowance after considering the above factors.
In May 1993, the Financial Accounting Standards Board issued Statement No. 114
(SFAS 114) "Accounting by Creditors for Impairment of a Loan", which addresses
the accounting for impairment of certain loans in the Company's loan portfolio.
The Company is required to adopt SFAS 114 by the year ending June 30, 1996.
Management is unable to estimate the impact SFAS 114 will have on the reporting
and disclosures in its balance sheet; however, management believes the statement
will not have a material effect on the results of operations.
33
<PAGE>
Premises and Equipment - Premises and equipment are stated at cost, less
accumulated depreciation and amortization. Depreciation and amortization are
computed using straight-line and accelerated methods based on estimated useful
lives of the assets.
Other Real Estate - Other real estate (real estate acquired through foreclosure
or through deed in lieu of foreclosure) is carried at the lower of fair value
less cost to sell or principal balance of the loan, and is held for resale.
Intangible Assets - The cost of businesses acquired in excess of net assets
includes $792,339 attributable to the purchase of the Golden Bank in 1962. This
amount is not being amortized since, in the opinion of management, this asset
has continuing value over an indefinite period of time. In 1994, the purchase of
the Applewood Bank resulted in cost of business acquired in excess of net assets
of $903,857, which is being amortized on a straight-line basis over a period of
fifteen years and has a book value of $849,263 at June 30, 1994.
Income Taxes - The Company adopted Statement of Financial Accounting Standards
NO. 109, "Accounting for Income Taxes" (SFAS No. 109), effective July 1, 1993.
This statement supersedes Statement of Financial Accounting Standards No. 96,
"Accounting for Income Taxes", which was adopted by the Company July 1, 1991. In
adopting SFAS No. 109 the Company did not restate its financial results prior to
fiscal 1994. The cumulative effect on prior years of adopting SFAS No. 109 was
recognized as an increase to income of $1,035,070 ($.76 per share).
The basic objective of SFAS No. 109 is the recognition of the tax consequences
of a transaction or an event in the same period that the transaction or event is
recognized in the Company's financial statements. It is a balance sheet approach
to income taxes and a current tax liability/asset is recognized for the
estimated taxes payable/refundable as reported in the current year's tax return.
In addition, deferred tax liabilities or assets are recognized for the estimated
future tax effects of temporary differences and carryforwards. Other than the
cumulative effect, the adoption of SFAS No. 109 had no effect on the results of
operations.
Earnings Per Share - Net income per share is calculated by dividing net income
and the cumulative effect of accounting change by the weighted average number of
common shares outstanding during the period.
Reclassifications - Certain previously reported amounts have been reclassified
to conform to the current year's presentation.
NOTE B - ACQUISITIONS
Effective the close of business on November 19, 1993, the Company acquired the
assets and deposit liabilities and certain other liabilities of Bank of
Applewood d/b/a Citywide Bank of Applewood. The Company formed a wholly owned
subsidiary, Goldenbank, Applewood, for the benefit of the purchased assets and
liabilities. The Company paid a purchase price of $2,640,000, including
$140,000, for a non-compete agreement which will be amortized over the term of
the agreement of three years.
The acquisition was accounted for under the purchase method and, accordingly,
the operating results of Goldenbank, Applewood have been included in the
consolidated operating results since the date of acquisition. The funds used for
the acquisition were provided by long-term debt, a special dividend from one of
the company's subsidiaries, Goldenbank, N.A., and cash from the Company. The
acquisition resulted in goodwill of $903,857 which is being amortized over 15
years on a straight-line basis. The pro forma results listed below are unaudited
and reflect purchase price accounting adjustments assuming the acquisition
occurred at the beginning of each year presented.
34
<PAGE>
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Net Interest Income $15,685,908 $14,436,110
Net Income Before Accounting Change 3,141,787 3,818,180
Net Income 4,176,859 3,818,180
Net Income Per Common Share:
Before Cumulative Effect of Accounting Change $2.29 $2.79
Cumulative Effect of Accounting Change .76 --
----- -----
Net Income Per Common Share $3.05 $2.79
===== =====
</TABLE>
NOTE C - RESTRICTIONS ON CASH AND DUE FROM BANKS
The Banks are required to maintain average reserve balances with the Federal
Reserve Bank. The average amount of these reserve balances for the year ended
June 30, 1994, was approximately $4,436,225.
NOTE D - INVESTMENT SECURITIES
The aggregate carrying amount and market value of investment securities at June
30 are:
<TABLE>
<CAPTION>
1994
---------------------------------------------------
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Government obligations $ 83,977,294 $ 109,325 $1,171,555 $ 82,915,064
Obligations of states
and political subdivisions 22,738,435 335,454 276,145 22,797,744
Mortgage backed securities 48,067,217 39,330 1,280,919 46,825,628
Asset backed securities 18,462,177 2,755 340,092 18,124,840
Federal Reserve Bank stock 301,150 301,150
------------ ---------- ---------- ------------
Total $173,546,273 $ 486,864 $3,068,711 $170,964,426
============ ========== ========== ============
<CAPTION>
1993
---------------------------------------------------
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Government obligations $ 59,658,599 $ 826,010 $ 9,868 $ 60,474,741
Obligations of states
and political subdivisions 26,414,100 738,704 36,467 27,116,337
Mortgage backed securities 45,394,060 230,396 223,096 45,401,360
Asset backed securities 16,917,965 111,494 10,500 17,018,959
Federal Reserve Bank stock 301,150 301,150
------------ ---------- ---------- ------------
Total $148,685,874 $1,906,604 $ 279,931 $150,312,547
============ ========== ========== ============
</TABLE>
The carrying amount and market value of investment securities at June 30, 1994,
by contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
35
<PAGE>
<TABLE>
<CAPTION>
Carrying Market
Amount Value
----------------------------
<S> <C> <C>
Under 1 year $ 45,268,957 $ 45,275,517
1 to 5 years 58,370,605 57,260,283
5 to 10 years 1,193,254 1,270,812
Over 10 years 2,184,063 2,207,346
Mortgage backed securities 48,067,217 46,825,628
Asset backed securities 18,462,177 18,124,840
------------ ------------
Total $173,546,273 $170,964,426
============ ============
</TABLE>
Gross gains of $60,618, $38,987, and $2,000, were primarily attributable to
securities called prior to maturity for the years ended 1994, 1993, and 1992,
respectively.
Investment securities with a par value of $43,285,000 and $23,046,000 at June
30, 1994, and 1993, respectively, are pledged to secure public deposits and for
other purposes.
NOTE E - LOANS AND ALLOWANCE FOR LOAN LOSSES
A comparative summary of loans by category is as follows:
<TABLE>
<CAPTION>
June 30
------------------------------
1994 1993
---- ----
<S> <C> <C>
Commercial, industrial, and agricultural $ 63,341,987 $ 38,596,854
Instalment 46,940,323 34,893,467
Real estate - mortgage 27,013,281 23,079,507
Real estate - construction 20,927,863 10,374,385
Industrial revenue and municipal loans 2,452,164 2,675,878
------------ ------------
Total $160,675,618 $109,620,091
============ ============
</TABLE>
As of June 30, 1994, management believes there are no significant concentrations
of credit risk in the loan portfolio other than real estate related loans, the
majority of which are located in the Denver metro area. The Banks have no
significant exposure to highly leveraged transactions and have no foreign
credits in their portfolio.
A comparative summary of changes in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
Years Ended June 30
------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $4,302,212 $3,737,913 $3,406,018
Applewood balance at
date of acquisition 1,257,746
Provision charged to
operations (436,500) 431,000 1,061,000
---------- ---------- ----------
Total 5,123,458 4,168,913 4,467,018
---------- ---------- ----------
Loan losses (490,102) (202,319) (1,030,333)
Less recoveries 540,425 335,618 301,228
---------- ---------- ----------
Net recoveries (losses) 50,323 133,299 (729,105)
---------- ---------- ----------
Balance at end of year $5,173,781 $4,302,212 $3,737,913
========== ========== ==========
</TABLE>
The principal amount of nonaccrual loans was $1,442,000, $1,095,000, and
$1,535,000 at June 30, 1994, 1993, and 1992, respectively. If interest had been
current on these loans, additional income would have approximated $55,000,
$90,000, and $195,000,
36
<PAGE>
respectively, for the years ended June 30, 1994, 1993, and 1992. The principal
amount of loans whose terms have been renegotiated to provide a reduction or
deferral of interest or principal because of a deterioration in the financial
condition of the borrower was $100,000, $716,000, and $885,000, at June 30,
1994, 1993, and 1992, respectively. At June 30, 1994, the amount the Company was
committed to lend to borrowers with loans that are nonaccrual or renegotiated
was $-0-. The effect on earnings of interest lost on renegotiated loans is not
material.
NOTE F - LOANS TO RELATED PARTIES
Certain directors and officers of the Company and the Banks and companies in
which they have ten percent or more beneficial interest were customers of and
had transactions with the Banks in the ordinary course of business. All loans
and commitments included in such transactions were made on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons and did not involve
more than the normal risk of collectibility. The aggregate dollar amount of
these loans is approximately $1,110,000 and $830,000 at June 30, 1994, and
1993, respectively. During 1994, $456,000 of new loans were made and
repayments totaled $176,000.
NOTE G - PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
June 30
--------------------------
1994 1993
---- ----
<S> <C> <C>
Land $1,479,421 $ 855,321
Buildings 3,309,116 881,287
Leasehold improvements 351,717 255,942
Furniture and fixtures 3,012,341 2,291,283
Automobiles 169,988 98,426
---------- ----------
Total 8,322,583 4,382,259
Less accumulated depreciation and amortization 2,606,192 2,303,626
---------- ----------
Premises and equipment - Net $5,716,391 $2,078,633
========== ==========
</TABLE>
NOTE H - SHORT-TERM BORROWINGS
The Company's short-term borrowings represent securities sold under agreements
to repurchase (repurchase agreements) and federal funds purchased. The
following table summarizes short-term borrowings for the last three years:
<TABLE>
<CAPTION>
June 30
---------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Balance at year end $ 4,799,885 $3,364,374 $2,707,467
Weighted average interest
rate at year end 3.9% 3.1% 4.0%
Maximum amount outstanding at
any month's end $13,676,806 $3,503,318 $3,000,617
Average amount outstanding
during the year $ 3,829,617 $3,048,000 $2,125,000
Weighted average interest
rate paid during the year 3.0% 3.4% 6.1%
</TABLE>
Repurchase agreements are collateralized by U.S. Government obligations with a
book value, including accrued interest, of $10,022,900 and $10,147,694 and a
market value of $9,980,627 and $10,467,719 at June 30, 1994, and 1993,
respectively. Repurchase agreements at June 30, 1994, provide solely for the
repurchase of securities identical to those sold. Repurchase agreements
mature within one year and bear interest from
37
<PAGE>
2.75% to 3.25% at June 30, 1994. The collateral pledged is held in safekeeping
at another financial institution.
<TABLE>
<CAPTION>
NOTE I - LONG-TERM DEBT
1994 1993
---- ----
<S> <C> <C>
Bank loan, bearing interest at the Bank's
reference rate plus 1/2% (7.75% at June 30,
1994), payable in quarterly instalment of
$117,857 principal plus interest through
October, 2000, at which time the balance
plus interest is due, collateralized by
substantially all of the outstanding shares
of common stock of the Golden and Applewood
Banks $2,946,429 $1,005,808
Mortgage payable, fully paid in the
fiscal year ended June 30, 1994 -- 373,256
---------- ----------
Total $2,946,429 $1,379,064
========== ==========
</TABLE>
Under the loan agreement, the Company cannot declare dividends, unless the
combined total of the Company's cash and the Company's subsidiary banks'
statutory dividend capacity can provide for two year's debt service on the debt
(see Note M).
Aggregate maturities of long-term debt for the ensuing five fiscal years are as
follows: 1995 - $471,428; 1996 - $471,428; 1997 - $471,428, 1998 - $471,428; and
1999 - $471,428.
<TABLE>
<CAPTION>
NOTE J - INCOME TAXES
The components of the income tax provision included in the consolidated
statements of income are as follows:
Years Ended June 30
------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current federal income tax provision $1,486,708 $1,015,339 $ 35,526
Deferred income tax 438,443 -- --
---------- ---------- -----------
Total $1,925,151 $1,015,339 $ 35,526
========== ========== ===========
</TABLE>
38
<PAGE>
Differences between the provision for income taxes and the amount computed by
applying the federal statutory income tax rate of 34% to income before income
taxes are as follows:
<TABLE>
<CAPTION>
Years Ended June 30
------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Income tax provision
at federal statutory rates $2,210,223 $1,669,621 $1,190,298
Tax effect of nontaxable interest
from obligations of states and
political subdivisions (352,924) (360,522) (386,597)
Tax effect of net operating loss carryforward 0 (827,646) (788,794)
Tax effect of nondeductible interest expense 21,207 12,988 16,810
Alternative minimum tax 0 314,427 0
Deferred tax asset limitation 0 206,316 0
Other 46,645 155 3,809
---------- ---------- ----------
Total $1,925,151 $1,015,339 $ 35,526
========== ========== ==========
</TABLE>
Deferred taxes are recorded based upon differences between the financial
statement and tax basis of assets and liabilities. Deferred tax liabilities and
assets have been computed based on the applicable statutory federal tax rate of
34%. At June 30, 1994, the following items comprise the Company's net deferred
tax assets.
<TABLE>
<S> <C>
Deferred Tax Assets:
Depreciable Property $126,780
Other Real Estate Owned 48,353
Allowance for Loan Losses 685,795
Accrued Sick Pay Benefits 52,167
Other Assets 44,115
------
Total Deferred Tax Assets 957,210
Deferred Tax Liabilities:
Intercompany Gain
on Transfer of Bank Buildings (360,583)
--------
Total Deferred Tax Liabilities (360,583)
--------
Net Deferred Tax Assets $596,627
========
</TABLE>
NOTE K - OTHER EXPENSE
Significant components of other expense are as follows:
<TABLE>
<CAPTION>
Years Ended June 30
----------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Automated teller machine expense $ 436,236 $ 393,221 $ 418,165
Postage 292,861 283,982 279,474
Office supplies 282,856 202,550 182,599
Data processing 506,675 391,395 383,625
Advertising 455,943 451,663 230,799
Other 2,768,936 2,204,574 2,310,719
---------- ---------- ----------
Total $4,743,507 $3,927,385 $3,805,381
========== ========== ==========
</TABLE>
NOTE L - LEASES
The Banks lease certain real property and equipment under operating leases
generally containing options for renewal. Future minimum rental payments, by
year and in the aggregate, under operating leases with initial or remaining
noncancelable terms in
39
<PAGE>
excess of one year consist of the following at June 30, 1994:
<TABLE>
<S> <C>
1995 $ 587,829
1996 507,159
1997 443,986
1998 414,927
1999 299,520
Thereafter 2,283,759
----------
Total $4,537,180
==========
</TABLE>
Total rental expense for the years ended June 30, 1994, 1993, and 1992, was
$574,691, $488,434 and $423,512, respectively.
NOTE M - RESTRICTIONS ON SUBSIDIARIES' DIVIDENDS, LOANS, OR ADVANCES
Certain restrictions exist regarding the ability of the Banks to transfer funds
to the Company in the form of cash dividends, loans, or advances. At June 30,
1994, the Banks can pay to the Company $6.0 million in dividends without prior
regulatory approval. The loan agreement discussed in Footnote I provides that
the Company can pay dividends only to the extent that the statutory dividend
capacity of the subsidiary banks, together with the Company's cash, exceeds
two years' debt service on this debt, after giving effect to the payment of such
dividend. At June 30, 1994, the Company could declare additional dividends
of $4.3 million under this agreement.
The Company is required to maintain minimum amounts of capital to total "risk
weighted" assets, as defined by the banking regulators. The Company's
subsidiary banks must also comply with the risk-based capital guidelines and
the leverage ratio requirements. At June 30, 1994, all of the subsidiary banks
exceed the regulatory requirements. The Company's capital ratios at June 30,
1994, are as follows:
<TABLE>
<CAPTION>
Required Current
Ratio Ratio
----- -----
<S> <C> <C>
Leverage 3.0% 6.95%
Tier 1 4.0 12.47
Total 8.0 13.72
</TABLE>
NOTE N - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Banks are party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of their customers. These
financial instruments include commitments to extend credit and standby letters
of credit. Those instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the statement of
financial position. The contract amounts of those instruments reflect the
extent of involvement the Banks have in particular classes of financial
instruments.
The Banks' 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 is represented by the contractual amounts of those
instruments. The Banks use the same credit policies in making commitments and
conditional obligations as they do for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as
here 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. At June 30, 1994 and 1993, the Banks' total unfunded
commitments to extend credit were $42,817,260 and $25,710,254, respectively.
The Banks evaluate each customer's
40
<PAGE>
creditworthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Banks upon extension of credit is based on management's
credit evaluation of the customer. Collateral held varies but may include
accounts receivable, inventory, property, plant and equipment, and income-
producing commercial properties.
Standby letters of credit are conditional commitments issued by the Banks to
guarantee the performance of a customer to a third party and total $1,346,000
and $1,403,000 at June 30, 1994 and 1993, respectively. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. Collateral held varies but may
include accounts receivable, inventory, equipment, marketable securities, and
property. Since most of the letters of credit are expected to expire without
being drawn upon, they do not necessarily represent future cash requirements.
NOTE O - 401(K) PLAN
Effective January 1, 1993, the Company established a 401(k) plan which is a
defined contribution plan covering their employees. This plan replaces the
Company's former Simplified Employee Pension (SEP) plan. An employee becomes
eligible in the plan after completing one year of service and attaining the age
of 21. The employee will become a participant on the January 1 or July 1
immediately following the completion of the age and service requirement.
Participants may make salary reduction contributions beginning January 1,
1994, up to 12% of their compensation on a pre-tax basis, not to exceed the
maximum allowed by section 402(g) of the Code. For each plan year, the
Company will contribute to the plan contributions determined by the Company
at its discretion. Expenses related to the above retirement plans during fiscal
1994, 1993, and 1992, were $212,729, $189,850 and $165,618 respectively.
NOTE P - PARENT COMPANY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Condensed Balance Sheets
June 30
----------------------------
1994 1993
---- ----
<S> <C> <C>
Cash and cash equivalents $ 109,062 $ 852,619
Investment in subsidiaries (at equity):
Bank 28,826,459 21,893,874
Nonbank 1,000 1,000
Cost of businesses acquired in excess of net assets 792,339 792,339
Premises and equipment 1,095,937 1,228,806
Other assets 726,649 271,888
----------- -----------
TOTAL ASSETS $31,551,446 $25,040,526
=========== ===========
Accrued expenses and other liabilities $ 1,373,859 $ 1,152,374
Long-term debt 2,946,429 1,379,064
Stockholders' equity 27,231,158 22,509,088
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $31,551,446 $25,040,526
=========== ===========
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Condensed Statements of Income
Years Ended June 30
------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Operating income:
Dividends received from subsidiaries $3,500,000 $1,870,000 $1,570,000
Other income 132,075 144,780 145,423
---------- ---------- ----------
TOTAL INCOME 3,632,075 2,014,780 1,715,423
---------- ---------- ----------
Operating expense:
Interest expense 185,655 133,342 245,198
Other expense 669,469 469,453 342,460
---------- ---------- ----------
TOTAL EXPENSE 855,124 602,795 587,658
---------- ---------- ----------
Income before income taxes 2,776,951 1,411,985 1,127,765
Income tax credit 421,040 207,281 100,882
---------- ---------- ----------
Income before equity in
undistributed net earnings of
subsidiaries 3,197,991 1,619,266 1,228,647
Undistributed net income of
subsidiaries 2,412,585 2,276,046 2,236,702
---------- ---------- ----------
NET INCOME $5,610,576 $3,895,312 $3,465,349
========== ========== ==========
<CAPTION>
Condensed Statements of Cash Flows
Years Ended June 30
------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $5,610,576 $3,895,312 $3,465,349
---------- ---------- ----------
Adjustments:
Equity in undistributed income
of subsidiaries (2,412,585) (2,276,046) (2,236,702)
Depreciation and amortization 132,869 132,869 132,868
Increase in other assets (454,761) (213,135) (38,080)
Decrease (increase) in accrued
and other liabilities 84,792 38,331 (67,746)
---------- ---------- ----------
Total adjustments (2,649,685) (2,317,981) (2,209,660)
---------- ---------- ----------
Net cash provided by operating activities 2,960,891 1,577,331 1,255,689
---------- ---------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase Applewood (2,500,000) -- --
Capital contribution to subsidiary (2,020,000) -- (75,000)
---------- ---------- ----------
Net cash applied to investing activities (4,520,000) (75,000)
---------- ---------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from long-term debt 2,359,992
Repayments of long-term debt (792,627) (861,917) (750,139)
Dividends paid (751,813) (410,080) (68,346)
---------- ---------- ----------
Net cash applied to financing activities 815,552 (1,271,997) (818,485)
---------- ---------- ----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (743,557) 305,334 362,204
CASH AND CASH EQUIVALENTS, AT
BEGINNING OF PERIOD 852,619 547,285 185,081
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, AT
END OF PERIOD $ 109,062 $ 852,619 $ 547,285
========== ========== ==========
</TABLE>
42
<PAGE>
NOTE Q - FAIR VALUE DISCLOSURES
Financial Accounting Standards Board Statement No. 107 "Disclosures about Fair
Value of Financial Instruments" (SFAS No. 107), requires disclosures of
information about the estimated fair values of financial instruments. The
estimated fair value amounts for the Company's financial instruments are
presented below. The estimated fair value amounts have been determined by the
Company using quoted market prices or other appropriate valuation techniques.
The derived fair values can be significantly affected by the assumptions used.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation techniques may have a material
effect on the estimated fair value amounts.
<TABLE>
<CAPTION>
June 30, 1994 June 30, 1993
---------------------- --------------------
Carrying Estimated Carrying Estimated
(In Thousands) Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks $ 23,066 $ 23,066 $ 15,551 $ 15,551
Federal funds sold 16,300 16,300 5,520 5,520
Investment Securities 173,546 170,964 148,686 150,313
Loans 155,502 154,672 105,318 106,233
Liabilities:
Noninterest-bearing, money market,
NOW and savings deposits 283,154 283,154 195,491 195,491
Time deposits 59,160 59,346 55,829 56,573
Short-term borrowings 4,800 4,800 3,364 3,364
Long-term debt 2,946 2,946 1,379 1,385
</TABLE>
The general methods used to estimate fair values are summarized below.
Cash and Due From Banks and Federal Funds Sold - The carrying amounts for cash
and due from banks and federal funds sold approximate the fair values of these
assets.
Investment Securities - Quoted market prices were used to estimate fair values
of securities for which such quotes were available. If a quoted market price was
not readily available, fair value was determined by fixed income and mortgage-
backed security traders who evaluated the individual characteristics of each
security and current market conditions to determine an appropriate value.
Loans - The fair value of the performing loan portfolio was estimated using a
discounted cash flow method in which the discount rate used was the rate at
which the Company's subsidiary banks would originate loans to borrowers for
similar types of loans as of June 30, 1994 and 1993. No adjustments were made
for changes in credit of performing loans. The Banks current pricing in
conjunction with specific and general reserves applicable to the performing loan
portfolio adequately compensate for risk factors embedded in the portfolio.
Nonperforming loans are reported at their current book value. It is not
practical to reasonably assess the credit adjustment that would be applied in
the market place for such loans. Management feels however, that it has allocated
adequate reserves in the allowance for loan losses to compensate for
nonperforming loans.
Noninterest-Bearing, Money Market, NOW and Savings Deposits - These account
balances are withdrawable on demand without penalty, and therefore for purposes
of SFAS No. 107, the carrying amount is deemed to be the fair value. The fair
value presented for these deposits does not include their "deposit base
intangible value". The intangible value attributable to these deposits, along
with certificates of deposit of less than $100,000 is based on the premise that
the cost of such deposits is comparatively less than alternative funding
sources. While management believes that the "deposit base intangible" has
significant value, its value has not been estimated at this time.
43
<PAGE>
Time Deposits - The fair value of time deposits was estimated using a
discounted cash flow calculation using the subsidiary banks' current
interest rates for similar deposits with like terms.
Short-Term Borrowings - The carrying amount is a reasonable estimate of fair
value for the short-term borrowings.
Long-Term Debt - The Company's long-term debt at June 30, 1994, is priced at a
rate currently available to the Company for debt with similar terms, and the
loan reprices with changes in the lending bank's interest reference rate.
Therefore, the carrying amount of the long-term debt, reflected in the
Consolidated Balance Sheet, reflects its current fair value.
At June 30, 1993, the fair value of long-term debt was estimated by using
discounted cash flows based on current borrowing rates for similar types of
borrowing arrangements.
Off Balance Sheet Financial Instruments - The Company's off balance sheet
items consist of commitments to extend credit and letters of credit. If
borrowers exercise these options, these financial instruments will become
interest-bearing assets of the Company. If the options expire, the Company
retains any fees paid by the borrower in order to obtain the credit commitment
or guarantees provided by the letter of credit. Based on the underlying terms
and conditions of commitments to extend credit, and the low probability of
funding standby letters of credit, these agreements do not pose
significant credit or interest rate risk to the Company and the related fair
values are deemed to be insignificant.
The fair value estimates presented herein are based upon pertinent information
available to management on June 30, 1994 and 1993. Although management is not
aware of any factors that would significantly affect the estimated fair value
amounts, such amounts have not been subsequently revalued for purposes of these
financial statements since that date and, therefore, current estimates of fair
value may differ significantly from the amounts presented herein.
ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors required by this item is contained in the
Registrant's 1994 Proxy Statement, pursuant to Regulation 14A, and is
incorporated herein by reference.
The information regarding Executive Officers required by this item is contained
in Part I of this Form 10-KSB.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this item is contained in the Registrant's 1994
Proxy Statement, pursuant to Regulation 14A, and is incorporated herein by
reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is contained on page 3 of the Registrant's
1994 Proxy Statement, pursuant to Regulation 14A, and is incorporated herein by
reference.
44
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained on pages 10-11 of the
Registrant's 1994 Proxy Statement, pursuant to Regulation 14A, and is
incorporated herein by reference.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of the Registrant and
its subsidiaries are included in Item 7:
Independent Auditors' Report
Consolidated Financial Statements of Goldenbanks of Colorado, Inc. and
Subsidiaries:
Consolidated Balance Sheets - June 30, 1994 and 1993
Consolidated Statements of Income - Years Ended June 30, 1994, 1993,
and 1992
Consolidated Statements of Cash Flows - Years Ended June 30, 1994,
1993, and 1992
Consolidated Statements of Stockholders' Equity - Years Ended June 30,
1994, 1993, and 1992
(2) Schedules to the consolidated financial statements required by Article 9
of Regulation S-X are not required under the related instructions or are
inapplicable, and therefore have been omitted.
(3) Listing of Exhibits.
Exhibit 3 - Articles of Incorporation and Bylaws
Exhibit 4 - Instruments Defining the Rights of Security Holders,
Including Indentures
(b) Reports on Form 8-K.
For the quarter ended June 30, 1994, the Company filed no reports on
Form 8-K.
(c) EXHIBIT 3 - CERTIFICATE OF INCORPORATION AND BYLAWS
The Restated Certificate of Incorporation and Amended Bylaws of the
Registrant filed on Forms 8-K dated March 17, 1987, and October 16, 1986,
respectively, are incorporated herein by reference.
EXHIBIT 4 - INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
The Restated Certificate of Incorporation and Amended Bylaws of the
Registrant, which define the rights of security holders, previously filed
with the Securities and Exchange Commission in reports on Form 8-K dated
March 17, 1987, and October 16, 1986, respectively, are incorporated
herein by reference.
(d) Financial Statement Schedules - None.
45
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GOLDENBANKS OF COLORADO, INC.
William J. Fortune
President, Chairman of the Board,
Director and Chief Executive Officer
Date: September 2, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
SIGNED, SIGNED,
Michael J. Hall G. Scott Gagon
Director Director, Executive Vice President,
Date: September 2, 1994 Treasurer and Principal Financial
Officer
Date: September 2, 1994
SIGNED, SIGNED,
Dan A. Gabrielson Jack Brandt
Director Vice President and Secretary
Date: September 2, 1994 Date: September 2, 1994
SIGNED, SIGNED,
David C. Beck Debra Mulcahy
Director Assistant Secretary and Treasurer and
Date: September 2, 1994 Principal Accounting Officer
Date: September 2, 1994
46
<PAGE>
APPENDIX D
GOLDENBANKS'S QUARTERLY REPORT ON
FORM 10-QSB FOR THE QUARTER ENDED
DECEMBER 31, 1994
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the Quarter Ended 12/31/94 Commission File No. 0-7463
GOLDENBANKS OF COLORADO, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-0632356
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1301 Jackson Street, Golden, Co. 80401
(Address of principal executive offices)
Registrant's telephone number, including area code (303)279-4563
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes X No
(2) Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of January 31, 1995.
Common Stock 1,366,932
<PAGE>
Part I - FINANCIAL INFORMATION
Item I - FINANCIAL STATEMENTS
December 31, 1994
GOLDENBANKS OF COLORADO, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Dec. 31, June 30,
1994 1994
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 26,478,697 $ 23,006,093
Federal funds sold 2,757,000 16,300,000
------------ ------------
Cash and cash equivalents 29,235,697 39,306,093
Investment securities:
U.S. Government securities 84,619,333 83,977,294
Obligations of states and political subdivisions 17,827,774 22,738,435
Federal Reserve Bank Stock 301,150 301,150
Other Investments 58,151,881 66,529,394
Loans 179,804,518 160,675,618
Less: Allowance for loan losses (5,182,799) (5,173,781)
------------ ------------
Net Loans 174,621,719 155,501,837
Bank premises and equipment less allowance
for depreciation 5,798,702 5,716,391
Other real estate 489,000 414,000
Cost of purchased subsidiaries in excess of net assets 1,612,147 1,641,602
Other assets 3,759,915 4,043,692
------------ ------------
TOTAL ASSETS $376,417,318 $380,169,888
============ ============
LIABILITIES
Deposits:
Money market accounts $ 58,065,908 $ 65,516,229
N.O.W. accounts 70,909,215 68,231,739
Other demand accounts 83,522,520 89,151,849
Savings 57,953,827 60,254,257
Time Certificates greater than $100,000 9,635,076 11,386,193
Other Time Certificates 45,483,228 47,773,571
------------ ------------
TOTAL DEPOSITS 325,569,774 342,313,838
Short-term borrowings 17,093,872 4,799,885
Long-term debt 2,710,715 2,946,429
Accrued expenses and other liabilities 1,852,519 2,878,579
------------ ------------
TOTAL LIABILITIES 347,226,880 352,938,731
STOCKHOLDERS' EQUITY
Common Stock 68,347 68,347
Capital Surplus 885,779 885,779
Retained Earnings 28,600,166 26,277,031
Unrealized Gain/(Loss) on Securities (363,854)
------------
TOTAL STOCKHOLDERS' EQUITY 29,190,438 27,231,157
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $376,417,318 $380,169,888
============ ============
MARKET VALUE OF INVESTMENT SECURITIES: $157,590,000 $170,964,000
----------- -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
GOLDENBANKS OF COLORADO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Dec. 31, Three Mo. Ended Dec. 31,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 8,364,729 $ 5,873,855 $4,218,503 $3,119,747
Taxable investment securities 3,703,703 3,490,055 1,842,064 1,798,813
Investment securities exempt from federal income taxes 367,556 471,173 174,664 224,258
Federal funds sold and other short-term investments 282,035 217,498 130,545 110,908
---------- ---------- ---------- ----------
Total Interest Income 12,718,023 10,052,581 6,365,776 5,253,726
INTEREST EXPENSE:
Deposits 3,373,831 2,990,557 1,655,148 1,531,666
Federal funds purchased and other short-term borrowings 96,663 51,210 49,633 26,716
Long-term debt 122,158 68,142 62,179 42,353
---------- ---------- ---------- ----------
Total Interest Expense 3,592,652 3,109,909 1,766,960 1,600,735
NET INTEREST INCOME 9,125,371 6,942,672 4,598,816 3,652,991
---------- ---------- ---------- ----------
Provision for Loan Losses (49,000) 475,000 (19,000) 490,000
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,076,371 7,417,672 4,579,816 4,142,991
OTHER INCOME:
Fees on deposit accounts 1,107,584 958,852 547,168 504,707
Other income 434,893 517,266 216,429 274,124
Gain on security transactions 12,750 59,468 0 6,700
---------- ---------- ---------- ----------
Total Other Income 1,555,227 1,535,586 763,597 785,531
OTHER EXPENSE:
Salaries & employee benefits 3,399,257 2,826,132 1,689,957 1,465,539
Occupancy expense, net 479,295 401,065 237,572 210,058
Equipment expense 269,804 183,497 134,480 96,263
Other operating expense 2,586,009 2,254,369 1,337,838 1,211,735
Other real estate expense (18,102) 46,922 (4,613) 763
---------- ---------- ---------- ----------
Total Other Expense 6,716,263 5,711,985 3,395,234 2,984,358
Income before income taxes 3,915,335 3,241,273 1,948,179 1,944,164
Applicable income taxes 1,182,121 978,244 593,887 610,087
---------- ---------- ---------- ----------
NET INCOME BEFORE ACCOUNTING CHANGE 2,733,214 2,263,029 1,354,292 1,334,077
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 1,035,070
NET INCOME $ 2,733,214 $ 3,298,099 $1,354,292 $1,334,077
---------- ---------- ---------- ----------
Net income per common share before
cumulative effect of accounting change $2.00 $1.65 0.99 0.98
Cumulative effect of accounting change $0.00 $0.76 0.00 0.00
Net income per common share $2.00 $2.41 0.99 0.98
Dividends per share $0.30 $0.20 0.15 0.10
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
GOLDENBANKS OF COLORADO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASHFLOWS
For the Six Months Ended
(Unaudited)
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,733,214 $3,298,099
--------- ---------
Adjustments:
Provision for loan losses 49,000 (475,000)
Depreciation and amortization 305,841 155,191
Accretion/amortization of discount/premium on investments 206,840 422,224
Write down of OREO 45,000 25,000
Gain/Loss on sale of Fixed Assets (2,487)
Gain on early call of investment securities (12,750) (59,468)
Change in other assets 313,232 (1,671,416)
Change in accrued expenses and other liabilities (850,476) 948,414
--------- ---------
Total adjustments 54,200 (655,055)
--------- ---------
Net cash provided by operating activities 2,787,414 2,643,044
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investment securities 1,224,296
Proceeds from maturities of investment securities 32,831,363 38,651,420
Purchases of investment securities (20,743,173) (52,211,723)
Change in loans (19,288,881) (11,175,753)
Purchase of Applewood -- (Net Cash) 9,060,534
Purchase of premises and equipment (364,510) (147,392)
Proceeds from sale of Fixed Assets 8,300
Net cash applied to investing activities (7,556,901) (14,598,618)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in deposits - Demand, Savings, & NOW (14,992,946) 30,456,863
Change in time deposits (1,751,117) (970,828)
Change in short-term borrowed funds 12,293,987 487,227
Proceeds from long-term debt 2,359,992
Change in long-term debt (235,714) (249,290)
Dividends paid (615,119) (410,080)
--------- ---------
Net cash (applied to)/provided by financing activities (5,300,909) 31,673,884
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS (10,070,396) 19,718,310
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 39,306,093 21,071,142
CASH AND CASH EQUIVALENTS, END OF PERIOD $29,235,697 $40,789,452
---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash received (paid) during the year for:
Interest income $12,069,012 $ 9,802,060
Interest expense 3,572,945 3,089,710
Income taxes 1,200,000 460,000
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Transfers of loans to other real estate owned 120,000 100,359
Dividends declared not yet paid 205,040 136,693
On November 19, 1993, the company acquired the assets and deposits
and certain liabilities of Bank of Applewood d/b/a Citywide Bank
of Applewood as follows:
Fair Value of Assets Acquired and Liabilities Assumed
Cash and cash equivalents $11,560,534
Investment Securities 11,122,753
Loans, net 19,034,851
Property and equipment 2,219,550
Deposits (42,943,347)
Other, net 1,505,659
----------
Cash Paid $ 2,500,000
==========
</TABLE>
See notes to Consolidated Financial Statements.
<PAGE>
GOLDENBANKS OF COLORADO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions for Form 10-QSB and with
generally accepted accounting principles for interim financial statements.
All adjustments which are, in the opinion of management, necessary for a fair
statement of results of operations have been reflected in the accompanying
financial statements. All such adjustments made are of a normal and
recurring nature.
Note 2 - Earnings per Share
Earnings per share for the six months and three months ended December 31,
1994, and 1993 are based on 1,366,932 common shares outstanding during each
period.
Note 3 - Change of Accounting Principle
Prior to July 1, 1994, the Company acquired investment securities with the
intent to hold the securities to maturity. Accordingly, such securities were
carried at amortized cost.
On July 1, 1994, the Company adopted Financial Accounting Standards Board
Statement No. 115 "Accounting for Certain Investments in Debt and Equity
Securities," and a portion of the Company's investment securities were
classified as "available for sale." Securities classified as "available for
sale" are measured at fair value. Unrealized holding gains and losses are
excluded from earnings and are reported as a separate component of
stockholders' equity until realized. As of December 31, 1994, securities
with a book value of $32.6 million are classified as "available for sale."
A valuation allowance of $364 thousand, which is net of income taxes, has
been recorded in equity to recognize the difference between the carrying
value and the fair value of these securities.
The adjusted cost of specific investment securities is used to compute gains
and losses upon disposition, and net gains/losses are shown separately as a
component of Other Income.
ITEM 4. OTHER INFORMATION
- --------------------------
The Annual Meeting of Stockholders of Goldenbanks of Colorado, Inc. was held
on October 20, 1994. Present at this meeting in person or by proxy were
Stockholders representing 1,272,087 shares of outstanding common stock.
These shares represented 93.06% of the total outstanding common stock.
William J. Fortune was re-elected a Director for a term of three years,
expiring at the third succeeding Annual Meeting of the Stockholders. The
vote for Mr. Fortune was 1,135,126 shares for and 141,988 shares withholding
authority. Dan A. Gabrielson was re-elected a Director for a term of three
years, expiring at the third succeeding Annual Meeting of the Stockholders.
The vote for Mr. Gabrielson was 1,132,564 shares for and 144,550 shares
withholding authority. The terms of office of the other three directorships
did not expire at this meeting. The names of the other three Directors are
David C. Beck, Michael J. Hall, and G. Scott Gagon.
<PAGE>
Stockholders also ratified the selection by the Board of Directors of
Deloitte and Touche as independent auditors for the Company for the fiscal
year ending June 30, 1995. The vote was 1,233,164 shares for; 8,728 shares
against; and 35,222 shares abstaining.
ITEM 6. REPORTS OF FORM 8-K
- ----------------------------
On November 22, 1994, the Company issued a press release concerning the
execution of a definitive agreement providing for the merger of the Company
into Norwest Corporation. The Company also granted an option to Norwest to
acquire up to 19.9% of Goldenbanks' currently outstanding common stock. This
option would be exercisable by Norwest only if certain conditions are met
relating to the proposed acquisition of the Company by a person or entity
other than Norwest.
William J. Fortune, President of the Company, and G. Scott Gagon, President
of the Company's principal subsidiary, Goldenbank, N.A., executed employment
agreements with the Company providing for continued employment by the
Company of Messrs. Fortune and Gagon for fifty weeks after the effective date
of the acquisition of the Company by Norwest. Form 8-K has been filed.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND FINANCIAL REVIEW
- -----------------------------------------------------
The following commentary presents management's discussion and
analysis of the Company's financial performance and financial
condition. The discussion is presented in order to provide a more
complete understanding of the Consolidated Financial Statements.
Earnings Performance
- --------------------
Goldenbanks of Colorado, Inc.'s (the Company) net income for the
six months ended December 31, 1994, totaled $2.7 million compared
to $3.3 million for the six months ended December 31, 1993. The
earnings for the six months ended December 31, 1993, reflected a
cumulative effect of an accounting change due to the Company's
adoption of Statement of Financial Accounting Standards No. 109
(SFAS No. 109), "Accounting for Income Taxes". The Company adopted
this new accounting standard through a one-time cumulative
adjustment in the amount of $1,035,070. Income before the
accounting change totaled $2.3 million for the six months ended
December 31, 1993. If interim earnings before the accounting
change are compared, an increase of $470 thousand or 20.8% was
realized.
Income per share was $2.00 for the first six months of the current
fiscal year. For the first six months of fiscal 1994, income per
share, before the cumulative effect of the accounting change, was
$1.65, and income per share was $2.41 inclusive of the accounting
change.
A moderate increase in income was realized when the quarter ended
December 31, 1994 is compared to the quarter ended December 31,
1993. The Company's income totaled $1,354 thousand for the quarter
ended December 31, 1994, compared to $1,334 thousand for the
quarter ended December 31, 1993. Earnings per share were $.99 for
the second quarter of the current fiscal year compared to $.98 for
the same period a year ago.
The Company's six month earnings produced a return on average
stockholders' equity of 19.42%, and a return on average assets of
1.44%, on an annualized basis. This compares to a return on
average equity of 27.36%, and a return on average assets of 2.05%,
for the first six months of fiscal 1994, on an annualized basis.
Prior to the cumulative effect of the accounting change for the
first six months of fiscal 1994, the Company's return on average
equity was 18.78%, and the return on average assets was 1.41%, on
an annualized basis.
For the quarter ending December 31, 1994, the Company's return on
average stockholders' equity was 19.19%, on an annualized basis,
compared to 21.41% for the same quarter a year ago. The Company's
<PAGE>
Management's Discussion
Page 2
Earnings Performance - (Continued)
- --------------------
return on average assets was 1.44%, on an annualized basis, for the
quarter ended December 31, 1994, compared to 1.52% for the quarter
ended December 31, 1993.
A notable factor, in comparing income and expense categories from
fiscal 1994 to fiscal 1995, is the acquisition of Goldenbank,
Applewood. The Applewood Bank was acquired by the Company
during the second quarter of fiscal 1994. Consequently, the
Consolidated Statement of Earnings reflects the operating results
of the Applewood Bank for the first six months of fiscal 1995,
while Applewood's operating results are reflected only for the
short period from November 19, 1993, to December 31, 1993, for
fiscal 1994.
In addition to the accounting change, and the addition of the
Applewood Bank, there were two other items which significantly
affected the Company's earnings. There was a significant increase
in net interest income for both the six month and three month
periods, ended December 31, 1994, compared to the same periods, in
the preceding fiscal year. Also impacting earnings, when both the
six month and three month periods ending December 31, 1994, are
compared to the same periods ending December 31, 1993, is a $500
thousand credit to the provision for loan loss expense, taken by
the Company's lead bank. The credit, taken during the second
quarter of fiscal 1994, was attributable to a reduction in the
allowance for loan loss level of that Bank.
Net interest income is defined as the total of interest income and
amortized fees on loans, less interest expense on deposits and
borrowed funds. Earning assets are funded by interest bearing
liabilities including deposits, short-term borrowings and long-term
debt. Earning assets are also funded by net noninterest related
funds consisting of demand deposits and stockholders' equity.
A strong net yield, plus changes in the mix and growth in earning
assets, produced net interest income on a fully taxable equivalent
basis (FTE) for the first six months of fiscal 1995 of $9.4
million, up 29.4% from $7.2 million in fiscal 1994. On a quarterly
basis, net interest income increased $917 thousand or 24.2%, from
the quarter ended December 31, 1993, to the quarter ended December
31, 1994. To arrive at income on a fully taxable equivalent basis,
adjustments were made to present yields, on certain tax exempt
municipal securities and loans, as if such income were fully
taxable.
<PAGE>
Management's Discussion
Page 3
Earnings Performance - (Continued)
- --------------------
The Company's net yield on interest earning assets on an annualized
FTE basis was 5.36% for the six months ended December 31, 1994,
compared to 4.84% for the six months ended December 31, 1993. For
the quarter ended December 31, 1994, the net yield was 5.40%
compared to 4.66% for the quarter ended December 31, 1993. The net
yield on interest earning assets is determined by expressing net
interest income as a percentage of earning assets. The Company's
net yield on interest earning assets is attributable to a combina-
tion of two factors which include the percentage of interest
earning assets funded by interest bearing liabilities, and the
difference between the yield on earning assets and the rate paid on
interest bearing liabilities.
During the six months ended December 31, 1994, 74.5% of the Com-
pany's interest bearing assets were funded by interest bearing
liabilities. During the six months ended December 31, 1993, 75.7%
of the Company's interest bearing assets were funded by interest
bearing liabilities. A reduction in the level of interest bearing
assets, funded by interest bearing liabilities, from 75.7% to 73.9%
was realized when the quarter ended December 31, 1994, is compared
to the quarter ended December 31, 1993. The Company's ability to
attract and maintain noninterest bearing deposits, and the decrease
in the level of interest bearing assets funded by interest bearing
liabilities has enhanced the Company's net interest income.
The yields on the Company's interest bearing assets increased when
both the six and three month periods ended December 31, 1994, are
compared to the six and three month periods ended December 31,
1993. The rates on interest bearing liabilities increased but
to a lesser degree when the same periods are compared.
The Company's yield on interest bearing assets increased 50 basis
points to 7.42% from 6.92% when the six month period ended
December 31, 1994, is compared to the six month period ended
December 31, 1993. The Company's cost of funds increased, by a
single basis point, to 2.76% from 2.75%, when the first six months
of fiscal 1995 is compared to the first six months of fiscal 1994.
These rate changes resulted in an increase in the Company's
interest rate spread of 49 basis points for the first six months of
the fiscal year, compared to the same period in the previous year.
When the quarter ended December 31, 1994, is compared to the
quarter ended December 31, 1993, an increase of 65 basis points was
realized in the interest rate spread.
<PAGE>
Management's Discussion
Page 4
Earnings Performance - (Continued)
- --------------------
As pointed out earlier in this discussion, a reduction in the
provision for loan losses positively impacted earnings in fiscal
1994. The provision for loan losses for the first six months of
fiscal 1994 reflected a credit balance of $475 thousand compared to
expense of $49 thousand for the first six months of fiscal 1995.
The credit balance is attributable to a $500 thousand reduction in
the Allowance for Loan Loss balance taken during the second quarter
of fiscal 1994, by the Company's lead bank. The credit was offset
by a provision expense of $25 thousand at another subsidiary bank.
The reduction in the Allowance for Loan Loss balance is due to the
fact that the Bank has improved the quality of its loan portfolio
and reduced the level of problem loans.
The Company's level of net charged off loans remained low during
the six months ended December 31, 1994, at $40 thousand, and for
the quarter ended December 31, 1993, net charge offs totaled $34
thousand. The Company realized net recoveries on previously
charged off loans in the amount of $219 thousand for the six months
ended December 31, 1993 and for the quarter ended December 31,
1993, recoveries totaled $177 thousand. The low level of charged
off loans is attributable to strong underwriting standards, early
identification and workouts on problem credits, and a strong
Colorado economy.
Management believes it has thoroughly reviewed its loan portfolio,
and has identified and allowed for problem loans. The allowance for
loan losses was 2.9% of total loans at December 31, 1994, and 3.2%
of total loans at June 30, 1994. The reduction in the allowance as
a percentage of total loans reflects growth in the loan portfolio,
and the low level of provision expense. Management feels that the
Company is adequately positioned against future credit risk.
The Company's noninterest income is reflected in the Other Income
section of the Consolidated Statement of Earnings. The Company's
other income is categorized into three components. The most
significant of these is fees on deposit accounts, followed by other
fee income, and investment security gains. Other income for the
first six months of fiscal 1995 totaled $1,555 thousand compared
with $1,536 thousand for the first six months of fiscal 1994. For
the quarter ended December 31, 1994, other income was $764 thousand
compared to $786 thousand for the quarter ended December 31, 1993.
<PAGE>
Management's Discussion
Page 5
Earnings Performance-(Continued)
- --------------------
Service charges on both deposits and other services provided by the Company's
banking subsidiaries have long been an important source of revenue. The increase
in service charge revenue from the first six months of fiscal 1994 to the first
six months of fiscal 1995 totaled $149 thousand or 15.5%. The increase in
service charges is attributable to the acquisition of Goldenbank, Applewood.
Service charges at the Applewood Bank totaled $195 thousand for the six month
period. Due to the timing of the acquisition of the bank in November, 1993,
Applewood contributed only $35 thousand to the service charge total for the
first six months of the preceding fiscal year.
The Company realized a $59 thousand investment security gain for the six months
ended December 31, 1993, of which $7 thousand was realized in the quarter ended
December 31, 1993. For the current fiscal year security gains totaled $13
thousand and there was no gain or loss on securities for quarter ended December
31, 1994. All of the investment security gains are attributable to gains
realized on municipal securities held by the Company which were called at a
premium.
In May 1993, the Financial Accounting Standards Board issued Statement No. 114
(SFAS 114) "Accounting by Creditors for Impairment of a Loan," which addresses
the accounting for impairment of certain loans in the Company's loan portfolio.
The Company is required to adopt SFAS 114 by the year ending June 30, 1996.
Management is unable to estimate the impact SFAS 114 will have on the reporting
and disclosures in its balance sheet; however, management believes the statement
will not have a material effect on the results of operations.
Other expenses for the first six months of fiscal 1995 totaled $6.7 million
which is an increase of $1 million or 17.6% compared to the first six months of
fiscal 1994. For the quarter ended December 31, 1994, an increase in other
expenses of $411 thousand or 13.8% was realized when comparison is made to the
quarter ended December 31, 1993. A significant factor in the increase in other
expenses, for both the six months ended December 31, 1993, compared to the six
months ended December 31, 1994, and the quarters ended on these dates, is the
acquisition of Goldenbank, Applewood.
Applewood contributed $137 thousand to other expenses for the first six months
of fiscal 1994. Due to the November, 1993, acquisition date, all of these other
expenses were realized in the second
<PAGE>
Management's Discussion
Page 6
Earnings Performance - (Continued)
- --------------------
quarter of that year. Other expenses for the Applewood Bank
totaled $913 thousand for the first six months of fiscal 1995, with
$472 thousand of the expenses realized during the second quarter of
the year.
Salaries and employee benefits, which represents 50.6% of total
other expense for the six months ended December 31, 1994, increased
$573 thousand or 20.3% from the six months ended December 31, 1993.
From the quarter ended December 31, 1993, to the quarter ended
December 31, 1994, an increase of $224 thousand or 15.3% was
realized. The expense increase reflects annual cost increases, and
additional staffing attributable to the Company's growth and the
Applewood acquisition.
Other real estate (OREO) expenses are the costs associated with
properties obtained through foreclosure, and include the costs of
administering and operating these properties, any write downs in
the value of the properties prior to their disposition, and the
effect of gains and losses on the subsequent sale of these
properties. Other real estate expenses also reflect rental income
realized on these properties as a reduction to other real estate
expenses.
The Company's earnings for the six months ended December 31, 1994,
reflected the positive impact of $18 thousand in OREO income.
Expenses from OREO properties exceeded income by $47 thousand for
the six months ended December 31, 1993. For the quarter ended
December 31, 1994, the Company realized $5 thousand in OREO income
and for the quarter ended December 31, 1993, the Company realized
OREO expenses totaling under $1 thousand.
Other operating expense for the six months ended December 31, 1994,
was $332 thousand greater than the six months ended December 31,
1993. Other operating expense attributable to the Applewood Bank
for the six months ended December 31, 1994, were $309 thousand
greater than in the first six months of the preceding fiscal year,
and this change accounted for 93% of the increase in this expense
category for the six month period. An increase of $126 thousand
was realized in other operating expense for the quarter ended
December 31, 1994, compared to the quarter ended December 31, 1993.
The rise in expense is attributable to the Applewood acquisition,
as Applewood's other operating expense was $132 thousand greater
for the quarter ended December 31, 1994, than for the quarter ended
December 31, 1993.
<PAGE>
Management's Discussion
Page 7
Earnings Performance - (Continued)
- --------------------
Income tax expense totaled $1.2 million for the six months ended December 31,
1994, an increase of 20.8% over the same six months in the preceding fiscal
year. The rise in income tax expense is attributable to the increase in the
Company's before tax earnings when the six months ended December 31, 1994, is
compared to the six months ended December 31, 1993. There is relatively little
change in income tax expense for the quarter ended December 31, 1994, when
compared to the quarter ended December 31, 1993. Income tax expense for the
quarter ended December 31, 1994, declined 2.7%, when the quarters are compared,
as income before income tax, for the two quarters, is fairly flat.
Financial Condition
- -------------------
The consolidated balance sheets presented in this report summarize the various
sources of funds generated by the Company and the manner in which those funds
were invested. Total assets declined approximately 1%, from $380 million, at
June 30, 1994, to $376 million at December 31, 1994.
The Company's total deposits have declined $16.7 million or 4.9% since June 30,
1994. There were declines in all deposit categories with the exception of N.O.W.
accounts. In the current rising interest rate environment, it appears that some
customers are taking advantage of some opportunities to earn a higher rate of
interest, on a variety of investment products other than bank deposits.
While the Company has experienced some declines in deposit balances, it
successfully grew its loan portfolio since June 30, 1994. The loan portfolio,
expressed as a percentage of total assets, increased from 42.3% as of June 30,
1994, to 47.8% as of December 31, 1994. The shifting of earning assets from
investments into higher yielding loans positively effects the Company's
earnings.
The loan portfolio increased $19.1 million or 11.9% since June 30, 1994. The
most significant loan growth included increases of $9.5 million in construction
real estate loans and $8.7 million in installment loans. Commercial loans and
real estate mortgage loans increased $546 thousand and $444 thousand,
respectively.
<PAGE>
Management's Discussion
Page 8
Financial Condition - (Continued)
- -------------------
With the growth of the loan portfolio the Company has seen a
decrease of $12.6 million or 7.3% in its investment portfolio.
Investments represented 45.6% of total assets at June 30, 1994, and
42.7% of total assets at December 31, 1994. The reduction in
investments, and the movement of funds into loans, has been
accomplished with maturing securities. No securities were sold
during the quarter.
The Company adopted Statement of Financial Accounting Standards No.
115 (SFAS 115), "Accounting for Certain Investments in Debt and
Equity Securities," on July 1, 1994. Under SFAS 115, a portion of
the Company's investment securities have been classified as
"available for sale." These securities are reported at current
market value with both unrealized gains and losses, which primarily
result from period-to-period interest rate changes, credited or
charged, net of the related tax effect, directly to a separate
component of stockholders' equity. This accounting adds volatility
to the Company's capital, but net income will not be impacted
unless the securities are sold.
Securities "available for sale" include securities considered part
of the Company's asset/liability management that may be sold in
response to changes in interest rates or for general liquidity
purposes. As of December 31, 1994, the Company has securities with
an amortized cost of $32.6 million classified as "available for
sale" which represents approximately 8.7% of the Company's total
assets at that date. As noted on the December 31, 1994,
Consolidated Balance Sheet, equity capital decreased $364 thousand
to recognize an unrealized loss in these securities' market values,
net of taxes.
As members of the Federal Reserve System, the Company's subsidiary
banks must maintain required levels of cash on hand or on deposit
with the Federal Reserve Bank or other financial institutions.
Each subsidiary bank is responsible for the maintenance of its
"cash position" and to meet these requirements on a continuous
basis. In addition to these regulatory requirements, the Company
keeps a portion of its funds available as cash or as amounts on
deposit with the Federal Reserve Bank or other depository
institutions, in order to satisfy its operational and liquidity
requirements. At June 30, 1994, 6% of the Company's funds were
held as cash and due from banks and at December 31, 1994, 7% of
funds were held in this manner.
<PAGE>
Management's Discussion
Page 9
Financial Condition-(Continued)
- -------------------
The Company's Stockholders' Equity, consisting of capital contributed by
stockholders and retained earnings, provides a significant source of funds for
the Company. Stockholders' Equity increased $2 million or 7.2% from June 30,
1994, to December 31, 1994. The change in equity is attributable to the
Company's earnings less dividends paid to shareholders and the unrealized loss
on securities (SFAS 115).
The Company's long-term debt decreased $236 thousand or 8% from June 30, 1994,
to December 31, 1994. The reduction is attributable to regular debt service.
Short-term borrowings, consisting of repurchase agreements and federal funds
purchased by the Company's subsidiary banks provided 4.5% of funds at December
31, 1994, and 1.3% of funds at June 30, 1994.
Asset Quality
- -------------
Loans of $179.8 million, and investment securities totaling $160.9 million are
the principal assets of the Company. These two asset categories combined make up
90.5% of total assets at December 31, 1994.
The quality of the Company's loan portfolio is monitored on an ongoing basis.
All of the Company's subsidiary banks have written loan policies which help
provide for consistent loan underwriting and the basis for prudent loan
decisions. Credit decisions are based on the ability of the borrowers to repay
the loan and the value and liquidity of underlying collateral. Loan officers are
charged with the responsibility of reviewing existing loans on an ongoing basis,
identifying potential problem credits, and developing action plans to collect
and reduce problem loans. In addition, loans are subject to review by the
Company's internal loan review officer, the Company's independent auditors, and
bank regulatory agencies.
The Company's internal loan review is performed by a loan review officer who
operates independently of the lending department and reports directly to the
banking subsidiaries' boards of directors. Loan review encompasses examinations
of the subsidiary banks' loans for credit quality, documentation, and adherence
to loan policy. The Company also strives to avoid undue credit risk in its loan
<PAGE>
Management's Discussion
Page 10
Asset Quality - (Continued)
- -------------
portfolio by monitoring concentrations of loans by collateral,
purpose, and industry. The Company has no significant exposure to
highly leveraged transactions and has no foreign credits in its
loan portfolio.
The Company's level of problem assets total $2.2 million at
December 31, 1994, compared to $1.9 million at June 30, 1994.
Problem assets consist of other real estate (OREO), nonaccrual
loans, and loans 90 days past due. The Applewood Bank's problem
assets totaled $968 thousand at December 31, 1994, and $1.1 million
at June 30, 1994. Applewood's problem asset level largely reflects
problem assets acquired in the acquisition of the Bank which took
place during the preceding fiscal year. The Company is addressing
the problem assets at the Applewood Bank and is implementing the
same monitoring and review standards which are in place at its
other subsidiary banks.
At December 31, 1994, the Company had other real estate of $489
thousand compared to $414 thousand at June 30, 1994. Appraisals on
OREO properties are obtained annually. Any reduction in the fair
market value of the property is recorded immediately. The OREO
balance reflected in the balance sheets is the estimated amount
expected to be realized on the sale of the property, net of sales
expense.
Nonaccrual loans at December 31, 1994, were $1.7 million compared
to $1.4 million at June 30, 1994. The Company's 90 day past due
loans totaled $9 thousand at December 31, 1994, compared to $7
thousand at June 30, 1994.
The quality of the investment portfolio is a primary concern of
management. The Company's investment portfolio is structured to
provide profitability, and is managed to monitor the quality of
investments, and provide acceptable levels of liquidity. U.S.
government securities make up $84.6 million or 52.6% of the
investment portfolio at December 31, 1994. Obligations of states
and political subdivisions (municipal securities), comprise $17.8
million or 11.1% of the portfolio. Currently, 69.3% of the
municipal securities are Colorado bonds and 94.5% are rated A or
higher.
The Company also invests in mortgage backed securities and asset
backed securities. The mortgage backed securities consist of bonds
secured by pools of pass-through mortgage securities, primarily of
U.S. Agencies. The asset backed securities are secured by pools of
<PAGE>
Management's Discussion
Page 11
Asset Quality - (Continued)
- -------------
automobile loans, home equity loans, and letters of credit. The
mortgage backed securities are high quality securities and
consequently provide a good credit risk. All of the mortgage
backed securities are rated AAA. All of the asset backed
securities are rated at least A and 92.8% are rated AAA.
Liquidity
- ---------
One of the principal functions of asset/liability management is to
provide for adequate liquidity. Liquidity is the ability to
ensure that sufficient funds are available to satisfy contractual
liabilities, to meet fluctuating loan demand and withdrawal
requirements of depositors, and to fund operations. The Company
depends on its financial strength, asset quality, and the stability
of its deposit base to ensure adequate liquidity. In the ordinary
course of business, cash flows needed to meet liquidity
requirements are generated from the Company's interest and fee
income, repayments of loan balances, and the regularly scheduled
maturities and cash flows of other earning assets.
Projected cash flows and maturities of the Company's investment
portfolio, due within one year, total $85.3 million, at December
31, 1994, and represent 53% of the portfolio. Maturities in the
loan portfolio also provide a steady flow of funds. Loan
maturities as well as regularly scheduled loan payments provide a
source of liquidity.
The overall liquidity of the Company is also enhanced by its
ability to purchase federal funds through established correspondent
banking relationships.
The parent company's cash requirements consist primarily of
dividends to shareholders and principal and interest payments on
debt. The long-term debt of the parent is relatively moderate
compared to its peers. The principal source of funds for the
parent is dividends from its subsidiary banks. Based on the strong
capital levels and current earnings of the subsidiary banks,
projected cash flows of the parent are adequate to service the debt
and provide for its operational needs.
<PAGE>
Management's Discussion
Page 12
Capital Resources
- -----------------
The Company's capital adequacy is important for a number of
reasons. The strength of the Company can be determined by a review
of its underlying capital. A strong capital base is necessary to
support the volume, type, and character of the Company's business
and to provide for the absorption of adverse operating results. In
addition, the capital position of the Company lends itself to
promote public confidence in the Company and its subsidiary banks,
and furnishes a safeguard for depositors and other creditors.
Equity of the Company increased $2 million or 7.2% from June 30,
1994, to December 31, 1994. The equity balance was increased by
the six month earnings, and reduced by shareholder dividends of
$.30 per share. The Company's equity total has also been reduced,
since June 30, 1994, by the net unrealized loss on securities held
as "available of sale," as discussed earlier.
The Company is subject to the Federal Reserve's guidelines
pertaining to risk-based capital. The guidelines require the
calculation of risk-based capital ratios which provide a consistent
system for comparing capital positions of banking organizations and
to consider the different degrees of credit risk among an
organization's assets and off-balance sheet items in assessing
capital adequacy. Under these final guidelines the Company's Tier
1 capital was 12.6%, and the total capital was 13.85%, of risk-
based assets. These risk-based capital ratios are well above the
minimum requirements of 4% for Tier 1 capital and 8% for total
risk-based capital.
In addition, the Federal Reserve Board has introduced the leverage
ratio, which measures Tier 1 capital against quarterly average
assets, net of goodwill. A leverage ratio of 3% is the minimum
requirement for the most highly rated banking organizations and
most banking organizations would be expected to maintain a leverage
ratio between 4% and 5%. The Company's leverage ratio at December
31, 1994, is 7.34%.
The Company's subsidiary banks must also comply with the risk-based
capital guidelines and the leverage ratio requirements. At
December 31, 1994, all of the subsidiary banks exceed the regu-
latory minimums.
The Federal Deposit Insurance Corporation (FDIC) has published the
conditions for banks to qualify as a "well capitalized" bank for
the purpose of assignment of FDIC insurance premium rates.
<PAGE>
Management's Discussion
Page 13
Capital Resources - (Continued)
- -----------------
To qualify as a "well capitalized" bank, an institution must have
a Tier 1 risk-based capital ratio of at least 6%, a total risk-
based capital ratio of at least 10%, and a leverage ratio of at
least 5%. If a bank meets these capital standards, and has a
sufficiently high supervisory rating, it will be assessed the
lowest FDIC insurance premium rate of $.23 per $100. At December
31, 1994, all of the Company's subsidiary banks met the criteria of
a "well capitalized" bank.
Interest Rate Sensitivity
- -------------------------
Interest sensitivity risk is the risk that future changes in
interest rates will decrease net interest income. Net interest
income is affected by fluctuations in market interest rates as a
result of mismatches in the repricing of its assets and liabili-
ties. These mismatches are quantified in specific time intervals
and are referred to as interest rate sensitivity gaps. An asset
sensitive gap position, indicates that the net interest margin will
move in the same direction as interest rates (i.e., as rates
increase the net interest margin will increase). A liability
sensitive gap position would cause net interest income to move in
the opposite direction from interest rates.
The following table presents the Company's gap profile at December
31, 1994. To take into account such factors as prepayments of
certain types of loans and investments the analysis focuses on the
expected repricing of these assets (the "managerial gap") rather
than on contractual terms. For deposits without defined maturities
- - savings, N.O.W., and money market accounts - the estimated life
is based on maximum stated lives as provided by the guidelines in
the proposed Section 305 of the Federal Deposit Insurance
Corporation Improvement Act.
<PAGE>
Management's Discussion
Page 14
Interest Rate Sensitivity - (Continued)
- -------------------------
Interest Rate Sensitivity Table
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
Cumulative Sensitivity Period
-----------------------------
One to Over
Three Six One Five Five
Months Months Year Years Years
<S> <C> <C> <C> <C> <C>
Interest Earning Assets:
Short-term investments $ 2,757 $ 2,757 $ 2,757 $ 2,757 $ 2,757
Securities 26,929 48,092 89,952 154,884 161,264
Loans 70,016 76,046 85,061 153,228 179,805
------- ------- ------- -------- --------
Total 99,702 126,895 177,770 310,869 343,826
Interest Bearing Liab.:
Savings and NOW accounts 0 0 0 128,863 128,863
Money market accounts 0 11,613 34,840 58,066 58,066
Time deposits 19,988 30,739 41,130 55,073 55,118
Short-term borrowings 17,094 17,094 17,094 17,094 17,094
Long-term debt 2,711 2,711 2,711 2,711 2,711
------- ------- ------- -------- --------
Total 39,793 62,157 95,775 261,807 261,852
------- ------- ------- -------- --------
Interest sensitivity gap $59,909 $64,738 $81,995 $ 49,062 $ 81,974
====== ====== ====== ====== ======
Percent of earning assets 17.42% 18.83% 23.85% 14.27% 23.84%
</TABLE>
This table shows that the Company is asset sensitive, and is in a
favorable position, as management believes we are currently in a rising
interest rate environment.
Gap analysis provides a static view of the Company's rate sensitivity at
a specific point in time. Further, this type of analysis assumes that
rate sensitive assets and liabilities are equally sensitive to rate
changes within the periods shown. In reality, however, there are varying
degrees of rate sensitivity.
Due to the limitations of gap reports the Company uses a simulation model
as its primary method of measuring interest rate risk. The model
simulates the Company's interest margin over a variety of interest rate
scenarios and time horizons. Because of the model's dynamic nature it can
capture the effects of different patterns of rate movements and the
changing relationships between rates. In addition, the model can take into
<PAGE>
Management's Discussion
Page 15
Interest Sensitivity - (Continued)
- --------------------
account the effects of interest rate ceilings and floors. At December 31,
1994, the Company's simulation modeling indicates that net interest income
would fluctuate by approximately 3% due to an increase or decrease in
interest rates of 200 basis points over the remainder of fiscal 1995. If
interest rates rise, the change would be positive, and as previously
stated, management believes that the Company is in a favorable position to
take advantage of a rising interest rate environment.
Other Matters
- -------------
On September 26, 1994, the Company announced that a letter of intent had
been signed for the merger of the Company into Norwest Corporation.
On November 22, 1994, the Company announced that a definitive agreement
providing for the merger of the Company into Norwest Corporation had been
executed. Terms of the agreement call for a tax free exchange of 1.9876
shares of Norwest common stock for each share of Goldenbanks common stock.
The agreement provides that if the average closing price of Norwest common
stock is less than $21.00 per share during the 15 trading days, ending
prior to the Goldenbanks shareholder meeting, held for the purpose of
approving the merger, Goldenbanks can terminate the purchase agreement.
Consummation of the transaction is conditioned on, among other things, the
approval of Goldenbanks' shareholders, and approval of all applicable
regulatory authorities. No assurances can be given regarding the time
frame under which the transaction would be completed. However, it is
anticipated the closing would occur in the first half of 1995.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOLDENBANKS OF COLORADO, INC.
Date: February 14, 1995
By _____________________________
William J. Fortune
President, Director, Chairman of the
Board, and Chief Executive
Officer
Date: February 14, 1995
By ____________________________
G. Scott Gagon
Director, Executive Vice President,
Treasurer, and Principal
Financial Accounting Officer
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Minneapolis, State of Minnesota, on the 22nd day of March, 1995.
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 amendment to
the Registration Statement has been signed on the 22nd day of March, 1995, 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 )
CHARLES M. HARPER )
N. BERNE HART )
WILLIAM A. HODDER )
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 )
IAN M. ROLLAND )
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-1
