<PAGE>
As filed with the Securities and Exchange Commission on July 6, 1995
Registration No. 033-60395
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 incorporation Classification Code Identification No.)
or organization) Number)
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-1000
612-667-1234
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Stanley S. Stroup
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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<PAGE>
DICKINSON BANCORPORATION, INC.
P.O. BOX 1118
DICKINSON, NORTH DAKOTA 58601
July 6, 1995
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Dickinson Bancorporation, Inc. ("DBI") to be held at the main office of Liberty
Bank and Trust, National Association, 115 First Avenue West, Dickinson,
North Dakota, on Thursday, August 3, 1995, at 9:00 a.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 February 24, 1995,
between DBI 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 DBI (the "Merger").
Under the terms of the Merger Agreement, the Merger will result in the
conversion of each share of DBI Common Stock outstanding immediately prior to
the time the Merger becomes effective into a number of shares of Norwest Common
Stock determined in accordance with the provisions of the Merger Agreement.
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 DBI and its shareholders and recommends that you vote in
favor of the Merger. Consummation of the Merger is subject to a number of
conditions including approval of the Merger Agreement by DBI's shareholders and
receipt by DBI 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.
F.L. Clarkson
CHAIRMAN AND VICE PRESIDENT
<PAGE>
DICKINSON BANCORPORATION, INC.
P.O. BOX 1118
DICKINSON, NORTH DAKOTA 58601
----------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 3, 1995
----------------------------
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders (the "Special
Meeting") of Dickinson Bancorporation, Inc. ("DBI"), a North Dakota corporation,
will be held at the main office of Liberty Bank and Trust, National Association,
115 First Avenue West, Dickinson, North Dakota, on Thursday, August 3, 1995, at
9:00 a.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 February 24, 1995, (including the
Agreement and Plan of Merger attached thereto) between DBI 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 DBI (the "Merger"), with DBI as the surviving corporation, and
(ii) each outstanding share of Common Stock, par value $1.00 per share, of
DBI would be converted into 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 DBI 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 shareholders of record on the books of DBI at the close of business on
July 5, 1995, will be entitled to vote at the Special Meeting or any
adjournments thereof.
Your attention is directed to the Proxy Statement-Prospectus accompanying
this notice for a more complete statement regarding the matters to be acted upon
at the Special Meeting.
By Order of the Board of Directors
DeEtta Frank
SECRETARY
July 6, 1995
THE BOARD OF DIRECTORS OF DBI UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE PROPOSAL.
HOLDERS OF DBI 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
DICKINSON BANCORPORATION, INC.
FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 3, 1995
----------------------------
PROSPECTUS
OF
NORWEST CORPORATION
COMMON STOCK
----------------------------
This Proxy Statement-Prospectus of Norwest Corporation ("Norwest") relates
to up to 680,000 shares of the common stock, par value $1 2/3 per share, of
Norwest ("Norwest Common Stock") issuable to the shareholders of Dickinson
Bancorporation, Inc. ("DBI") upon consummation of the merger (the "Merger") of a
wholly owned subsidiary of Norwest with DBI, with DBI as the surviving
corporation, pursuant to the terms of an Agreement and Plan of Reorganization
dated as of February 24, 1995, between DBI 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 shareholders of
DBI in connection with the solicitation of proxies by the Board of Directors of
DBI (the "DBI Board") for use at the special meeting of shareholders of DBI to
be held on August 3, 1995, and at any adjournments or postponements thereof
(the "Special Meeting").
At the Special Meeting, the holders of record of the common stock of DBI on
July 5, 1995, will consider and vote upon a proposal to approve the Merger
Agreement. Except as described herein, upon consummation of the Merger, each
outstanding share of Common Stock, par value $1.00 per share, of DBI ("DBI
Common Stock") will be converted into shares of Norwest Common Stock in
accordance with the provisions of the Merger Agreement. For a more complete
description of the Merger Agreement and the terms of the Merger, see "THE
MERGER."
This Proxy Statement-Prospectus and the form of proxy are first being
mailed to shareholders of DBI on or about July 6, 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 July 6, 1995.
<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . 5
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 DBI . . . . . . . . . . . . . . . . . . . . 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
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . 9
Certain Federal Income Tax Consequences . . . . . . . . . . . 9
Market Information . . . . . . . . . . . . . . . . . . . . . . 10
Certain Differences in Rights of Shareholders . . . . . . . . 10
Comparative Unaudited Per Share Data . . . . . . . . . . . . . 11
Selected Financial Data . . . . . . . . . . . . . . . . . . . 13
MEETING INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 17
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Date, Place, and Time . . . . . . . . . . . . . . . . . . . . 17
Record Date; Vote Required . . . . . . . . . . . . . . . . . . 17
Principal Shareholders and Security Ownership of
Management of DBI . . . . . . . . . . . . . . . . . . . . . 18
Voting and Revocation of Proxies . . . . . . . . . . . . . . . 19
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . 19
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Background of and Reasons for the Merger . . . . . . . . . . . 20
Terms of the Merger . . . . . . . . . . . . . . . . . . . . . 20
Effective Date and Time of the Merger . . . . . . . . . . . . 22
Surrender of Certificates . . . . . . . . . . . . . . . . . . 22
Conditions to the Merger . . . . . . . . . . . . . . . . . . . 23
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . 23
Conduct of Business Pending the Merger . . . . . . . . . . . . 24
Certain Covenants. . . . . . . . . . . . . . . . . . . . . . . 24
No Solicitation . . . . . . . . . . . . . . . . . . . . . . . 25
Waiver, Amendment, and Termination . . . . . . . . . . . . . . 25
Effect on Employee Benefit Plans . . . . . . . . . . . . . . . 25
Interests of Certain Persons in the Merger . . . . . . . . . . 26
Management and Operations After the Merger . . . . . . . . . . 26
Certain Differences in Rights of Shareholders . . . . . . . . 26
Rights of Dissenting Shareholders . . . . . . . . . . . . . . 34
Certain Federal Income Tax Consequences. . . . . . . . . . . . 36
2
<PAGE>
Resale of Norwest Common Stock . . . . . . . . . . . . . . . . 38
Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . 39
Dividend Reinvestment and Optional Cash Payment Plan . . . . . 39
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . 39
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
INFORMATION ABOUT DBI AND THE BANK . . . . . . . . . . . . . . . . 40
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . 41
CERTAIN REGULATORY CONSIDERATIONS . . . . . . . . . . . . . . . . 69
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Dividend Restrictions. . . . . . . . . . . . . . . . . . . . . 69
Holding Company Structure. . . . . . . . . . . . . . . . . . . 69
Capital Requirements . . . . . . . . . . . . . . . . . . . . . 70
Federal Deposit Insurance Corporation Improvement Act of 1991 71
FDIC Insurance . . . . . . . . . . . . . . . . . . . . . . . . 72
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . 73
MANAGEMENT OF NORWEST AND ADDITIONAL INFORMATION . . . . . . . . . 73
FINANCIAL STATEMENTS OF DBI . . . . . . . . . . . . . . . . . . . F-1
APPENDIX A AGREEMENT AND PLAN OF REORGANIZATION, AND AGREEMENT
AND PLAN OF MERGER
APPENDIX B NORTH DAKOTA BUSINESS CORPORATION ACT, SECTIONS
10-19.1-87 AND 10-19.1-88
3
<PAGE>
AVAILABLE INFORMATION
Norwest is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission").
The reports, proxy statements, and other information filed by Norwest 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 Norwest also may be inspected at the offices of the
New York Stock Exchange at 20 Broad Street, New York, New York 10005 and at the
offices of the Chicago Stock Exchange at One Financial Place, 440 South LaSalle
Street, Chicago, Illinois 60605.
This Proxy Statement-Prospectus does not contain all of the information set
forth in the Registration Statement on Form S-4 and the exhibits thereto (the
"Registration Statement") covering the securities offered hereby that Norwest
has filed with the Commission. Certain portions of the Registration Statement
have been omitted pursuant to the rules and regulations of the Commission.
Reference is hereby made to such omitted portions for further information with
respect to Norwest, DBI, 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 DBI SINCE THE DATE OF THIS PROXY STATEMENT-PROSPECTUS.
4
<PAGE>
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, TO LAUREL A. HOLSCHUH, SECRETARY, NORWEST
CORPORATION, NORWEST CENTER, SIXTH AND MARQUETTE, MINNEAPOLIS, MINNESOTA 55479-
1026, TELEPHONE (612) 667-8655. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JULY 27, 1995.
The following documents filed with the Commission by Norwest (File
No. 1-2979) 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 Quarterly Report on Form 10-Q for the quarter ended March
31, 1995; and
3. Norwest's Current Reports on Form 8-K dated January 9, 1995, January
27, 1995, February 17, 1995, April 21, 1995, and July 3, 1995.
All documents filed by Norwest with the Commission pursuant to
Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the Special 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.
5
<PAGE>
SUMMARY
The following summary is not intended to be complete and is qualified in
all respects by the more detailed information included in this Proxy Statement-
Prospectus, the Appendices hereto, and the documents incorporated by reference
herein. As used in this Proxy Statement-Prospectus, the terms "Norwest" and "
DBI" 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 DBI included
in this Proxy Statement-Prospectus has been furnished by DBI 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"). 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 March 31, 1995, Norwest had consolidated total assets of $61.8 billion,
total deposits of $37.1 billion, and total shareholders' equity of $4.4 billion.
Based on total assets at March 31, 1995, 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 DBI, having aggregate total assets
at March 31, 1995, of $4.7 billion. Certain of these acquisitions were
consummated subsequent to March 31, 1995, and the others remain subject to
regulatory approval and are expected to be completed by the end of 1995. None
of these acquisitions are significant or material to the financial statements of
Norwest.
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
<PAGE>
DICKINSON BANCORPORATION, INC.
Dickinson Bancorporation, Inc. is a bank holding company organized under
the laws of North Dakota in 1988. Its principal executive offices are located
at 115 First Avenue West, Dickinson, North Dakota 58601, and its telephone
number is 701-227-3333. It holds 100% of the issued and outstanding capital
stock of Liberty Bank and Trust, National Association (the "Bank"), a full
service commercial bank chartered under the laws of the United States. The Bank
offers a full range of commercial and consumer banking services in the area. At
March 31, 1995, the Bank had total assets of $123.5 million, while DBI had total
assets on a consolidated basis of $123.7 million and total shareholders' equity
of $9.8 million. See "INFORMATION ABOUT DBI AND THE BANK."
TERMS OF THE MERGER
The Merger Agreement provides for the merger of a wholly owned subsidiary
of Norwest with DBI, with DBI as the surviving corporation. Upon consummation
of the Merger, each outstanding share of DBI Common Stock (other than shares as
to which statutory dissenters' rights have been exercised and not forfeited)
will be converted into a number of shares of Norwest Common Stock determined in
accordance with the provisions of the Merger Agreement. The conversion factor
for determining the exact number of shares of Norwest Common Stock into which
each outstanding share of DBI Common Stock will be converted will be computed
using the following formula: $15.5 million (reduced by certain potential
environmental costs) divided by the average closing price of Norwest Common
Stock over a specified period divided by the number of shares of DBI Common
Stock then outstanding. 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 DBI shareholders to consider and vote on a proposal
to approve the Merger Agreement will be held on Thursday, August 3, 1995, at
9:00 a.m., local time, at the main office of the Bank, 115 First Avenue West,
Dickinson, North Dakota. Only holders of record of DBI Common Stock at the
close of business on July 5, 1995, will be entitled to receive notice of and to
vote at the Special Meeting. At such date, there were 2,146 shares of DBI
Common Stock outstanding. Each share of DBI 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 DBI Common Stock. As of the
record date for the Special Meeting, directors and officers of DBI and their
affiliates owned beneficially an aggregate of 1,585 shares, or approximately
73.86%, of the DBI Common Stock outstanding on that date. Both of DBI's
directors, who are also officers, have entered into agreements with Norwest to
vote all of their shares in favor of the Merger Agreement. ACCORDINGLY, THE
DIRECTORS HAVE THE ABILITY TO APPROVE THE MERGER WITHOUT THE VOTE OF THE
REMAINING DBI SHAREHOLDERS. At the record date, directors and executive
officers of Norwest did not own beneficially any shares of DBI Common Stock.
See "MEETING INFORMATION--Record Date; Vote Required" and "--Principal
Shareholders and Security Ownership of Management of DBI."
7
<PAGE>
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS OF DBI
The Board of Directors of DBI (the "DBI Board") has concluded that the
Merger is in the best interests of the holders of DBI Common Stock, who will
receive, in a tax free exchange, stock of a much larger and a more diversified
enterprise that is actively traded on national exchanges. In addition to
providing greater liquidity to shareholders, the Merger will provide customers
of the Bank with access to a broader range of services and will provide the Bank
with increased financial strength. This should allow the Bank to compete more
effectively with competitors in the North Dakota market area, several of which
are part of larger, multibank holding companies. The DBI Board therefore
recommends that DBI shareholders vote FOR approval of the Merger Agreement. See
"THE MERGER--Background of and Reasons for the Merger."
For information on the interests of certain officers and directors of DBI
in the Merger, see "THE MERGER--Interests of Certain Persons in the Merger."
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 North Dakota (the "Effective Date") at 11:59
p.m., Dickinson, North Dakota time (the "Effective Time"). Such filing will be
made within ten 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 (the "Closing") 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 DBI to consummate the Merger are
subject to certain conditions, including the receipt of regulatory approvals,
approval of the Merger Agreement by the shareholders of DBI, receipt by DBI of
an opinion regarding the tax consequences to DBI shareholders of the Merger, 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
North Dakota, whether prior to or after approval by the DBI shareholders, by
either party under specified conditions, including if the Merger shall not have
been consummated by October 31, 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, Norwest may terminate the
Merger Agreement if the cost of certain environmental remediation that may have
to be performed at one of the Bank's locations and environmental damages would
exceed $500,000. See "THE MERGER--Terms of the Merger," "--Conditions to the
Merger," and "--Waiver, Amendment, and Termination."
8
<PAGE>
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 State of North
Dakota. The approval of the Federal Reserve Board has been received. The
approval of the State of Norwest Dakota is pending as of the date of this Proxy
Statement-Prospectus. See "THE MERGER--Regulatory Approvals."
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for by Norwest as a
purchase transaction under generally accepted accounting principles. See "THE
MERGER--Accounting Treatment."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Following the Merger, Norwest intends to operate at the Bank's present
locations and to offer products and services offered by Norwest affiliates.
Subsequent to the Closing, the Bank will be consoldiated with Norwest Bank North
Dakota, National Association. See "THE MERGER--Management and Operations After
the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
F.L. Clarkson and Alan Hann are directors and executive officers and also
shareholders of DBI, and can be expected, upon consummation of the Merger, to
receive shares of Norwest Common Stock in exchange for their shares of DBI
Common Stock. Alan Hann, who is President and a director of DBI and President
and a director of the Bank, has agreed that effective as of the Effective Time
he will not compete with DBI or the Bank in the banking business in Stark and
Bowman Counties, North Dakota. In addition, F.L. Clarkson and Alan Hann have
entered into an agreement whereby Mr. Clarkson will transfer 125 shares of DBI
Common Stock to Mr. Hann in consideration of cancellation of Mr. Hann's option
to purchase shares of DBI Common Stock in the future. See "THE MERGER--
Interests of Certain Persons in the Merger."
DISSENTERS' RIGHTS
North Dakota law provides that a shareholder of a North Dakota corporation
who dissents from a merger is generally entitled to receive payment of the
appraised value of his stock. See "THE MERGER--Rights of Dissenting
Shareholders."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The consummation of the merger is conditioned upon, among other things, the
opinion of Lindquist & Vennum P.L.L.P., counsel to DBI, that the Merger will
qualify as a "tax free" reorganization for federal income tax purposes.
Accordingly, no gain or loss (other than with respect to cash received in lieu
of fractional shares or in satisfaction of dissenters' rights) generally will be
recognized by DBI shareholders upon the exchange of their DBI Common Stock for
Norwest Common Stock. However, the federal income tax considerations related to
the Merger may be different to particular types of DBI shareholders or in light
of each DBI shareholder's personal investment circumstances. Consequently, DBI
shareholders are urged to consult their own tax advisors concerning the federal
income tax considerations that may be relevant to them in
9
<PAGE>
connection with the Merger, as well as the application to them of any state,
local, foreign, or other tax laws. See "THE MERGER--Certain Federal Income Tax
Consequences."
MARKET INFORMATION
Norwest Common Stock is listed on the New York Stock Exchange (the "NYSE")
and the Chicago Stock Exchange (the "CHX"). On February 23, 1995, the last
trading day preceding the execution of the Merger Agreement, the closing price
per share of Norwest Common Stock was $25.00 and on July 3, 1995, the price was
$28.75. There is no public market for DBI Common Stock. DBI shareholders 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 DBI shareholders 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 "INFORMATION ABOUT DBI AND
THE BANK."
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
Upon consummation of the Merger, shareholders of DBI will become
stockholders of Norwest. As a result, such shareholders' rights will change.
See "THE MERGER--Certain Differences in Rights of Shareholders."
10
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
The following table presents selected comparative unaudited per share data
for Norwest Common Stock on a historical and a pro forma combined basis and for
DBI Common Stock on a historical and a pro forma equivalent basis giving effect
to the Merger using the purchase method of accounting. 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
DBI, 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 "FINANCIAL STATEMENTS OF
DBI."
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.
11
<PAGE>
COMPARATIVE UNAUDITED PER SHARE DATA
<TABLE>
<CAPTION>
Norwest Common Stock DBI Common Stock
-------------------------- ---------------------------
Pro Forma Pro Forma
Historical Combined Historical Equivalent
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
BOOK VALUE (1):
March 31, 1995 $11.96 11.97 4,553.25 3,408.74
December 31, 1994 $10.79 10.79 4,272.93 3,073.15
DIVIDENDS DECLARED (2) :
Three Months Ended
March 31, 1995 0.21 0.21 - 59.79
Year Ended
December 31, 1994 0.765 0.765 - 217.81
NET INCOME (3):
Three Months Ended
March 31, 1995 0.65 0.65 142.55 185.07
Year Ended
December 31, 1994 2.41 2.40 556.27 684.63
<FN>
(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
DBI divided by total pro forma common shares of the combined entities assuming
conversion of the outstanding DBI Common Stock at an assumed conversion factor
of 284.72. The pro forma equivalent book value per share of DBI represents the
pro forma combined amount multiplied by the conversion factor. The conversion
factor used in this table assumes that the Norwest Measurement Price is $25.375
and that there is no adjustment to the consideration in the Merger for the
Remediation Cost (as defined below), resulting in the issuance of approximately
611,000 shares of Norwest Common Stock upon conversion of all outstanding shares
of DBI in the Merger. See "THE MERGER--Terms of the Merger."
(2) Assumes no changes in cash dividends per share. The pro forma equivalent
dividends per share of DBI Common Stock represent cash dividends declared per
share of Norwest Common Stock multiplied by the conversion factor.
(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 DBI divided by the
average pro forma common shares of the combined entities, assuming a conversion
factor of 284.72. The pro forma equivalent net income per share of DBI
represents the pro forma combined net income per share multiplied by the
conversion factor.
</TABLE>
12
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial information for Norwest and DBI. The income statement and balance
sheet data included in the selected financial data for the five years ended
December 31, 1994, are derived from audited consolidated financial statements of
Norwest and DBI for such five-year periods. The selected financial data for
the three-month periods ended March 31, 1995 and 1994, are derived from the
unaudited historical financial statements of Norwest and DBI. All financial
information derived from unaudited financial statements reflects, in the
respective opinions of management of Norwest and DBI, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such data. Results for the three months ended March 31, 1995,
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 DBI, including
the notes thereto, appearing elsewhere in this Proxy Statement-Prospectus. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "FINANCIAL STATEMENTS OF
DBI."
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
NORWEST CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31 YEAR ENDED DECEMBER 31
-------------------- -------------------------------------------------
1995 1994 1994 1993(1) 1992(2) 1991 1990(3)
---- ---- ---- ------- ------- ---- -------
(In millions except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income $ 1,288.0 992.8 4,393.7 3,946.3 3,806.4 4,025.9 3,885.8
Interest expense 544.3 342.9 1,590.1 1,442.9 1,610.6 2,150.3 2,320.1
-------- ------- ------- ------- ------- ------- -------
Net interest income 743.7 649.9 2,803.6 2,503.4 2,195.8 1,875.6 1,565.7
Provision for credit losses 55.3 36.3 164.9 158.2 270.8 406.4 433.0
Non-interest income 428.2 434.1 1,638.3 1,585.0 1,273.7 1,064.0 896.3
Non-interest expense 792.6 769.1 3,096.4 3,050.4 2,553.1 2,041.5 1,744.5
-------- ------- ------- ------- ------- ------- -------
Income before income taxes 324.0 278.6 1,180.6 879.8 645.6 491.7 284.5
Income tax expense 107.2 88.1 380.2 266.7 175.6 73.4 115.1
-------- ------- ------- ------- ------- ------- -------
Income before cumulative effect of a
change in accounting method 216.8 190.5 800.4 613.1 470.0 418.3 169.4
Cumulative effect on years prior
to 1992 of a change in accounting method - - - - (76.0) - -
------- ------- ------- ------- ------- ------- -------
Net income $ 216.8 $ 190.5 800.4 613.1 394.0 418.3 169.4
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
PER SHARE DATA
Net income per share:
Primary:
Before cumulative effect of a
change in accounting method $0.66 0.59 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 $0.66 0.59 2.45 1.89 1.19 1.33 0.59
---- ---- ---- ---- ---- ---- ----
---- ---- ---- ---- ---- ---- ----
Fully diluted:
Before cumulative effect of a
change in accounting method $0.65 0.58 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 $0.65 0.58 2.41 1.86 1.19 1.32 0.59
---- ---- ---- ---- ---- ---- ----
---- ---- ---- ---- ---- ---- ----
Dividends declared per
common share $0.210 0.185 0.765 0.640 0.540 0.470 0.423
BALANCE SHEET DATA
At period end:
Total assets $61,845.1 55,328.2 59,315.9 54,665.0 50,037.0 45,974.5 43,523.0
Long-term debt 10,886.9 6,829.5 9,186.3 6,850.9 4,553.2 3,686.6 3,066.0
Total stockholders' equity 4,387.5 3,853.3 3,846.4 3,760.9 3,371.8 3,192.3 2,434.0
14
<PAGE>
<FN>
(1) On January 14, 1994, First United Bank Group, Inc. ("First United"), a $3.9
billion bank holding company headquartered in Albuquerque, New Mexico, was
acquired in a pooling transaction. Norwest's historical results have been
restated to include the historical results of First United. Appropriate Norwest
items reflect an increase in First United's provision for credit losses of $16.5
million to conform with Norwest's credit loss reserve practices and methods and
$83.2 million in accruals and reserves for merger-related expenses, including
termination costs, systems and operations costs, and investment banking, legal,
and accounting expenses.
(2) On February 9, 1993, Lincoln Financial Corporation ("Lincoln"), a $2.0
billion bank holding company headquartered in Fort Wayne, Indiana, was acquired
in a pooling transaction. Norwest's historical results have been restated to
include the historical results of Lincoln. Appropriate Norwest items reflect an
increase in Lincoln's provision for credit losses of $60.0 million and $33.5
million in Lincoln's provisions and expenditures for costs related to
restructuring activities.
(3) On April 19, 1991, United Banks of Colorado, Inc. ("United"), a $5.5
billion financial institution headquartered in Denver, Colorado, merged with
Norwest in a pooling transaction. Norwest's historical results have been
restated to include the historical results of United. Appropriate Norwest items
reflect United's special provisions for credit losses and writedowns for other
real estate owned, which together totaled $165 million, and $31 million of
accruals for expected reorganization and restructuring costs for the year ended
December 31, 1990. The special provisions were due to deterioration of several
large commercial loan relationships, the anticipated results of the then recent
examination by the Office of the Comptroller of the Currency, and the
anticipated impact of the Resolution Trust Corporation's accelerated efforts to
liquidate foreclosed properties at deep discounts.
</TABLE>
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
DICKINSON BANCORPORATION INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31 YEAR ENDED DECEMBER 31
------------------ -----------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(In millions except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income $ 2.1 2.1 8.2 6.5 6.1 6.9 7.1
Interest expense 0.9 0.8 3.3 2.5 2.5 3.4 3.8
--- --- --- --- --- --- ---
Net interest income 1.2 1.3 4.9 4.0 3.6 3.5 3.3
Provision for credit losses - - - (0.3) (0.3) - -
Non-interest income 0.3 0.2 1.2 0.8 0.7 0.8 0.6
Non-interest expense 1.0 1.0 4.2 3.3 2.8 3.2 2.9
--- --- --- --- --- --- ---
Income before income taxes 0.5 0.5 1.9 1.8 1.8 1.1 1.0
Income tax expense 0.2 0.2 0.7 0.6 0.6 0.4 0.3
--- --- --- --- --- --- ---
Net income $0.3 $0.3 1.2 1.2 1.2 0.7 0.7
--- --- --- --- --- --- ---
--- --- --- --- --- --- ---
PER SHARE DATA
Net income per share:
Primary $142.55 140.38 556.27 576.55 600.98 345.77 253.94
Fully diluted 142.55 140.38 556.27 576.55 600.98 345.77 253.94
Dividends declared per
common share $ - - - - - - -
BALANCE SHEET DATA
At period end:
Total assets $ 123.7 130.7 127.7 135.0 84.4 79.0 78.0
Long-term debt 3.4 5.0 3.4 7.3 3.3 3.5 -
Total stockholders' equity 9.8 8.6 9.0 8.7 7.8 6.5 8.0
</TABLE>
16
<PAGE>
MEETING INFORMATION
GENERAL
This Proxy Statement-Prospectus is being furnished to holders of DBI Common
Stock in connection with the solicitation of proxies by the DBI Board for use at
the Special Meeting, to be held on Thursday, August 3, 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 DBI 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
shareholders of DBI 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 DBI shareholders enclosed herewith are first being
mailed to shareholders of DBI on or about July 6, 1995.
DATE, PLACE, AND TIME
The Special Meeting will be held at the main office of the Bank, 115 First
Avenue West, Dickinson, North Dakota, on Thursday, August 3, 1995, at 9:00 a.m.,
local time.
RECORD DATE; VOTE REQUIRED
The DBI Board has fixed the close of business on July 5, 1995, as the
record date for the determination of shareholders of DBI entitled to receive
notice of, and to vote at, the Special Meeting. On the record date there were
2,146 shares of DBI 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 DBI Common Stock. The Merger
cannot be consummated without the requisite approval of the Merger Agreement by
the holders of DBI Common Stock.
As of the record date for the Special Meeting, directors and officers of
DBI and their affiliates owned beneficially an aggregate of 1,585 shares, or
approximately 73.86%, of the DBI Common Stock outstanding on that date. F.L.
Clarkson and Alan Hann, who are directors and executive officers of DBI, have
entered into agreements with Norwest to vote all of their shares in favor of the
Merger Agreement. ACCORDINGLY, MSSRS. CLARKSON AND HANN HAVE THE ABILITY TO
APPROVE THE MERGER WITHOUT THE VOTE OF THE REMAINING DBI SHAREHOLDERS.
Information regarding the shares of DBI Common Stock beneficially owned,
directly or indirectly, by certain shareholders, by each director and officer of
DBI, and by all directors and officers as a group is set forth in the table
under the heading "Principal Shareholders and Security Ownership of Management
of DBI" below.
At the record date, directors and executive officers of Norwest did not own
beneficially any shares of DBI Common Stock.
17
<PAGE>
PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT OF DBI
Set forth below are the names and, in the case of holders of 5% or more,
the addresses of and the number of shares held as of the record date for the
Special Meeting by each holder of record of 5% or more of the outstanding shares
of DBI Common Stock, by each director and officer, and by all directors and
officers as a group. Each shareholder named below has sole voting and
investment power over the shares shown in the table unless otherwise indicated.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Percent of
Name and Address Owned Total Shares
- --------------------------- ---------------------- -------------
<S> <C> <C>
F.L. Clarkson (1) 928 (2) 43.24%
P.O. Box 551
Belle Fourche, SD 57717
Alan Hann (3) 657 30.62%
587 Park St.
Dickinson, ND 58601
Ferman L. Clarkson 182 8.48%
Grandchildren's Trust (4)
Pioneer Bank and Trust, Trustee
P.O. Box 729
Belle Fourche, SD 57717
Clarkson Ranch & Petroleum 173 8.06%
Exploration, Inc. (4)
P.O. Box 551
Belle Fourche, SD 57717
DeEtta Frank (5) 0 0.00%
Directors and Officers as a 1,585 (2) 73.86%
Group (3 individuals)
<FN>
- ------------------------
(1) Mr. Clarkson serves as Chairman, Vice President, and a director of both DBI
and the Bank.
(2) Includes 125 shares owned by Mr. Clarkson which are transferable to Mr.
Hann upon the closing of the Merger. See "THE MERGER--Interests of Certain
Persons in the Merger."
(3) Mr. Hann serves as President, Chief Executive Officer, Treasurer, and a
director of DBI and as President, Chief Executive Officer, Secretary, and a
director of the Bank.
(4) Mr. Clarkson serves as a director of Clarkson Ranch & Petroleum
Exploration, Inc.
(5) Ms. Frank serves as secretary of DBI.
</TABLE>
18
<PAGE>
VOTING AND REVOCATION OF PROXIES
Shares of DBI 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 DBI 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 DBI 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 approve the Merger
Agreement must be approved by the holders of a majority of the outstanding DBI
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 DBI 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
DBI may solicit proxies from the shareholders of DBI, either personally or by
telephone 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. DBI will bear
its own expenses in connection with any solicitation of proxies for the Special
Meeting. See "THE MERGER--Expenses."
ALL SHAREHOLDERS OF DBI ARE REQUESTED TO COMPLETE, DATE, AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO DBI IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE.
19
<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 shareholders are urged to read the Merger Agreement in
its entirety.
BACKGROUND OF AND REASONS FOR THE MERGER
During the summer of 1994, representatives of Norwest approached DBI
regarding Norwest's interest in acquiring DBI. After a number of discussions,
the DBI Board concluded that a merger with Norwest was in the best interests of
the shareholders of DBI. This conclusion was based upon the amount of
consideration to be paid by Norwest in the Merger, the tax free nature of the
Merger to the shareholders of DBI, and the increased liquidity associated with
receiving stock of a company that is publicly traded on national exchanges.
Accordingly, DBI and Norwest proceeded to negotiate the terms of the Merger and
entered into the Merger Agreement on February 24, 1995.
The DBI Board has concluded that the Merger is in the best interest of the
holders of DBI Common Stock. The holders of DBI Common Stock will receive, in a
tax free exchange, stock of a much larger and more diversified enterprise, which
is listed on the NYSE and CHX, freely tradable (subject to certain restrictions
described herein), and much more widely held than DBI Common Stock. See
"SUMMARY--Comparative Unaudited Per Share Data" and "Market Information," and
"Certain Federal Income Tax Considerations."
Further, after the Merger, the Bank will have access to a broader range of
services to provide to its customers and to the greater resources of Norwest in
several important operational areas. The directors believe that affiliation
with Norwest will increase the Bank's financial strength and provide greater
geographic diversity. In addition, employees of the Bank will have the
opportunity for career advancement in a larger organization. See "Management
and Operations After the Merger."
THE BOARD OF DIRECTORS OF DBI UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE MERGER.
TERMS OF THE MERGER
BASIC TERMS
At the Effective Time, a wholly owned subsidiary of Norwest to be organized
as a corporation under North Dakota law ("Merger Co.") will merge into DBI, with
DBI as the surviving corporation, and each outstanding share of DBI Common Stock
will be converted into a number of shares of Norwest Common Stock determined in
accordance with the provisions of the Merger Agreement. The conversion factor,
used to determine the number of shares of Norwest Common Stock into which each
outstanding share of DBI Common Stock (other than shares as to which dissenters'
have been exercised and not forfeited) will be converted at the Closing, will be
determined by dividing the Adjusted Norwest Shares by the number of shares of
DBI Common Stock then outstanding. The "Adjusted Norwest Shares" will be a
number equal to (i) $15,500,000 minus the Remediation Cost divided by (ii) the
Norwest Measurement Price. The "Remediation Cost" will be an amount equal to
the aggregate costs actually incurred prior to the Effective Date in connection
with the investigation, removal, and/or remediation (the "Remediation") of
20
<PAGE>
environmental contamination of the parking lot at the Bank's Bowman location
(the "Bowman Site"), minus $15,000. 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 NYSE during the period of 20 trading days ending on
the trading day immediately preceding the day on which the Special Meeting is
held. If the Remediation is not completed to Norwest's satisfaction prior to
the Effective Date, then a number of shares of Norwest Common Stock equal to
$500,000 divided by the Norwest Measurement Price will be deducted from the
Adjusted Norwest Shares otherwise payable to shareholders of DBI and deposited
in an escrow (the "Escrow").
THE ESCROW
The Merger Agreement provides that the Escrow will be governed by an escrow
agreement to be entered into by DBI and Norwest, effective as of the Effective
Date (the "Escrow Agreement"). However, subsequent to execution of the Merger
Agreement, the North Dakota State Department of Health and Consolidated
Laboratories informed the Bank that it would not require any further
investigation, monitoring, or remedial action at the Bowman Site. Accordingly,
Norwest waived the requirement that the Escrow Agreement be entered into within
30 days after the date of the Merger Agreement, but reserved the right to
require execution of the Escrow Agreement prior to the closing of the Merger.
If the Special Meeting had been held on July 5, 1995, the Norwest
Measurement Price would have been approximately $28.669, and, assuming no change
in the number of shares of DBI Common Stock outstanding and further assuming no
adjustment to the consideration in the Merger on account of the Remediation
Cost, each share of DBI Common Stock outstanding would have been converted into
approximately 251.936 shares of Norwest Common Stock. The foregoing information
is provided for purposes of illustration only. There can be no assurance
concerning the number of shares of Norwest Common Stock that DBI shareholders
will receive at the Closing. 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, there can be
no assurance as to the final Norwest Measurement Price, and the market value of
each share of Norwest Common Stock that shareholders of DBI 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 conversion factor 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 DBI 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 shareholder of DBI 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 one share of DBI Common Stock. Thereafter,
DBI will be a wholly owned subsidiary of Norwest.
Shares of Norwest Common Stock issued and outstanding immediately prior to
the Effective Time will remain issued and outstanding.
21
<PAGE>
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 Articles of Merger are filed with the Secretary
of State of the State of North Dakota. The filing will be made within ten
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., Dickinson, North Dakota
time, on the Effective Date. Norwest and DBI anticipate that the closing of the
Merger 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 DBI
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.
SHAREHOLDERS OF DBI 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 DBI
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
shareholders of DBI entitled to receive certificates for shares of Norwest
Common Stock until such shareholders surrender their certificates representing
shares of DBI Common Stock. Upon such surrender, there shall be paid to the
shareholder 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 DBI 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 shareholders of DBI, (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.
DBI's obligation to consummate the Merger is also subject, among other
things, to the receipt of an opinion of counsel for DBI to the effect that for
federal income tax purposes the Merger will be a tax-free reorganization.
Norwest's obligation to consummate the Merger is also subject, among other
things, to the following conditions: (i) the total number of shares of DBI
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 shall not have exceeded
2,146; (ii) Norwest shall have received a certificate from DBI's Chief Executive
Officer and DBI's Chief Financial Officer concerning the accuracy of the
financial information of DBI included in this Proxy Statement-Prospectus and the
absence of any material changes in such information since the date of DBI's most
recent interim financial statements; (iii) DBI and its subsidiaries taken as a
whole shall not have sustained since December 31, 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; (iv)
there shall be no reasonable basis for any proceeding, claim, or action seeking
to impose, or that could result in the imposition, on DBI or any of its
subsidiaries of any liability relating to 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 DBI and its subsidiaries taken as a whole; (v) since December
31, 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 DBI and
its subsidiaries taken as a whole, other than changes in banking laws or
regulations, or interpretations thereof, that affect the banking industry
generally or changes in the general level of interest rates; (vi) the
noncompetition agreement, entered into by Alan Hann, Mary Kay Hann, DBI, the
Bank, and Norwest on February 24, 1995, shall remain in full force and effect;
(vii) the buy-sell agreement, dated October 9, 1989, between F.L. Clarkson and
Alan Hann relating to certain shares of DBI Common Stock shall have been
terminated; and (viii) DBI shall deliver to Norwest at the Closing certificates
evidencing the outstanding capital stock of all of DBI's subsidiaries free and
clear of any lien, claim, charge, option, encumbrance, or agreement with respect
thereto.
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 May 17, 1995, the Federal Reserve
Board informed Norwest that it had approved the Merger.
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The Merger is also subject to the approval of the Department of Banking and
Financial Institutions of the State of North Dakota. As of the date of this
Proxy Statement-Prospectus, the approval of the Department of Banking and
Financial Institution is still pending. There can be no assurance that such
approval will be granted.
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, shareholders. Regulatory approvals do not constitute an endorsement or
recommendation of the proposed Merger.
Norwest and DBI 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 DBI 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 significant 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. In addition, the Merger Agreement provides,
among other things, that DBI will (i) establish such additional accruals and
reserves as may be necessary to conform DBI's accounting and credit loss reserve
practices to those of Norwest and Norwest's plans with respect to the conduct of
DBI's business following the Merger and to provide for costs and expenses
related to the consummation of the transactions contemplated by the Merger
Agreement; (ii) obtain, at its sole expense, and deliver Phase I environmental
assessments on certain properties, and obtain, at its sole expense, Phase II
environmental assessments on properties identified by Norwest on the basis of
the Phase I assessments; (iii) obtain, at its sole expense, and deliver title
insurance and boundary surveys for each of its bank facilities; (iv) apply funds
to be loaned to it by Norwest to repay in full all indebtedness of DBI secured
by the capital stock of any of its subsidiaries; and (v) use its best efforts to
complete or cause to be completed the Remediation.
In addition, prior to the Effective Time, neither DBI nor any of its
subsidiaries will, without the prior written consent of Norwest, (i) pay
dividends or make any other distribution with respect to its capital stock
except as specifically permitted by the Merger Agreement; (ii) 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
$100,000; (iii) authorize or incur any long-term debt, except in the ordinary
course of business; (iii) amend or terminate, or make any contributions to any
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
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course of business and in accordance with existing policies and procedures;
(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; or (vi) increase the compensation of any officers, directors,
or executive employees, except pursuant to existing compensation plans and
practices.
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, immediately prior to the Time of Filing,
Norwest will loan to DBI funds sufficient to enable DBI to repay in full all
indebtedness of DBI secured by the capital stock of any of its subsidiaries.
NO SOLICITATION
DBI has agreed in the Merger Agreement that neither it nor any of its
subsidiaries, nor any director, officer, representative, or agent of DBI or any
of its subsidiaries, will, directly or indirectly, solicit, authorize the
solicitation of, or 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 DBI 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 DBI or any of its
subsidiaries except in the ordinary course of business; or (iv) to merge,
consolidate, or otherwise combine with DBI 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 no amendment after approval of the Merger by DBI shareholders shall be made
which adversely affects the consideration to be received by DBI shareholders.
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 31, 1995, unless such failure of consummation is due to
the failure of the party seeking termination to perform or observe in all
material respects the covenants and agreements to be performed or observed by it
under the 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)
Norwest if it determines that the cost of the Remediation and the potential
damages associated with the Bowman Site would exceed $500,000.
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EFFECT ON EMPLOYEE BENEFIT PLANS
The Merger Agreement provides that, subject to any eligibility requirements
applicable to such plans, employees of DBI shall be entitled to participate in
those Norwest employee benefit and welfare plans specified in the Merger
Agreement. The eligible employees of DBI 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.
Eligible DBI employees will receive credit for past service for the purpose
of determining certain benefits under certain of Norwest's benefit plans.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Alan Hann, President, Chief Executive Officer, Treasurer, and a director of
DBI and President, Chief Executive Officer, Secretary, and a director of the
Bank, has an interest in the Merger separate from his interest as a holder of
DBI Common Stock. Mr. Hann, Mary Kay Hann, Norwest, DBI, and the Bank have
entered into an agreement, dated February 24, 1995, under which Mr. Hann agrees
to not compete with DBI or the Bank after the Effective Date for a period of
three years and also agrees to resign, under certain circumstances, as
"Controller" under the terms of the Escrow Agreement, dated as of September 21,
1993, by and between DBI and Bowman Capital Co., the former owner of the Bank's
Bowman office. The agreement also provides for the purchase of an annuity for
the benefit of Mr. Hann the purpose of which is to fulfill DBI's obligations to
Mr. Hann under his existing salary continuation agreement. In addition, the
agreement provides for either the purchase or surrender of the life insurance
policy and the termination of the split dollar life insurance agreement between
Mr. Hann and DBI. Finally, the agreement provides for the termination of Mr.
Hann's management incentive agreement dated May 16, 1991.
F.L. Clarkson and Alan Hann entered into an agreement, dated October 9,
1989, whereby Mr. Clarkson granted Mr. Hann the option to purchase DBI Common
Stock in the future at a specified formula price. Mr. Hann has agreed to
exchange his option rights with Mr. Clarkson in consideration for 125 shares of
DBI Common Stock. It is contemplated that Mr. Clarkson would transfer the 125
shares of DBI Common Stock to Mr. Hann immediately prior to the Closing.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
As of the Effective Time, DBI will become a subsidiary of Norwest, and the
Bank will become an indirect subsidiary of Norwest. After the Closing, the Bank
will continue to operate at its present locations, providing products and
services offered by Norwest affiliates. In addition, the Bank will be
consolidated with Norwest Bank North Dakota, National Association. See "Terms
of the Merger."
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
If the holders of DBI Common Stock approve the Merger Agreement and the
Merger is subsequently consummated, shareholders of DBI will become stockholders
of Norwest. DBI is a corporation organized under and governed by the North
Dakota Business Corporation Act (the "NDBCA"). Norwest 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 DBI 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 DBI's Articles of
Incorporation (the "DBI Articles") and Bylaws.
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This summary is qualified in its entirety by reference to the DGCL, the Norwest
Certificate, Norwest's By-Laws and rights plan, the NDBCA, and the DBI Articles
and Bylaws.
AUTHORIZED STOCK
DBI. The DBI Articles authorize the issuance of 50,000 shares of common
stock, par value $1.00 per share. As of March 31, 1995, there were 2,146 shares
of DBI Common Stock issued and outstanding. The DBI Articles do not authorize
the issuance 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, 5,000,000
shares of preferred stock, without par value ("Preferred Stock"), and 4,000,000
shares of preference stock ("Preference Stock"). At March 31, 1995, 334,025,247
shares of Common Stock were issued, of which 322,408,644 were outstanding, and
11,616,603 were held as treasury shares, and 3,292,502 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 25,000
shares are held by a subsidiary of Norwest), 1,143,675 shares of Cumulative
Convertible Preferred Stock, Series B, 13,955 shares of ESOP Cumulative
Convertible Preferred Stock, and 52,747 shares of 1995 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 March 31, 1995, not
to exceed $925,000,000. 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 and Preference Stock
authorized for issuance under the Norwest Certificate, the maximum number of
shares of Preferred Stock, Preference 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, 4,000,000 shares of Preference Stock, and 500,000,000
shares of Common Stock. All or any portion of the authorized but unissued
Preferred Stock, Preference 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 shareholders. Holders
of Preferred Stock or Preference 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
or Preference Stock issued in the future may be established by the Board of
Directors of Norwest (the "Norwest Board") without shareholder action, provided
that each share of Preference Stock will not be entitled to more than one vote
per share. Although Norwest has no current plans for the issuance of any shares
of Preferred Stock or Preference 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 or Preference Stock then
outstanding, holders of Common Stock are entitled to receive such dividends as
are declared by the Norwest Board 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
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CONSIDERATIONS." Subject to the rights, if any, of any Preferred Stock or
Preference 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 or Preference 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 shareholders 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
DBI. DBI currently has 2 directors, who serve for one-year terms.
Under the DBI Bylaws, the entire DBI Board or any individual director may
be removed by the affirmative vote of the holders of a majority of the voting
power of the outstanding shares entitled to vote for directors. If less than
the entire Board is to be removed, no director may be removed 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 entire board of directors.
Vacancies on the DBI Board by reason of death, resignation, or increase in
the number of directors are filled by a majority vote of the directors then in
office, even though the number of directors then in office is less than a quorum
of the whole DBI Board. Vacancies resulting from removal by a vote of the
shareholders may be filled by the shareholders at the same meeting at which
removal occurs.
NORWEST. Norwest currently has 14 directors, who serve for one-year terms.
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
DBI. Unlike Norwest, DBI has not adopted any shareholder rights plan or
issued any similar rights to the holders of DBI Common Stock. One Norwest Right
(as defined below) will be attached to each share of Norwest Common Stock issued
in the Merger to DBI shareholders.
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 shareholders 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 shareholders against coercive takeover tactics.
The purpose of the Norwest Rights is to encourage potential acquirors to
negotiate with Norwest's Board of Directors
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prior to attempting a takeover and to give the Norwest Board leverage in
negotiating on behalf of all shareholders 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 shareholders 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.
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 four-hundredth of a Junior Preferred Share.
(3) In the event of certain business combinations involving Norwest
or the sale of 50% or more of the assets or earning power of Norwest, the
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.
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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.
AMENDMENT OF CORPORATE CHARTER AND BYLAWS
DBI. Generally, under the NDBCA, amendments to articles of incorporation
require the affirmative vote of the holders of a majority of the shares present
and entitled to vote on the proposed amendment, unless the existing articles or
the proposed amendment require a greater vote. DBI's Bylaws provide that both
the DBI Board and DBI's shareholders have the power to amend DBI's Bylaws by a
majority vote; provided, however, that the DBI Board may not make or amend any
bylaw fixing directors' qualification, classification, term of office, or
number, except that the DBI Board may adopt or amend a bylaw to increase its
number.
NORWEST. The provisions of the DGCL governing the amendment of the Norwest
Certificate are essentially the same as those of the NDBCA. Norwest's By-Laws
provide that they may be altered or amended by the affirmative vote of a
majority of the Norwest Board or the holders of a majority of the outstanding
Norwest stock entitled to vote on the amendment under the DGCL.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
In addition to being subject to the laws of North Dakota and Delaware,
respectively, both DBI 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."
DBI. Under North Dakota law, the vote of a majority of the outstanding
shares of DBI Common Stock entitled to vote thereon is required to approve a
merger or exchange involving DBI or the sale, lease, transfer, or other
disposition of all or substantially all of DBI's property and assets. With
respect to a merger or exchange, no vote is required if (i) the articles of
incorporation of the corporation will not be amended in the transaction; (ii)
each holder of shares outstanding immediately before the effective date of the
transaction will hold the same number of shares with identical rights
immediately thereafter; and (iii) the number of shares entitled to vote or to
participate without limitation in distributions by the corporation immediately
after the merger or exchange, plus the number of shares entitled to vote
issuable upon conversion of securities or exercise of rights issued in the
transaction, will not exceed by more than 20% the number of shares entitled to
vote or to participate without limitation in distributions by the corporation
immediately before the transaction.
NORWEST. 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 or the
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sale, lease, or exchange of substantially all of Norwest's corporate assets.
However, no vote of the shareholders of Norwest is required in connection with a
merger if Norwest is the survivor and (i) the related agreement of merger does
not amend Norwest's Certificate, (ii) each share of capital stock outstanding
immediately before the merger is to be an identical outstanding or treasury
share of Norwest after the merger, and (iii) 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 Norwest's capital stock outstanding immediately before the merger.
APPRAISAL RIGHTS
DBI. Under the NDBCA, a holder of shares of a North Dakota corporation is
generally entitled to dissent from amendments to the corporation's articles
which have a material adverse effect on certain rights or preferences of such
shares, a sale, lease, transfer, or other disposition, not made in the ordinary
course of business, of all or substantially all of the corporation's property
and assets, or a plan of merger or exchange, and to receive payment of the fair
value of such shareholder's shares. See "Rights of Dissenting Shareholders."
NORWEST. 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 shareholder 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 (i) 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 (ii) 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 (a) shares of the surviving or resulting corporation; (b) shares of stock
of another corporation so listed or held of record by not fewer than 2,000
persons; and/or (c) 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. Because shares of Norwest Common Stock are listed on the NYSE and
the CHX and because Norwest currently has more than 2,000 shareholders of
record, holders of Norwest Common Stock are not, subject to the express
exceptions noted above, entitled to any rights of appraisal in connection with
proposed mergers or consolidations involving Norwest.
SPECIAL MEETINGS
DBI. DBI's Bylaws provide that a special meeting of shareholders may be
called by the President, the Board of Directors, any two or more directors, or
by one or more shareholders holding in the aggregate ten percent or more of the
shares entitled to vote at the special meeting.
NORWEST. The By-Laws of Norwest provide that a special meeting of
shareholders 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.
DIRECTORS' DUTIES
DBI. Under the NDBCA, a director is required to perform his or her duties
as a director in good faith, in a manner he or she believes to be in or not
opposed to the best interests of the corporation, and with the care an
ordinarily prudent person would exercise under similar circumstances in a like
position. The NDBCA further provides that in considering the best
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interests of the corporation, a director may consider (i) the interests of the
corporation's employees, customers, suppliers, and creditors; (ii) the economy
of the state and the nation; (iii) community and societal considerations; and
(iv) the long-term interests as well as the short-term of the corporation and
its shareholders, including the possibility that those interests may be best
served by the continued independence of the corporation.
NORWEST. Unlike the NDBCA, the DGCL does not specifically enumerate
directors' duties. In addition, the DGCL does not contain any provision
equivalent to the North Dakota statute specifying what factors a director may
consider in determining a corporation's best interests. However, judicial
decisions in Delaware have established that directors, in performing their
duties, are bound to use that amount of care which ordinarily prudent people
would use in similar circumstances.
LIMITATION OF DIRECTOR LIABILITY AND INDEMNIFICATION
DBI. The NDBCA provides that a corporation shall indemnify a present or
former director who is made or threatened to be made a party to a threatened,
pending, or completed civil, criminal, administrative, arbitration, or
investigative proceeding, including a proceeding by or in the right of the
corporation, or "derivative action," against judgments, penalties, fines
(including excise taxes assessed with respect to an employee benefit plan),
settlements, and reasonable expenses, including attorneys' fees, incurred by the
director in connection with the proceeding. Such indemnification is available
if, with respect to the acts or omissions which are the subject of the
proceeding, the director has not been indemnified by another party; acted in
good faith; received no improper personal benefit; in the case of a criminal
proceeding, had no reasonable cause to believe the conduct was unlawful; and,
depending upon the nature of the acts or omissions, reasonably believed that the
conduct was in, or not opposed to, the best interests of the corporation. The
termination of a proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent does not alone establish that the
director failed to meet the criteria for indemnification. If a director is made
or threatened to be made a party to a proceeding, the director is entitled, upon
written request, to payment or reimbursement of reasonable expenses, including
attorneys' fees, incurred in advance of final disposition of the proceeding.
The written request must affirm the director's good faith belief that the
criteria for indemnification have been satisfied and include an undertaking to
repay all amounts paid or reimbursed if it is ultimately determined that the
criteria have not been satisfied. A determination that the facts then known
would not preclude indemnification must be made by a majority of a quorum of the
board. Directors who are parties to the proceeding are not counted for
determining either a majority or a quorum. If a quorum is unavailable, the
determination must be made by a duly designated committee of the board
consisting of two or more disinterested directors. If neither the board nor a
committee of the board makes the determination, then the determination must be
made by special legal counsel or if not special legal counsel, then by the
disinterested shareholders. If no determination is made by one of the foregoing
or if no determination has been made within 60 days after the termination of the
proceeding or after a request for an advance of expenses, then the determination
must be made by a court upon application of the party seeking indemnification.
A corporation that indemnifies or advances expenses under the NDBCA must
give a written report thereon to its shareholders no later than at the next
meeting of shareholders.
The NDBCA provides that a North Dakota corporation may maintain insurance
to protect directors or other persons in their official capacity against any
liability, regardless of whether the corporation would be required to indemnify
that person against liability under the NDBCA.
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The NDBCA provides that a corporation's articles may limit or eliminate a
director's personal liability to the corporation for breach of fiduciary duty.
The DBI Articles do not include such a provision. The right to indemnification
is not exclusive of any other right which any person may have or acquire under
any statute, corporate documents, agreement, vote of shareholders, 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 shareholders 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 shareholders, (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 shareholders, or disinterested
directors, or otherwise.
ACTION WITHOUT A MEETING
DBI. Any action which may be taken at a shareholders' meeting may be taken
by written consent signed by all the shareholders entitled to vote on the
subject matter of the proposed action.
NORWEST. Section 228 of the DGCL permits any action required or permitted
to be taken at a shareholders' 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 shareholders. The DGCL also provides that a
corporation's certificate of incorporation may restrict or even
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prohibit shareholders' action without a meeting. The Norwest Certificate does
not restrict or prohibit shareholders' action without a meeting.
DIVIDENDS
DBI. A North Dakota corporation may pay dividends only if the board
determines that the corporation will be able to pay its debts in the ordinary
course of business after making the distribution.
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 DBI 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--DBI AND NORWEST
The Norwest By-Laws contain detailed advance notice and informational
procedures which must be complied with in order for a shareholder to nominate a
person to serve as a director. The Norwest By-Laws generally require a
shareholder to give notice of a proposed nominee in advance of the shareholder
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 shareholder to propose an item of business for
consideration at a meeting of Norwest shareholders. There are no similar
provisions in the DBI Bylaws.
RIGHTS OF DISSENTING SHAREHOLDERS
DBI. All shareholders of DBI are entitled to exercise dissenters' rights
pursuant to the provisions of Sections 10-19.1-87 and 10-19.1-88 of the NDBCA.
In accordance with these sections, such shareholders have the right to dissent
from the Merger and to be paid the fair value of their shares. The term "fair
value" means the value of the shares of a corporation immediately before the
effective date of various corporate actions, including mergers. Under Section
10-19.1-88, where a transaction is to be submitted for approval at the meeting
of shareholders, the corporation must notify each of its shareholders of the
right to dissent and include in such notice a copy of Sections 10-19.1-87 and
10-19.1-88. This Proxy Statement-Prospectus shall constitute such notice to the
shareholders of DBI.
The following discussion is not a complete statement of the laws pertaining
to a dissenting shareholder's rights under North Dakota law and is qualified in
its entirety by the full text of Sections 10-19.1-87 and 10-19.1-88 attached as
Appendix B to this Proxy Statement-Prospectus. Any shareholder who wishes to
preserve the right to do so, should review the following discussion and Appendix
B carefully. DISSENTERS' RIGHTS WILL BE LOST IF THE PROCEDURAL REQUIREMENTS ARE
NOT FULLY AND PRECISELY SATISFIED.
A holder of DBI Common Stock wishing to exercise the right to demand the
fair value of such shareholder's shares must first file, BEFORE the vote of
shareholders is taken at the Special Meeting, a written notice to the
corporation of intent to demand the fair value of such shareholder's shares and
must, in addition, not vote the shares in favor of the proposal to approve the
Merger
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Agreement. Because a proxy which does not contain voting instructions will,
unless revoked, be voted FOR approval of the Merger Agreement, a shareholder of
DBI who votes by proxy and who wishes to exercise dissenters' rights must (i)
vote AGAINST approval of the Merger Agreement or (ii) ABSTAIN from voting on
approval of the Merger Agreement. A vote against the Merger Agreement, whether
in person or by proxy, will not in and of itself satisfy the requirement of a
written notice of intent to demand the fair value of a shareholder's common
stock.
A shareholder may not assert dissenters' rights as to less than all of the
shares registered in the name of the shareholder, unless the shareholder
dissents with respect to all the shares that are beneficially owned by another
person but registered in the name of the shareholder and discloses the name and
address of each beneficial owner on whose behalf the shareholder dissents. In
that event, the rights of the dissenter must be determined as if the shares as
to which the shareholder has dissented and the other shares were registered in
the names of different shareholders. The beneficial owner of shares who is not
the shareholder may assert dissenters' rights with respect to shares held on
behalf of the beneficial owner and must be treated as a dissenting shareholder
under the terms of this Sections 10-19.1-87 and 10-19.1-88, if the beneficial
owner submits to the corporation at the time of or before the assertion of the
rights a written consent of the shareholder.
Shareholders of DBI who elect to exercise dissenters' rights and demand
fair value should mail or deliver their written demand to DBI. The written
demand should specify the shareholder's name and mailing address, the number of
shares owned, and that the shareholder is thereby demanding the fair value of
such shareholder's shares.
After the Merger Agreement has been approved, DBI will cause to be mailed
to each of the shareholders of DBI who has properly asserted dissenters' rights
a notice that contains (i) the address to which a demand for payment and stock
certificates must be sent in order to receive payment and the date by which they
must be received; (ii) a form to be used to certify the date on which the
shareholder, or the beneficial owner on whose behalf the shareholder dissents,
acquired the shares or an interest in them, and to demand payment; and (iii) a
copy of Sections 10-19.1-87 and 10-19.1-88. To receive the fair value of common
stock a dissenting shareholder must demand payment and deposit the certificates
representing such shares within 30 days after the notice is given, but the
dissenter retains all other rights of a shareholder until the proposed action
takes effect.
After the Effective Date or after the corporation receives a valid demand
for payment, whichever is later, DBI will cause to be remitted to each
dissenting shareholder who has properly asserted dissenters' rights the fair
value of the shares of DBI Common Stock with interest commencing five days after
the Effective Date up to and including the date of payment, calculated at the
rate for interest on verdicts and judgments. Such payment will be accompanied
by (i) DBI's closing balance sheet and statement of income for a fiscal year
ending not more than sixteen months before the effective date of the Merger,
together with the latest available interim financial statements; (ii) an
estimate by DBI of the fair value of the shares and a brief description of the
method used to reach the estimate; and (iii) additional copies of Sections 10-
19.1-87 and 10-19.1-88. If DBI fails to remit payment within 60 days after
receiving shares from a dissenting shareholder, it is obligated to return any
certificates for such shares to the dissenting shareholder.
DBI may withhold the remittance from a person who was not a shareholder on
the date the action dissented from was first announced to the public or who is
dissenting on behalf of a person who was not a beneficial owner on that date.
If the dissenter has complied with the proper procedure and notices, DBI shall
forward materials on the fair value of the shares and interest, a statement of
the reason for withholding the remittance, and an offer to pay to the dissenter
the amount listed in the materials if the dissenter agrees to accept the amount
in full satisfaction.
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If the dissenting shareholder, or the dissenting shareholder whose
remittance has been withheld, believes that the amount remitted by DBI is less
than the fair value of the shares plus interest, such dissenting shareholder may
give written notice to DBI of such shareholder's own estimate of the fair value
for the shares plus interest and demand a supplemental payment for the
difference. Any written demand for supplemental payment must be made within 30
days after DBI has mailed its original remittance or notice of withholding
remittance. Otherwise, a dissenter is entitled only to the amount remitted by
the corporation.
Within 60 days after receiving a demand for supplemental payment, DBI, as
the surviving entity, must either pay the amount of the supplemental payment
demanded (or agreed to between the dissenting shareholder and DBI) or file a
petition in Stark County District Court requesting that the court determine the
fair value of the shares plus interest. A petition so filed must name as
parties all dissenting shareholders who have demanded supplemental payments and
who have been unable to reach an agreement with DBI concerning the fair value of
their shares. The court may appoint appraisers, with such power and authority
as the court deems proper, to receive evidence on and recommend the amount of
the fair value of the shares. The jurisdiction of the court is plenary and
exclusive, and the fair value as determined by the court is binding on all
shareholders, wherever located. A dissenting shareholder, if successful, is
entitled to a judgment for the amount by which the fair value of such
shareholder's shares as determined by the court, plus interest, exceeds the
amount originally remitted by DBI, but shall not be liable to DBI for the
amount, if any, by which the amount, if any, remitted to the dissenter exceeds
the fair market value of the shares as determined by the court, plus interest.
Generally, the costs and expenses associated with a court proceeding to
determine the fair value of the shares will be borne by the surviving entity,
unless the court finds that a dissenting shareholder has demanded supplemental
payment in a manner which is arbitrary, vexatious, or not in good faith.
Similar costs and expenses may also be assessed in instances where DBI has
failed to comply with the procedures in Section 10-19.1-88 pertaining to
dissenters' rights discussed above. The court may, in its discretion, award
attorneys' fees to an attorney representing dissenting shareholders out of any
amount awarded to such dissenters.
Failure to follow the steps required by Section 10-19.1-88 for asserting
dissenters' rights may result in the loss of a shareholder's rights to demand
the fair value of such shareholder's shares of DBI Common Stock. Shareholders
considering seeking appraisal should realize that the fair value of their
shares, as determined under Section 10-19.1-88 in the manner outlined above,
could be more than, the same as, or less than the value of the Norwest Common
Stock they would be entitled to as a result of the Merger if they did not seek
appraisal of their shares.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary contains a description of certain United States
federal income tax considerations for DBI and DBI's shareholders with respect to
the Merger. This summary is set forth in reliance upon the opinion of Lindquist
& Vennum P.L.L.P., counsel for DBI. The conclusions discussed herein are based,
in part, on certain representations made by the management of DBI and Norwest.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), regulations, rulings and decisions in effect on the date of this Proxy
Statement-Prospectus, all of which are subject to change. All section
references herein are to the Code, unless stated otherwise. This summary does
not discuss any aspect of state, local, or foreign taxation and does not discuss
all the tax considerations that may be relevant to particular DBI shareholders
in light of their personal investment circumstances, or to certain types of
shareholders that may be subject to special tax rules, such as financial
institutions, tax exempt organizations,
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insurance companies, dealers in stock or securities, foreign corporations, and
individuals who are not citizens or residents of the United States. The
discussion with respect to DBI shareholders is limited to those shareholders who
have held DBI Common Stock and who will hold the Norwest Common Stock received
in the Merger as "capital assets" within the meaning of Section 1221 of the
Code.
DBI SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE
TAX CONSIDERATIONS THAT MAY BE RELEVANT IN CONNECTION WITH THE PROPOSED MERGER,
INCLUDING THE APPLICATION TO THEIR PARTICULAR SITUATION OF THE TAX
CONSIDERATIONS DISCUSSED BELOW, AS WELL AS THE APPLICATION OF STATE, LOCAL,
FOREIGN, OR OTHER TAX LAWS.
THE PROPOSED REORGANIZATION
The merger of a wholly owned subsidiary of an acquiring corporation, such
as Norwest, with another corporation that will survive the merger, such as DBI,
in exchange for voting stock of the acquiring corporation, will be treated as a
"tax free" reverse triangular merger for federal income tax purposes under
Section 368(a)(1)(A) and 368(a)(2)(E) of the Code, provided the transaction
meets the requirements of a valid reverse triangular merger. The two most
significant requirements of a valid reverse triangular merger are (i) that after
the transaction the surviving corporation holds substantially all its properties
and the properties of the merged corporation and (ii) that in the transaction
former shareholders of the surviving corporation exchange at least 80% of the
stock of the surviving corporation for voting stock of the acquiring
corporation. Based on the information contained in the Proxy Statement-
Prospectus, the Merger Agreement, and certain representations made by the
management of Norwest and the management of DBI, the merger of Norwest's wholly
owned subsidiary with DBI will constitute a "tax free" reverse triangular merger
under Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
EFFECT OF THE REORGANIZATION ON DBI
For purposes of a reverse triangular merger, the surviving corporation is
treated as having received the stock of the acquiring corporation and any
additional money or property distributed by the acquiring corporation. If the
surviving corporation distributes all the stock, money, and other property
received in the reorganization to its shareholders in exchange for the stock of
the surviving corporation, Section 361 of the Code provides that the surviving
corporation will not recognize any gain or loss pursuant to the reorganization.
Accordingly, DBI will be treated as having received the Norwest Common Stock and
any cash paid in satisfaction of dissenters' rights, and as having distributed
the stock and cash received to DBI shareholders, so that DBI will recognize no
gain or loss pursuant to the Merger.
EFFECT OF THE REORGANIZATION ON NORWEST
Norwest will recognize no gain or loss on its receipt of DBI Common Stock
in exchange for its stock pursuant to Code section 1032. The Code and
regulations promulgated thereunder are unclear as to how to calculate Norwest's
basis in the DBI Common Stock received in the reorganization. Regulations that
are proposed, but not yet final, propose that Norwest's basis on the stock
should be equal to the sum of (i) Norwest's basis immediately before the
reorganization in the stock of Merger Co., (ii) the net basis of property
transferred in the reorganization to Merger Co. that is not distributed to DBI's
shareholders in the reorganization, and distributed to DBI's shareholders in the
reorganization, and (iii) DBI's net basis in its property after the
reorganization. For this purpose, the net basis of property transferred by
Norwest to Merger Co. is the excess, if any, of (i) the sum of the amount of
money and the basis in the property transferred, over (ii) any liabilities of
Norwest assumed by Merger Co. in the reorganization and any liabilities to which
the
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transferred property is subject. In addition, DBI's net basis in its property
is the excess, if any, of (i) the sum of the amount of money and the basis of
property held by DBI after the reorganization, over (ii) DBI's liabilities after
the reorganization, other than liabilities to which property acquired by DBI in
the reorganization is subject.
EFFECT OF THE REORGANIZATION ON DBI SHAREHOLDERS
DBI's shareholders will recognize no gain or loss upon the receipt of the
Norwest Common Stock (including fractional share interests, if any, to which
they are entitled) in exchange for their DBI Common Stock pursuant to section
354(a)(1). The basis of the Norwest Common Stock (including fractional share
interests) received by DBI shareholders will be the same as the basis of DBI
Common Stock surrendered in exchange therefor as provided in section 358(a)(1).
Pursuant to section 1223(1), the holding period of the Norwest Common Stock
(including fractional share interests) received by DBI shareholders will include
the holding period of DBI Common Stock surrendered in exchange thereof, provided
that such stock was held as a capital asset in the hands of DBI shareholders on
the date of the reorganization.
The receipt of cash in lieu of fractional share interests of Norwest Common
Stock will be treated as if the fractional shares were distributed as part of
the exchange and then were redeemed by Norwest. Depending on the personal
investment circumstances of each shareholder, such cash payments will be treated
as either having been received as a distribution in full payment in exchange for
the stock redeemed or as having been received as a dividend, as provided in
section 302 of the Code. If the cash payment as having been received by a DBI
shareholder as a distribution in full payment in exchange for the fractional
share redeemed, such shareholder will recognize gain or loss to the extent that
the amount of cash received exceeds, or is less than, the basis allocable to the
fractional share. Such gain or loss will be capital gain or loss, provided that
the fractional share is a capital asset in the hands of the DBI shareholder. If
the cash payment is treated as having been received by a DBI shareholder as a
dividend, the shareholder generally will recognize ordinary income in the amount
of the cash payment received.
DBI shareholders who exercise dissenters' rights and receive cash in the
reorganization in lieu of Norwest Common Stock will be treated as having
received the cash as a distribution in redemption of their DBI Common Stock as
provided in section 302 of the Code. Such shareholders generally will recognize
capital gain or loss measured by the difference between the amount of cash
received and their aggregate adjusted tax basis in the DBI Common Stock,
provided the DBI Common Stock was a capital asset in the hands of the
shareholder. Shareholders exercising dissenters' rights who also own Norwest
Common Stock, or who are deemed for federal income tax purposes to own
constructively Norwest Common Stock actually owned by other persons or entitles,
may recognize dividend income, taxable as ordinary income, equal to the amount
of the cash received. DBI SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS IN DETERMINING THE TAX CONSIDERATIONS THAT MAY BE RELEVANT IN
CONNECTION WITH THE REORGANIZATION, INCLUDING THE APPLICATION TO THEIR
PARTICULAR SITUATION OF THE RECEIPT OF CASH IN LIEU OF FRACTIONAL SHARES OR THE
EXERCISE OF DISSENTERS' RIGHTS, AS WELL AS THE OTHER TAX CONSIDERATIONS
DISCUSSED ABOVE, AND THE APPLICATION OF STATE, LOCAL, FOREIGN, OR OTHER TAX
LAWS.
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RESALE OF NORWEST COMMON STOCK
The shares of Norwest Common Stock issuable to shareholders of DBI upon
consummation of the Merger have been registered under the Securities Act. Such
shares may be traded freely and without restriction by those shareholders not
deemed to be "affiliates" of DBI or Norwest as that term is defined in the rules
under the Securities Act. Norwest Common Stock received by those shareholders
of DBI who are deemed to be "affiliates" of DBI 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 DBI generally
include individuals or entities that control, are controlled by or are under
common control with, DBI, and may include the executive officers and directors
of DBI as well as certain principal shareholders of DBI. In the Merger
Agreement, DBI has agreed to use its best efforts to cause each DBI shareholder
who is an executive officer or director of DBI or who may otherwise reasonably
be deemed to be an affiliate of DBI to enter into an agreement with Norwest
providing that such affiliate will not sell, transfer, or otherwise dispose of
the shares of Norwest Common Stock to be received by such person in the Merger
except in compliance with the applicable provisions of the Securities Act and
the rules and regulations promulgated thereunder. This Proxy Statement-
Prospectus does not cover any resales of Norwest Common Stock received by
affiliates of DBI.
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 shareholders who elect to
participate, that dividends on Norwest Common Stock will be reinvested in shares
of Norwest Common Stock at market price (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
shareholders of DBI 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 purchase
transaction in accordance with generally accepted accounting principles.
EXPENSES
Except as otherwise provided in the Merger Agreement, Norwest and DBI 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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INFORMATION ABOUT DBI AND THE BANK
GENERAL
DBI is a bank holding company organized in 1988 as a North Dakota
corporation and headquartered in Dickinson, North Dakota. The sole business
activity of the DBI is holding 100% of the issued and outstanding capital stock
of the Bank. DBI has no other direct subsidiaries. At March 31, 1995, the Bank
had total assets of $123.5 million, while DBI had total assets on a consolidated
basis of $123.7 million and total shareholders' equity of $9.8 million.
BUSINESS
The Bank is a full service commercial bank chartered under the laws of the
United States. It provides general commercial and retail banking services to
its customers in the Dickinson and Bowman areas.
The Bank offers all forms of commercial and consumer lending, including
lines of credit, term loans, real estate financing, and mortgage lending. Loans
outstanding at March 31, 1995, were $48.0 million, net of loan loss reserves.
As of that date, the Bank's lending limit was $2,164,249 per borrower. No
material portion of the Bank's loans is concentrated in a single industry or
customer.
The Bank also offers a full range of personal banking services, including
checking accounts, and savings and time accounts. As of March 31, 1995, the
Bank had 48 full-time employees (including 17 officers) and 8 part-time
employees. It owns facilities located at 115 First Avenue West, Dickinson; at
Prairie Hills Mall, 1681 Third Avenue West, Dickinson; at 57 Hamilton, Scranton;
and at 10 East Second Street, Bowman, North Dakota. All of these buildings and
facilities are in good condition.
The Bank has active competition in all areas of business in which it
presently engages. It competes with the smaller independent financial
institutions in the Dickinson and Bowman areas for commercial and individual
deposits and loans.
MARKETS AND DIVIDENDS
There has been no public market for shares of DBI Common Stock since DBI
has had a small number of shareholders throughout its existence. As of the date
of this Proxy Statement-Prospectus, there are issued and outstanding 2,146
shares of DBI Common Stock, held by 17 shareholders of record. Since January 1,
1993, DBI has not paid any dividends on DBI Common Stock.
40
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
THE CONSOLIDATED OPERATIONS OF
DICKINSON BANCORPORATION, INC. AND SUBSIDIARIES
GENERAL
The following is management's discussion and analysis of the significant
factors affecting the consolidated results of operations of DBI and the
financial condition of the Bank. DBI purchased The First National Bank of
Bowman, Bowman, North Dakota on September 21, 1993. Until January 1, 1995, DBI
owned and controlled 100% of the outstanding shares of both the Bank and First
National Bank of Bowman, Bowman, North Dakota ("Bowman Bank"). As of January 1,
1995, the Bowman Bank was merged with and into the Bank. The results of
operation of the two banks have been consolidated in the following discussion.
References to the entity of "Bank" or "the Bank" in this dicussion shall be
construed to refer to the merged entity. The results of this analysis should be
read in conjunction with the Bank's financial statements and accompanying
footnotes and other selected financial data presented elsewhere in this
document.
FINANCIAL CONDITION
Consolidated assets as of March 31, 1995 decreased $4,005,113 or 3.1% from
their December 31, 1994, level. Consolidated assets posted a similar decline of
$7,245,240 or 5.4% over the period of December 31, 1993 to December 31, 1994.
The declines are partially attributable to the loss of deposits customary to
falling interest rate environments as consumers began seeking higher returns by
selecting alternative investment options and the loss of deposits which closely
follows many transactions involving a change in ownership. The Bank's portfolio
of investment securities has declined as a means to fund the run-off of
deposits. During the year ended December 31, 1993, DBI elected to change its
method of accounting to comply with FASB Statement No. 109, ACCOUNTING FOR
INCOME TAXES . The change in method had no material effect on the tax accounts
of Bank.
<TABLE>
<CAPTION>
TOTAL ASSETS (in thousands)
---------------------------
<S> <C>
March 31, 1995 $123,725
December 31, 1994 $127,730
December 31, 1993 $134,975
</TABLE>
Average Federal Funds Sold increased approximately $286,000 over the
period of December 31, 1994 to December 31, 1993. As of March 31, 1995, Bank
had $2,600,000 in Federal Funds Sold. The decline in the Bank's investment
securities portfolio has created an excess of funds for investment which are
temporarily invested in Federal Funds transactions.
41
<PAGE>
<TABLE>
<CAPTION>
AVERAGE SECURITIES (in thousands)
---------------------------------
<S> <C>
March 31, 1995 (Actual) $65,439
December 31, 1994 $70,898
December 31, 1993 *$54,424
</TABLE>
Outstanding loans and leases posted strong growth in 1994. As of
December 31, 1994, total loans equalled $49,484,264 compared to the $42,395,897
reported at December 31, 1993, an increase of $7,088,367 or 16.7%. There were
$49,294,367 in outstanding loans and leases as of March 31, 1995.
<TABLE>
<CAPTION>
AVERAGE LOANS AND LEASES (in thousands)
---------------------------------------
<S> <C>
March 31, 1995 (Actual) $49,294
December 31, 1994 $46,615
December 31, 1993 *$33,627
</TABLE>
<TABLE>
<CAPTION>
AVERAGE INTEREST BEARING DEPOSITS (in thousands)
------------------------------------------------
<S> <C>
March 31, 1995 (Actual) $97,612
December 31, 1994 $97,671
December 31, 1993 *$70,576
</TABLE>
<TABLE>
<CAPTION>
AVERAGE CAPITAL (in thousands)
------------------------------
<S> <C>
March 31, 1995 (Actual) $9,771
December 31, 1994 $8,778
December 31, 1993 $8,342
</TABLE>
Over the same periods discussed above, there are no other changes in
the balance sheet accounts that are deemed material.
* The acquisition of the Bowman, North Dakota Bank on September 21, 1993
resulted in an increase in total loans of $19,202,758, an increase in deposits
of $44,677,642, and an increase in investment securities of $28,282,780.
42
<PAGE>
COMPARISON OF THE THREE MONTHS ENDED
MARCH 31, 1995 AND 1994
EARNINGS PERFORMANCE
Consolidated net income of $305,008 (net of applicable taxes) for the
quarter ended March 31, 1995, compared favorably to the $295,378 reported for
the same period in 1994. The increase can be partially attributable to cost
savings experienced in other noninterest expenses, most notably salaries and
benefits.
The increase in interest income was offset by a corresponding increase
in interest expense, a combined result of the rising interest rate environment.
The result was that there was no significant change in net interest income.
Management's assessment of loan quality and the adequacy of the loan
loss reserve resulted in the need for no provisions to the Bank's loan loss
reserve in the first quarter of 1995. This compares favorably to the $3,000
which was provided in the first quarter of 1994.
The following is a concise summary of the statement of income for the
three months ended March 31, 1994 and 1995.
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31,
----------
1995 1994
---- ----
<S> <C> <C>
Interest Income $2,142 $2,070
Interest Expense (920) (831)
Net Interest Income 1,222 1,239
Provisions to the Reserve 0 (3)
Other Operating Income 250 245
Other Operating Expense (994) (1,009)
Net Income before tax 478 472
Applicable taxes (173) (177)
Net Income after tax $305 $295
</TABLE>
43
<PAGE>
NET INTEREST INCOME
Net Interest Income was affected by both the volume of assets and
liabilities which were sensitive to changes in the interest rate environment and
the changes in the rate applied to the assets and liabilities. The following
table is provided to show the percentage of change in interest income and
expense of the significant interest sensitive assets and deposit liabilities (in
thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
Percentage Increase
-------------------
1995 1994 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Interest Income
Loans $1,180 $ 983 20.0%
Securities 951 1,062 (10.6%)
Fed Funds Sold 11 25 (56.0%)
Total Interest Income $2,142 $2,070 3.4%
Interest Expense
Deposits $ 834 $692 20.5%
Notes 68 132 (48.5%)
Fed Funds Purchased 18 7 157.1%
Total Interest Expense $920 $831 10.7%
Net Interest Income $1,222 $1,239 (1.4%)
</TABLE>
44
<PAGE>
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1994 AND 1993
EARNINGS PERFORMANCE
The Bank earned net income of $1,190,056 in the year ended December 31,
1993, and $1,176,262 in the year ended December 31, 1994. Due to the rising
interest rate environment experienced throughout 1994, Bank was able to increase
its net interest income by $929,532 to $4,949,493. The increase is partially
attributable to the shift in the asset mix at the Bank. Bank's loan volume
increased at the same time deposits were declining. In addition, the Bank
displayed a $12,183,952 decrease in investment securities. This shift from
securities to loans favorably impacts net interest income since loans
traditionally earn higher rates of interest than securities. In the year ended
December 31, 1993, the Bank's income was affected by its provision for loan
losses. In 1994, the Bank provided $8,000 to the loan loss reserve to cover
future potential loan losses. By contrast, the Bank took a reverse provision of
$300,000 in the year ended December 31, 1993, effectively increasing income in
that year. This change is attributable, in part to the purchase of the Bowman
Bank on September 21, 1993 and to management's assessment of the overall quality
of the Bank's loan portfolio. The acquisition added $168,597 to DBI's combined
loan loss reserve. In both 1994 and 1993, the Bank experienced net loan
recoveries in excess of loans charged-offs. In 1994, the Bank posted recoveries
in excess of charged off credits of $62,496, in 1993 the amount was $34,911.
The Bank had a return on average assets of 0.93% in 1994 which compared
unfavorably to the 1.25% achieved in 1993. Similarly, the return on average
equity showed a decrease from 14.27% as of December 31, 1993, to 13.40% for the
year ended December 31, 1994. On a weighted-average per share basis, net
income for the years 1994 and 1993 were $556.27, and $576.55.
The following is a condensed summary of the consolidated statement of income (in
thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Net Interest Income $4,949 $4,020
Provision for loan losses 8 (300)
Operating Income 1,211 780
Operating Expense 4,289 3,287
Net Income before tax $1,864 $1,813
</TABLE>
45
<PAGE>
NET INTEREST INCOME
Net interest income is affected by changes in both the volume of average
earning assets and interest-bearing liabilities and changes in the interest
rate. The following table presents the percentage change in interest income and
expense of significant interest-bearing assets and liabilities on a taxable-
equivalent basis.
<TABLE>
<CAPTION>
Change in
Dollars Percentage
(in thousands) Increase/(Decrease)
-------------- -------------------
94-93 93-92 94-93 93-92
----- ----- ----- -----
<S> <C> <C> <C> <C>
Interest Income
Loans $1,143 $155 35.8% 5.1%
U.S. Gov't & Agencies 652 208 23.6% 8.1%
State & Municipals (44) 46 (7.5%) 8.3%
Other Securities (10) (20) (20.4%) (29.0%)
Federal Funds Sold 28 6 57.1% 14.3%
Deposits at other banks (15) (26) (100.0%) (63.4%)
Total $1,754 $369 27.1% 6.0%
Interest Expense
Deposits $850 $(160) 41.7% 7.4%
Federal Funds Purchased 15 1 62.5% 4.3%
Borrowed Money (26) 52 (6.8%) 15.9%
Total $839 $(107) 34.4% (4.3%)
Net Interest Income $915 $476 22.8% 13.2%
</TABLE>
The following tables represent the changes in net interest income and
expense attributable to changes in the volume and interest rate of significant
interest earning assets and interest-bearing liabilities on a taxable-equivalent
basis:
46
<PAGE>
<TABLE>
<CAPTION>
Change in 1994-1993
Dollars
(in thousands) Attributable to Change
-------------- ----------------------
In Volume In Rate
--------- -------
<S> <C> <C> <C>
Interest Income
Loans $1,143 $1,235 $(92)
Taxable Securities 642 928 (286)
Non-Taxable Securities (44) 45 (89)
Federal Funds Sold 28 9 19
Deposits at other banks (15) (15) 0
Total $1,754 $2,202 $(448)
Interest Expense
Deposits $850 $730 $120
Federal Funds Purchased 15 7 8
Borrowed Money (26) 44 (70)
Total $839 $781 $58
Net Interest Income $915 $1,421 $(506)
<CAPTION>
Change in 1993-1992
Dollars
(in thousands) Attributable to Change
-------------- ----------------------
In Volume In Rate
--------- -------
<S> <C> <C> <C>
Interest Income
Loans $155 $353 $(198)
Taxable Securities 188 711 (523)
Non-Taxable Securities 46 159 (113)
Federal Funds Sold 6 11 (5)
Deposits at other banks (26) (23) (3)
Total $369 $1,211 $(842)
Interest Expense
Deposits $(160) $426 $(586)
Federal Funds Purchased 1 4 (3)
Borrowed Money 52 94 (42)
Total $107 $524 $(631)
Net Interest Income $476 $687 $(211)
</TABLE>
47
<PAGE>
The following table represents the average balance of significant balance
sheet accounts for the years ended December 31, 1993 and 1994, and the
percentage changes: (1)
<TABLE>
<CAPTION>
Dollars Percentage
(in thousands) Increase(Decrease)
-------------- ------------------
1994 1993 1994/1993
---- ---- ---------
<S> <C> <C> <C>
Deposits at other banks $0 $165 (100.0%)
Federal Funds Sold 1,829 1,543 18.5%
Taxable Securities 64,666 48,638 33.0%
Nontaxable Securities 6,232 5,786 7.7%
Loans and Leases 46,615 33,627 38.6%
Total Average
Earning Assets $119,342 $89,760 33.0%
Interest Bearing Deposits
Demand $45,836 $30,605 49.8%
Savings 9,750 7,948 22.7%
Time 42,085 32,023 31.4%
Fed Funds Purchased 929 731 27.1%
Borrowed Money 5,387 4,643 16.0%
Total Average Interest
Bearing Liabilities $103,987 $75,950 36.9%
</TABLE>
- ---------------------------
(1) In the third quarter of 1993, DBI acquired the Bowman Bank. At the
time of the purchase, Bowman had approximately $51,574,577 in total assets.
This transaction is in part responsible for the change in the average balance of
significant balance sheet accounts shown on the table.
48
<PAGE>
The following table represents the average interest yield on earning assets and
the average interest rate paid on interest bearing liabilities on a taxable-
equivalent basis:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Deposits at other banks 0.0% 9.09%
Federal Funds Sold 4.16% 3.11%
Taxable Securities 5.35% 5.79%
Nontaxable Securities 8.63% 10.06%
Loans and Leases 9.31% 9.51%
Total Interest
Earning Assets 7.13% 7.54%
Interest Bearing Deposits
Demand 2.13% 1.89%
Savings 2.22% 2.42%
Time 4.02% 3.96%
Fed Funds Purchased 4.20% 3.28%
Notes Payable 6.88% 8.58%
Other Borrowed Money 4.87% 3.84%
Total Average Interest
Bearing Liabilities 3.15% 3.21%
Net Interest Yield on Earning Assets 3.97% 4.32%
</TABLE>
Net Interest Income for the year ended December 31, 1994, increased
$915,000 on a taxable-equivalent basis over the amount posted for the year ended
December 31, 1993. The increase was a function of the rising interest rate
environment and the acquisition of the Bowman Bank on September 21, 1993, which
increased both the average interest sensitive assets and the average interest
sensitive liabilities.
Both Interest Income and Interest Expense rose on an individual basis in
the year ended December 31, 1994. The rise in Net Interest Income however,
outpaced the rise in Net Interest Expense. The increase in loan volume coupled
with the slight decline in interest bearing deposit liabilities caused net
interest income to increase to the $4,949,493 posted as of December 31, 1994.
PROVISION FOR LOAN LOSSES
The allowance for loan and lease losses is determined based on management's
evaluation of the loan and lease portfolio, economic conditions, prior loss
experience, review of specific problem loans and other pertinent factors.
Actual losses on loans are charged to this reserve and recoveries are credited
to the reserve. Management is charged with the responsibility of maintaining
the reserve at a safe and sound level and will periodically provide monies to
this reserve via a charge to current period earnings.
49
<PAGE>
In 1993, the Bowman Bank was acquired which added $168,597 to the reserve.
In addition, recoveries on previously charged-off loans exceeded current charge-
offs by $34,911. After Management's evaluation of the quality of the loan
portfolio, a reverse provision of $300,000 was deemed appropriate. The balance
of the reserve at December 31, 1993, was $1,235,512 or 2.91% of gross loans and
leases. In 1994, recoveries of previously charged-off loans exceeded current
charge-offs by $62,496. Management elected to further provide another $8,000 to
the reserve through a charge to current earnings to leave the balance at
$1,306,008, or 2.64% of gross loans and leases as of December 31, 1994.
OPERATING INCOME (NON INTEREST)
The following table illustrates the volume and percentage changes of
operating income excluding interest:
<TABLE>
<CAPTION>
Dollars Percentage
(in thousands) Increase(Decrease)
1994 1993 1994/1993
---- ---- ---------
<S> <C> <C> <C>
Income from Insurance Contracts $104 $62 67.7%
Income from Fiduciary Activities 294 246 19.5%
Service Charges on Deposit Accounts 387 301 28.6%
Other Service Charges 281 142 97.9%
Other Income 145 28 417.9%
Total Operating Income $1,211 $780 55.3%
</TABLE>
Fee income has become a significant source of income to banks in light of
the interest rate environment which has served to heighten banks awareness of
cost controls and sources of income not governed by interest rates. The
addition of the Bowman Bank on September 21, 1993, opened up additional
opportunities for the Bank to access fee income by broadening its customer base.
The Bank also generated increased fee income through its trust department.
OPERATING EXPENSE (NON INTEREST)
The following table sets forth a concise summary of the volume and
percentage change in operating expenses excluding interest:
<TABLE>
<CAPTION>
Dollars Percentage
(in thousands) Increase(Decrease)
1994 1993 1994/1993
---- ---- ---------
<S> <C> <C> <C>
Salary and Benefits $1,945 $1,636 18.9%
Occupancy and equipment 597 414 44.2%
Other Expenses 1,747 1,237 41.2%
Total operating expense $4,289 $3,287 30.5%
</TABLE>
50
<PAGE>
The acquisition of the Bowman Bank in 1993 increased operating expenses
significantly due to the costs of operating the physical sites in Bowman and
Scranton, North Dakota.
FUNDS MANAGEMENT AND LIQUIDITY
The Bank primarily funds its asset fluctuation through the use of
borrowings in the form of deposits, maturing loans and investment securities and
federal funds purchases and sales. The maintenance of adequate liquidity is
necessary to ensure that sufficient funds are available to meet the demands of
increased loans or unforeseen deposit withdrawals. Secondary sources of asset
liquidity are provided by maturing loans and securities and sales of high-
quality investment securities.
The Bank's Funds Management Policy outlines minimum liquidity standards
which are reviewed monthly by the Funds Management Committee and Quarterly by
the Board of Directors. The Funds Management Committee is charged with the
primary responsibility of maintaining adequate liquidity and managing the risk
inherent in interest rate changes while sustaining a stable growth in the net
interest margin. The Bank has adopted a basic strategy of minimizing interest
rate risk through the matching of repricing periods of its earning assets and
interest bearing liabilities.
CAPITAL ADEQUACY
Bank regulatory agencies measure capital adequacy through standardized
risk-based capital guidelines which compare different levels of capital (as
defined by the guidelines) to risk-weighted assets and off-balance sheet
obligations. Under these rules (effective December 31, 1992) all financial
institutions are required to maintain a level of core capital, known as TIER 1
capital, of at least 4% of risk-weighted assets, and a minimum level of total
capital of at least 8% of risk-weighted assets. TIER 1 capital mainly consists
of stockholders' equity less goodwill, less any market appreciation or
depreciation in certain investments that Bank has determined they will not hold
to their stated maturity. Total Capital is comprised of TIER 1 capital plus a
portion of the allowance for loan and lease losses, and other specifically
defined debt instruments.
The following table sets forth the Bank's TIER 1, and Total Capital in
dollars and percentage of risk-weighted assets (in thousands):
<TABLE>
<CAPTION>
03/31/95 12/31/94
-------- --------
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
TIER 1 $13,154 21.1% $12,713 20.4%
Allowable portion
of Loan Reserve $786 1.3% $783 1.3%
Total Capital $13,940 22.4% $13,496 21.7%
Risk-weighted
Assets $62,321 62,127
Minimum Capital
Required $4,986 8.0% $4,970 8.0%
</TABLE>
51
<PAGE>
Additionally, the Federal Reserve Board has also adopted a minimum ratio of
TIER 1 capital to average total assets known as the TIER 1 leverage ratio. The
principal objective of this measure is to place a constraint on the maximum
degree to which a banking organization can leverage its equity capital base.
The regulation has established a minimum level of 3% of average total assets.
The Bank's actual TIER 1 leverage capital ratio as of March 31, 1995, and
December 31, 1994 was 10.59% and 10.33%, respectively.
ACCOUNTING ISSUES
INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 109 , ACCOUNTING FOR INCOME TAXES.
The Bank adopted SFAS No. 109 in calendar year 1993.
SFAS No. 109 requires the use of the asset and liability method of
accounting for income taxes. Under this method, deferred tax assets and
deferred tax liabilities are recognized for the future tax consequences
attributable to the differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
which includes the enactment date. There was no cumulative effect of the change
in the method of accounting for income taxes on Bank's books.
INVESTMENT IN DEBT AND EQUITY SECURITIES
In June 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 115 , ACCOUNTING FOR CERTAIN
INVESTMENTS IN DEBT AND EQUITY SECURITIES. The Bank adopted SFAS No. 115 in
calendar year 1994.
This statement addressed the accounting and reporting for investments by
classifying them into one of three categories: held-to-maturity, available-for-
sale, or trading account. Due to the Bank's adoption of this method, the
investment securities portfolio is divided in these categories as follows:
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
-------------- -----------------
<S> <C> <C>
Available-for-Sale $32,168,983 $23,948,988
Held-to-Maturity $32,877,965 $41,845,355
Trading Account $0 $0
Government Issues $391,800 $414,600
</TABLE>
52
<PAGE>
As of December 31, 1994, there was $2,477,388 in unrealized market
depreciation in the securities held-to-maturity and $1,505,211 in unrealized
market depreciation in the securities designated available-for-sale. As of
March 31, 1995, the available-for-sale portfolio had improved and showed only
$975,236 in market depreciation, an improvement of $529,975. The held-to-
maturity securities had also risen in value and had decreased the market
depreciation by $929,397 to $1,547,991.
IMPAIRMENT OF LOANS
Effective January 1, 1995, the Bank adopted FASB Statement No. 114,
ACCOUNTING BY CREDITOR FOR IMPAIRMENT OF A LOAN. This statement addresses the
accounting treatment for loans deemed impaired by specifying how the allowance
for loan losses related to certain loans should be determined. The statement
requires that the collectibility of impaired loans be measured by one of three
methods. If the value of the impaired loan is less than its balance, the bank
will include the difference in its allowance for loan losses. The Bank has no
loans which are currently being accounted for using the rules of this statement.
53
<PAGE>
DICKINSON BANCORPORATION, INC.
AND SUBSIDIARIES
DICKINSON, NORTH DAKOTA
SELECTED STATISTICAL DATA
DECEMBER 31, 1994 AND 1993
WITH INDEPENDENT ACCOUNTANT'S REPORT
<PAGE>
[Eide Helmeke PLLP Letterhead]
INDEPENDENT ACCOUNTANT'S REPORT
The Board of Directors
Dickinson Bancorporation, Inc.
Dickinson, North Dakota
Our report on our audit of the basic financial statements of Dickinson
Bancorporation, Inc. for 1994 and our disclaimer of an opinion on the basic
financial statements of Dickinson Bancorporation, Inc for 1993 appears on page 1
of the consolidated financial statements. The audit of the 1994 financial
statements was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The additional information on pages 2 through 14 of
this document is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has not been
subjected to the auditing procedures applied in the audit of the basic financial
statements, and, accordingly, we express no opinion on it.
/s/ Eide Helmeke PLLP
- ---------------------
April 28, 1995
Bismarck, North Dakota
55
-1-
<PAGE>
DICKINSON BANCORPORATION, INC.
DAILY AVERAGE BALANCE SHEET AND RELATED YIELDS AND RATES
(Amounts in Thousands)
(See Independent Accountant's Report)
<TABLE>
<CAPTION>
1994 1993
- -------------------------------------------------------------------------------------------------------------------
INTEREST INTEREST
YIELDS YIELDS
AND AND
BALANCE INTEREST RATES BALANCE INTEREST RATES
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
INTEREST BEARING DEPOSITS WITH BANKS 165 15 9.09%
FEDERAL FUNDS SOLD 1,829 76 4.16% 1,543 48 3.11%
TAXABLE INVESTMENT SECURITIES 64,666 3,459 5.35% 48,638 2,817 5.79%
NONTAXABLE INVESTMENT SECURITIES 6,232 538 8.63% 5,786 582 10.06%
LOANS 46,615 4,340 9.31% 33,627 3,197 9.51%
ALLOWANCE FOR LOAN LOSSES (1,272) (1,417)
- -------------------------------------------------------------------------------------------------------------------
TOTAL EARNING ASSETS 118,070 8,413 7.13% 88,343 6,659 7.54%
CASH AND DUE FROM BANKS 3,937 2,851
OTHER ASSETS 4,648 3,694
- -------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 126,655 94,888
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
NONINTEREST BEARING DEPOSITS 12,129 8,948
- -------------------------------------------------------------------------------------------------------------------
INTEREST BEARING DEMAND DEPOSITS 45,836 978 2.13% 30,605 578 1.89%
SAVINGS DEPOSITS 9,750 216 2.22% 7,948 192 2.42%
TIME DEPOSITS 42,085 1,693 4.02% 32,023 1,267 3.96%
- -------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST BEARING DEPOSITS 97,671 2,887 2.96% 70,576 2,037 2.89%
</TABLE>
-56-
<PAGE>
DAILY AVERAGE BALANCE SHEET AND RELATED
YIELDS AND RATES - page 2
(See Independent Accountant's Report)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FEDERAL FUNDS PURCHASED/REPO'S 929 39 4.20% 731 24 3.28%
NOTES PAYABLE 4,565 314 6.88% 4,252 365 8.58%
OTHER BORROWED FUNDS 822 40 4.87% 391 15 3.84%
- -------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST BEARING LIABILITIES 103,987 3,280 3.15% 75,950 2,441 3.21%
ACCRUED EXPENSES AND OTHER LIABILITIES 1,761 1,648
STOCKHOLDER'S EQUITY 8,778 8,342
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY 126,655 94,888
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 5,133 4,218
NET INTEREST SPREAD 3.97% 4.32%
NET INTEREST SPREAD WITHOUT
TAXABLE-EQUIVALENT INCREMENTS 3.82% 4.10%
NET INTEREST INCOME TO EARNING ASSETS 4.35% 4.77%
</TABLE>
Interest and rate are presented on a fully taxable-equivalent basis under a tax
rate of 34% for the periods indicated. Nonaccrual loans are included in average
loan balances.
-57-
<PAGE>
DICKINSON BANCORPORATION, INC.
CHANGES IN RATE AND VOLUME ON A TAX-EQUIVALENT BASIS
(Amounts in Thousands)
(See Independent Accountant's Report)
<TABLE>
<CAPTION>
DECEMBER 31
- -------------------------------------------------------------------------------------------------------------------
1994 COMPARED WITH 1993 1993 COMPARED WITH 1992
- -------------------------------------------------------------------------------------------------------------------
YIELD/ YIELD/
VOLUME RATE TOTAL VOLUME RATE TOTAL
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN:
Interest income:
Loans 1,235 (92) 1,143 353 (198) 155
Taxable investment securities 928 (286) 642 711 (523) 188
Nontaxable investment securities 45 (89) (44) 159 (113) 46
Federal funds sold 9 19 28 11 (5) 6
Interest bearing deposits with banks (15) 0 (15) (23) (3) (26)
- -------------------------------------------------------------------------------------------------------------------
Total 2,202 (448) 1,754 1,211 (842) 369
- -------------------------------------------------------------------------------------------------------------------
Interest expense:
Demand deposits 288 112 400 150 (247) (97)
Savings deposits 44 (20) 24 48 (69) (21)
Time deposits 398 28 426 228 (270) (42)
Federal funds purchased and repo's 7 8 15 4 (3) 1
Notes payable 27 (78) (51) 88 (37) 51
Other borrowed funds 17 8 25 6 (5) 1
- -------------------------------------------------------------------------------------------------------------------
Total 781 58 839 524 (631) (107)
- -------------------------------------------------------------------------------------------------------------------
INCREASE IN NET INTEREST INCOME 1,421 (506) 915 687 (211) 476
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
This table shows the components of the change in net interest income by volume
and rate on a taxable-equivalent basis. The effect of changes in rates on volume
changes is allocated based on the percentage relationship of changes in volume
and changes in rate. This table does not take into account the level of
noninterest-bearing funding nor does it fully reflect changes in the mix of
assets and liabilities.
-58-
<PAGE>
DICKINSON BANCORPORATION, INC.
SELECTED STATISTICAL DATA
INVESTMENTS
DECEMBER 31, 1994, AND 1993
(Amounts in Thousands)
(See Independent Accountant's Report)
The following table sets forth the book value of the securities in the Company's
portfolio by type at the dates indicated:
<TABLE>
<CAPTION>
1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Government and federal agency
securities $ 36,917 $ 48,084
Mortgage-backed pass-through securities 4,129 6,191
State and municipal securities 6,235 6,652
Collateralized mortgage obligations 18,513 17,049
Other securities 415 417
- --------------------------------------------------------------------------------
$ 66,209 $ 78,393
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
DICKINSON BANCORPORATION, INC.
SELECTED STATISTICAL DATA
INVESTMENTS
DECEMBER 31, 1994
(Amounts in Thousands)
(See Independent Accountant's Report)
The following table sets forth the book value, maturity, and approximate yields
of the securities in the Company's portfolio by type based on contractual
maturity as of December 31, 1994:
<TABLE>
<CAPTION>
YIELD AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND FEDERAL AGENCY SECURITIES:
One year or less 6.05% $ 2,000
Over one through five years 5.89% 33,914
Over five through ten years 5.62% 1,003
Over ten years 0.00% 0
- --------------------------------------------------------------------------------
Total 5.89% $ 36,917
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORTGAGE-BACKED PASS-THROUGH SECURITIES:
One year or less 0.00% $ 0
Over one through five years 7.63% 369
Over five through ten years 9.56% 17
Over ten years 7.90% 3,743
- --------------------------------------------------------------------------------
Total 7.88% $ 4,129
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATE AND MUNICIPAL SECURITIES:
One year or less 10.90% $ 300
Over one through five years 9.66% 2,193
Over five through ten years 7.25% 3,387
Over ten years 7.83% 355
- --------------------------------------------------------------------------------
Total 8.31% $ 6,235
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
60
<PAGE>
DICKINSON BANCORPORATION, INC.
SELECTED STATISTICAL DATA
INVESTMENTS
DECEMBER 31, 1994
(Amounts in Thousands)
(See Independent Accountant's Report)
<TABLE>
<CAPTION>
YIELD AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS:
One year or less 0.00% $ 0
Over one through five years 5.93% 1,435
Over five through ten years 5.14% 1,664
Over ten years 5.84% 15,414
- --------------------------------------------------------------------------------
TOTAL 5.78% $ 18,513
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OTHER SECURITIES:
One year or less 0.00% $ 0
Over one through five years 0.00% 0
Over five through ten years 0.00% 0
Over ten years 0.00% 0
- --------------------------------------------------------------------------------
TOTAL 0.00% $ 0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES:
One year or less 6.69% $ 2,300
Over one through five years 6.13% 37,910
Over five through ten years 6.41% 6,072
Over ten years 6.27% 19,512
- --------------------------------------------------------------------------------
TOTAL 6.21% $ 65,794
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No contractual maturity 7.55% $ 415
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES 6.22% $ 6,209
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Yields were determined by dividing aggregate annual interest income by aggregate
book value. The yields for tax-exempt securities have been computed on a fully
tax equivalent basis using a tax rate of 34%.
The Bank does not hold securities by any single issuer (other than the U.S.
Government) totaling more that 10% of stockholders' equity.
61
<PAGE>
DICKINSON BANCORPORATION, INC.
SELECTED STATISTICAL DATA
LOANS
DECEMBER 31, 1994, AND 1993
(Amounts in Thousands)
(See Independent Accountant's Report)
The following table sets forth the composition of the Bank's loan portfolio at
the dates indicated:
<TABLE>
<CAPTION>
1994 1993
- -----------------------------------------------------------------------------------------------
Amount % Amount %
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Agricultural 18,807 39.04% 14,292 34.72%
Commercial 12,551 26.05% 10,869 26.41%
Real estate 8,782 18.23% 8,309 20.19%
Consumer 8,209 17.04% 8,002 19.44%
Credit card 1,075 2.23% 893 2.17%
Overdrafts 60 0.12% 31 0.07%
- -----------------------------------------------------------------------------------------------
Total loans 49,484 102.71% 42,396 103.00%
Allowance for loan losses 1,306 2.71% 1,236 3.00%
- -----------------------------------------------------------------------------------------------
Total loans, net 48,178 100.00% 41,160 100.00%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
62
<PAGE>
DICKINSON BANCORPORATION, INC.
SELECTED STATISTICAL DATA
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
DECEMBER 31, 1994
(Amounts in Thousands)
(See Independent Accountant's Report)
<TABLE>
<CAPTION>
Maturing
Maturing After One
in One Year Maturing
Year or Through After
Less Five Years Five Years Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Agricultural 10,853 7,525 429 18,807
Commercial 5,119 4,949 2,483 12,551
Real estate 1,362 4,805 2,615 8,782
Consumer 1,229 6,778 202 8,209
Credit card 1,075 1,075
Overdrafts 60 60
- --------------------------------------------------------------------------------
19,698 24,057 5,729 49,484
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Due in Due After
One Year One Year Total
- --------------------------------------------------------------------------------
Loans at fixed interest rates 6,385 17,543 23,928
Loans at variable interest rates 13,313 12,243 25,556
- --------------------------------------------------------------------------------
19,698 29,786 49,484
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
63
<PAGE>
DICKINSON BANCORPORATION, INC.
SELECTED STATISTICAL DATA
NONPERFORMING LOANS
DECEMBER 31, 1994, AND 1993
(Amounts in Thousands)
(See Independent Accountant's Report)
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Nonaccrual loans 134 120
Loans past due 90 days or more 29 46
Restructured loans 0 0
Interest income that would have been recorded if
the nonaccrual loans had been current 9 16
Interest income on nonaccrual loans that was
included in net income 5 0
</TABLE>
The Bank's policy indicate that loans are placed on nonaccrual status if: (a)
they are maintained on a cash basis because of deterioration in the financial
position of the borrower, (b) payment in full of interest or principal is not
expected, or (c) principal or interest has been in default for a period of 90
days or more unless that obligation is both well secured and in the process of
collection.
-64-
<PAGE>
DICKINSON BANCORPORATION, INC.
SELECTED STATISTICAL DATA
ALLOWANCE FOR LOAN LOSSES
DECEMBER 31, 1994, AND 1993
(Amounts in Thousands)
(See Independent Accountant's Report)
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year 1,236 1,332
- --------------------------------------------------------------------------------
Allowance for loan losses incident to purchase
of First National Bank of Bowman 0 169
- --------------------------------------------------------------------------------
Charge-offs:
Agricultural 0 2
Commercial 4 34
Real estate 0 11
Consumer 8 5
Credit card 13 1
- --------------------------------------------------------------------------------
Total charge-offs 25 53
- --------------------------------------------------------------------------------
Recoveries:
Agricultural 0 0
Commercial 80 69
Real estate 0 11
Consumer 5 5
Credit card 2 3
- --------------------------------------------------------------------------------
Total recoveries 87 88
- --------------------------------------------------------------------------------
Net recoveries (charge-offs) 62 35
Provision for loan losses charged to operations 8 (300)
- --------------------------------------------------------------------------------
Balance, end of year 1,306 1,236
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average gross loans outstanding during the year 46,615 33,627
Ratio of net recoveries during the year to
average gross loans outstanding during the year 0.13% 0.10%
</TABLE>
The policy of the bank is to maintain an allowance for loan losses that will be
adequate to absorb all estimated inherent losses in the bank's loan portfolio.
The bank maintains an effective loan review system and controls to identify
asset quality problems in a timely manner taking into consideration the current
market conditions affecting the loan portfolio. This procedure is applied on a
quarterly basis in order to properly report the allowance for loan losses.
-65-
<PAGE>
DICKINSON BANCORPORATION, INC.
SELECTED STATISTICAL DATA
ALLOWANCE FOR LOAN LOSSES
DECEMBER 31, 1994, AND 1993
(Amounts in Thousands)
(See Independent Accountant's Report)
The following table set forth the allowance for loan losses by loan category,
based upon management's assessment of the risk associated with such categories,
at the dates indicated.
<TABLE>
<CAPTION>
1994 1993
- -----------------------------------------------------------------------------------------------------
Percent of Percent of Percent of Percent of
Allowance Loans in Allowance Loans in
in Each Each in Each Each
Category Category Category Category
to Total to Total to Total to Total
Amount Allowance Loans Amount Allowance Loans
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Agricultural 497 38.05% 38.01% 411 33.28% 33.71%
Commercial 323 24.73% 25.36% 332 26.88% 25.64%
Real estate 296 22.67% 17.75% 307 24.86% 19.60%
Consumer 168 12.86% 16.59% 167 13.52% 18.87%
Credit card 22 1.69% 2.17% 18 1.46% 2.11%
Overdrafts 0 0.00% 0.12% 0 0.00% 0.07%
- -----------------------------------------------------------------------------------------------------
Total 1,306 100.00% 100.00% 1,235 100.00% 100.00%
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
-66-
<PAGE>
DICKINSON BANCORPORATION, INC.
SELECTED STATISTICAL DATA
TIME DEPOSITS OF $100,000 OR MORE
DECEMBER 31, 1994
(Amounts in Thousands)
(See Independent Accountant's Report)
<TABLE>
<CAPTION>
<S> <C>
Maturing in Under Three Months $2,452
Maturing in Three to Twelve Months 1,763
Maturing in Over Twelve Months 613
- -------------------------------------------------------------------------------
Total $4,828
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
DICKINSON BANCORPORATION, INC.
SELECTED STATISTICAL DATA
RETURN ON EQUITY AND ASSETS
DECEMBER 31, 1994 AND 1993
(See Independent Accountant's Report)
<TABLE>
<CAPTION>
1994 1993
- --------------------------------------------------------------------------------
<S> <S> <C> <C>
RETURN ON ASSETS NET INCOME DIVIDED BY
AVERAGE TOTAL ASSETS 0.93% 1.25%
RETURN ON EQUITY NET INCOME DIVIDED BY
AVERAGE EQUITY 13.40% 14.27%
DIVIDEND PAYOUT RATIO DIVIDENDS DECLARED PER
SHARE DIVIDED BY NET
INCOME PER SHARE 0.00% 0.00%
EQUITY TO ASSETS RATIO AVERAGE EQUITY DIVIDED BY
AVERAGE TOTAL ASSETS 6.93% 8.79%
</TABLE>
68
<PAGE>
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
As a bank holding company, Norwest is subject to supervision and
examination by the Federal Reserve Board. Norwest's banking subsidiaries are
subject to supervision and examination by applicable federal and state banking
agencies. The deposits of Norwest's banking subsidiaries are insured by the
Bank Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"), and
therefore such banking subsidiaries are subject to regulation by the FDIC. In
addition to the impact of regulation, commercial banks are affected
significantly by the actions of the Federal Reserve Board as it attempts to
control the money supply and credit availability in order to influence the
economy.
DIVIDEND RESTRICTIONS
Various federal and state statutes and regulations limit the amount of
dividends the subsidiary banks can pay to Norwest without regulatory approval.
The approval of the OCC is required for any dividend by a national bank if the
total of all dividends declared by the bank in any calendar year would exceed
the total of its net profits, as defined by regulation, for that year combined
with its retained net profits for the preceding two years less any required
transfers to surplus or a fund for the retirement of any preferred stock. In
addition, a national bank may not pay a dividend in an amount greater than its
net profits then on hand after deducting its losses and bad debts. For this
purpose, bad debts are defined to include, generally, loans which have matured
and are in arrears with respect to interest by six months or more, other than
such loans which are well secured and in the process of collection. Under these
provisions Norwest's national bank subsidiaries could have declared, as of March
31, 1995, aggregate dividends of at least $217.5 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.
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
69
<PAGE>
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. Section 55) permits the OCC to order the pro rata
assessment of shareholders of a national bank whose capital stock has become
impaired, by losses or otherwise, to relieve a deficiency in such national
bank's capital stock. This statute also provides for the enforcement of any
such pro rata assessment of shareholders of such national bank to cover such
impairment of capital stock by sale, to the extent necessary, of the capital
stock of any assessed shareholder failing to pay the assessment. Similarly, the
laws of certain states provide for such assessment and sale with respect to
banks chartered by such states. Norwest, as the sole shareholder of 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 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
70
<PAGE>
also subject to capital requirements adopted by applicable regulatory agencies
which are substantially similar to the foregoing. At March 31, 1995, Norwest's
Tier 1 and total capital (the sum of Tier 1 and Tier 2 capital) to risk-adjusted
assets ratios were 9.74% and 12.01%, respectively, and Norwest's leverage ratio
was 6.72%. Neither Norwest nor any subsidiary bank has been advised by the
appropriate federal regulatory agency of any specific leverage ratio applicable
to it.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
In December 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), which substantially revised the
bank regulatory and funding provisions of the Federal Deposit Insurance Act and
makes revisions to several other federal banking statutes. Among other things,
FDICIA requires the federal banking regulators to take "prompt corrective
action" in respect of FDIC-insured depository institutions that do not meet
minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized." Under applicable
regulations, an FDIC-insured depository institution is defined to be well
capitalized if it maintains a leverage ratio of at least 5%, a risk-adjusted
Tier 1 capital ratio of at least 6%, and a risk-adjusted total capital ratio of
at least 10%, and is not subject to a directive, order, or written agreement to
meet and maintain specific capital levels. An insured depository institution is
defined to be adequately capitalized if its meets all of its minimum capital
requirements as described above. An insured depository institution will be
considered undercapitalized if it fails to meet any minimum required measure,
significantly undercapitalized if it has a risk-adjusted total capital ratio of
less than 6%, risk-adjusted Tier 1 capital ratio of less than 3%, or a leverage
ratio of less than 3%, and critically undercapitalized if it fails to maintain a
level of tangible equity equal to at least 2% of total assets. An insured
depository institution may be deemed to be in a capitalization category that is
lower than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to a
wide range of limitations on operations and activities, including growth
limitations, and are required to submit a capital restoration plan. The federal
banking agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to succeed
in restoring the depository institution's capital. In addition, for a capital
restoration plan to be acceptable, the depository institution's parent holding
company must guarantee that the institution will comply with such capital
restoration plan. The aggregate liability of the parent holding company is
limited to the lesser of (i) an amount equal to 5% of the depository
institution's total assets at the time it became undercapitalized and (ii) the
amount which is necessary (or would have been necessary) to bring the
institution into compliance with all capital standards applicable with respect
to such institution as of the time it fails to comply with the plan. If a
depository institution fails to submit an acceptable plan, it is treated as if
it were significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets, and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator.
71
<PAGE>
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 March 31, 1995, all of Norwest's banking subsidiaries were well
capitalized and therefore were not subject to these restrictions.
FDIC INSURANCE
Effective January 1, 1993, the deposit insurance assessment rate for the
Bank Insurance Fund ("BIF") increased as part of the adoption by the FDIC of a
transitional risk-based assessment system. In June 1993, the FDIC published
final regulations making the transitional system permanent effective January 1,
1994, but left open the possibility that it may consider expanding the range
between the highest and lowest assessment rates at a later date. An
institution's risk category is based upon whether the institution is well
capitalized, adequately capitalized, or less than adequately capitalized. Each
insured depository institution is also to be assigned to one of the following
"supervisory subgroups": Subgroup A, B, or C. Subgroup A institutions are
financially sound institutions with few minor weaknesses; Subgroup B
institutions are institutions that demonstrate weaknesses which, if not
corrected, could result in significant deterioration; and Subgroup C
institutions are institutions for which there is a substantial probability that
the FDIC will suffer a loss in connection with the institution unless effective
action is taken to correct the areas of weakness. Based on its capital and
supervisory subgroups, each BIF member institution will be assigned an annual
FDIC assessment rate ranging from 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.
72
<PAGE>
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 DBI and subsidiaries as of
December 31, 1994, and for the year ended December 31, 1994, included in this
Proxy Statement-Prospectus have been audited by Eide Helmeke PLLP, 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 OPINION
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
March 31, 1995, Mr. Stroup was the beneficial owner of 108,607 shares and held
options to acquire 179,931 additional shares of Norwest 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 DBI desiring copies of such documents may contact Norwest at its address or
phone number indicated under "AVAILABLE INFORMATION" above.
73
<PAGE>
FINANCIAL STATEMENTS
OF
DICKINSON BANCORPORATION, INC.
INDEX
PAGE
----
Interim Consolidated Financial Statements F-2
Independent Accountant's Report F-3
Consolidated Balance Sheets at March 31, 1995 and 1994 F-4
Consolidated Statements of Income for Three Months Ended F-5
March 31, 1995 and 1994
Conolidated Statements of Stockholders' Equity F-7
for Three Months Ended March 31, 1995 and 1994
Consolidated Statements of Cash Flows for Three F-8
Months Ended March 31, 1995 and 1994
Notes to Consolidated Financial Statements F-10
Audited Consolidated Financial Statements F-23
Independent Accountant's Report F-24
Consolidated Balance Sheets at December 31, 1994 and 1993 F-25
Consolidated Statements of Income for Years Ended F-26
December 31, 1994 and December 31, 1993
Consolidated Statements of Stockholders' Equity for Years F-28
Ended December 31, 1994 and December 31, 1993
Consolidated Statements of Cash Flows for Years Ended F-29
December 31, 1994 and December 31, 1993
Notes to Consolidated Financial Statements F-31
F-1
<PAGE>
DICKINSON BANCORPORATION, INC.
AND SUBSIDIARIES
DICKINSON, NORTH DAKOTA
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995, AND 1994
WITH INDEPENDENT ACCOUNTANT'S REPORT
F-2
<PAGE>
- -------------------------
- -------------------------
[Logo] Eide Helmeke PLLP
Certified Public Accountants & Consultants
INDEPENDENT ACCOUNTANT'S REPORT
-------------------------------
The Board of Directors
Dickinson Bancorporation, Inc.
Dickinson, North Dakota
The accompanying consolidated balance sheets of Dickinson Bancorporation, Inc.
as of March 31, 1995, and 1994, and the related consolidated statements of
income, stockholders' equity, and cash flows for the three months then ended
were not audited by us and, accordingly, we do not express an opinion on them.
\s\ Eide Helmeke PLLP
April 28, 1995
Bismarck, North Dakota
F-3
<PAGE>
DICKINSON BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995, AND 1994
(See Independent Accountant's Report) Unaudited
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash and due from banks (Note 3) $ 3,270,146 $ 3,995,358
Federal funds sold 2,600,000 200,000
Investment securities (Note 4) 65,438,748 78,953,449
Loans, net (Notes 5 and 6) 47,977,521 43,201,305
Bank premises and equipment, net (Note 7) 1,380,217 1,508,185
Interest receivable 1,383,654 1,417,801
Investment in life insurance contracts 844,905 747,215
Deferred income tax benefit (Note 11) 391,000 244,000
Intangible assets (Note 8) 100,000 300,000
Other assets 338,722 165,033
- ----------------------------------------------------------------------------------------------------
$ 123,724,913 $ 130,732,346
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Liabilities:
Deposits (Note 9) $ 109,209,515 $ 115,691,389
Notes payable (Note 10) 3,417,791 4,974,177
Federal funds purchased and securities sold
under agreements to repurchase 50,448
Accrued expenses and other liabilities 1,001,199 1,128,395
Income taxes payable 325,130 275,682
- ----------------------------------------------------------------------------------------------------
Total liabilities 113,953,635 122,120,091
- ----------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock, $1 par value; 50,000 shares authorized,
issued 2,146 in 1995; 3,501 in 1994 2,146 3,501
Capital surplus 4,623,184 8,650,402
Retained earnings 5,710,353 4,524,461
Treasury stock, 1,433 shares (4,203,773)
Unrealized loss on securities available for
sale, net (564,405) (362,336)
- -----------------------------------------------------------------------------------------------------
Total stockholders' equity 9,771,278 8,612,255
- ----------------------------------------------------------------------------------------------------
$ 123,724,913 $ 130,732,346
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
DICKINSON BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1995, AND 1994
(See Independent Accountant's Report) Unaudited
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------------------
INTEREST INCOME:
<S> <C> <C>
Interest and fees on loans $ 1,180,140 $ 982,971
Interest and dividends on investment securities:
U.S. Government and agency securities 865,372 958,925
State and municipal securities 84,640 96,299
Other debt securities 1,664
Equity securities 450 5,265
Interest on federal funds sold 10,905 25,356
- ----------------------------------------------------------------------------------------------------
Total interest income 2,141,507 2,070,480
- ----------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits 833,609 691,411
Interest on notes payable 67,869 132,319
Interest on federal funds purchased and securities
sold under agreements to repurchase 18,418 7,377
Interest on other borrowed funds
- -----------------------------------------------------------------------------------------------------
Total interest expense 919,896 831,107
- ------------------------------------------------------------------------------------------------------
INTEREST INCOME 1,221,611 1,239,373
PROVISION FOR CREDIT LOSSES (NOTE 6) 3,000
- ------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR
CREDIT LOSSES 1,221,611 1,236,373
- ------------------------------------------------------------------------------------------------------
OTHER INCOME:
Income from insurance contracts 13,438 15,909
Income from fiduciary activities 75,477 66,600
Service charges on deposit accounts 87,467 96,008
Other service charges and fees 50,259 54,223
Other income 23,592 12,271
- ------------------------------------------------------------------------------------------------------
Total other income 250,233 245,011
- ------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
Salaries and employee benefits 489,117 482,124
Occupancy and equipment expenses 127,479 139,498
Net investment securities losses 2,008 5,978
Other expenses 375,232 381,406
- -------------------------------------------------------------------------------------------------------
Total other expenses 993,836 1,009,006
- -------------------------------------------------------------------------------------------------------
</TABLE>
(continued on next page)
F-5
<PAGE>
CONSOLIDATED STATEMENT OF INCOME - page 2
- ------------------------------------------
(See Independent Accountant's Report) Unaudited
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCOME BEFORE INCOME TAXES 478,008 472,378
PROVISION FOR INCOME TAXES (NOTE 11) 173,000 177,000
- ----------------------------------------------------------------------------------------------------
NET INCOME $ 305,008 $ 295,378
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
DICKINSON BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(See Independent Accountant's Report) Unaudited
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Unrealized
Loss on
Securities
Available
Common Capital Retained Treasury for Sale,
Stock Surplus Earnings Stock Net Total
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY
1, 1994: $ 3,501 $ 8,650,402 $ 4,229,083 $ (4,203,773) $ $ 8,679,213
Cumulative effect of
change in accounting
for certain investments
in debt and equity
securities as of
January 1, 1994 42,139 42,139
Net change in unrealized
loss on securities
available for sale,
net of deferred tax
effect (404,475) (404,475)
Net income 295,378 295,378
- ----------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH
31, 1994 $ 3,501 $ 8,650,402 $ 4,524,461 $ (4,203,773) $ (362,336) $ 8,612,255
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
BALANCE, JANUARY
1, 1995: $ 2,116 $ 4,532,614 $ 5,405,345 $ - $ (898,559) $ 9,041,516
Net change in unrealized
loss on securities
available for sale,
net of deferred tax
effect 334,154 334,154
Issuance of common
stock 30 90,570 90,600
Net income 305,008 305,008
- ----------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH
31, 1995 $ 2,146 $ 4,623,184 $ 5,710,353 $ - $ (564,405) $ 9,771,278
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<PAGE>
DICKINSON BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994.
(See Independent Accountant's Report) Unaudited
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 305,008 $ 295,378
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses 3,000
Net investment securities losses 2,008 5,978
Depreciation and amortization 107,428 133,950
Accretion of investment security
premiums and discounts 97,013 134,037
Income from insurance contracts, net
of maturity costs (12,471) (15,056)
Provision for deferred income taxes 2,000 (22,000)
Decrease in interest receivable 268,872 177,528
(Increase) in other assets (88,465) (98,055)
(Decrease) in accrued expenses and other
liabilities (222,180) (494,992)
(Decrease) increase in income taxes payable (28,921) 102,597
- ------------------------------------------------------------------------------------------------------
- - Net cash provided by
operating activities 430,292 222,365
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Federal funds sold, net 200,000 4,150,000
Proceeds from investment securities 1,951,340 9,109,506
Purchases of investment securities (747,891) (10,389,810)
Net decrease (increase) in loans 200,735 (2,043,920)
Purchases of bank premises and equipment (7,196)
- -----------------------------------------------------------------------------------------------------
Net cash provided by investing activities 1,604,184 818,580
- -----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits (2,233,048) 1,248,263
Net decrease in federal funds purchased and securities
sold under agreements to repurchase (2,249,074) (2,736,664)
Proceeds from notes payable 800,000
Payments on notes payable (1,652) (3,095,166)
Issuance of common stock 90,600
- -----------------------------------------------------------------------------------------------------
Net cash used in financing activities (4,393,174) (3,783,567)
- -----------------------------------------------------------------------------------------------------
</TABLE>
(CONTINUED ON NEXT PAGE)
F-8
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS - page 2
- ----------------------------------------------
(See Independent Accountant's Report) Unaudited
-----------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DECREASE IN CASH AND DUE FROM BANKS (2,358,698) (2,742,622)
CASH AND DUE FROM BANKS, BEGINNING
OF YEAR 5,628,844 6,737,980
- --------------------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS, END
OF YEAR $ 3,270,146 $ 3,995,358
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-9
<PAGE>
DICKINSON BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(See Independent Accountant's Report) Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION - Dickinson Bancorporation,
Inc. (Company) owns 100% of the outstanding shares of Liberty National
Bank & Trust Company of Dickinson, North Dakota and the First National Bank
of Bowman, North Dakota. On January 1, 1995, First National Bank was
merged with Liberty National Bank & Trust Company and assumed the name
Liberty Bank & Trust, N.A. The following footnotes refer to the two banks
as one merged entity and is called the "bank."
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
B. TRUST ASSETS - Assets of the trust department, other than cash on deposit,
are not included in these financial statements because they are not assets
of the Bank.
C. INVESTMENT SECURITIES - Prior to January 1, 1994, the Bank reported all of
its investment debt securities as securities which the Bank had the ability
and intent to hold to maturity. These securities are stated at cost
adjusted for amortization of premium and accretion of discount, computed by
the interest method. Gains and losses on the sale of investment securities
are computed on the basis of specific identification of the adjusted cost
of each security. The investment marketable equity securities are carried
at the lower of cost or market value.
Effective January 1, 1994, the Bank adopted FASB Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." The
Bank divided its securities holdings between the following three
categories:
SECURITIES HELD TO MATURITY - Securities classified as held to
maturity are those debt securities the Bank has both the intent and
ability to hold to maturity regardless of changes in market
conditions, liquidity needs, or changes in general economic
conditions. These securities are carried at cost adjusted for
amortization of premium and accretion of discount, computed by the
interest method over their contractual lives.
(CONTINUED ON NEXT PAGE)
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 2
- ---------------------------------------------------
(See Independent Accountant's Report) Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE - Securities classified as available for
sale are those debt securities that the Bank intends to hold for an
indefinite period of time but not necessarily to maturity. Any
decision to sell a security classified as available for sale would be
based on various factors, including significant movements in interest
rates, changes in the maturity mix of the Bank's assets and
liabilities, liquidity needs, regulatory capital considerations, and
other similar factors. Securities available for sale are carried at
fair value. Unrealized gains or losses are reported as increases or
decreases in stockholders' equity, net of the related deferred tax
effect. Realized gains or losses, determined on the basis of the
amortized cost of specific securities sold, are included in earnings.
INVESTMENTS IN GOVERNMENT CORPORATIONS: Securities classified as
investments in government corporations are equity securities that do
not have readily determinable fair values. These securities are
carried at cost adjusted for amortization of premium and accretion of
discount, computed by the interest method. Gains or losses on the sale
of these securities are computed on the basis of specific
identification of the adjusted cost of each security.
D. LOANS - The allowance for credit losses is maintained at a level adequate
to absorb probable losses. Management determines the adequacy of the
allowance based upon reviews of individual credits, recent loss experience,
current economic conditions, the risk characteristics of the various
categories of loans and other pertinent factors. Credits deemed
uncollectible are charged to the allowance. Provisions for credit losses
and recoveries on loans previously charged off are added to the allowance.
Interest on loans is accrued and credited to income based on the principal
amount outstanding. The accrual of interest on loans is discontinued when,
in the opinion of management, there is an indication that the borrower may
be unable to meet payments as they become due. Upon such discontinuance,
unpaid interest which was accrued in a prior year is charged to the
allowance for credit losses, and unpaid interest which was accrued during
the current year is reversed to interest income.
Loan origination and commitment fees are recognized as income when
collected and direct origination costs are recognized as expense when
incurred. Loan origination and commitment fees and direct loan origination
costs are not significant.
Effective January 1, 1995, the Bank adopted FASB Statement No. 114,
"Accounting by Creditors for Impairment of a Loan." Statement No. 114
addresses the accounting for impairment of loans by specifying how
allowance for credit losses related to certain loans should be determined.
The Statement requires that impaired loans be measured based on one of
three methods. If the value of the impaired loan is less than the balance
of the loan, the bank will include the difference in its allowance for
credit losses.
(CONTINUED ON NEXT PAGE)
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 3
- ---------------------------------------------------
(See Independent Accountant's Report) Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
E. BANK PREMISES AND EQUIPMENT - Bank premises and equipment are stated at
cost less accumulated depreciation. Amortization of leasehold improvements
is included in depreciation expense. Depreciation is computed principally
on the straight-line method over the following estimated useful lives:
Years
-----
Bank buildings 15-40
Furniture and equipment 5-25
Vehicles 5
F. INVESTMENT IN LIFE INSURANCE CONTRACTS - Investment in life insurance
contracts is stated at cash surrender value of various insurance policies.
The income on the investment is included in other operating income.
Mortality costs are charged to other operating expenses.
G. INCOME TAXES - Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes
currently due plus deferred taxes. Deferred taxes are computed on the
liability method as prescribed in FASB Statement No. 109 "Accounting for
Income Taxes."
H. AMORTIZATION - Covenant not to compete is amortized over two years, the
term of the covenant, using the straight-line method.
I. LEASING ARRANGEMENTS - The Bank, as lessee, leases a branch facility under
a lease classified as an operating lease. The Bank, as lessor, leases a
portion of its main banking facility under leases classified as operating
leases.
J. OFF BALANCE SHEET FINANCIAL INSTRUMENTS - In the ordinary course of
business the Bank has entered into off balance sheet financial instruments
consisting of commitments to extend credit, commitments under credit card
arrangements, commercial letters of credit and standby letters of credit.
Such financial instruments are recorded in the financial statements when
they become payable.
K. PRESENTATION OF CASH FLOWS - For purposes of reporting cash flows, cash and
due from banks includes cash on hand and amounts due from banks (including
cash items in process of clearing). Cash flows from loans, deposits, and
federal funds sold are reported net.
(CONTINUED ON NEXT PAGE)
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 4
- ---------------------------------------------------
(See Independent Accountant's Report) Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 2 - REORGANIZATION
On February 24, 1995, the Company entered into an Agreement and Plan of
Reorganization with Norwest Corporation. The stockholders of the Company will
exchange their shares of common stock of Dickinson Bancorporation, Inc. into
shares of voting common stock of Norwest Corporation. If the remediation of the
parking lot site owned by the Company located in Bowman, North Dakota is not
completed to Norwest's satisfaction prior to the effective date of the merger,
then a number of shares of Norwest common stock equal to $500,000 will be
deposited in an escrow. According to the terms of the agreement, Dickinson
Bancorporation, Inc. may not declare a dividend which would reduce its equity
below $9.9 million minus the remediation costs.
NOTE 3 - RESTRICTION ON CASH AND DUE FROM BANKS
Based on the type and amount of deposits received, the Banks must maintain an
appropriate amount of non-interest bearing cash balances in accordance with
Federal Reserve Bank reserve requirements. The total of those reserve
requirements was $384,000 as of March 31, 1995.
NOTE 4 - INVESTMENT SECURITIES
Effective January 1, 1994, the Bank adopted FASB Statement No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." The Bank divided its
securities holdings among securities held to maturity, securities available for
sale, and investments in government corporations.
The carrying value of investment securities consists of the following:
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Securities held to maturity, at amortized cost $ 32,877,965 $ 49,524,783
Securities available for sale, at fair value 32,168,983 29,011,766
Investments in government corporations, at cost 391,800 416,900
- ------------------------------------------------------------------------------------------------------
$ 65,438,748 $ 78,953,449
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
(CONTINUED ON NEXT PAGE)
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 5
- ---------------------------------------------------
(See Independent Accountant's Report) Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES HELD TO MATURITY:
Carrying amounts and fair values of securities being held to maturity as of
March 31, 1995, and 1994 are summarized as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Market
1995 Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and federal agency
securities $ 15,790,538 $ - $ 602,882 $ 15,187,656
State and municipal securities 6,132,182 37,967 166,755 6,003,394
Collateralized mortgage obligations 10,955,245 - 816,321 10,138,924
- ----------------------------------------------------------------------------------------------------------
$ 32,877,965 $ 37,967 $ 1,585,958 $ 31,329,974
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Amortized Unrealized Unrealized Market
1994 Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------
U.S. Government and federal agency
securities $ 31,636,844 $ 135,588 $ 283,217 $ 31,489,215
Mortgage-backed pass-through
securities 3,466,392 159,688 17,451 3,608,629
State and municipal securities 6,493,242 131,208 119,617 6,504,833
Collateralized mortgage obligations 7,928,305 - 292,662 7,635,643
- ----------------------------------------------------------------------------------------------------------
$ 49,524,783 $ 426,484 $ 712,947 $ 49,238,320
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of securities being held to maturity as of
March 31, 1995, by contractual maturity are shown below.
<TABLE>
<CAPTION>
Amortized Market
Cost Value
- ----------------------------------------------------------------------------------------------------------
Due in one year or less $ 401,542 $ 401,737
Due after one year through five years 17,293,661 16,753,139
Due after five years through ten years 5,529,679 5,260,331
Due after ten years 9,653,083 8,914,767
- ----------------------------------------------------------------------------------------------------------
$ 32,877,965 $ 31,329,974
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
(continued on next page)
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 6
- ---------------------------------------------------
(See Independent Accountant's Report) Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AVAILABLE FOR SALE:
Carrying amounts and fair values of securities available for sale as of March
31, 1995 and 1994 are summarized as follows:
Amortized Unrealized Unrealized Market
1995 Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and federal agency
securities $ 20,921,362 $ 53,862 $ 335,598 $ 20,639,626
Mortgage-backed pass-through
securities 4,227,676 98,451 262,566 4,063,561
Collateralized mortgage obligations 7,995,181 2,252 531,637 7,465,796
- ---------------------------------------------------------------------------------------------------------
$ 33,144,219 $ 154,565 $ 1,129,801 $ 32,168,983
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Amortized Unrealized Unrealized Market
1994 Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------
U.S. Government and federal agency
securities $ 23,842,514 $ 200,771 $ 437,815 $ 23,605,470
Mortgage-backed pass-through
securities 2,162,227 19,082 240,563 1,940,746
Collateralized mortgage obligations 3,586,757 199 121,406 3,465,550
- ----------------------------------------------------------------------------------------------------------
$ 29,591,498 $ 220,052 $ 799,784 $ 29,011,766
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of debt securities available for sale as of
March 31, 1995, by contractual maturity are shown below.
<TABLE>
<CAPTION>
Amortized Market
Cost Value
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 500,000 $ 496,094
Due after one year through five years 21,822,887 21,541,396
Due after five years through ten years 1,024,203 950,604
Due after ten years 9,797,129 9,180,889
- ----------------------------------------------------------------------------------------------------------
$ 33,144,219 $ 32,168,983
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
There were no sales of investment securities for the three months ended March
31, 1995. Proceeds from the sales of securities during the three months ended
March 31, 1994 were $3,254,938, resulting in a loss of $5,978.
(CONTINUED ON NEXT PAGE)
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 7
- ---------------------------------------------------
(See Independent Accountant's Report) Unaudited
INVESTMENTS IN GOVERNMENT CORPORATIONS:
The cost of investments in government corporations as of March 31, 1995, and
1994 is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Bank stock $ 238,300 $ 261,100
Federal Reserve Bank stock 151,800 151,800
Farmer Mac stock 1,700 4,000
- ----------------------------------------------------------------------------------------------------------
$ 391,800 $ 416,900
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Investment securities with a market value of approximately $27,797,000 and
$21,145,000 at March 31, 1995, and 1994, were pledged as collateral on public
deposits, trust activities, notes payable and for other purposes as required or
permitted by law.
During the three months ended March 31, 1995, securities with a carrying value
of approximately $8,816,000 and a net unrealized loss of approximately $37,000
were transferred from securities held to maturity to securities available for
sale. The securities were transferred in connection with the merger of Liberty
National Bank & Trust Company and the First National Bank of Bowman as of
January 1, 1995.
NOTE 5 - LOANS
The Bank originates commercial, commercial real estate, agricultural, consumer,
and residential real estate loans primarily in western North Dakota,
northwestern South Dakota, and southeastern Montana. Most residential real
estate loans are sold on the secondary market. The Bank requires collateral with
values exceeding loaned amounts on real estate loans. The amount of collateral
obtained, if deemed necessary, by the Bank for other types of loans is based
upon management's credit evaluation of the borrower. Collateral held varies but
includes accounts receivable, inventory, and property and equipment. The bank
grants certain loans on an unsecured basis.
Credit card loans are originated throughout the Bank's service area and are
substantially unsecured.
(CONTINUED ON NEXT PAGE)
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 8
- ---------------------------------------------------
(See Independent Accountant's Report) Unaudited
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
The composition of loans as of March 31, 1995 and 1994 is as follows:
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Agricultural $ 17,897,008 $ 15,327,638
Commercial 13,302,094 12,661,322
Real estate 9,150,834 7,792,478
Consumer 7,960,082 7,815,278
Credit card 946,542 835,365
Overdrafts 37,807 15,794
- ----------------------------------------------------------------------------------------------------------
Total loans 49,294,367 44,447,875
Allowance for possible loan losses 1,316,846 1,246,570
- ----------------------------------------------------------------------------------------------------------
Total loans, net $ 47,977,521 $ 43,201,305
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Non-accruing and restructured loans totaled $198,000 and $151,000 at March 31,
1995, and 1994, which had the effect of reducing interest income by $6,000 and
$2,000 for the three months ended March 31, 1995, and 1994.
NOTE 6 - ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the three months ended March 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, January 1 $ 1,306,008 $ 1,235,512
Credits charged off (4,124) (2)
Recoveries 14,962 8,060
- -----------------------------------------------------------------------------------------------------------
Net recoveries 10,838 8,058
- -----------------------------------------------------------------------------------------------------------
Provision for credit losses, net - 3,000
- ----------------------------------------------------------------------------------------------------------
Balance, March 31 $ 1,316,846 $ 1,246,570
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(CONTINUED ON NEXT PAGE)
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 9
- ---------------------------------------------------
(See Independent Accountant's Report) Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 7 - BANK PREMISES AND EQUIPMENT
The major classes of bank premises and equipment and the total accumulated
depreciation as of March 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bank buildings $ 1,881,569 $ 1,877,988
Furniture and equipment 1,748,719 2,098,677
- ----------------------------------------------------------------------------------------------------------
3,630,288 3,976,665
Less accumulated depreciation 2,250,071 2,468,480
- ----------------------------------------------------------------------------------------------------------
$ 1,380,217 $ 1,508,185
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Depreciation expense totaled $57,428 and $83,950 for the three months ended
March 31, 1995, and 1994.
NOTE 8 - INTANGIBLE ASSETS
Intangible assets consist of covenant not to compete of $400,000 net of
accumulated amortization of $300,000 as of March 31, 1995 and $100,000 as of
March 31, 1994. The covenant not to compete relates to the purchase of the First
National Bank of Bowman and is being amortized over 2 years, the term of the
covenant. Amortization expense totaled $50,000 for the three months ended March
31, 1995 and 1994.
NOTE 9 - DEPOSITS
The composition of deposits as of March 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Demand $ 11,597,641 $ 12,954,402
NOW accounts 40,777,546 49,716,152
Savings 8,267,063 10,289,338
Time, $100,000 and over 9,790,874 7,026,889
Other time 38,776,391 35,704,608
- ----------------------------------------------------------------------------------------------------------
Total deposits $ 109,209,515 $ 115,691,389
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(continued on next page)
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 10
- ----------------------------------------------------
(See Independent Accountant's Report) Unaudited
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOTE 10 - NOTES PAYABLE
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Advance payable to Federal Home Loan Bank, principal
due at maturity, interest due monthly at 6.516%
due March 28, 2003, secured by investment securities $ 167,791 $ 174,177
Notes payable to unrelated bank, principal due annually,
interest due semi-annually at bank's base rate, due March
21, 2005, secured by stock of Liberty Bank & Trust, N.A. 3,250,000 4,000,000
Advance payable to Federal Reserve Bank of Minneapolis,
paid in full in 1994 800,000
- ----------------------------------------------------------------------------------------------------------
$ 3,417,791 $ 4,974,177
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Aggregate maturities of notes payable are as follows: 1996 - $339,726; 1997 -
$340,952; 1998 - $341,687; 1999 - $342,494; 2000 - $343,378.
NOTE 11 - INCOME TAXES
The consolidated provision for income taxes for the three months ended March 31,
1995, and 1994, consisted of the following:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Currently paid or payable $ 171,000 $ 199,000
Deferred income taxes, net 2,000 (22,000)
- ----------------------------------------------------------------------------------------------------------
$ 173,000 $ 177,000
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(continued on next page)
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 11
- ----------------------------------------------------
(See Independent Accountant's Report) Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A reconciliation of the expected provision for income taxes computed at 34% to
the provision for income tax included in the statements of income for the three
months ended March 31, 1995, and 1994, is as follows:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Taxes at statutory federal income tax rate $ 163,000 $ 161,000
State income taxes, net of federal income
tax benefit 26,000 28,000
Tax exempt interest (26,000) (31,000)
Officer life insurance (5,000) (5,000)
Push down accounting amortization 15,000 24,000
- ----------------------------------------------------------------------------------------------------------
$ 173,000 $ 177,000
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The components of deferred income taxes are principally related to allowance for
loan losses, depreciation, discount accretion, salary continuation payable, and
unrealized loss on securities available for sale. The deferred income tax
benefit in the accompanying balance sheets include the following components as
of March 31, 1995, and 1994:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets $ 546,000 $ 403,000
Deferred tax liabilities 155,000 159,000
- ----------------------------------------------------------------------------------------------------------
Net deferred income tax benefit $ 391,000 $ 244,000
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 12 - EMPLOYEE BENEFIT PLANS
The Bank has a profit sharing plan covering substantially all employees. The
annual contribution to the plan is determined by the Bank. The Bank makes an
accrual for the plan contribution based on the anticipated contribution. The
contribution expense totaled approximately $6,000 and $8,000 for the three
months ended March 31, 1995, and 1994.
Liberty National Bank & Trust Company has entered into a salary continuation
agreement with a former employee whereby the Bank will pay the former employee
monthly benefits until December 1995. The Bank has also entered into a salary
continuation agreement with an officer whereby the Bank will pay the officer
monthly benefits upon retirement. The agreement with the officer includes a
death benefit whereby the Bank will pay the officer's beneficiary monthly
payments upon the officer's death. The Bank has life insurance policies in place
to provide the funding for these benefits. The Bank is accruing the cost of
providing these post-retirement benefits over the period from the date of the
agreement to the date the employee obtains full eligibility.
(continued on next page)
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 12
- ----------------------------------------------------
(See Independent Accountant's Report) Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 13 - SUPPLEMENTAL DISCLOSURES RELATED TO STATEMENTS OF
CASH FLOWS
Supplemental disclosure of cash flow information:
<TABLE>
<CAPTION>
1995 1994
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash payments for:
Interest $ 908,332 $ 1,109,438
Income taxes 201,703 96,121
Supplemental schedule of noncash investing and
financing activities:
Net change in unrealized loss on
securities available for sale (532,275) 579,735
Deferred tax effect of unrealized loss on
securities available for sale 198,121 (217,399)
</TABLE>
NOTE 14 - TRANSACTIONS WITH DIRECTORS AND OFFICERS
The Bank has entered into banking transactions with its directors, principal
officers, their immediate families and affiliated companies in which they are
principal stockholders. Such transactions were made in the ordinary course of
business on substantially the same terms and conditions including interest rates
and collateral, as those prevailing at the same time for comparable transactions
with other customers, and did not, in the opinion of management, involve more
than normal credit risk or present other unfavorable features. The aggregate
amount of loans to such related parties was approximately $35,000 and $106,000
as of March 31, 1995, and 1994.
NOTE 15 - LEASE COMMITMENTS AND RENTAL EXPENSE
The Company leases office space for a branch location under a lease classified
as an operating lease, which expires in 1998. The lease also requires the
Company to pay its pro-rata share of utility and maintenance expenses.
(continued on next page)
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 13
- -----------------------------------------------------
(See Independent Accountant's Report) Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The total minimum rental commitment as of March 31, 1995 under the lease
mentioned above is as follows:
1996 $ 20,186
1997 20,186
1998 20,186
1999 11,775
-------------------------------------------------------------------------------
$ 72,333
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Rental expense included in the statements of income totaled $5,578 and $6,249
for the three months ended March 31, 1995, and 1994.
NOTE 16 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank has entered into lines of credit to extend credit to customers as long
as there is no violation of any condition established in the contract and as
long as the Bank does not in good faith deem itself insecure under the contract.
Lines of credit generally have fixed expiration dates. Since some of the lines
are expected to expire without being drawn upon, the total of the lines does not
necessarily represent future cash requirements. The Bank evaluates each
customer's credit worthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Bank upon extension of credit, is based on
management's credit evaluation of the customer, and is consistent with that
required for a loan. Lines of credit totaled approximately $11,597,000 at March
31, 1995.
For credit card loans, the Bank establishes a credit limit for each card holder.
By agreement, the Bank can terminate the credit limit at any time for any
reason. The total credit limit in excess of disbursed amounts was approximately
$3,822,000 at March 31, 1995.
As of March 31, 1995, the Bank has issued irrevocable letters of credit totaling
approximately $100,000, of which no advances on the letters of credit have been
funded. Credit and collateral policies are consistent with lending policies.
# # # # #
F-22
<PAGE>
DICKINSON BANCORPORATION, INC.
AND SUBSIDIARIES
DICKINSON, NORTH DAKOTA
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
WITH INDEPENDENT ACCOUNTANT'S REPORT
F-23
<PAGE>
[Eide Helmeke PLLP Letterhead]
INDEPENDENT ACCOUNTANT'S REPORT
The Board of Directors
Dickinson Bancorporation, Inc.
Dickinson, North Dakota
We have audited the consolidated balance sheet of Dickinson Bancorporation, Inc.
and subsidiaries as of December 31, 1994, and the related consolidated
statements of income, stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1994 financial statements referred to above present fairly,
in all material respects, the financial position of Dickinson Bancorporation,
Inc. and subsidiaries as of December 31, 1994, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated balance sheet of Dickinson Bancorporation, Inc. as
of December 31, 1993 and the related consolidated statements of income,
stockholders' equity and cash flows for the years ended December 31, 1993 and
1992 were not audited by us and, accordingly, we do not express an opinion on
them.
As discussed in Note 3 to the financial statements, the Company changed its
method of accounting for certain investments in debt and equity securities in
1994.
/s/ Eide Helmeke PLLP
- ---------------------
April 28, 1995
Bismarck, North Dakota
F-24
<PAGE>
DICKINSON BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994, AND 1993
(See Independent Accountant's Report)
<TABLE>
<CAPTION>
1994 1993
(Audited) (Unaudited)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks (Note 3) $ 5,628,844 $ 6,737,980
Federal funds sold 2,800,000 4,350,000
Investment securities (Note 4) 66,208,943 78,392,895
Loans, net (Notes 5 and 6) 48,178,256 41,160,385
Bank premises and equipment, net (Note 7) 1,437,645 1,584,939
Interest receivable 1,652,526 1,595,329
Investment in life insurance contracts 832,434 732,159
Deferred income tax benefit (Note 11) 591,000 5,000
Intangible assets (Note 8) 150,000 350,000
Other assets 250,378 66,579
- -------------------------------------------------------------------------------------------------------------
$ 127,730,026 $ 134,975,266
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits (Note 9) $ 111,442,563 $ 114,443,126
Notes payable (Note 10) 3,419,443 7,269,343
Federal funds purchased and securities sold
under agreements to repurchase 2,249,074 2,787,112
Accrued expenses and other liabilities 1,223,379 1,623,387
Income taxes payable 354,051 173,085
- -------------------------------------------------------------------------------------------------------------
Total liabilities 118,688,510 126,296,053
- -------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock, $1 par value; 50,000 shares authorized;
issued 2,116 in 1994, 3,501 in 1993 2,116 3,501
Capital surplus 4,532,614 8,650,402
Retained earnings 5,405,345 4,229,083
Treasury stock, 1,433 shares (4,203,773)
Unrealized loss on securities available for
sale, net (898,559)
- -------------------------------------------------------------------------------------------------------------
Total stockholders' equity 9,041,516 8,679,213
- -------------------------------------------------------------------------------------------------------------
$ 127,730,026 $ 134,975,266
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-25
<PAGE>
DICKINSON BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(See Independent Accountant's Report)
<TABLE>
<CAPTION>
1994 1993 1992
(Audited) (Unaudited) (Unaudited)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 4,339,514 $ 3,196,915 $ 3,041,588
Interest and dividends on investment securities:
U.S. Government and agency securities 3,420,284 2,767,627 2,559,321
State and municipal securities 355,209 383,804 354,429
Other debt securities 2,110 28,018 43,019
Equity securities 36,309 20,868 26,193
Interest on federal funds sold 76,285 48,722 42,424
Interest on deposits in banks 15,335 41,384
- ---------------------------------------------------------------------------------------------------------------
Total interest income 8,229,711 6,461,289 6,108,358
- ---------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits 2,887,453 2,036,577 2,153,022
Interest on notes payable 313,851 365,996 313,838
Interest on federal funds purchased and securities
sold under agreements to repurchase 38,699 24,213 22,735
Interest on other borrowed funds 40,215 14,542 14,457
- ---------------------------------------------------------------------------------------------------------------
Total interest expense 3,280,218 2,441,328 2,504,052
- ---------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 4,949,493 4,019,961 3,604,306
PROVISION FOR CREDIT LOSSES (NOTE 6) 8,000 (300,000) (300,000)
- ---------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR
CREDIT LOSSES 4,941,493 4,319,961 3,904,306
- ---------------------------------------------------------------------------------------------------------------
OTHER INCOME:
Income from insurance contracts 104,018 62,195 24,487
Income from fiduciary activities 294,088 246,000 241,537
Service charges on deposit accounts 386,830 301,270 299,290
Other service charges and fees 281,447 142,062 72,993
Other income 145,070 28,344 67,754
- ---------------------------------------------------------------------------------------------------------------
Total other income 1,211,453 779,871 706,061
- ---------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
Salaries and employee benefits 1,945,115 1,635,706 1,399,793
Occupancy and equipment expenses 596,990 413,958 365,924
Net investment securities losses 161,811 13,271 73,124
Other expenses 1,584,768 1,223,841 960,466
- ---------------------------------------------------------------------------------------------------------------
Total other expenses 4,288,684 3,286,776 2,799,307
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(CONTINUED ON NEXT PAGE)
F-26
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME - page 2
(See Independent Accountant's Report)
<TABLE>
<CAPTION>
1994 1993 1992
(Audited) (Unaudited) (Unaudited)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME BEFORE INCOME TAXES 1,864,262 1,813,056 1,811,060
PROVISION FOR INCOME TAXES (NOTE 11) 688,000 623,000 597,000
- -------------------------------------------------------------------------------------------------------------
NET INCOME $ 1,176,262 $ 1,190,056 $ 1,214,060
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-27
<PAGE>
DICKINSON BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(See Independent Accountant's Report)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
UNREALIZED
LOSS ON
SECURITIES
COM- AVAILABLE
MON CAPITAL RETAINED TREASURY FOR SALE,
STOCK SURPLUS EARNINGS STOCK NET TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1991 (UNAUDITED): $ 3,434 $ 8,973,187 $ 1,824,967 $ (4,203,773)$ $ 6,597,815
Issuance of common stock 20 26,600 26,620
Settlement of purchase
price of 1,082 shares
of capital stock of
Liberty National
Bank & Trust Company (422,573) (422,573)
Net income 1,214,060 1,214,060
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31,
1992 (UNAUDITED): 3,454 8,577,214 3,039,027 (4,203,773) 7,415,922
Issuance of common stock 47 73,188 73,235
Net income 1,190,056 1,190,056
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31,
1993 (UNAUDITED): 3,501 8,650,402 4,229,083 (4,203,773) 8,679,213
Issuance of common stock 50 86,550 86,600
Redemption of common
stock (1,435) (4,204,338) 4,203,773 (2,000)
Cumulative effect of
change in accounting
for certain investments
in debt and equity
securities as of
January 1, 1994 42,139 42,139
Net change in unrealized
loss on securities
available for sale,
net of deferred tax
effect (940,698) (940,698)
Net income 1,176,262 1,176,262
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER
31, 1994 (AUDITED) $ 2,116 $ 4,532,614 $ 5,405,345 $ - $ (898,559)$ 9,041,516
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-28
<PAGE>
DICKINSON BANCORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(See Independent Accountant's Report)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992
(AUDITED) (UNAUDITED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,176,262 $ 1,190,056 $ 1,214,060
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses 8,000 (300,000) (300,000)
Net investment securities losses 161,811 13,271 73,124
Depreciation and amortization 473,062 273,774 215,069
Accretion of investment security
premiums and discounts 492,512 325,101 172,283
Income from insurance contracts, net
of mortality costs (100,275) (59,085) (21,404)
Provision for deferred income taxes 23,000 138,000 85,300
(Increase) decrease in interest
receivable (57,197) 555,866 65,397
(Increase) decrease in other assets (183,847) 41,545 3,554
(Decrease) increase in accrued expenses
and other liabilities (400,008) 293,656 (152,878)
Increase (decrease) in income taxes
payable 180,966 (312,806) 269,893
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by
operating activities 1,774,286 2,159,378 1,624,398
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from interest bearing deposits
with banks, net 382,000
Federal funds sold, net 1,550,000 (1,050,000) 5,445,000
Proceeds from investment securities 27,627,385 24,527,857 19,167,982
Purchases of investment securities (17,605,267) (26,174,206) (31,613,473)
Net (increase) decrease in loans (7,025,871) 4,775,224 2,101,048
Purchases of bank premises and equipment (125,768) (371,442) (134,437)
Payment for intangible assets (400,000)
Payment for purchase of First National Bank (4,058,429)
Cash acquired in purchase of First National Bank 2,011,542
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities 4,420,479 (357,454) (5,033,880)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(CONTINUED ON NEXT PAGE)
F-29
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS -
page 2
(See Independent Accountant's Report)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992
(AUDITED) (UNAUDITED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits (3,000,563) (589,002) 2,806,009
Proceeds from notes payable 4,180,000
Payments on notes payable (3,849,900) (192,538) (452,893)
Net (decrease) increase in federal funds purchased
and securities sold under agreements to
repurchase (538,038) 343,260 2,142,810
Payment of payable to former affiliate (1,933,333)
Issuance of common stock 86,600 73,235 26,620
Redemption of common stock (2,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (7,303,901) 1,881,622 4,522,546
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND DUE
FROM BANKS (1,109,136) 3,683,546 1,113,064
CASH AND DUE FROM BANKS, BEGINNING
OF YEAR 6,737,980 3,054,434 1,941,370
- ------------------------------------------------------------------------------------------------------------------------------------
CASH AND DUE FROM BANKS, END
OF YEAR $ 5,628,844 $ 6,737,980 $ 3,054,434
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-30
<PAGE>
DICKINSON BANCORPORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(Information for the years ended December 31, 1993 and 1992 is unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION - Dickinson Bancorporation, Inc.
(Company) owns 100% of the outstanding shares of Liberty National Bank &
Trust Company of Dickinson, North Dakota and the First National Bank of
Bowman, North Dakota. The financial statements include the operations of the
First National Bank since the bank was purchased on September 20, 1993. On
January 1, 1995, First National Bank was merged with Liberty National Bank &
Trust Company and assumed the name Liberty Bank & Trust, N.A. The following
footnotes refer to the two banks as one merged entity and is called the
"bank."
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated.
B. TRUST ASSETS - Assets of the trust department, other than cash on deposit,
are not included in these financial statements because they are not assets of
the Bank.
C. INVESTMENT SECURITIES - Prior to January 1, 1994, the Bank reported all of
its investment debt securities as securities which the Bank had the ability
and intent to hold to maturity. These securities are stated at cost adjusted
for amortization of premium and accretion of discount, computed by the
interest method. Gains and losses on the sale of investment securities are
computed on the basis of specific identification of the adjusted cost of each
security.
Effective January 1, 1994, the Banks adopted FASB Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." The Bank
divided its securities holdings among the following three categories:
SECURITIES HELD TO MATURITY - Securities classified as held to maturity are
those debt securities the Bank has both the intent and ability to hold
to maturity regardless of changes in market conditions, liquidity
needs, or changes in general economic conditions. These securities are
carried at cost adjusted for amortization of premium and accretion of
discount, computed by the interest method over their contractual lives.
SECURITIES AVAILABLE FOR SALE - Securities classified as available for sale
are those debt securities that the Bank intends to hold for an
indefinite period of time but not necessarily to maturity. Any decision
to sell a security classified as available for sale would be based on
various factors, including significant movements in interest rates,
changes in the maturity mix of the Bank's assets and liabilities,
liquidity needs, regulatory capital considerations, and other similar
factors. Securities available for sale are carried at fair value.
Unrealized gains or losses are reported as increases or decreases in
stockholders' equity, net of the related deferred tax effect. Realized
gains or losses, determined on the basis of the amortized cost of
specific securities sold, are included in earnings.
(CONTINUED ON NEXT PAGE)
F-31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 2
- ---------------------------------------------------
(Information for the years ended December 31, 1993 and 1992 is unaudited)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
INVESTMENTS IN GOVERNMENT CORPORATIONS: Securities classified as investments
in government corporations are equity securities that do not have
readily determinable fair values. These securities are carried at cost
adjusted for amortization of premium and accretion of discount,
computed by the interest method. Gains or losses on the sale of these
securities are computed on the basis of specific identification of the
adjusted cost of each security.
D. LOANS - The allowance for credit losses is maintained at a level adequate to
absorb probable losses. Management determines the adequacy of the allowance
based upon reviews of individual credits, recent loss experience, current
economic conditions, the risk characteristics of the various categories of
loans and other pertinent factors. Credits deemed uncollectible are charged
to the allowance. Provisions for credit losses and recoveries on loans
previously charged off are added to the allowance.
Interest on loans is accrued and credited to income based on the principal
amount outstanding. The accrual of interest on loans is discontinued when, in
the opinion of management, there is an indication that the borrower may be
unable to meet payments as they become due. Upon such discontinuance, unpaid
interest which was accrued in a prior year is charged to the allowance for
credit losses, and unpaid interest which was accrued during the current year
is reversed to interest income.
Loan origination and commitment fees are recognized as income when collected
and direct origination costs are recognized as expense when incurred. Loan
origination and commitment fees and direct loan origination costs are not
significant.
Effective January 1, 1995, the Bank adopted FASB Statement No. 114
"Accounting by Creditors for Impairment of a Loan." Statement No. 114
addresses the accounting for impairment of loans by specifying how allowance
for credit losses related to certain loans should be determined. The
Statement requires that impaired loans be measured based on one of three
methods. If the value of the impaired loan is less than the balance of the
loan, the bank will include the difference in its allowance for credit
losses.
E. BANK PREMISES AND EQUIPMENT - Bank premises and equipment are stated at cost
less accumulated depreciation. Amortization of leasehold improvements is
included in depreciation expense. Depreciation is computed principally on the
straight-line method over the following estimated useful lives:
Years
-----
Bank buildings 15-40
Furniture and equipment 5-25
Vehicles 5
(CONTINUED ON NEXT PAGE)
F-32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 3
- ---------------------------------------------------
(Information for the years ended December 31, 1993 and 1992 is unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
F. INVESTMENT IN LIFE INSURANCE CONTRACTS - Investment in life insurance
contracts is stated at cash surrender value of various insurance policies.
The income on the investment is included in other operating income. Mortality
costs are charged to other operating expenses.
G. INCOME TAXES - Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes. Deferred taxes are computed on the liability method as
prescribed in FASB Statement No. 109 "Accounting for Income Taxes."
H. AMORTIZATION - Covenant not to compete is amortized over two years, the term
of the covenant, using the straight-line method.
I. LEASING ARRANGEMENTS - The Bank, as lessee, leases a branch facility under a
lease classified as an operating lease. The Bank, as lessor, leases a portion
of its main banking facility under a lease classified as an operating lease.
J. OFF BALANCE SHEET FINANCIAL INSTRUMENTS - In the ordinary course of business
the Bank has entered into off balance sheet financial instruments consisting
of commitments to extend credit, commitments under credit card arrangements,
commercial letters of credit and standby letters of credit. Such financial
instruments are recorded in the financial statements when they become
payable.
K. PRESENTATION OF CASH FLOWS - For purposes of reporting cash flows, cash and
due from banks includes cash on hand and amounts due from banks (including
cash items in process of clearing). Cash flows from loans, deposits, interest
bearing deposits with banks, federal funds sold, federal funds purchased,
repurchase agreements, and other borrowed funds are reported net.
NOTE 2 - SUBSEQUENT EVENT
On February 24, 1995, the Company entered into an Agreement and Plan of
Reorganization with Norwest Corporation. The stockholders of the Company will
exchange their shares of common stock of Dickinson Bancorporation, Inc. into
shares of voting common stock of Norwest Corporation. If the remediation of the
parking lot site owned by the Company located in Bowman, North Dakota is not
completed to Norwest's satisfaction prior to the effective date of the merger,
then Norwest Corporation stock equal to $500,000 will be deposited in an escrow
account. According to the terms of the agreement, Dickinson Bancorporation, Inc.
may not declare a dividend which would reduce its equity below $9.9 million
minus the remediation costs.
(CONTINUED ON NEXT PAGE)
F-33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 4
- ---------------------------------------------------
(Information for the years ended December 31, 1993 and 1992 is unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 3 - RESTRICTION ON CASH AND DUE FROM BANKS
Based on the type and amount of deposits received, the Banks must maintain an
appropriate amount of non-interest bearing cash balances in accordance with
Federal Reserve Bank reserve requirements. The total of those reserve
requirements was approximately $459,000 and $485,000 at December 31, 1994, and
1993.
NOTE 4 - INVESTMENT SECURITIES
DECEMBER 31, 1994:
Effective January 1, 1994, the Bank adopted FASB Statement No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." The Bank divided its
securities holdings among securities held to maturity, securities available for
sale, and investments in government corporations.
The carrying value of investment securities as of December 31, 1994 consists of
the following:
<TABLE>
<CAPTION>
<S> <C>
Securities held to maturity, at amortized cost $ 41,845,355
Securities available for sale, at fair value 23,948,988
Investments in government corporations, at cost 414,600
- ------------------------------------------------------------------------------------------------------------------------------------
$ 66,208,943
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SECURITIES HELD TO MATURITY:
Carrying amounts and fair values of securities being held to maturity as of
December 31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and federal
agency securities $ 20,085,682 $ 937 $ 1,057,713 $ 19,028,906
Mortgage-backed pass-through
securities 2,826,366 63,340 44,555 2,845,151
State and municipal securities 6,235,024 28,229 321,416 5,941,837
Collateralized mortgage obligations 12,698,283 976 1,147,186 11,552,073
- ------------------------------------------------------------------------------------------------------------------------------------
$ 41,845,355 $ 93,482 $ 2,570,870 $ 39,367,967
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(CONTINUED ON NEXT PAGE)
F-34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 5
- ---------------------------------------------------
(Information for the years ended December 31, 1993 and 1992 is unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The amortized cost and fair value of securities being held to maturity as of
December 31, 1994, by contractual maturity are shown below.
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 2,300,075 $ 2,294,518
Due after one year through five years 21,078,824 20,093,176
Due after five years through ten years 5,138,202 4,720,327
Due after ten years 13,328,254 12,259,946
- ------------------------------------------------------------------------------------------------------------------------------------
$ 41,845,355 $ 39,367,967
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SECURITIES AVAILABLE FOR SALE:
Carrying amounts and fair values of securities available for sale as of December
31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and federal
agency securities $17,452,474 $ 340 $ 621,495 $ 16,831,319
Mortgage-backed pass-through
securities 1,551,686 5,225 253,866 1,303,045
Collateralized mortgage obligations 6,450,039 635,415 5,814,624
- ------------------------------------------------------------------------------------------------------------------------------------
$25,454,199 $ 5,565 1,510,776 $ 23,948,988
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of debt securities available for sale as of
December 31, 1994, by contractual maturity are shown below.
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due after one year through five years $ 17,452,774 $ 16,831,319
Due after ten years 1,026,984 933,487
Due after ten years 6,974,441 6,184,182
- ------------------------------------------------------------------------------------------------------------------------------------
$ 25,454,199 $ 23,948,988
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(CONTINUED ON NEXT PAGE)
F-35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 6
- ---------------------------------------------------
(Information for the years ended December 31, 1993 and 1992 is unaudited)
- --------------------------------------------------------------------------------
Proceeds from the sale of securities during the year ended December 31, 1994
were $15,357,727, resulting in a loss of $161,811.
INVESTMENTS IN GOVERNMENT CORPORATIONS:
The cost of investments in government corporations as of December 31, 1994 are
summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Federal Home Loan Bank stock $ 261,100
Federal Reserve Bank stock 151,800
Farmer Mac stock 1,700
- ------------------------------------------------------------------------------------------------------------------------------------
$ 414,600
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Investment securities with a market value of approximately $29,886,000 at
December 31, 1994, were pledged as collateral on public deposits, trust
activities, notes payable, and for other purposes as permitted or required by
law.
DECEMBER 31, 1993:
The amortized cost and estimated market values of investments in debt and equity
securities are as follows:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEBT SECURITIES
U.S. Government and federal
agency securities $48,084,160 $ 942,190 $ 440,884 $ 48,585,466
Mortgage-backed pass-through
securities 6,190,714 201,129 285,912 6,105,931
State and municipal securities 6,652,036 227,385 34,105 6,845,316
Collateralized mortgage obligations 17,049,085 46,923 134,090 16,961,918
- ------------------------------------------------------------------------------------------------------------------------------------
77,975,995 1,417,627 894,991 78,498,631
EQUITY SECURITIES
Investments in government corporations 416,900 - - 416,900
- ------------------------------------------------------------------------------------------------------------------------------------
$78,392,895 $ 1,417,627 $ 894,991 $ 78,915,531
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(CONTINUED ON NEXT PAGE)
F-36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 7
- ---------------------------------------------------
(Information for the years ended December 31, 1993 and 1992 is unaudited)
- --------------------------------------------------------------------------------
The maturities of debt securities as of December 31, 1993, are shown below.
Expected maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 9,717,447 $ 9,778,653
Due after one year through five years 40,700,071 41,336,709
Due after five years through ten years 8,353,344 8,499,457
Due after ten years 19,205,133 18,883,812
- ------------------------------------------------------------------------------------------------------------------------------------
$ 77,975,995 $ 78,498,631
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Investment securities with a market value of approximately $20,955,000 at
December 31, 1993, were pledged as collateral on public deposits, trust
activities, notes payable, and for other purposes as permitted or required by
law.
Proceeds from the sales of debt securities during the years ended December 31,
1993 were 4,961,971, resulting in a loss of $13,271.
NOTE 5 - LOANS
The Banks originate commercial, commercial real estate, agricultural, consumer
and residential real estate loans primarily in western North Dakota,
northwestern South Dakota and southeastern Montana. Most residential real estate
loans are sold on the secondary market. The Bank requires collateral with values
exceeding loaned amounts on real estate loans. The amount of collateral
obtained, if deemed necessary, by the Bank for other types of loans is based
upon management's credit evaluation of the borrower. Collateral held varies but
includes accounts receivable, inventory, and property and equipment. The Bank
grants certain loans on an unsecured basis.
Credit card loans are originated throughout the Banks' service area and are
substantially unsecured.
(CONTINUED ON NEXT PAGE)
F-37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 8
- ---------------------------------------------------
(Information for the years ended December 31, 1993 and 1992 is unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The composition of loans is as follows:
1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Agricultural $ 18,806,860 $ 14,292,474
Commercial 12,551,092 10,868,595
Real estate 8,781,795 8,308,965
Consumer 8,209,269 8,001,556
Credit card 1,075,152 892,935
Overdrafts 60,096 31,372
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans 49,484,264 42,395,897
Allowance for possible loan losses 1,306,008 1,235,512
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans, net $ 48,178,256 $ 41,160,385
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Non-accruing and restructured loans totaled $134,000 and $120,000 at December
31, 1994, and 1993 which had the effect of reducing interest income $9,000 and
$16,000 for the years ended December 31, 1994, and 1993.
NOTE 6 - ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of year $ 1,235,512 $ 1,332,004
Credits charged off (24,976) (53,512)
Recoveries 87,472 88,423
- ------------------------------------------------------------------------------------------------------------------------------------
Net recoveries 62,496 34,911
Provision for credit losses, net 8,000 (300,000)
Changes incident to purchase of First National Bank 168,597
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 1,306,008 $ 1,235,512
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(CONTINUED ON NEXT PAGE)
F-38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 9
- ---------------------------------------------------
(Information for the years ended December 31, 1993 and 1992 is unaudited)
- --------------------------------------------------------------------------------
NOTE 7 - BANK PREMISES AND EQUIPMENT
The major classes of bank premises and equipment and the total accumulated
depreciation are as follows:
<TABLE>
<CAPTION>
1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bank buildings $ 1,879,943 $ 1,876,363
Furniture and equipment 1,748,719 2,175,015
- ------------------------------------------------------------------------------------------------------------------------------------
3,628,662 4,051,378
Less accumulated depreciation 2,191,017 2,466,439
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1,437,645 $ 1,584,939
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Depreciation expense was $273,062, $223,774 and $215,069 for the years ended
December 31, 1994, 1993, and 1992.
NOTE 8 - INTANGIBLE ASSETS
Intangible assets consist of covenant not to compete of $400,000 net of
accumulated amortization of $250,000 as of December 31, 1994 and $50,000 as of
December 31, 1993. The covenant not to compete relates to the purchase of the
First National Bank of Bowman and is being amortized over 2 years, the term of
the covenant. Amortization expense totaled $200,000 and $50,000 for the years
ended December 31, 1994, and 1993.
NOTE 9 - DEPOSITS
The composition of deposits at December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Demand $ 16,709,967 $ 15,620,157
NOW accounts 43,174,148 46,209,018
Savings 9,003,656 12,635,485
Time, $100,000 and over 4,078,712 7,027,486
Other time 38,476,080 32,950,980
- ------------------------------------------------------------------------------------------------------------------------------------
Total deposits $111,442,563 $ 114,443,126
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(CONTINUED ON NEXT PAGE)
F-39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 10
- ----------------------------------------------------
(Information for the years ended December 31, 1993 and 1992 is unaudited)
- --------------------------------------------------------------------------------
NOTE 10 - NOTES PAYABLE
<TABLE>
<CAPTION>
1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Advance payable to Federal Home Loan Bank, principal
due at maturity, interest due monthly at 6.516%,
due March 28, 2003, secured by investment securities $ 169,443 $ 175,683
Notes payable to unrelated bank, principal due annually,
interest due semi-annually at bank's base rate,
due March 21, 2005, secured by stock of Liberty
National Bank & Trust Company and the First
National Bank of Bowman 3,250,000 4,000,000
Notes payable to former shareholders of parent, paid in
full in 1994 3,093,660
- ------------------------------------------------------------------------------------------------------------------------------------
$ 3,419,443 $ 7,269,343
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Aggregate maturities of notes payable are as follows: 1995 - $340,123; 1996 -
$340,778; 1997 - $341,497; 1998 - $342,285; 1999 - $343,149.
NOTE 11 - INCOME TAXES
The consolidated provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently paid or payable $ 665,000 $ 485,000 $ 511,700
Deferred income taxes, net 23,000 138,000 85,300
- ------------------------------------------------------------------------------------------------------------------------------------
$ 688,000 $ 623,000 $ 597,000
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(CONTINUED ON NEXT PAGE)
F-40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 11
- ----------------------------------------------------
(Information for the years ended December 31, 1993 and 1992 is unaudited)
- --------------------------------------------------------------------------------
A reconciliation of the expected provision for income taxes computed at 34% to
the provision for income tax included in the statements of income for the years
ended December 31, 1994, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Taxes at statutory federal income tax rate $ 634,000 $ 616,000 $ 616,000
State income taxes, net of federal income
tax benefit 112,000 86,000 82,000
Tax exempt interest (111,000) (123,000) (112,000)
Officers life insurance (16,000) (1,000) 11,000
Push-down accounting amortization 69,000 45,000 -
- ------------------------------------------------------------------------------------------------------------------------------------
$ 688,000 $ 623,000 $ 597,000
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The components of deferred income taxes are principally related to allowance for
loan losses, depreciation, discount accretion, salary continuation payable and
unrealized loss on securities available for sale. The deferred income tax
benefit in the accompanying balance sheets include the following components as
of December 31, 1994, and 1993:
<TABLE>
<CAPTION>
1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets $ 744,000 $ 167,000
Deferred tax liabilities 153,000 162,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net deferred income tax benefit $ 591,000 $ 5,000
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
During the year ended December 31, 1993, the Company changed the method of
accounting for income taxes to the liability method as prescribed in FASB
Statement No. 109 "Accounting for Income Taxes." There was no cumulative effect
of this change on years prior to January 1, 1993.
NOTE 12 - EMPLOYEE BENEFIT PLANS
The Banks have profit sharing plans covering substantially all employees. The
annual contribution to the plan is determined by the Bank. The Bank makes an
accrual for the plan contribution based on the anticipated contribution. The
contribution expense was approximately $142,000, $119,000, and $107,000 for the
years ended December 31, 1994, 1993, and 1992.
(CONTINUED ON NEXT PAGE)
F-41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 12
- ----------------------------------------------------
(Information for the years ended December 31, 1993 and 1992 is unaudited)
- --------------------------------------------------------------------------------
Liberty National Bank & Trust Company has entered into a salary continuation
agreement with a former employee whereby the Bank will pay the former employee
monthly benefits until December 1995. The Bank has also entered into a salary
continuation agreement with an officer whereby the Bank will pay the officer
monthly benefits upon retirement. The agreement with the officer includes a
death benefit whereby the Bank will pay the officer's beneficiary monthly
payments upon the officer's death. The Bank has life insurance policies in place
to provide the funding for these benefits. The Bank is accruing the cost of
providing these post-retirement benefits over the period from the date of the
agreement to the date the employee obtains full eligibility.
NOTE 13 - SUPPLEMENTAL DISCLOSURES RELATED TO STATEMENTS OF
CASH FLOWS
Supplemental disclosure of cash flow information:
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash payments for:
Interest $ 3,482,486 $ 2,383,188 $ 2,632,802
Income taxes 527,809 623,514 241,391
Supplemental schedule of noncash investing and
financing activities:
Net change in unrealized loss on
securities available for sale $ 1,507,511 $ $
Deferred tax effect of unrealized loss
on securities available for sale (608,952)
Retirement of treasury stock 4,203,773
Settlement of purchase price of 1,082
shares of capital stock of Liberty
National Bank & Trust Company 422,573
</TABLE>
NOTE 14 - TRANSACTIONS WITH DIRECTORS AND OFFICERS
The Bank has entered into banking transactions with its directors, principal
officers, their immediate families and affiliated companies in which they are
principal stockholders. Such transactions were made in the ordinary course of
business on substantially the same terms and conditions including interest rates
and collateral, as those prevailing at the same time for comparable transactions
with other customers, and did not, in the opinion of management, involve more
than normal credit risk or present other unfavorable features. The aggregate
amount of loans to such related parties was approximately $48,000 and $114,000
at December 31, 1994, and 1993.
(CONTINUED ON NEXT PAGE)
F-42
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - page 13
- ----------------------------------------------------
(Information for the years ended December 31, 1993 and 1992 is unaudited)
- -------------------------------------------------------------------------------
NOTE 15 - LEASE COMMITMENTS AND RENTAL EXPENSE
The Company leases office space for a branch location under a lease classified
as an operating lease, which expires in 1998. The lease also requires the
Company to pay its pro-rata share of utility and maintenance expenses.
The total minimum rental commitment as of December 31, 1994 under the lease
mentioned above is as follows:
<TABLE>
<CAPTION>
<S> <C>
1995 $ 20,186
1996 20,186
1997 20,186
1998 16,822
- ------------------------------------------------------------------------------------------------------------------------------------
$ 77,380
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Rental expense included in the statements of income totaled $24,120, $20,707,
and $19,749 for the years ended December 31, 1994, 1993, and 1992.
NOTE 16 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank has entered into lines of credit to extend credit to customers as long
as there is no violation of any condition established in the contract and as
long as the Bank does not in good faith deem itself insecure under the contract.
Lines of credit generally have fixed expiration dates. Since some of the lines
are expected to expire without being drawn upon, the total of the lines does not
necessarily represent future cash requirements. The Bank evaluates each
customer's credit worthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Bank upon extension of credit, is based on
management's credit evaluation of the customer, and is consistent with that
required for a loan. Lines of credit totaled approximately $11,900,000 and
$9,100,000 at December 31, 1994, and 1993.
For credit card loans, the Bank establishes a credit limit for each card holder.
By agreement, the Bank can terminate the credit limit at any time for any
reason. The total credit limit in excess of disbursed amounts was approximately
$3,700,000 and $2,700,000 at December 31, 1994, and 1993.
As of December 31, 1994, and 1993 the Bank has issued irrevocable letters of
credit totaling approximately $145,000 and $200,000, of which no advances on the
letters of credit have been funded. Credit and collateral policies are
consistent with lending policies.
# # # # #
F-43
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
AND
PLAN OF MERGER
<PAGE>
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as of
the 24th day of February, 1995, by and between DICKINSON BANCORPORATION, INC.
("DBI"), a North Dakota 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 DBI (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 DBI of
the par value of $1.00 per share ("DBI 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 ("Merger Co.") will be merged by statutory
merger with and into DBI pursuant to the Merger Agreement, with DBI as the
surviving corporation, in which merger each share of DBI Common Stock
outstanding immediately prior to the Effective Time of the Merger (as defined in
subparagraph (d) below)(other than shares as to which statutory dissenters'
appraisal rights have been exercised) will be converted into and exchanged for
the number of shares of Norwest Common Stock determined by dividing the Adjusted
Norwest Shares by the number of shares of DBI Common Stock then outstanding.
The "Adjusted Norwest Shares" shall be a number equal to (i) $15,500,000 minus
the Remediation Cost (as defined below) divided by (ii) the Norwest Measurement
Price (as defined below); PROVIDED, HOWEVER, that if the Remediation (as defined
in paragraph 4(p) hereof) of the parking lot site owned by DBI or any subsidiary
of DBI and located in Bowman, North Dakota (the "Bowman Site") is not completed
to Norwest's satisfaction prior to the Effective Date of the Merger, then a
number of shares of Norwest Common Stock equal to $500,000 divided by the
Norwest Measurement Price shall be deducted from the Adusted Norwest Shares that
would otherwise be payable to the shareholders of DBI pursuant to this paragraph
1(a) and such shares shall not be paid to the DBI shareholders at closing, but
shall instead be deposited in an escrow (the "Escrow"). The Escrow shall be
governed by an escrow agreement, with Norwest Bank Minnesota, N. A. Corporate
Custody Services as the escrow agent, which escrow agreement shall be entered
into within thirty days after the date of this Agreement effective as of the
Effective Date of the Merger and which escrow agreement must be acceptable to
Norwest in its sole discretion. The shares held in the Escrow shall not be
pledged. From time to time, upon notice from Norwest, the escrow agent shall
distribute to Norwest the number of escrowed shares equal to the costs of
Remediation of the Bowman site actually incurred
A-1
<PAGE>
since the Effective Date of the Merger and the damages caused by the
contamination in, on or emanating from the Bowman Site. The Escrow shall
terminate three years from the Effective Date of the Merger (as defined in
subparagraph (d) below) and the shares of Norwest Common Stock remaining in the
Escrow shall be distributed to the former shareholders of DBI; PROVIDED,
HOWEVER, that if any claims for costs of Remediation or damages remain
unresolved at such time, the Escrow shall not terminate, but all of the shares
in excess of the number necessary to pay in full such costs of Remediation or
damages shall be distributed to the former shareholders of DBI. Norwest will
agree to use its best efforts to make claims relating to the forgoing pursuant
to the Escrow Agreement, dated September 21, 1993, between DBI and Bowman
Capital Co.; PROVIDED, HOWEVER, that Norwest shall not be obligated to incur any
out-of-pocket expense in pursuing such claims, nor shall the making of such a
claim be a prerequisite to making a claim under the Escrow. Norwest would be
willing to incur out-of-pocket expenses and cooperate in pursuing a claim
against the Bowman Capital Co. escrow if Norwest receives an acceptable
reimbursement and indemnification agreement with respect to such costs and
actions. Any recovery from the Bowman Capital Co. escrow shall be deposited in
the Escrow to the extent that it represents a recovery for a claim already paid
by the Escrow. 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 20 trading
days ending on the trading day immediately preceding the meeting of shareholders
required by paragraph 4(c) of this Agreement. "Remediation Cost" shall mean an
amount equal to (y) the aggregate costs actually incurred prior to the Effective
Date of the Merger for Remediation of the Bowman Site as required by paragraph
4(p), minus (z) $15,000.
(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 the number of
shares of Norwest Common Stock into which a share of DBI 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 DBI Common Stock shall be converted will equal the
number of shares of Norwest Common Stock which holders of shares of DBI 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.
(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 trading day
immediately preceding the meeting of shareholders 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 Articles of Merger
shall be filed with the Secretary of State of the State of North Dakota within
ten (10) business days following the satisfaction or waiver of all conditions
precedent set forth in Sections 6 and 7 of this Agreement or on such other date
as may be agreed to by the parties (the "Closing Date"). Each of the parties
agrees to use its best efforts to cause the Merger to be completed as soon as
practicable after the receipt of final
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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.
Dickinson, North Dakota time on the Effective Date of the Merger. At the
Effective Time of the Merger, the separate existence of Merger Co. shall cease
and Merger Co. will be merged with and into DBI 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 DBI. DBI represents and warrants to
Norwest as follows:
(a) ORGANIZATION AND AUTHORITY. DBI is a corporation duly organized,
validly existing and in good standing under the laws of the State of North
Dakota, 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 DBI and the DBI Subsidiaries (as defined
below) 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.
DBI 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"). DBI has
furnished Norwest true and correct copies of its articles of incorporation and
by-laws, as amended.
(b) DBI'S SUBSIDIARIES. Schedule 2(b) sets forth a complete and correct
list of all of DBI's subsidiaries as of the date hereof (individually a "DBI
Subsidiary" and collectively the "DBI Subsidiaries"), all shares of the
outstanding capital stock of each of which, except as set forth on Schedule
2(b), are owned directly or indirectly by DBI. No equity security of any DBI
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 DBI Subsidiary is bound
to issue additional shares of its capital stock, or any option, warrant or right
to purchase or acquire any additional shares of its capital stock. Subject to
12 U.S.C. section 55 (1982) and the North Dakota Business Corporation Act, all
of such shares so owned by DBI 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 DBI 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), DBI 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 DBI consists of
50,000 shares of common stock, $1.00 par value, of which, as of the close of
business on January 31, 1995, 2146 shares were outstanding and no shares were
held in the treasury. The maximum number of shares
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of DBI Common Stock (assuming for this purpose that phantom shares and other
share-equivalents constitute DBI Common Stock) that would be outstanding as of
the Effective Date of the Merger if all options, warrants, conversion rights and
other rights with respect thereto were exercised is 2146. All of the
outstanding shares of capital stock of DBI have been duly and validly authorized
and issued and are fully paid and nonassessable. Except as set forth in
Schedule 2(c), there are no outstanding subscriptions, contracts, conversion
privileges, options, warrants, calls, preemptive rights or other rights
obligating DBI or any DBI Subsidiary to issue, sell or otherwise dispose of, or
to purchase, redeem or otherwise acquire, any shares of capital stock of DBI or
any DBI Subsidiary. Since December 31, 1994, no shares of DBI capital stock
have been purchased, redeemed or otherwise acquired, directly or indirectly, by
DBI or any DBI Subsidiary and no dividends or other distributions have been
declared, set aside, made or paid to the shareholders of DBI.
(d) AUTHORIZATION. DBI has the corporate power and authority to enter
into this Agreement and the Merger Agreement and, subject to any required
approvals of its shareholders, to carry out its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Merger Agreement by DBI and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors of DBI.
Subject to such approvals of shareholders and of government agencies and other
governing boards having regulatory authority over DBI as may be required by
statute or regulation, this Agreement and the Merger Agreement are valid and
binding obligations of DBI enforceable against DBI in accordance with their
respective terms.
Except as set forth on Schedule 2(d), neither the execution, delivery and
performance by DBI of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor compliance
by DBI 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 DBI or any DBI 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 DBI or any DBI Subsidiary
is a party or by which it may be bound, or to which DBI or any DBI Subsidiary or
any of the properties or assets of DBI or any DBI Subsidiary may be subject, or
(ii) subject to compliance with the statutes and regulations referred to in the
next paragraph, violate any statute, rule or regulation, OR, to the best
knowledge of DBI, violate any judgment, ruling, order, writ, injunction or
decree applicable to DBI or any DBI Subsidiary or any of their respective
properties or assets.
Other than in connection or in compliance with the provisions of the
Securities Act of 1933 and the rules and regulations thereunder (the "Securities
Act"), the Securities Exchange Act of 1934 and the rules and regulations
thereunder (the "Exchange Act"), the securities or blue sky laws of the various
states or filings, consents, reviews, authorizations, approvals or exemptions
required under the BHC Act or the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 ("HSR Act"), and filings required to effect the Merger under North
Dakota 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 DBI of the transactions contemplated by this Agreement and the
Merger Agreement. Neither DBI nor any DBI Subsidiary has adopted any resolution
to except
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any of them from being acquired under the North Dakota Reciprocal Interstate
Banking law as provided in Section 6-08.3-11 of the North Dakota Century Code.
(e) DBI FINANCIAL STATEMENTS. The balance sheets of DBI, of Liberty
National Bank and Trust Company and of The First National Bank of Bowman, each
as of November 30, 1994, December 31, 1994 and December 31, 1993 and the related
statements of profit and loss for the years then ended, and the consolidated
balance sheet of DBI and DBI's Subsidiaries as of December 31, 1993 and the
related consolidated statements of profit and loss for the year then ended
(collectively, the "DBI 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 financial position (consolidated
in the case of December 31, 1993) of DBI and DBI's Subsidiaries at the dates and
the profit and loss (consolidated in the case of the year ended December 31,
1993) of DBI and DBI's Subsidiaries for the periods stated therein.
(f) REPORTS. Since December 31, 1989, DBI and each DBI Subsidiary has
filed all reports, registrations and statements, together with any required
amendments thereto, that it was required to file, if any, 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 Federal Deposit Insurance Corporation (the
"FDIC"), (iv) the United States Comptroller of the Currency (the "Comptroller")
and (v) any applicable state securities or banking authorities. All such
reports and statements filed with any such regulatory body or authority are
collectively referred to herein as the "DBI Reports". As of their respective
dates, the DBI Reports complied in all material respects with all the rules and
regulations promulgated by the SEC, the Federal Reserve Board, the FDIC, the
Comptroller and applicable state securities or banking authorities, as the case
may be, and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Copies of all the DBI Reports have been made available to
Norwest by DBI.
(g) PROPERTIES AND LEASES. Except as may be reflected in the DBI
Financial Statements and except for any lien for current taxes not yet
delinquent, DBI and each DBI 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 DBI's balance sheet as of
December 31, 1994 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 DBI or any DBI Subsidiary pursuant to which DBI or
such DBI 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 DBI or such DBI Subsidiary or any event which, with notice or lapse
of time or both, would constitute such a material default. Substantially all
DBI's and each DBI 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 DBI and the DBI Subsidiaries has filed all federal,
state, county, local and foreign tax returns, including information returns,
required to be filed by it, and paid all taxes owed by it, including those with
respect to income, withholding, social security, unemployment, workers
compensation, franchise, ad valorem, premium, excise and sales taxes, and no
taxes shown on such returns to be owed by it or assessments received by it are
delinquent. The federal
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income tax returns of DBI and the DBI Subsidiaries for the fiscal year ended
December 31, 1990, and for all fiscal years prior thereto, are for the purposes
of routine audit by the Internal Revenue Service closed because of the statute
of limitations, and no claims for additional taxes for such fiscal years are
pending. Except only as set forth on Schedule 2(h), (i) neither DBI nor any DBI
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 DBI or any DBI Subsidiary which has not been
settled, resolved and fully satisfied. Each of DBI and the DBI Subsidiaries has
paid all taxes owed or which it is required to withhold from amounts owing to
employees, creditors or other third parties. The DBI Financial Statements as of
December 31, 1994, referred to in paragraph 2(e) hereof, include adequate
provision for all accrued but unpaid federal, state, county, local and foreign
taxes, interest, penalties, assessments or deficiencies of DBI and the DBI
Subsidiaries with respect to all periods through the date thereof.
(i) ABSENCE OF CERTAIN CHANGES. Since December 31, 1994, there has been
no change in the business, financial condition or results of operations of DBI
or any DBI 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 DBI and the DBI 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).
(j) COMMITMENTS AND CONTRACTS. Except as set forth on Schedule 2(j),
neither DBI nor any DBI 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 DBI or such DBI 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 DBI or any DBI 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, DBI or
any DBI Subsidiary may carry on its business (other than as may be required
by law or applicable regulatory authorities);
(v) any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K; or
(vi) any lease with annual rental payments aggregating $10,000 or
more.
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(k) LITIGATION AND OTHER PROCEEDINGS. DBI has furnished Norwest copies of
(i) all attorney responses to the request of the independent auditors for DBI
with respect to loss contingencies as of December 31, 1994 in connection with
the DBI financial statements, and (ii) a written list of legal and regulatory
proceedings filed against DBI or any DBI Subsidiary since said date. There is
no pending or, to the best knowledge of DBI, threatened, claim, action, suit,
investigation or proceeding against DBI or any DBI Subsidiary nor is DBI or any
DBI Subsidiary 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 DBI and the DBI Subsidiaries taken as a whole.
(l) INSURANCE. DBI and each DBI Subsidiary is presently insured, and
during each of the past five calendar years (or during such lesser period of
time as DBI has owned such DBI Subsidiary) has been insured, for reasonable
amounts with financially sound and reputable insurance companies against such
risks as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured and has maintained all insurance
required by applicable law and regulation.
(m) COMPLIANCE WITH LAWS. DBI and each DBI 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 DBI or such DBI Subsidiary;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect and, to the best knowledge of DBI, no suspension or
cancellation of any of them is threatened; and all such filings, applications
and registrations are current. The conduct by DBI and each DBI 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 DBI nor any DBI 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 DBI or any DBI Subsidiary which reasonably could be
expected to have a material adverse effect on the business or properties of DBI
and the DBI Subsidiaries taken as a whole.
(n) LABOR. No work stoppage involving DBI or any DBI Subsidiary is
pending or, to the best knowledge of DBI, threatened. Neither DBI nor any DBI
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 DBI or such DBI Subsidiary. Employees of DBI
and the DBI 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 DBI, no officer or director of DBI or
any DBI 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 DBI or any DBI Subsidiary.
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Schedule 2(o) sets forth a correct and complete list of any loan from DBI
or any DBI 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 DBI's
or such DBI Subsidiary's Board of Directors.
(p) DBI 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 DBI or any DBI 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 DBI or any DBI
Subsidiary are those set forth on Schedule 2(p)(i) (the "Plans"). No Plan
is a "multi-employer plan" within the meaning of Section 3(37) of ERISA.
(ii) Each Plan is and has been in all material respects operated and
administered in accordance with its provisions and applicable law. Except
as set forth on Schedule 2(p)(ii), DBI or the DBI 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. DBI 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.
(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)(iv), and to the best
knowledge of DBI, 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 DBI,
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 DBI and the DBI 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.
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(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)(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 DBI or any DBI Subsidiary
under any Plan or otherwise, (ii) materially increase any benefits
otherwise payable under any Plan or (iii) result in the acceleration of the
time of payment or vesting of any such benefits to any material extent.
(q) PROXY STATEMENT, ETC. None of the information regarding DBI and the
DBI Subsidiaries supplied or to be supplied by DBI for inclusion in (i) a
Registration Statement on Form S-4 and the prospectus included therein 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 DBI Common Stock pursuant to
the provisions of the Merger Agreement (the "Registration Statement"), (ii) the
proxy statement included in the Registration Statement to be mailed to DBI's
shareholders 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
Registration Statement, Proxy Statement and other 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
and in the case of the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the meeting of shareholders referred to in paragraph
4(c), and at the Effective Time of the Merger 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 contained therein, in light of the
circumstances under which they were made, not misleading. All documents which
DBI and the DBI 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 DBI nor any DBI Subsidiary is under any obligation, contingent or
otherwise, which will survive the Merger, to register any of its securities
under the Securities Act.
(s) BROKERS AND FINDERS. Neither DBI nor any DBI 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 DBI or any DBI Subsidiary, in connection with this Agreement
and the Merger Agreement or the transactions contemplated hereby and thereby.
(t) ADMINISTRATION OF TRUST ACCOUNTS. DBI and each DBI Subsidiary has
properly administered in all respects material and which could reasonably be
expected to be material to the financial condition of DBI and the DBI
Subsidiaries taken as a whole all accounts for which it acts as a fiduciary,
including but not limited to accounts for which it serves as a trustee, agent,
custodian, personal representative, guardian, conservator or investment advisor,
in accordance with the terms of the governing documents and applicable state and
federal law and regulation and
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common law. Neither DBI, any DBI Subsidiary, nor any director, officer or
employee of DBI or any DBI Subsidiary has committed any breach of trust with
respect to any such fiduciary account which is material to or could reasonably
be expected to be material to the financial condition of DBI and the DBI
Subsidiaries taken as a whole, and the accountings for each such fiduciary
account are true and correct in all material respects and accurately reflect the
assets of such fiduciary account.
(u) NO DEFAULTS. Neither DBI nor any DBI 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 DBI and the DBI Subsidiaries, taken as a whole. To the best of DBI's
knowledge, all parties with whom DBI or any DBI Subsidiary has material leases,
agreements or contracts or who owe to DBI or any DBI Subsidiary material
obligations other than with respect to those arising in the ordinary course of
the banking business of the DBI Subsidiaries are in compliance therewith in all
material respects.
(v) ENVIRONMENTAL LIABILITY. There is no legal, administrative, or other
proceeding, claim, or action of any nature seeking to impose, or that could
result in the imposition of, on DBI or any DBI 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 DBI's knowledge,
threatened against DBI or any DBI Subsidiary the result of which has had or
could reasonably be expected to have a material adverse effect upon DBI and
DBI's Subsidiaries taken as a whole; to the best of DBI's knowledge, there is no
reasonable basis for any such proceeding, claim or action; and to the best of
DBI's knowledge, neither DBI nor any DBI 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. DBI 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 DBI 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, 1994, 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
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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, 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 Norwest Subsidiary is bound to issue additional shares
of its capital stock, or options, warrants or rights to purchase or acquire any
additional shares of its capital stock. Subject to 12 U.S.C. section 55 (1982),
all of such shares so owned by Norwest are fully paid and nonassessable and are
owned by it free and clear of any lien, claim, charge, option, encumbrance or
agreement with respect thereto. Each Norwest Subsidiary is a corporation or
national banking association duly organized, validly 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 September 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
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 September 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, violate any statute, rule or
regulation or, to the best knowledge of Norwest, violate any judgment, ruling,
order, writ, injunction or decree applicable to Norwest or any Norwest
Subsidiary or any of their respective properties or assets.
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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 North Dakota 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 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 September 30, 1994 and the
related unaudited consolidated statements of income and cash flows for the nine
months then ended included in Norwest's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1994, as filed with the SEC (collectively,
the "Norwest Financial Statements"), have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis and
present fairly (subject, in the case of financial statements for interim
periods, to normal recurring adjustments) the consolidated financial position of
Norwest and its subsidiaries at the dates and the consolidated results of
operations, changes in financial position and cash flows of Norwest and its
subsidiaries for the periods stated therein.
(f) REPORTS. Since December 31, 1989, Norwest and each Norwest Subsidiary
has filed all reports, registrations and statements, together with any required
amendments thereto, that it was required to file, if any, 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 September 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 that 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,
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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 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 September 30, 1994, 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 September 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); or
(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. There are no pending or, to the
best knowledge of Norwest, threatened, claims, actions, suits, investigations or
proceedings against Norwest or any Norwest Subsidiary nor is Norwest or any
Norwest Subsidiary subject to any order, judgment or decree, except for matters
which, in the aggregate, will not have, or cannot reasonably be expected
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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 Norwest
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 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)(i) (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)(ii), Norwest or the Norwest
Subsidiaries have received favorable determination letters from the
Internal Revenue Service under the provisions of TEFRA,
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DEFRA and 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.
(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 Norwest 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)(iv), and to the best
knowledge of Norwest, no Norwest Plan or any trust created thereunder, nor
any trustee, fiduciary or administrator thereof, has engaged in a
"prohibited transaction", as such term is defined in Section 4975 of the
Code or Section 406 of ERISA or violated fiduciary standards under Part 4
of Title I of ERISA, which could subject, to the best knowledge of Norwest,
such Norwest Plan or trust, or any trustee, fiduciary or administrator
thereof, or any party 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)(v), 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 Registration Statement, Proxy Statement and other
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, and, in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the meeting of
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shareholders referred to in paragraph 4(c), and at the Effective Time of the
Merger 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
contained therein, in light of the circumstances under which they were made, not
misleading. 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.
(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 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 DBI. DBI 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, DBI and each DBI 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, make any new loan or
modify,
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restructure or renew any existing loan (except pursuant to commitments made
prior to the date of this Agreement) to any borrower if the amount of the
resulting loan, when aggregated with all other loans or extensions of credit to
such person, would be in excess of $100,000; maintain proper business and
accounting records; 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 with all laws,
regulations, ordinances, codes, orders, licenses and permits applicable to the
properties and operations of DBI and each DBI Subsidiary the non-compliance with
which reasonably could be expected to have a material adverse effect on DBI and
the DBI Subsidiaries taken as a whole; and permit Norwest and its
representatives (including KPMG Peat Marwick) to examine its and its
subsidiaries books, records and properties and to interview officers, employees
and agents at all reasonable times when it is open for business. No such
examination by Norwest or its representatives either before or after the date of
this Agreement shall in any way affect, diminish or terminate any of the
representations, warranties or covenants of DBI herein expressed.
(b) Except as otherwise contemplated or required by this Agreement, from
the date hereof until the Effective Time of the Merger, DBI and each DBI
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; 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 banking
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 1 year and in amounts of $100,000 or less; amend or terminate any
Plan except as required by law or by paragraph 4(j); make any contributions to
any Plan except as required by the terms of such Plan in effect as of the date
hereof; declare, set aside, make or pay any dividend or other distribution with
respect to its capital stock except any dividend declared by a DBI Subsidiary's
Board of Directors in accordance with applicable law and regulation and except
for any dividend declared by DBI's Board of Directors that is payable between
the month-end preceding the Effective Date of the Merger and the Effective Date
of the Merger, if and only if, after payment of such dividend, total equity
capital of DBI and the DBI Subsidiaries on a consolidated basis would be equal
to or greater than $9.9 million minus the Remediation Cost based on the monthly
financial statement as of the month-end immediately preceding the Effective Date
of the Merger prepared in accordance with generally accepted accounting
principles applied consistently with the DBI Financial Statements (but excluding
from such financial statements any accruals or reserves established pursuant to
paragraph 4(l)(A) and any accruals or reserves established to reflect the cost
of obtaining the audited financial statements required by paragraph 4(d)
hereof); redeem, purchase or otherwise acquire, directly or indirectly, any of
the capital stock of DBI; 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
DBI Subsidiary; or sell or otherwise dispose of any of its assets or properties
other than in the ordinary course of business.
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(c) The Board of Directors of DBI 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, a meeting of its shareholders and will direct
that this Agreement and the Merger Agreement be submitted to a vote at such
meeting. The Board of Directors of DBI will (i) cause proper notice of such
meeting to be given to its shareholders in compliance with the North Dakota
Business Corporation Act and other applicable law and regulation, (ii) recommend
by the affirmative vote of the Board of Directors a vote in favor of approval of
this Agreement and the Merger Agreement, and (iii) use its best efforts to
solicit from its shareholders proxies in favor thereof.
(d) DBI will furnish or cause to be furnished to Norwest all the
information concerning DBI and its subsidiaries required for inclusion in the
Registration Statement referred to in paragraph 5(c) hereof (including but not
limited to audited consolidated financial statements for DBI, which DBI agrees
to have prepared at its sole expense after the date hereof, which comply in all
material respects with the applicable accounting requirements of the Securities
Act and the published rules and regulations thereunder, and which otherwise are
required or necessary to be filed or included in the Registration Statement), or
any statement or application made by Norwest to any governmental body in
connection with the transactions contemplated by this Agreement. Any financial
statement for any fiscal year provided under this paragraph must include the
audit opinion and the consent of the auditor to use such opinion in such
Registration Statement. Any interim quarterly financial information provided
under this paragraph must have been reviewed by the auditor in accordance with
generally accepted auditing standards and DBI must provide Norwest with a copy
of such review report.
(e) DBI 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 DBI 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) DBI 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) DBI will hold in confidence all documents and information concerning
Norwest and its subsidiaries furnished to DBI 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 DBI's outside professional advisers in connection with this
Agreement, with the same undertaking from such professional advisers. If the
transactions contemplated by this Agreement shall not be consummated, such
confidence shall be maintained and such information shall not be used in
competition with Norwest (except to the extent that such information can be
shown to be previously known to DBI, in the public domain, or later acquired by
DBI 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 DBI, nor any DBI Subsidiary, nor any director, officer,
representative or agent thereof, will, directly or indirectly, solicit,
authorize the solicitation of or enter into any discussions with any
corporation, partnership, person or other entity or group (other than Norwest)
concerning any offer or possible offer (i) to purchase any shares of common
stock, any option or warrant to purchase any shares of common stock, any
securities convertible into any shares of such common stock, or any other equity
security of DBI or any DBI Subsidiary, (ii) to make a tender or exchange
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offer for any shares of such common stock or other equity security, (iii) to
purchase, lease or otherwise acquire the assets of DBI or any DBI Subsidiary
except in the ordinary course of business, or (iv) to merge, consolidate or
otherwise combine with DBI or any DBI Subsidiary. If any corporation,
partnership, person or other entity or group makes an offer or inquiry to DBI or
any DBI Subsidiary concerning any of the foregoing, DBI or such DBI Subsidiary
will promptly disclose such offer or inquiry, including the terms thereof, to
Norwest.
(i) DBI shall consult with Norwest as to the form and substance of any
proposed press release or other proposed public disclosure of matters related to
this Agreement or any of the transactions contemplated hereby.
(j) DBI and each DBI Subsidiary will take all action necessary or required
(i) to terminate or amend, if requested by Norwest, all qualified retirement and
welfare benefit plans and all non-qualified benefit plans and compensation
arrangements as of the Effective Date of the Merger, (ii) to amend the Plans to
comply with the provisions of the TRA and regulations thereunder and other
applicable law, and (iii) to submit application to the Internal Revenue Service
for a favorable determination letter for each of the Plans which is subject to
the qualification requirements of Section 401(a) of the Code prior to the
Effective Date of the Merger
(k) DBI shall use its best efforts to obtain and deliver to Norwest at
least 32 days prior to the Effective Date of the Merger signed representations
substantially in the form attached hereto as Exhibit B by each executive
officer, director or shareholder of DBI who may reasonably be deemed an
"affiliate" of DBI within the meaning of such term as used in Rule 145 under the
Securities Act.
(l) DBI shall establish such additional accruals and reserves as may be
necessary (A) to conform DBI's accounting and credit loss reserve practices and
methods to those of Norwest and to Norwest's plans with respect to the conduct
of DBI's business following the Merger and (B) to provide for the costs and
expenses relating to the consummation by DBI of the Merger and the other
transactions contemplated by this Agreement.
(m) DBI shall obtain, at its sole expense, 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. DBI shall obtain, at its
sole expense, Phase II environmental assessments for properties identified by
Norwest on the basis of the results of such Phase I environmental assessments.
(n) DBI shall obtain, at its sole expense, commitments for title insurance
and boundary surveys for each bank facility which shall be delivered to Norwest
no later than four (4) weeks from the date of this Agreement.
(o) Immediately prior to the Time of Filing, DBI shall apply the funds to
be loaned to it by Norwest pursuant to paragraph 5(n) hereof to pay in full,
without premium or penalty, all indebtedness of DBI secured by the stock of any
DBI Subsidiary.
(p) DBI shall use its best efforts to complete, or to cause the
appropriate DBI Subsidiary to complete, to Norwest's satisfaction, prior to the
Effective Date of the Merger, the Remediation (as defined below) of the Bowman
Site. For purposes of this Agreement, "Remediation" shall mean the
investigation, removal and/or remediation of, or other response to (including
testing,
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monitoring, sampling or other investigation) any contamination in, on or
emanating from the properties or assets of DBI or the DBI Subsidiaries that is
required of DBI or any DBI Subsidiary to comply with environmental laws and
regulations and the presentation by DBI or the appropriate DBI Subsidiary of
plans for Remediation to the appropriate state authority and the receipt of such
authority's approval and certification of the completion of any necessary
Remediation.
5. COVENANTS OF NORWEST. Norwest covenants and agrees with DBI 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 DBI all the information concerning Norwest
required for inclusion in a proxy statement or statements to be sent to the
shareholders of DBI, or in any statement or application made by DBI to any
governmental body in connection with the transactions contemplated by this
Agreement.
(c) As promptly as practicable after the execution of this Agreement,
Norwest will file with the SEC a registration statement on Form S-4 (the
"Registration Statement") under the Securities Act and any other applicable
documents, relating to the shares of Norwest Common Stock to be delivered to the
shareholders of DBI pursuant to the Merger Agreement, and will use its best
efforts to cause the Registration Statement to become effective. At the time
the Registration Statement becomes effective, the Registration Statement will
comply in all material respects with the provisions of the Securities Act and
the published rules and regulations thereunder, and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not false or
misleading, and at the time of mailing thereof to the DBI shareholders, at the
time of the DBI shareholders' meeting referred to in paragraph 4(c) hereof and
at the Effective Time of the Merger the prospectus included as part of the
Registration Statement, as amended or supplemented by any amendment or
supplement filed by Norwest (hereinafter the "Prospectus"), will not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not false or misleading; PROVIDED, HOWEVER, that
none of the provisions of this subparagraph shall apply to statements in or
omissions from the Registration Statement or the Prospectus made in reliance
upon and in conformity with information furnished by DBI or any DBI 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
shareholders of DBI pursuant to this Agreement and the Merger Agreement will,
upon such issuance and delivery to said shareholders pursuant to the Merger
Agreement, be duly authorized, validly issued, fully
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paid and nonassessable. The shares of Norwest Common Stock to be delivered to
the shareholders of DBI 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 DBI to obtain all such approvals and consents required by DBI.
(h) Norwest will hold in confidence all documents and information
concerning DBI and DBI's Subsidiaries furnished to it and its representatives in
connection with the transactions contemplated by this Agreement and will not
release or disclose such information to 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 DBI (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
DBI.
(i) Norwest will file any documents or agreements required to be filed in
connection with the Merger under the North Dakota Business Corporation Act.
(j) Norwest will use its best efforts to deliver to the Closing all
opinions, certificates and other documents required to be delivered by it at the
Closing.
(k) Norwest shall consult with DBI 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 DBI written notice of receipt of the regulatory
approvals referred to in paragraph 7(e).
(m) For a period not exceeding fifteen days prior to the Closing Date,
Norwest will permit DBI 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 DBI or
its representatives shall in any way affect, diminish or terminate any of the
representations, warranties or covenants of Norwest herein expressed.
(n) Immediately prior to the Time of Filing, Norwest shall loan to DBI
funds sufficient to enable DBI to pay in full, without premium or penalty, all
indebtedness of DBI secured by the stock of any DBI Subsidiary.
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6. CONDITIONS PRECEDENT TO OBLIGATION OF DBI. The obligation of DBI 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
DBI:
(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) DBI 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 DBI required for approval of a plan of merger in accordance with the
provisions of DBI's Articles of Incorporation and the North Dakota Business
Corporation Act.
(e) Norwest shall have received approval by the Federal Reserve Board and
by such other governmental agencies as may be required by law of the
transactions contemplated by this Agreement 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 DBI 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) DBI shall have received an opinion, dated the Closing Date, of counsel
to DBI, 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 DBI Common Stock upon receipt of Norwest Common
Stock except for cash received in lieu of fractional shares; (iii) the basis of
the Norwest Common Stock received by the shareholders of DBI will be the same as
the basis of DBI Common Stock exchanged therefor; and (iv) the holding period of
the shares of Norwest Common Stock received by the shareholders of DBI will
include the holding period of the DBI Common Stock, provided such shares of DBI
Common Stock were held as a capital asset as of the Effective Time of the
Merger.
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(i) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order, and no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened and be unresolved. Norwest shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATION OF NORWEST. The obligation of
Norwest to effect the Merger shall be subject to the satisfaction at or before
the Time of Filing of the following conditions, which may be waived in writing
by Norwest:
(a) Except as they may be affected by transactions contemplated hereby and
except to the extent such representations and warranties are by their express
provisions made as of a specified date and except for activities or transactions
or events occurring after the date of this Agreement made in the ordinary course
of business and not expressly prohibited by this Agreement, the representations
and warranties contained in paragraph 2 hereof shall be true and correct in all
respects material to DBI and the DBI Subsidiaries taken as a whole as if made at
the Time of Filing.
(b) DBI 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 DBI required for approval of a plan of merger in accordance with the
provisions of DBI's Articles of Incorporation and the North Dakota Business
Corporation Act.
(d) Norwest shall have received a favorable certificate dated as of the
Effective Date of the Merger signed by the Chairman or President and by the
Secretary or Assistant Secretary of DBI, 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 requirement
relating to DBI or any DBI Subsidiary that, in the good faith judgment of
Norwest, is unreasonably burdensome to Norwest.
(f) DBI and each DBI Subsidiary shall have obtained any and all material
consents or waivers from other parties to loan agreements, leases or other
contracts material to DBI's or such DBI Subsidiary's business required for the
consummation of the Merger, and DBI and each DBI 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.
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(h) At any time since the date hereof the total number of shares of DBI
Common Stock outstanding and subject to issuance upon exercise (assuming for
this purpose that phantom shares and other share-equivalents constitute DBI
Common Stock) of all warrants, options, conversion rights, phantom shares or
other share-equivalents shall not have exceeded 2146.
(i) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order, and no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened or be unresolved. Norwest shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
(j) Norwest shall have received from the Chief Executive Officer and Chief
Financial Officer of DBI 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 DBI 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 DBI;
(ii) the amounts reported in the interim quarterly financial
statements of DBI agree with the general ledger of DBI;
(iii) the annual and quarterly financial statements of DBI and the
DBI Subsidiaries included in, or incorporated by reference in, the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the published
rules and regulations thereunder;
(iv) from the date of the most recent consolidated financial
statements of DBI and the DBI Subsidiaries as may be included in the
Registration Statement to a date 5 days prior to the effective date of the
Registration Statement and to a date 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 DBI and the DBI 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 DBI and the DBI 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 DBI and the DBI 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 DBI and
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the DBI Subsidiaries and have found them to be in agreement with financial
records and analyses prepared by DBI included in the annual and quarterly
financial statements, except as disclosed in such letters.
(k) DBI and the DBI Subsidiaries considered as a whole shall not have
sustained since December 31, 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.
(l) 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 DBI
or any DBI 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 upon
DBI and its subsidiaries taken as a whole.
(m) Since December 31, 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 DBI and the DBI 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).
(n) The agreement between Alan Hann, Mary Kay Hann, DBI, Liberty Bank and
Trust, N.A. and Norwest, dated the date hereof, shall be in full force and
effect.
(o) The Buy-Sell Agreement, dated October 9, 1989, between F.L. Clarkson
and Alan Hann shall have been terminated and be of no further force and effect.
(p) DBI shall own directly, and shall deliver to Norwest at the Closing,
stock certificates evidencing all of the outstanding capital stock of the DBI
Subsidiaries free and clear of any lien, claim, charge, option, encumbrance or
agreement with respect thereto.
8. EMPLOYEE BENEFIT PLANS. Each person who is an employee of DBI or any
DBI Subsidiary as of the Effective Date of the Merger ("DBI 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 DBI employee shall be eligible
for participation in the employee welfare benefit plans of Norwest listed below
subject to any eligibility requirements applicable to such plans and shall enter
each plan not later than the first day of the calendar quarter which begins at
least 32 days after the Effective Date of the Merger:
Medical Plan
Dental Plan
Vision Plan
Short Term Disability Plan
Long Term Disability Plan
Long Term Care Plan
Flexible Benefits Plan
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Basic Group Life Insurance Plan
Group Universal Life Insurance Plan
Dependent Group Life Insurance Plan
Business Travel Accident Insurance Plan
Accidental Death and Dismemberment Plan
Severance Pay Plan
Vacation Program
For the purpose of determining each DBI Employee's benefit for the year in which
the Merger occurs under the Norwest vacation program, vacation taken by an DBI
Employee in the year in which the Merger occurs will be deducted from the total
Norwest benefit.
(b) EMPLOYEE RETIREMENT BENEFIT PLANS.
Each DBI 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 DBI and the DBI
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 DBI 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 31, 1995
unless such failure of consummation shall be due to the failure of the
party seeking to terminate to perform or observe in all material respects
the covenants and agreements hereof to be performed or observed by such
party;
(iii) by DBI 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 Norwest if it determines in its sole discretion that the cost
of Remediation and the potential damages caused by the contamination in, on
or emanating from the Bowman Site would exceed an aggregate of $500,000
without regard to Norwest's liability therefor.
(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,
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duties or obligations arising hereunder, and the obligations under paragraphs
4(g), 5(h) and 10 shall survive such termination.
10. EXPENSES. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by DBI and DBI Subsidiaries shall be borne by DBI, and
all such expenses incurred by Norwest shall be borne by Norwest.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, but shall not be assignable by either party hereto without the prior
written consent of the other party hereto.
12. THIRD PARTY BENEFICIARIES. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto.
13. NOTICES. Any notice or other communication provided for herein or
given hereunder to a party hereto shall be in writing and shall be delivered in
person or shall be mailed by first class registered or certified mail, postage
prepaid, addressed as follows:
If to Norwest:
Norwest Corporation
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Attention: Secretary
If to DBI:
Dickinson Bancorporation, Inc.
115 First Avenue West, Box 1118
Dickinson, ND 58601
Attention: President
With a copy to:
Lindquist & Vennum
4200 IDS Center
80 South Eighth Street
Minneapolis, MN 55402-2205
Attention: J. Kevin Costley, Esq.
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.
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15. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
16. WAIVER AND OTHER ACTION. Either party hereto may, by a signed
writing, give any consent, take any action pursuant to paragraph 9 hereof or
otherwise, or waive any inaccuracies in the representations and warranties by
the other party and compliance by the other party with any of the covenants and
conditions herein.
17. AMENDMENT. At any time before the Time of Filing, the parties hereto,
by action taken by their respective Boards of Directors or pursuant to authority
delegated by their respective Boards of Directors, may amend this Agreement;
provided, however, that no amendment after approval by the shareholders of DBI
shall be made which changes in a manner adverse to such shareholders the
consideration to be provided to said shareholders 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 without regard to conflict of
laws provisions.
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.
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 DICKINSON BANCORPORATION, INC.
By: /s/ James R. Campbell By: /s/ Alan Hann
------------------------------ ----------------------------
Its: Executive Vice President Its: President
------------------------------ ----------------------------
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EXHIBIT A
AGREEMENT AND PLAN OF MERGER
BETWEEN
DICKINSON BANCORPORATION, INC.
a North Dakota corporation
(the surviving corporation)
AND
___________________
a North Dakota corporation
(the merged corporation)
This Agreement and Plan of Merger dated as of __________, 1995, between
DICKINSON BANCORPORATION, INC., a North Dakota corporation (hereinafter
sometimes called "DBI" and sometimes called the "surviving corporation") and
MERGER CO., a North Dakota corporation ("Merger Co.")(said corporations being
hereinafter sometimes referred to as the "constituent corporations"),
WHEREAS, Merger Co., a wholly-owned subsidiary of Norwest Corporation
("Norwest"), was incorporated by Articles of Incorporation filed in the office
of the Secretary of State of the State of North Dakota on _______, 1995, and
said corporation is now a corporation subject to and governed by the provisions
of the North Dakota Business Corporation Act. 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, DBI was incorporated by Articles of Incorporation filed in the
office of the Secretary of State of the State of North Dakota on December 23,
1988 and said corporation is now a corporation subject to and governed by the
provisions of the North Dakota Business Corporation Act. DBI has authorized
capital stock of 50,000 shares of Common Stock, par value $1.00 per share ("DBI
Common Stock") of which __________ shares were outstanding and no shares were
held in the treasury as of ______________ 1995; and
WHEREAS, Norwest and DBI are parties to an Agreement and Plan of
Reorganization dated as of February 24, 1995 (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 DBI, with DBI continuing as the surviving corporation, on the
terms and conditions hereinafter set forth in accordance with the provisions of
the North Dakota Business Corporation Act, which statute permits such merger;
and
WHEREAS, it is the intent of the parties to effect a merger which qualifies
as a tax-free reorganization pursuant to 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 DBI and 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 DBI
pursuant to the laws of the State of North Dakota, and do hereby agree upon,
prescribe and set forth the terms and conditions of the merger of Merger Co.
with and into DBI, the mode of carrying said merger into effect, the manner and
basis of converting the shares of DBI 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 DBI,
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 Dickinson Bancorporation, Inc.
SECOND: The Articles of Incorporation of DBI 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:
[AMENDMENTS]
THIRD: The By-Laws of DBI 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 become 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 become 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 DBI Common Stock
into shares of Norwest Common Stock shall be as follows:
1. Each of the shares of DBI 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 the number of shares of Norwest Common
Stock determined by dividing __________________ by the number of shares of
DBI Common Stock then outstanding.
2. As soon as practicable after the merger becomes effective, each holder
of a certificate for shares of DBI Common Stock outstanding immediately
prior to the time of merger shall be entitled, upon surrender of such
certificate for cancellation to Norwest Bank Minnesota, National
Association, as the designated agent of the surviving 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 DBI
Common Stock shall not be transferable on the
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books of the surviving corporation but 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 DBI Common Stock have been converted on the basis above set
forth; provided, however, until the holder of such certificate for DBI
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. 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 ending on the trading day immediately preceding the meeting of
shareholders held to vote on the merger.
4. Each share of Merger Co. Common Stock issued and outstanding at the
time of merger shall be converted into and exchanged for shares of the
surviving corporation after the time of merger.
SEVENTH: The merger provided for by this Agreement shall be effective as
follows:
1. The effective date of merger shall be the date on which 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 North
Dakota; 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 DBI in accordance with the North Dakota Business Corporation
Act; and
b. Articles of merger (with this Agreement attached as part thereof)
with respect to the merger, setting forth the information required by
the North Dakota Business Corporation Act, shall be executed by the
President or a Vice President of Merger Co. and by the Secretary or an
Assistant Secretary of Merger Co., and by the President or a Vice
President of DBI and by the Secretary or an Assistant Secretary of
DBI, and shall be filed in the office of the Secretary of State of the
State of North Dakota in accordance with the North Dakota Business
Corporation Act.
2. The merger shall become effective as of 11:59 p.m. (the "time of
merger") on the effective date of merger.
A-31
<PAGE>
EIGHTH: At the time of merger:
1. The separate existence of Merger Co. shall cease, and the corporate
existence and identity of DBI shall continue as the surviving corporation.
2. The merger shall have the other effects prescribed by Section 10-19.1-
102 of the North Dakota Business Corporation Act.
NINTH: The following provisions shall apply with respect to the merger
provided for by this Agreement:
1. 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
officers and directors of DBI 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.
2. 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.
3. 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
North Dakota.
4. This Agreement cannot be altered or amended except pursuant to an
instrument in writing signed by both of the parties hereto.
5. At any time prior to the filing of Articles of Merger with the
Secretary of State of the State of North Dakota, 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.
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, pursuant to authority duly given by their respective Boards of
Directors, all as of the day and year first above written.
A-32
<PAGE>
DICKINSON BANCORPORATION, INC.
By: _________________________________
Its: _________________________________
Attest:
__________________________
Secretary
[MERGER CO.]
By: ________________________________
Its: ________________________________
(Corporate Seal)
Attest:
___________________________
Secretary
A-33
<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 Dickinson
Bancorporation, Inc., a North Dakota corporation ("DBI").
Pursuant to an Agreement and Plan of Reorganization, dated as of
February 24, 1995, (the "Reorganization Agreement"), between DBI and Norwest
Corporation, a Delaware corporation ("Norwest") it is contemplated that a
wholly-owned subsidiary of Norwest will merge with and into DBI (the "Merger")
and as a result, I will receive in exchange for each share of Common Stock, par
value $1.00 per share, of DBI ("DBI 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 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 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 satisfactory to
it that some other exemption from registration under the Act is available,
or pursuant to a registration statement under the Act."
A-34
<PAGE>
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 (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.
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 DBI.
Dated: ____________________
Sincerely,
_________________________
A-35
<PAGE>
APPENDIX B
NORTH DAKOTA BUSINESS CORPORATION ACT
SECTIONS 10-19.1-87 AND 10-19.1-88
<PAGE>
10-19.1-87 RIGHTS OF DISSENTING SHAREHOLDERS.--1. A shareholder of a
corporation may dissent from, and obtain payment for the fair value of the
shareholder's shares in the event of, any of the following corporate actions:
a. An amendment of the articles that materially and adversely affects the
rights or preferences of the shares of a dissenting shareholder in that it:
(1) Alters or abolishes a preferential right of the shares;
(2) Creates, alters, or abolishes a right in respect of the redemption of
the shares, including a provision respecting a sinking fund for the redemption
or repurchase of shares;
(3) Alters or abolishes a preemptive right of the holder of the shares to
acquire shares, securities other than shares, or rights to purchase shares of
securities other than shares; or
(4) Excludes or limits the right of a shareholder to vote on a matter, or
to accumulate votes, except as the right may be excluded or limited through the
authorization or issuance of securities of an existing or new class or series
with similar or different voting rights;
(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation not made in the usual or
regular course of its business, but not including a disposition in dissolution
described in subsection 2 of section 10-19.1-109 or a disposition pursuant to an
order of a court, or a disposition for cash on terms requiring that all or
substantially all of the net proceeds of disposition be distributed to the
shareholders in accordance with their respective interests within one year after
the date of disposition;
c. A plan of merger to which the corporation is a party, except as
provided in subsection 3;
d. A plan of exchange, whether under this chapter or under chapter 10-32,
to which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to vote on the plan; or
e. Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the board
directs that dissenting shareholders may obtain payment for their shares.
2. A shareholder may not assert dissenters' rights as to less all of the
shares registered in the name of the shareholder, unless the shareholders
dissents with respect to all the shares that are beneficially owned by another
person but registered in the name of the shareholder and discloses the name and
address of each beneficial owner on whose behalf the shareholder dissents. In
that event, the rights of the dissenter must be determined as if the shares as
to which the shareholder has dissented and the other shares were registered in
the names of different shareholders. The beneficial owner of shares who is not
the shareholder may assert dissenters' rights with respect to shares held on
behalf of the beneficial owner, and must be treated as a dissenting shareholder
under the terms of this section and section 10-19.1-88, if the beneficial owner
submits to the corporation at the time of or before the assertion of the rights
a written consent of the shareholder.
3. The right to obtain payment under this section does not apply to the
shareholders of the surviving corporation in a merger if the shares of the
shareholder are not entitled to be voted on the merger.
4. The shareholders of a corporation who have a right under this section
to obtain payment for their shares do not have a right at law or in equity to
have a corporate action is fraudulent with regard to the complaining shareholder
or the corporation.
10-19.1-88 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.-- 1. For purposes
of this section, the terms defined in this subsection have the meanings given
them.
a. "Corporation" means the issuer of the shares held by a dissenter before
the corporation action referred to in subsection 1 of section 10-19.1-87 or the
successor by merger of that issuer.
b. "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of a corporate action referred
to in subsection 1 of section 10-19.1-87.
B-1
<PAGE>
c. "Interest" means interest commencing five days after the effective date
of the corporate action referred to in subsection 1 of section 10-19.1-87, up to
and including the date of payment, calculated at the rate provided in section
28-20-34 for interest on verdicts and judgments.
2. If a corporation calls a shareholder meeting at which any action
described in subsection 1 of section 10-19.1-87 is to be voted upon, the notice
of the meeting shall inform each shareholder of the right to dissent and shall
include a copy of section 10-19.1-87 and this section.
3. If the proposed action must be approved by the shareholders, a
shareholder who wishes to exercise dissenters' rights must file with the
corporation before the vote on the proposed action a written notice of intent to
demand the fair value of the shares owned by the shareholder and must not vote
the shares in favor of the proposed action.
4. After the proposed action has been approved by the board and, if
necessary, the shareholders, the corporation shall send to all shareholders who
have complied with subsection 3 and to all shareholders entitled to dissent if
no shareholder vote was required, a notice that contains:
a. The address to which a demand for payment and share certificates must
be sent in order to obtain payment and the date by which they must be received;
b. A form to be used to certify the date on which the shareholder, or the
beneficial owner on whose behalf the shareholder dissents, acquired the shares
or an interest in them and to demand payment; and
c. A copy of section 10-19.1-87 and this section.
5. In order to receive the fair value of shares, a dissenting shareholder
must demand payment and deposit certificated shares within thirty days after the
notice was given, but the dissenter retains all other rights of a shareholder
until the proposed action takes effect.
6. After the corporate action takes effect, or after the corporation
receives a valid demand for payment, whichever is later, the corporation shall
remit to each dissenting shareholder who has complied with subsections 3, 4, and
5, the amount the corporation estimates to be the fair value of the shares, plus
interest, accompanied by:
a. The corporation's closing balance sheet and statement of income for a
fiscal year ending not more than sixteen months before the effective date of the
corporate action, together with the latest available interim financial
statements;
b. An estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
c. A copy of section 10-19.1-87 and this section.
7. The corporation may withhold the remittance described in subsection 6
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person who
was not a beneficial owner on that date. If the dissenter has complied with
subsections 3, 4, and 5, the corporation shall forward to the dissenter the
materials described in subsection 6, a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept the amount in full satisfaction.
The dissenter may decline the offer and demand payment under subsection 9.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subsections 10 and 11 apply.
8. If the corporation fails to remit within sixty days of the deposit of
certificates, it shall return all deposited certificates. However, the
corporation may again give notice under subsections 4 and 5 and require deposit
at a later time.
9. If a dissenter believes that the amount remitted under subsections 6,
7, and 8 is less than the fair value of the shares plus interest, the dissenter
may give written notice to the corporation of the dissenter's own estimate of
the fair value of the shares plus interest, within thirty days after the
corporation mails the remittance under subsections 6, 7, and 8, and demand
payment of the difference. Otherwise, a dissenter is entitled only to the
amount remitted by the corporation.
B-2
<PAGE>
10. If the corporation receives a demand under subsection 9, it shall,
within sixty days after receiving the demand, either pay to the dissenter that
amount demanded or agreed to by the dissenter after a discussion with the
corporation or file in court a petition requesting that the court determine the
fair value of the shares plus interest. The petition shall be filed in the
county in which the registered office of the corporation is located, except that
a surviving foreign corporation that receives a demand relating to the shares of
a constituent corporation shall file the petition in the county in this state in
which the last registered office of the constituent corporation was located.
The petition shall name as parties all dissenters who have demanded payment
under subsection 9 and who have not reached agreement with the corporation. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or other shareholders in question have
fully complied with the requirements of this section, and shall determine the
fair value of the shares, taking into account any and all factors the court
finds relevant, computed by any method or combination of methods that the court,
in its discretion, sees fit to use, whether or not used by the corporation or by
a dissenter. The fair value of the shares as determined by the court is binding
on all shareholders, wherever located. A dissenter is entitled to judgment for
the amount by which the fair value of the shares as determined by the court,
plus interest, exceeds the amount, if any, remitted under subsections 6, 7, and
8, but shall not be liable to the corporation for the amount, if any, by which
the amount, if any, remitted to the dissenter under subsections 6, 7, and 8
exceeds the fair value of the shares as determined by the court, plus interest.
11. The court shall determine the costs and expenses of a proceeding under
subsection 10, including the reasonable expenses in compensation of any
appraisers appointed by the court, and shall assess those costs and expenses
against the corporation, except that the court may assess part or all of those
costs and expenses against a dissenter whose action ins demanding payment under
subsection 9 is found to be arbitrary, vexatious, or not in good faith.
12. If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
13. The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if any.
B-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registrant has duly caused 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 6th day of July, 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 6th day of July, 1995,
by the following persons in the capacities indicated:
/s/ Richard M. Kovacevich President and Chief Executive
- ------------------------------ Officer
Richard M. Kovacevich (Principal Executive Officer)
/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 )
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 )
IAN M. ROLLAND )
STEPHEN E. WATSON )
- ---------
*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
