<PAGE>
As filed with the Securities and Exchange Commission on August 26, 1996
Registration No. 333-_____
--------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
__________________
NORWEST CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 6711 41-0449260
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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
Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
612-667-8858
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Robert J. Kaukol O. Paul Corley, Jr.
Norwest Corporation Thompson & Knight, a Professional Corporation
Norwest Center 1700 Pacific Avenue, Suite 3300
Sixth and Marquette Dallas, Texas 75201
Minneapolis, Minnesota 55479-1026
__________________
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of the Registration
Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================
Title of Securities Amount Proposed Maximum Proposed Maximum Amount of
to Be to Be Offering Price Aggregate Registration
Registered Registered Per Share Offering Price Fee
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 800,000 N/A $14,899,709(3) $5,137.82
(par value $1-2/3 per share) (1)
=====================================================================================================
</TABLE>
(1) Each share of the registrant's common stock includes one preferred stock
purchase right.
(2) Based upon the maximum number of shares that may be issued in the
transaction described herein.
(3) Estimated solely for the purpose of computing the registration fee, in
accordance with Rule 457(f), based upon the book value as of
June 30, 1996 of all shares of common stock to be acquired by the
registrant in the transaction described herein.
__________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
===============================================================================
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B)
<TABLE>
<CAPTION>
Form S-4 Item Prospectus Heading
------------- ------------------
<S> <C>
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus......... Outside Front Cover Page of Prospectus
2. Inside Front and
Outside Back Cover
Pages of Prospectus.............. Available Information; Incorporation
of Certain Documents by Reference;
Table of Contents
3. Risk Factors, Ratio of
Earnings to Fixed Charges
and Other Information............ Summary
4. Terms of the
Transaction...................... The Merger; Comparison of Rights
of Holders of Bancorp Common Stock
and Norwest Common Stock
5. Pro Forma Financial
Information...................... *
6. Material Contracts with the
Company Being Acquired........... The Merger
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be
Underwriters..................... *
8. Interests of Named Experts and
Counsel.......................... Legal Opinions
9. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities....... *
10. Information with Respect to S-3
Registrants...................... Summary; The Merger; Comparison of
Rights of Holders of Bancorp Common
Stock and Norwest Common Stock;
Certain Regulatory Considerations
11. Incorporation of Certain
Information by Reference......... Incorporation of Certain Documents by
Reference; Management of Norwest and
Additional Information
12. Information with Respect to S-2
or S-3 Registrants............... *
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B)
<TABLE>
<CAPTION>
Form S-4 Item Prospectus Heading
------------- ------------------
<S> <C>
13. Incorporation of Certain
Documents by Reference........... *
14. Information with Respect to
Registrants Other Than S-2
or S-3 Registrants............... *
15. Information with Respect to
S-3 Companies.................... *
16. Information with Respect to
S-2 or S-3 Companies............. *
17. Information with Respect to
Companies Other Than S-2 or S-3
Companies........................ Summary--Selected Financial Information;
Summary--Comparative Per Common Share
Data; Comparison of Rights of Holders
of Bancorp Common Stock and Norwest
Common Stock; Information Concerning
Bancorp
18. Information If Proxies,
Consents or Authorizations
Are to Be Solicited.............. Meeting Information; The Merger--
Dissenters' Rights; Management of
Norwest and Additional Information
19. Information If Proxies,
Consents, or Authorizations Are
Not to Be Solicited in an
Exchange Offer................... *
- ---------------------------
</TABLE>
*Item is omitted because answer is negative or item is inapplicable.
<PAGE>
[BANCORP LETTERHEAD]
, 1996
Dear Shareholder:
A special meeting of shareholders of Texas Bancorporation, Inc.
("Bancorp") will be held on , 1996 to
consider and vote upon a proposal to approve the Agreement and Plan of
Reorganization dated June 3, 1996 (the "Merger Agreement") between Bancorp and
Norwest Corporation ("Norwest") pursuant to which a wholly-owned subsidiary of
Norwest will merge with and into Bancorp (the "Merger"). If the Merger
Agreement is approved and the Merger becomes effective, Bancorp will become a
wholly-owned subsidiary of Norwest and holders of Bancorp common stock will be
entitled to receive shares of Norwest common stock upon the terms and subject
to the conditions set forth in the Merger Agreement.
Bancorp's board of directors has unanimously approved the Merger
Agreement as being advisable and in the best interests of Bancorp's
shareholders and recommends that you vote for approval of the Merger
Agreement.
Enclosed with this letter are a notice of special meeting, which sets
forth the time and location of the special meeting, and a Proxy Statement-
Prospectus, which describes in more detail the terms and conditions of the
Merger and discusses the background of and reasons for the Merger. Please
carefully review and consider the information in the Proxy Statement-
Prospectus. Additional information concerning Norwest, including its 1995
annual report on Form 10-K, may be obtained from Norwest as indicated in the
Proxy Statement-Prospectus under the section entitled "Incorporation of
Certain Documents by Reference."
Your vote is very important. Please mark, date, sign and return the
enclosed proxy in the enclosed postage prepaid envelope as soon as possible,
regardless of whether you plan to attend the special meeting. A failure to
vote, either by not returning the enclosed proxy or by checking the "Abstain"
box thereon, will have the same effect as a vote against approval of the
Merger Agreement. If you attend the meeting, you may vote in person if you
wish, even though you have previously returned your proxy.
Richard D. Browning
Chairman and Chief Executive Officer
<PAGE>
TEXAS BANCORPORATION, INC.
4101 NORTH JBS PARKWAY
ODESSA, TEXAS 79762
(915) 368-0931
-----------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1996
-----------------------------------------
A special meeting (the "Special Meeting") of shareholders of Texas
Bancorporation, Inc., a Texas corporation ("Bancorp"), will be held at the
offices of Bancorp located at 4101 North JBS Parkway, Odessa, Texas, on
_____________, 1996,b at __:__ .m., central time, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement
and Plan of Reorganization dated June 3, 1996 (as amended, the "Merger
Agreement") between Bancorp and Norwest Corporation ("Norwest") pursuant
to which a wholly-owned subsidiary of Norwest will merge with and into
Bancorp and Bancorp will become a wholly-owned subsidiary of Norwest, all
upon the terms and subject to the conditions set forth in the Merger
Agreement, a copy of which is attached as an appendix to the accompanying
Proxy Statement-Prospectus.
2. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Only shareholders of record on the books of Bancorp at the close of
business on ____________, 1996 will be entitled to vote at the Special Meeting
or any adjournments or postponements 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
Dale Spivey
Secretary
, 1996
_____________________________________________________________________________
PLEASE COMPLETE, SIGN AND DATE YOUR PROXY AND PROMPTLY MAIL IT IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE PROXY STATEMENT-
PROSPECTUS AT ANY TIME BEFORE IT IS EXERCISED.
PLEASE DO NOT SEND IN ANY SHARE CERTIFICATES AT THIS TIME.
_____________________________________________________________________________
<PAGE>
TEXAS BANCORPORATION, INC.
PROXY STATEMENT
FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1996
______________________
NORWEST CORPORATION
PROSPECTUS
SHARES OF COMMON STOCK
______________________
This Proxy Statement-Prospectus is being provided to holders of the
common stock, par value $.01 per share ("Bancorp Common Stock") of Texas
Bancorporation, Inc., a Texas corporation ("Bancorp"), in connection with the
solicitation of proxies by the board of directors of Bancorp (the "Bancorp
Board") for a special meeting of Bancorp's shareholders to be held on
, 1996 (the "Special Meeting").
At the Special Meeting, Bancorp's shareholders will consider and vote
upon a proposal to approve the Agreement and Plan of Reorganization dated June
3, 1996 (including all exhibits thereto, the "Merger Agreement") between Bancorp
and Norwest Corporation, a Delaware corporation ("Norwest"), pursuant to which a
wholly-owned subsidiary of Norwest will merge with and into Bancorp and Bancorp
will become a wholly-owned subsidiary of Norwest (the "Merger"). If the Merger
is approved and becomes effective, each share of Bancorp Common Stock
outstanding immediately prior to the Effective Time of the Merger (as
hereinafter defined) will be automatically converted into and exchanged for the
right to receive the fraction of a share of Norwest's common stock, par value
$1-2/3 per share ("Norwest Common Stock"), determined by dividing 762,500 by the
number of shares of Bancorp Common Stock outstanding immediately prior to the
Effective Time of the Merger (the "Exchange Ratio"). As of the date of this
Proxy Statement-Prospectus, there are 860,685 shares of Bancorp Common Stock
outstanding. Assuming there are 860,685 shares of Bancorp Common Stock
outstanding immediately prior to the Effective Time of the Merger, the Exchange
Ratio will equal 0.8859. For additional information concerning the consideration
to be received by holders of Bancorp Common Stock and certain risks due to
fluctuations in the price of Norwest Common Stock, see "THE MERGER--Merger
Consideration." A copy of the Merger Agreement is attached as Appendix A to this
Proxy Statement-Prospectus and incorporated herein by reference.
Norwest has filed a registration statement on Form S-4 (File No. 333-
) (the "Registration Statement") with the Securities and Exchange
Commission (the "Commission") registering under the Securities Act of 1933, as
amended (the "Securities Act"), the shares of Norwest Common Stock to be issued
in the Merger. In addition to serving as the proxy statement in connection with
the Special Meeting, this document constitutes the prospectus of Norwest filed
as part of the Registration Statement.
Norwest Common Stock trades on the New York Stock Exchange ("NYSE") and
the Chicago Stock Exchange ("CHX") under the symbol "NOB." The closing price of
Norwest Common Stock as reported on the NYSE composite tape on , 1996
was $ per share. There is no public market for shares of Bancorp Common
Stock.
NORWEST AND ITS BANKING AND SAVINGS ASSOCIATION SUBSIDIARIES ARE SUBJECT
TO A VARIETY OF FEDERAL AND STATE BANKING STATUTES, REGULATIONS AND GUIDELINES,
MANY OF WHICH MATERIALLY AFFECT OR HAVE THE POTENTIAL TO MATERIALLY AFFECT
NORWEST'S BUSINESS AND FINANCIAL CONDITION, INCLUDING BUT NOT LIMITED TO
RESTRICTING ITS ABILITY TO PAY DIVIDENDS ON THE COMMON STOCK. SEE "CERTAIN
REGULATORY CONSIDERATIONS PERTAINING TO NORWEST."
All information concerning Norwest contained in this Proxy Statement-
Prospectus has been provided by Norwest, and all information concerning Bancorp
contained in this Proxy Statement-Prospectus has been provided by Bancorp.
This Proxy Statement-Prospectus and the accompanying form of proxy are
first being mailed to shareholders of Bancorp on or about
, 1996.
__________________________
THE SHARES OF NORWEST COMMON STOCK OFFERED BY THIS PROXY STATEMENT-PROSPECTUS
ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR
NONBANK SUBSIDIARY OF NORWEST AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENTAL AGENCY.
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 ,
1996.
<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION.....................................................
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...........................
EXPLANATORY NOTE AND DEFINITIONS OF CERTAIN TERMS.........................
SUMMARY...................................................................
Parties to the Merger................................................
Special Meeting and Vote Required....................................
The Merger...........................................................
Market Information...................................................
Comparison of Rights of Holders of Bancorp Common Stock and Norwest
Common Stock.......................................................
Comparative Per Common Share Data....................................
Selected Consolidated Financial Data.................................
MEETING INFORMATION.......................................................
General..............................................................
Record Date; Voting Rights; Vote Required............................
Voting and Revocation of Proxies.....................................
Solicitation of Proxies..............................................
THE MERGER................................................................
General..............................................................
Background of and Reasons for the Merger.............................
Merger Consideration.................................................
Dissenters' Rights...................................................
Surrender of Certificates............................................
Conditions to the Merger.............................................
Regulatory Approvals.................................................
Conduct of Business Pending the Merger...............................
No Solicitation......................................................
Certain Additional Agreements........................................
Termination of the Merger Agreement..................................
Amendment of the Merger Agreement....................................
Waiver of Performance of Obligations.................................
Effect on Employee Benefit Plans.....................................
Interests of Certain Persons in the Merger...........................
U.S. Federal Income Tax Consequences.................................
Resale of Norwest Common Stock.......................................
Stock Exchange Listing...............................................
Accounting Treatment.................................................
Expenses.............................................................
COMPARISON OF RIGHTS OF HOLDERS OF BANCORP COMMON STOCK AND NORWEST COMMON
STOCK.....................................................................
General..............................................................
Directors............................................................
Amendment of Articles or Certificate of Incorporation and Bylaws.....
Shareholder or Stockholder Approval of Mergers and Asset.............
Sales................................................................
Appraisal Rights.....................................................
Special Meetings.....................................................
Action Without a Meeting.............................................
Limitation of Director Liability.....................................
Indemnification of Officers and Directors............................
Dividends............................................................
Proposal of Business; Nomination of Director.........................
2
<PAGE>
INFORMATION CONCERNING BANCORP.............................................
General...............................................................
Texas Bank............................................................
Nonbanking Activities.................................................
Competition...........................................................
Regulation and Supervision............................................
Employees.............................................................
Properties............................................................
Legal Proceedings.....................................................
Description of Securities.............................................
Dividends and Dividend Policy.........................................
Holders...............................................................
Security Ownership of Management......................................
Management's Discussion and Analysis of Financial Condition and
Results of Operations...............................................
COMPARATIVE PER SHARE PRICES AND DIVIDENDS.................................
CERTAIN REGULATORY CONSIDERATIONS PERTAINING TO NORWEST....................
General...............................................................
Dividend Restrictions.................................................
Holding Company Structure.............................................
Capital Requirements..................................................
Federal Deposit Insurance Corporation Improvement Act of 1991.........
FDIC Insurance........................................................
EXPERTS....................................................................
LEGAL OPINIONS.............................................................
MANAGEMENT OF NORWEST AND ADDITIONAL INFORMATION...........................
CONSOLIDATED FINANCIAL STATEMENTS OF TEXAS BANCORPORATION, INC. AND
SUBSIDIARY............................................................... F-1
APPENDIX A AGREEMENT AND PLAN OF REORGANIZATION...........................
APPENDIX B TEXAS BUSINESS CORPORATION ACT, ARTICLES 5.11, 5.12 AND 5.13...
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 file reports, proxy statements and other information with 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 7 World Trade Center, Suite
1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Such materials also may be accessed
through the Commission's Web site on the Internet located at http://www.sec.gov.
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 concerning 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 and the exhibits thereto. 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 and the shares of Norwest Common
Stock offered hereby. Statements contained herein concerning the provisions of
certain documents are necessarily summaries of such documents, and each
statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission or attached hereto as an appendix.
No person is authorized to give any information or make any representations
other than those expressly set forth in this Proxy Statement-Prospectus. Any
such information or representations must not be relied upon as being authorized.
The delivery of this Proxy Statement-Prospectus is neither an offer to sell or a
solicitation of an offer to buy shares of Norwest Common Stock nor a
solicitation of a proxy in any circumstances in which such offer to sell,
solicitation of an offer to buy or solicitation of a proxy is unlawful. Neither
the delivery of this Proxy Statement-Prospectus nor any distribution of
securities hereunder shall under any circumstances create any implication that
there has been no change in the business prospects, financial condition or other
affairs of Norwest or Bancorp since the date of this Proxy Statement-Prospectus
or that the information contained herein is correct and complete as of any time
subsequent to the date of this Proxy Statement-Prospectus.
4
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS THAT
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS AS
FILED WITH THE COMMISSION (OTHER THAN EXHIBITS THERETO NOT SPECIFICALLY
INCORPORATED BY REFERENCE THEREIN) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN OR
ORAL REQUEST, IN THE CASE OF DOCUMENTS RELATING TO NORWEST, TO LAUREL A.
HOLSCHUH, SECRETARY, NORWEST CORPORATION, NORWEST CENTER, SIXTH AND MARQUETTE,
MINNEAPOLIS, MINNESOTA 55479-1026, TELEPHONE (612) 667-8655. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE RECEIVED BY NORWEST
, 1996 [FIVE BUSINESS DAYS PRIOR TO DATE OF
MEETING].
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: (i) Norwest's annual report on Form 10-K for the year
ended December 31, 1995; (ii) Norwest's quarterly reports on Form 10-Q for the
quarters ended March 31, 1996 and June 30, 1996; (iii) Norwest's current reports
on Form 8-K dated January 17, 1996, February 20, 1996, as amended pursuant to
Form 8-K/A, February 26, 1996, April 17, 1996, July 2, 1996 and July 15, 1996;
(iv) Norwest's current report on Form 8-K dated April 30, 1996 containing a
description of the Norwest Common Stock; and (v) Norwest's registration
statement on Form 8-A dated December 6, 1988, as amended pursuant to Form 8-A/A
dated June 29, 1993, relating to preferred stock purchase rights attached to
shares of Norwest Common Stock.
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 that 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>
EXPLANATORY NOTE AND DEFINITIONS OF CERTAIN TERMS
Bancorp is incorporated under the laws of the state of Texas and is
governed by the Texas Business Corporation Act and Bancorp's articles of
incorporation and bylaws (as amended and in effect as of the date of this Proxy
Statement-Prospectus, the "TBCA," "Bancorp Articles" and "Bancorp Bylaws,"
respectively). Norwest is incorporated under the laws of the state of Delaware
and is governed by the Delaware General Corporation Law and Norwest's restated
certificate of incorporation and bylaws (as amended and in effect as of the date
of this Proxy Statement-Prospectus, the "DGCL," "Norwest Certificate" and
"Norwest Bylaws," respectively). The TBCA uses the term "shareholder" to refer
to a holder of capital stock of a Texas corporation. The DGCL uses the term
"stockholder" to refer to a holder of capital stock of a Delaware corporation.
Accordingly, this Proxy Statement-Prospectus uses the term "shareholder" to
refer to a holder of Bancorp Common Stock and the term "stockholder" to refer to
a holder of Norwest Common Stock.
6
<PAGE>
SUMMARY
The following summary of certain information relating to the Merger is not
intended to be complete and is qualified in all respects by the more detailed
information contained or incorporated by reference in this Proxy Statement-
Prospectus and the appendices hereto. Shareholders of Bancorp are urged to read
this Proxy Statement-Prospectus and the appendices hereto in their entirety.
PARTIES TO THE MERGER
NORWEST. Norwest 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 "Bank Holding Company Act").
Norwest owns subsidiaries engaged in banking and in a variety of 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, Nevada, 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, mortgage-backed securities servicing, and venture capital investment.
At June 30, 1996, Norwest had consolidated total assets of $77.8 billion,
total deposits of $46.3 billion and total stockholders' equity of $5.6 billion.
Based on total assets at June 30, 1996, Norwest was the 12th largest commercial
banking organization in the United States.
Norwest regularly explores opportunities for acquisitions of financial
institutions and related businesses. Norwest generally does not make a public
announcement of an acquisition until a definitive agreement has been signed.
Norwest generally provides information concerning the aggregate asset value of,
and the aggregate consideration anticipated to be paid for, its pending
acquisitions in its annual and quarterly reports filed with the Commission and
incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
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 "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
BANCORP. Bancorp, a bank holding company headquartered in Odessa, Texas,
derives substantially all of its revenues and income from the operation of its
wholly-owned bank subsidiary, Texas Bank ("Texas Bank" or the "Bank"), Odessa,
Texas. Texas Bank provides a full range of commercial and consumer banking
services to individuals and small and middle market businesses in the Permian
Basin as well as Central Texas. Texas Bank operates two full service branches in
Odessa, Texas, two in Austin, Texas, and one each in Pflugerville, Dripping
Springs, Burnet, Kingsland, and Buchanan Dam, Texas. As of June 30, 1996,
Bancorp had total consolidated assets of $167.0 million, total deposits of
$151.0 million and total shareholders' equity of $14.9 million. At June 30,
1996, Bancorp and Texas Bank employed 104 full time equivalent employees. See
"Information Concerning Bancorp."
SPECIAL MEETING AND VOTE REQUIRED
SPECIAL MEETING. The Special Meeting will be held on , 1996 at
the offices of Bancorp located at 4101 North JBS Parkway, Odessa, Texas for the
purpose of voting on a
7
<PAGE>
proposal to approve the Merger Agreement. Only holders of record of Bancorp
Common Stock at the close of business on , 1996 (the "Record Date") will
be entitled to receive notice of and to vote at the Special Meeting. At the
Record Date, there were outstanding 860,685 shares of Bancorp Common Stock. 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 at least two-thirds of the outstanding shares of Bancorp
Common Stock. Holders of Bancorp Common Stock are entitled to one vote per share
owned of record on the Record Date. If at least two-thirds of the votes eligible
to be cast by the holders of Bancorp Common Stock do not vote in favor of
approval of the Merger Agreement, Bancorp will continue to act as a separate
entity and a going concern. See "MEETING INFORMATION--Record Date; Voting
Rights; Vote Required."
The Merger
EFFECT OF THE MERGER. If the Merger Agreement is approved and the Merger
becomes effective, a wholly-owned subsidiary of Norwest will merge with and into
Bancorp and Bancorp, as the surviving corporation in the Merger, will become a
wholly-owned subsidiary of Norwest. In the Merger, each share of Bancorp Common
Stock outstanding immediately prior to the Effective Time of the Merger will be
automatically converted into and exchanged for the right to receive the fraction
of a share of Norwest Common Stock determined in accordance with the Exchange
Ratio. See "THE MERGER--Merger Consideration."
RECOMMENDATION OF BANCORP'S BOARD OF DIRECTORS. At a meeting of Bancorp's
board of directors (the "Bancorp Board") held on May 31, 1996, after considering
the terms and conditions of the Merger Agreement, the Bancorp Board unanimously
approved the Merger Agreement. The Bancorp Board believes that the Merger is
advisable and in the best interests of Bancorp and its shareholders and
recommends that shareholders of Bancorp vote in favor of approval of the Merger
Agreement. For a discussion of the circumstances surrounding the Merger and the
factors considered by the Bancorp Board in making its recommendation, see "THE
MERGER--Background of and Reasons for the Merger."
CONDITIONS TO THE MERGER; TERMINATION OF THE MERGER AGREEMENT. The
obligations of Norwest and Bancorp to effect the Merger are subject to the
satisfaction or, if permissible under the Merger Agreement, waiver of a number
of conditions, in addition to approval of the Merger Agreement by Bancorp's
shareholders. The Merger Agreement is subject to termination by one or more
parties at any time prior to the Effective Time of the Merger upon the
occurrence of certain specified events. See "THE MERGER--Conditions to the
Merger" and "--Termination of the Merger Agreement."
REGULATORY APPROVALS. The Merger is subject to the approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"). The
approval of the Federal Reserve Board was received on August 20, 1996. The
Merger is also subject to certain filing and other requirements of the Texas
Department of Banking. See "THE MERGER--Regulatory Approvals."
EFFECTIVE TIME AND CLOSING OF THE MERGER. If the Merger Agreement is
approved at the Special Meeting and all other conditions to the Merger have been
satisfied or waived, the parties expect the Merger to become effective (the
"Effective Time of the Merger") upon the filing with the Texas Secretary of
State of articles of merger relating to the Merger (the "Articles of Merger") in
accordance with the relevant provisions of the TBCA. The parties expect to file
the Articles of Merger with the Texas Secretary of State as soon as practicable
following approval of the Merger Agreement at the Special Meeting. The closing
of the Merger (the "Closing") will be held on the date the Articles of Merger
are filed with the Texas Secretary of State or on such other date as the parties
may agree (the "Closing Date"). See "THE MERGER--Conditions to the Merger" and
"--Regulatory Approvals."
8
<PAGE>
NO SOLICITATION. Bancorp and its subsidiaries, and their respective
directors, officers, representatives and agents, are prohibited under the Merger
Agreement from directly or indirectly soliciting, authorizing the solicitation
of or entering into any discussions with any party other than Norwest concerning
certain transactions involving the acquisition of Bancorp's capital stock or
assets. See "THE MERGER--No Solicitation."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. In the Merger, the directors
and executive officers will receive the same consideration for their shares of
Bancorp Common Stock as the other shareholders of Bancorp will receive for their
shares of Bancorp Common Stock. Certain members of the Bancorp Board and
management, however, may be deemed to have interests in the Merger that are in
addition to and separate from the interests of Bancorp's shareholders generally.
These interests include, among others, provisions in the Merger Agreement
relating to the continuation of certain director and officer indemnification
rights and the maintenance of certain directors' and officers' liability
insurance policies. See "THE MERGER--Interests of Certain Persons in the
Merger."
DIRECTORS AND OFFICERS OF BANCORP AFTER THE MERGER. Following the Effective
Time of the Merger, Norwest will be the sole shareholder of Bancorp and, for
that reason, will be in a position to elect or appoint all of the directors and
officers of Bancorp.
DISSENTERS' RIGHTS. Holders of Bancorp Common Stock will have the right to
dissent with respect to their shares of Bancorp Common Stock. For more
information concerning dissenters' rights and the procedures to be followed to
exercise such rights, see "THE MERGER--Dissenters' Rights."
U.S. FEDERAL INCOME TAX CONSEQUENCES. The Merger is intended to be a tax-
free reorganization. Generally, no gain or loss will be recognized by Bancorp's
shareholders, except with respect to cash received for any remaining fractional
shares. The Merger's effectiveness is conditioned upon the receipt by Bancorp of
a written opinion of its counsel to that effect. See "THE MERGER--U.S. Federal
Income Tax Consequences."
THE U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE MERGER MAY BE DIFFERENT
FOR PARTICULAR TYPES OF BANCORP SHAREHOLDERS OR IN LIGHT OF EACH BANCORP
SHAREHOLDER'S PERSONAL INVESTMENT CIRCUMSTANCES. FOR THAT REASON, BANCORP
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S.
FEDERAL INCOME TAX CONSEQUENCES THAT MAY BE RELEVANT TO THEM IN CONNECTION WITH
THE MERGER, AS WELL AS THE APPLICATION TO THEM OF ANY STATE, LOCAL, FOREIGN, OR
OTHER TAX LAWS.
Market Information
On May 30, 1996, the last business day preceding public announcement of the
Merger Agreement, and on , 1996, the last practicable date prior to the
mailing of this Proxy Statement-Prospectus, the closing price per share of
Norwest Common Stock (as reported on the NYSE composite tape) was $35.625 and
$ , respectively. There is no public market for the Bancorp Common Stock.
The market price for Norwest Common Stock will fluctuate between the date
of this Proxy Statement-Prospectus and the Effective Time of the Merger, which
will be a period of several weeks. The market value per share of the Norwest
Common Stock that Bancorp's 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 Time of the Merger. Bancorp's
shareholders are advised to obtain current market quotations for Norwest Common
Stock.
COMPARISON OF RIGHTS OF HOLDERS OF BANCORP CAPITAL STOCK AND NORWEST COMMON
STOCK
9
<PAGE>
As of the date of this Proxy Statement-Prospectus, the rights of
Bancorp's shareholders are governed by the TBCA and the Bancorp Articles and
Bancorp Bylaws. At the Effective Time of the Merger, Bancorp's shareholders
will become stockholders of Norwest. As such, their rights will thereafter be
governed by the DGCL and the Norwest Certificate and Norwest Bylaws. See
"COMPARISON OF RIGHTS OF HOLDERS OF BANCORP CAPITAL STOCK AND NORWEST COMMON
STOCK."
COMPARATIVE PER COMMON SHARE DATA
The following table presents selected comparative per common share data
for Norwest Common Stock on a historical and pro forma combined basis and for
Bancorp Common Stock on a historical and pro forma equivalent basis giving
effect to the Merger using the purchase method of accounting. The historical
data for Norwest and Bancorp for each of the years in the three-year period
ended December 31, 1995 are derived from the respective audited consolidated
financial statements of Norwest and Bancorp, including the related notes
thereto, for such three-year period. The historical data for Norwest and
Bancorp for the six-month period ended June 30, 1996 are derived from the
respective unaudited consolidated financial statements of Norwest and Bancorp,
including notes thereto, for such six-month period. The data are 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 become
effective prior to the periods indicated. The above-referenced audited and
unaudited consolidated financial statements of Bancorp are included in this
Proxy Statement-Prospectus. See "CONSOLIDATED FINANCIAL STATEMENTS OF
BANCORP." The above-referenced audited and unaudited consolidated financial
statements of Norwest are incorporated by reference into this Proxy Statement-
Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
COMPARATIVE PER COMMON SHARE DATA
<TABLE>
<CAPTION>
Norwest Common Stock Bancorp Common Stock
--------------------- ----------------------
Pro Forma Pro Forma
Historical Combined Historical Equivalent
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
BOOK VALUE (1):
June 30, 1996 $14.71 14.72 17.31 13.04
December 31, 1995 $14.20 14.21 15.74 12.59
DIVIDENDS DECLARED (2):
Six Months Ended
June 30, 1996 $0.510 0.510 0.290 0.452
Year Ended
December 31, 1995 $0.900 0.900 0.581 0.797
NET INCOME (3):
Six Months Ended
June 30, 1996 $ 1.50 1.50 1.90 1.33
Year Ended
December 31, 1995 $ 2.73 2.73 3.14 2.42
</TABLE>
(1) The pro forma combined book value per share of Norwest Common Stock
represents the historical total combined common stockholders' equity for
Norwest and Bancorp divided by total pro forma common shares of the
combined entities. The data assume (i) an Exchange Ratio equal to 0.8859
and (ii) the issuance in the Merger of 762,500 shares of Norwest Common
Stock in exchange for 860,685 shares of Bancorp Common Stock. The pro
forma equivalent book value per share of Bancorp represents the pro forma
combined book value per share multiplied by an assumed Exchange Ratio of
0.8859.
(2) Assumes no changes in cash dividends per share by Norwest. The pro forma
equivalent dividends per share of Bancorp Common Stock represent cash
dividends declared per share of Norwest Common Stock multiplied by an
assumed Exchange Ratio of 0.8859.
10
<PAGE>
(3) The pro forma combined net income per share of Norwest Common Stock
(based on fully diluted net income and weighted average number of common
and common equivalent shares) is based upon the combined historical net
income for Norwest and Bancorp divided by the average pro forma common
and common equivalent shares of the combined entities. The pro forma
equivalent net income per share of Bancorp Common Stock represents the
pro forma combined net income per share multiplied by an assumed Exchange
Ratio of 0.8859.
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial information for Norwest and Bancorp. The income statement and
balance sheet data for Norwest and Bancorp included in the selected
consolidated financial data for each of the five years in the period ended
December 31, 1995 are derived from the respective audited consolidated
financial statements of Norwest and Bancorp for such five-year period. The
selected financial data for the six-month periods ended June 30, 1996 and 1995
are derived from the unaudited consolidated financial statements of Norwest
and Bancorp for such periods. All financial data derived from unaudited
financial statements reflect, in the respective opinions of Norwest's and
Bancorp's management, all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of such data. Results for the
six-month period ended June 30, 1996 are not necessarily indicative of the
results that may be expected for any other interim period or for the year as a
whole. The data in the following table should be read in conjunction with the
consolidated financial statements of Norwest and Bancorp and the related notes
thereto, included in this Proxy Statement-Prospectus in the case of Bancorp
and incorporated herein by reference in the case of Norwest. See
"CONSOLIDATED FINANCIAL STATEMENTS OF BANCORP" and "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
NORWEST CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30 YEARS ENDED DECEMBER 31
--------------------- --------------------------------------------------------
1996 1995 1995 1994 1993(1) 1992(2) 1991
--------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA
Interest income........................ $ 3,099.0 2,677.1 5,717.3 4,393.7 3,946.3 3,806.4 4,025.9
Interest expense....................... 1,291.7 1,135.2 2,448.0 1,590.1 1,442.9 1,610.6 2,150.3
--------- -------- -------- -------- -------- -------- --------
Net interest income.................. 1,807.3 1,541.9 3,269.3 2,803.6 2,503.4 2,195.8 1,875.6
Provision for credit losses............ 175.2 130.0 312.4 164.9 158.2 270.8 406.4
Non-interest income.................... 1,203.6 842.2 1,848.2 1,638.3 1,585.0 1,273.7 1,064.0
Non-interest expenses.................. 1,963.2 1,581.2 3,382.3 3,096.4 3,050.4 2,553.1 2,041.5
--------- -------- -------- -------- -------- -------- --------
Income before income taxes........... 872.5 672.9 1,422.8 1,180.6 879.8 645.6 491.7
Income tax expense..................... 315.7 221.8 466.8 380.2 266.7 175.6 73.4
--------- -------- -------- -------- -------- -------- --------
Income before cumulative effect of
a change in accounting method........ 556.8 451.1 956.0 800.4 613.1 470.0 418.3
Cumulative effect on years prior to
1992 of change in accounting
method............................... -- -- -- -- -- (76.0) --
--------- -------- -------- -------- -------- -------- --------
Net income........................... $ 556.8 451.1 956.0 800.4 613.1 394.0 418.3
========= ======== ======== ======== ======== ======== ========
PER COMMON SHARE DATA
Net income per share:
Primary:
Before cumulative effect of a
change in accounting method...... $ 1.50 1.34 2.76 2.45 1.89 1.44 1.33
Cumulative effect on years prior
to 1992 of change in
accounting method................ -- -- -- -- -- (0.25) --
--------- -------- -------- -------- -------- -------- --------
Net income......................... $ 1.50 1.34 2.76 2.45 1.89 1.19 1.33
========= ======== ======== ======== ======== ======== ========
Fully diluted:
Before cumulative effect of a
change in accounting method...... $ 1.50 1.32 2.73 2.41 1.86 1.42 1.32
Cumulative effect on years prior
to 1992 of change in
accounting method................ -- -- -- -- -- (0.23) --
--------- -------- -------- -------- -------- -------- --------
Net income......................... $ 1.50 1.32 2.73 2.41 1.86 1.19 1.32
========= ======== ======== ======== ======== ======== ========
Dividends declared per common
share................................ $ 0.510 0.420 0.900 0.765 0.640 0.540 0.470
BALANCE SHEET DATA
At period end:
Total assets......................... $77,849.3 66,623.0 72,134.4 59,315.9 54,655.0 50,037.0 45,974.5
Long-term debt....................... 13,787.6 12,382.1 13,676.8 9,186.3 6,850.9 4,553.2 3,686.6
Total stockholders' equity........... 5,634.9 4,726.0 5,312.1 3,846.4 3,760.9 3,371.8 3,192.3
</TABLE>
12
<PAGE>
(1) On January 14, 1994, First United Bank Group, Inc. ("First United"), a $3.9
billion bank holding company headquartered in Albuquerque, New Mexico, was
acquired in a pooling of interests 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 charges 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 of interests 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.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
TEXAS BANCORPORATION, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED DECEMBER 31
ENDED JUNE 30 ---------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income................... $ 6,906 5,550 11,950 9,279 8,649 9,667 9,005
Interest expense.................. 1,739 1,401 3,132 2,118 1,809 2,269 3,346
-------- ------- ------- ------- ------- ------- -------
Net interest income............. 5,167 4,149 8,818 7,161 6,840 7,398 5,659
Provision for credit losses....... 215 177 378 239 260 449 380
Non-interest income............... 1,350 1,085 2,870 2,803 3,273 2,527 2,360
Non-interest expenses............. 3,818 3,334 7,118 6,104 6,040 4,846 4,121
-------- ------- ------- ------- ------- ------- -------
Income before income taxes...... 2,484 1,723 4,192 3,621 3,813 4,630 3,518
Income tax expense................ 846 579 1,487 1,281 1,330 1,688 1,327
-------- ------- ------- ------- ------- ------- -------
Income before cumulative effect
of a change in accounting
method.......................... 1,638 1,144 2,705 2,340 2,483 2,942 2,191
Cumulative effect on years prior
to 1993 of change in
accounting method............... - - - - 170 - -
-------- ------- ------- ------- ------- ------- -------
Net income.................... $ 1,638 1,144 2,705 2,340 2,313 2,942 2,191
======== ======= ======= ======= ======= ======= =======
PER COMMON SHARE DATA
Net income per share:
Before cumulative effect of a
change in accounting
method........................ $ 1.90 1.33 3.14 2.72 2.88 3.42 2.55
Cumulative effect on years
prior to 1993 of change in
accounting method............. - - - - 0.19 - -
-------- ------- ------- ------- ------- ------- -------
Net income.................... $ 1.90 1.33 3.14 2.72 2.69 3.42 2.55
======== ======= ======= ======= ======= ======= =======
Shareholders' equity.............. $ 17.31 14.21 15.74 11.93 10.59 9.96 6.54
======== ======= ======= ======= ======= ======= =======
Weighted average common
shares outstanding.............. 860,685 860,685 860,685 860,685 860,685 860,685 860,685
======== ======= ======= ======= ======= ======= =======
Dividends declared per common
share........................... $ 0.29 - 0.58 - 2.05 - -
======== ======= ======= ======= ======= ======= =======
BALANCE SHEET DATA
At period end:
Total assets.................... $166,988 148,985 162,143 123,927 117,764 108,011 106,485
Long-term debt.................. $ 277 277 277 277 277 277 277
Total shareholders' equity...... $ 14,900 12,237 13,548 10,274 9,120 8,572 5,630
</TABLE>
14
<PAGE>
MEETING INFORMATION
GENERAL
This Proxy Statement-Prospectus is being furnished to holders of Bancorp
Common Stock in connection with the solicitation of proxies by the Bancorp
Board for use at the Special Meeting to be held on , 1996
and at any adjournments or postponements thereof. At the Special Meeting,
shareholders of Bancorp will consider and vote upon a proposal to approve the
Merger Agreement. The Bancorp Board is not aware as of the date of this Proxy
Statement-Prospectus of any business to be acted upon at the Special Meeting
other than the proposal to approve the Merger Agreement. If 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.
RECORD DATE; VOTING RIGHTS; VOTE REQUIRED
The Bancorp Board has fixed the close of business on , 1996
as the record date for the determination of shareholders of Bancorp entitled
to receive notice of and to vote at the Special Meeting (the "Record Date").
On the Record Date there were outstanding 860,685 shares of Bancorp Common
Stock. Holders of Bancorp Common Stock are entitled to one vote per share held
of record on the Record Date. The presence in person or by proxy at the
Special Meeting of the holders of a majority of the shares of Bancorp Common
Stock outstanding on the Record Date will constitute a quorum for the
transaction of business at the Special Meeting.
Under the TBCA and the Bancorp Articles and Bancorp Bylaws, approval of
the Merger Agreement will require the affirmative vote of the holders of at
least two-thirds of the shares of Bancorp Common Stock. Directors and
executive officers of Bancorp and their affiliates beneficially owned as of
the Record Date an aggregate of 820,023, or approximately 95.3%, of the
outstanding shares of Bancorp Common Stock. Directors and executive officers
of Bancorp intend to vote all shares of Bancorp Common Stock held in their
individual capacities in favor of approval of the Merger Agreement. If at
least two-thirds of the votes eligible to be cast by the holders of Bancorp
Common Stock do not vote in favor of approval of the Merger Agreement, Bancorp
will continue to act as a separate entity and a going concern. A failure to
vote, either by not returning the enclosed proxy or by checking the "Abstain"
box thereon, will have the same effect as a vote against approval of the
Merger Agreement.
VOTING AND REVOCATION OF PROXIES
Shares of Bancorp 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 Bancorp 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 Bancorp 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 by 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
15
<PAGE>
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 will not be counted as voting in favor of such proposal. The proposal to
approve the Merger Agreement must be approved by the holders of at least two-
thirds of the shares of Bancorp Common Stock outstanding on the Record Date.
Because the proposal to approve the Merger Agreement 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.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees
of Bancorp may solicit proxies from the shareholders of Bancorp, 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. Bancorp will bear its own expenses in connection with any
solicitation of proxies for the Special Meeting. See "THE MERGER--Expenses."
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE TO
THE SHAREHOLDERS OF BANCORP. SHAREHOLDERS ARE URGED TO READ AND CAREFULLY
CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT-PROSPECTUS AND TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO
BANCORP IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
16
<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, a copy of
which is attached as Appendix A to this Proxy Statement-Prospectus and
incorporated herein by reference. Shareholders are urged to read the Merger
Agreement in its entirety.
Parenthetical references are to sections of the Merger Agreement.
GENERAL
At the Effective Time of the Merger, a wholly-owned subsidiary of Norwest
will be merged with and into Bancorp, with Bancorp being the surviving
corporation in the Merger. Following the Merger, Bancorp will be a wholly-
owned subsidiary of Norwest. Except with respect to remaining fractional
shares and shares as to which dissenters' rights have been exercised, if the
Merger is approved and becomes effective, each share of Bancorp Common Stock
outstanding immediately prior to the Effective Time of the Merger will be
automatically converted into and exchanged for the right to receive the
fraction of a share of Norwest Common Stock determined in accordance with the
Exchange Ratio. Following the Effective Time of the Merger, Norwest will be
the sole shareholder of Bancorp. Shares of Norwest Common Stock issued and
outstanding immediately before the Effective Time of the Merger will remain
issued and outstanding immediately after the Effective Time of the Merger.
BACKGROUND AND REASONS FOR THE MERGER
A majority of the Bancorp Board instructed its management to identify
opportunities for the sale of Bancorp because they believed that the current
economic conditions were prime for garnering an optimum price for the Bancorp
Common Stock. They also believed that there was little potential for the
market price of comparable banking organizations to maintain its lofty level.
In evaluating potential candidates for the acquisition of Bancorp, the Bancorp
Board determined that the best candidate would be a company whose stock is
listed on one of the major exchanges to create liquidity for the shareholders,
a company recognized as a high performing, well regarded, and highly rated
financial institution nationwide. In addition, the Bancorp Board determined
that the transaction price must be adequate in terms of total consideration
and that the transaction must be structured as a nontaxable stock for stock
exchange so that each individual shareholder would have the opportunity to
decide in the future whether he or she wished to continue with ownership of
the company.
The Bancorp Board believes the Merger will meet the criteria outlined
above and, for that reason, recommends that Bancorp's shareholders approve
the Merger.
MERGER CONSIDERATION
SHARES OF NORWEST COMMON STOCK. Except with respect to remaining
fractional shares as described below and shares as to which dissenters' rights
have been exercised, if the Merger Agreement is approved and the Merger
becomes effective, each share of Bancorp Common Stock outstanding immediately
prior to the Effective Time of the Merger will be automatically converted into
and exchanged for the fraction of a share of Norwest Common Stock determined
in accordance with the Exchange Ratio. The term "Exchange Ratio," as used
herein, means the fraction determined by dividing 762,500 by the number of
shares of Bancorp Common Stock outstanding immediately prior to the Effective
Time of the Merger. (Section 1(a)) As of the date of this Proxy Statement-
Prospectus, there are 860,685 shares of Bancorp Common Stock outstanding. The
Merger Agreement prohibits Bancorp from redeeming or issuing shares of Bancorp
Common Stock without the prior written consent of Norwest. (Section 4b) See
"--Conduct of Business Pending the Merger. Assuming there are 860,685 shares
of Bancorp
17
<PAGE>
Common Stock outstanding immediately prior to the Effective Time of the
Merger, the Exchange Ratio would equal 0.8859.
THE PRICE OF NORWEST COMMON STOCK, AND THUS THE VALUE OF THE
CONSIDERATION TO BE RECEIVED IN THE MERGER BY BANCORP'S SHAREHOLDERS, WILL
FLUCTUATE BETWEEN THE DATE OF THIS PROXY STATEMENT-PROSPECTUS AND THE
EFFECTIVE TIME OF THE MERGER. THERE CAN BE NO ASSURANCE THAT THE PRICE OF
NORWEST COMMON STOCK AS OF THE EFFECTIVE TIME OF THE MERGER WILL NOT BE
MATERIALLY LOWER THAN THE PRICE OF NORWEST COMMON STOCK AS OF THE DATE OF
THIS PROXY STATEMENT-PROSPECTUS OR AS OF THE DATE OF THE SPECIAL MEETING.
CASH IN LIEU OF REMAINING FRACTIONAL SHARES. In the event the aggregate
number of shares of Norwest Common Stock to be received in the Merger by a
Bancorp shareholder does not equal a whole number, the holder will receive
cash in lieu of the remaining fractional share. By way of illustration only,
assuming an Exchange Ratio of .8859, a holder of 1,000 shares of Bancorp
Common Stock would receive 885 shares of Norwest Common Stock and cash in lieu
of the remaining 0.9 share of Norwest Common Stock. The cash payment will be
equal to the product of the fractional part of the share of Norwest Common
Stock multiplied by the average of the closing prices of a share of Norwest
Common Stock as reported on the NYSE's composite tape for the five trading
days ending on the day immediately preceding the Special Meeting. (Section
1(c))
DISSENTERS' RIGHTS
The following is a summary of the rights of dissenting shareholders
pursuant to Texas law and does not purport to be a complete statement thereof.
The summary is qualified in its entirety by reference to Articles 5.11 through
5.13 of the TBCA, copies of which are set forth in full in Appendix C to this
Proxy Statement-Prospectus.
Record holders of Bancorp Common Stock will have the right under the TBCA
to dissent with respect to the Merger and, subject to certain conditions,
receive a cash payment equal to the fair value of their shares. ANY
SHAREHOLDER WHO WISHES TO ASSERT HIS OR HER DISSENTER'S RIGHTS MUST CAUSE
BANCORP TO RECEIVE, BEFORE THE SPECIAL MEETING, A WRITTEN OBJECTION TO THE
MERGER STATING THAT SUCH SHAREHOLDER'S RIGHT TO DISSENT WILL BE EXERCISED IF
THE MERGER IS EFFECTIVE AND GIVING THE SHAREHOLDER'S ADDRESS TO WHICH ANY
NOTICES SHOULD BE SENT, AND SUCH SHAREHOLDER MAY NOT VOTE ANY OF HIS OR HER
SHARES IN FAVOR OF THE MERGER AGREEMENT. VOTING AGAINST THE MERGER AGREEMENT
IS NOT SUFFICIENT, IN AND OF ITSELF, FOR A SHAREHOLDER TO ASSERT HIS OR HER
DISSENTER'S RIGHTS.
In the event Bancorp's shareholders approve the Merger Agreement at the
Special Meeting, Bancorp is required to deliver or mail a written notice to
all shareholders who are entitled to demand payment for their shares no later
than 10 days after the Effective Time of the Merger. Any shareholder to whom
a notice is sent by Bancorp and who desires to exercise his or her dissenter's
rights must, within 10 days from the delivery or mailing of Bancorp's notice,
make written demand on Bancorp for the payment of the fair value of his or her
shares. Pursuant to the TBCA, the fair value of the shares is the value
thereof as of the day immediately preceding the Special Meeting, excluding any
appreciation or depreciation in anticipation of the Merger. The demand must
state the number of shares owned by the shareholder and the fair value of the
shares as estimated by the shareholder. Any shareholder who does not demand
payment for his or her shares within the 10 day period is bound by the Merger.
Upon receiving a demand for payment from a dissenting shareholder, Bancorp
must make an appropriate notation of the demand in its shareholder records.
Within 20 days after making such demand, the dissenting shareholder must
submit his or her share certificates to Bancorp for notation thereon that
demand has been made.
Within 20 days after Bancorp's receipt of a demand from a dissenting
shareholder, it must deliver or mail to the shareholder a written notice that
either accepts the amount claimed in the shareholder's demand as the fair
value of the shares or sets forth Bancorp's estimate of the fair value of the
shares. If the shareholder's amount is accepted, the notice must state that
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Bancorp will pay that amount to the shareholder within 90 days after the
date the Merger was effected, upon surrender of the certificates for the
shareholder's shares, duly endorsed. If the notice includes Bancorp's
estimate of the fair value of the shares, such notice must also include an
offer to pay the amount of that estimate to the shareholder within 90 days
after the date the Merger was effected, upon receipt of notice within 60 days
after that date from the shareholder that he or she agrees to accept that
amount and surrenders the certificates for the shareholder's shares. The
failure of a dissenting shareholder to submit his or her share certificates
for notation terminates such shareholder's right to dissent, at the option of
Bancorp, unless a court of competent jurisdiction for good and sufficient
cause otherwise directs.
If, within 60 days after the date on which the Merger was effected, the
value of the shares is agreed upon by Bancorp and the dissenting shareholder,
then payment for the shares must be made by Bancorp to the shareholder within
90 days after the date on which the Merger was effected, upon the
shareholder's surrender of the certificates, duly endorsed. Upon payment of
the agreed value, the shareholder ceases to have any interest in the shares
or Bancorp.
If, however, within 60 days after the date on which the Merger was
effected, the dissenting shareholder and Bancorp do not agree upon the value
of the shares, then either may, within an additional 60 days after the
expiration of the first 60 day period, file a petition in any court of
competent jurisdiction in Ector County, Texas, asking the court to determine
the fair value of the shareholder's shares. If the petition is filed by the
shareholder, Bancorp must, within 10 days after service of the petition upon
it, file in the office of the clerk of the court a list containing the names
and addresses of all shareholders who have demanded payment for their shares
and with whom agreements as to the value of their shares have not been reached
by Bancorp. If the petition is filed by Bancorp, then the petition must be
accompanied by such list. The clerk of the court then gives notice of the
time and place fixed for the hearing by the court of the petition by
registered mail to Bancorp and each of the shareholders named on the list at
the addresses stated therein, and the shareholders as notified and Bancorp are
bound by the final judgment of the court.
After the hearing of the petition, the court determines the shareholders
who have complied with the foregoing procedure and become entitled to the
valuation of and payment for their shares and appoints one or more appraisers
to determine that value. The appraisers may examine the books and records of
Bancorp and are required to afford a reasonable opportunity to the interested
parties to submit pertinent evidence as to the value of the shares. The
appraisers then determine the fair value of the shares of all of the
shareholders entitled to payment for their shares and file their report of
that value in the office of the clerk of the court, who gives notice of such
filing to the parties in interest. After hearing any exceptions to the
report, the court then determines the fair value of the shares of all the
shareholders entitled to payment and directs Bancorp to pay that value,
together with interest thereon, beginning 91 days after the date on which the
Merger was effected until the date of the judgment, to the shareholders
entitled to payment, upon surrender of the certificates for their shares, duly
endorsed. Upon payment of the judgment, the dissenting shareholders cease to
have any interest in those shares or Bancorp. The court allows the appraisers
a reasonable fee as court costs, and all court costs are allotted between the
parties in a manner as the court determines to be fair and equitable.
Any shareholder who has demanded payment for his or her shares may
withdraw such demand at any time before payment for the shares or before any
petition is filed seeking a determination of the fair value of the shares and,
with the consent of Bancorp, after any such petition is filed. If (i) the
demand is withdrawn, (ii) Bancorp has terminated the shareholder's rights
under Article 5.12 because of the failure of the shareholder to submit the
certificates for his or her shares for notation of demand, (iii) no petition
is timely filed, or (iv) after hearing the petition, the court determines the
shareholder is not entitled to the relief provided by Article 5.12, then the
shareholder is conclusively presumed to have approved the Merger and is bound
thereby, and his or her status as a shareholder is restored and he or she is
entitled to receive any dividends paid to shareholders in the interim.
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In the absence of fraud, the remedy provided by Article 5.12 of the TBCA
to a shareholder objecting to the proposed Merger is the exclusive remedy for
the recovery of the value of his or her shares and, if Bancorp complies with
Article 5.12, then any shareholder who fails to comply with the requirements
of Article 5.12 is not entitled to bring suit for the recovery of the value of
his or her shares or money damages to the shareholder with respect to the
Merger.
SURRENDER OF CERTIFICATES
Promptly following the Effective Time of the Merger, Norwest Bank
Minnesota, National Association, acting in the capacity of exchange agent for
Norwest (the "Exchange Agent"), will mail to each holder of record of shares
of Bancorp 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 BANCORP 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
Bancorp 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, if applicable, a check for the amount representing any remaining
fractional share (without interest). 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 is 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 taxes have been paid or are not due.
All Norwest Common Stock issued pursuant to the Merger will be deemed
issued as of the Effective Time of the Merger. No dividends in respect of the
Norwest Common Stock with a record date after the Effective Time of the Merger
will be paid to the former shareholders of Bancorp entitled to receive
certificates for shares of Norwest Common Stock until such shareholders
surrender their certificates representing shares of Bancorp Common Stock.
Upon such surrender, there shall be paid to the stockholder in whose name the
certificates representing such shares of Norwest Common Stock are issued any
dividends the record and payment dates of which shall have been after the
Effective Time of the Merger and before the date of such surrender. After
such surrender, there shall be paid to the person in whose name the
certificate representing such shares of Norwest Common Stock is issued, on the
appropriate dividend payment date, any dividend on such shares of Norwest
Common Stock which shall have a record date after the Effective Time of the
Merger, as the case may be, and prior to the date of surrender, but a payment
date subsequent to the surrender. In no event shall the persons entitled to
receive such dividends be entitled to receive interest on amounts payable as
dividends.
CONDITIONS TO THE MERGER
CONDITIONS TO THE OBLIGATIONS OF NORWEST AND BANCORP. The obligations of
both Norwest and Bancorp to effect the Merger are subject to the satisfaction
as of the Effective Time of the Merger or, if permissible under the Merger
Agreement, waiver of a number of conditions, including, among others, the
following: (i) the approval of the Merger Agreement by the requisite vote of
Bancorp's shareholders; (ii) the receipt of all requisite regulatory
approvals; (iii) the absence of any order issued by any court or governmental
authority of competent jurisdiction restraining, enjoining or otherwise
prohibiting consummation of the Merger; and (iv) the effectiveness of the
Registration Statement. (Sections 6 and 7)
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CONDITIONS TO THE OBLIGATION OF BANCORP. The obligation of Bancorp to
effect the Merger is subject to the satisfaction as of the Effective Time of
the Merger or, if permissible under the Merger Agreement, waiver of certain
additional conditions, including, among others, the following: (i) the
performance by Norwest in all material respects of the agreements made by
Norwest in the Merger Agreement and the truthfulness in all material respects
of the representations made by Norwest in the Merger Agreement; (ii) the
approval for listing on the NYSE and CHX of the shares of Norwest Common Stock
to be issued in the Merger; and (iii) the receipt of an opinion of counsel to
Bancorp at the Closing regarding certain federal income tax consequences of
the Merger. (Section 6) See "-- U.S. Federal Income Tax Consequences."
CONDITIONS TO THE OBLIGATION OF NORWEST. The obligation of Norwest to
effect the Merger is subject to the satisfaction as of the Effective Time of
the Merger or, if permissible under the Merger Agreement, waiver of certain
additional conditions, including, among others, the following (i) the
performance by Bancorp in all material respects of the agreements made by
Bancorp in the Merger Agreement and the truthfulness in all material respects
of the representations made by Bancorp in the Merger Agreement; (ii) the
absence of any condition or requirement in any approval, license or consent
relating to the Merger that, in the good faith judgment of Norwest, is
unreasonably burdensome to Norwest; and (iii) at any time since June 3, 1996
(the date of the Merger Agreement) the total number of shares of Bancorp
Common Stock outstanding and subject to issuance upon exercise (assuming for
this purpose that phantom shares and other share equivalents constitute
Bancorp Common Stock) of all warrants, options, conversion rights (including
equity securities convertible into Bancorp Common Stock), phantom shares or
other share equivalents shall not have exceeded 860,685. Under the terms of
the Merger Agreement, the receipt by Norwest of an opinion of Bancorp's
independent auditors that the activities of Bancorp will not preclude the
Merger from being treated as a pooling of interests is also a condition to
Norwest's obligation to effect the Merger; however, Norwest intends to account
for the Merger as a purchase and therefore anticipates waiving this condition.
(Section 7) See "--Certain Additional Agreements."
See Sections 6 and 7 of the Merger Agreement for additional conditions to
the Merger becoming effective.
REGULATORY APPROVALS
The Merger is subject to prior approval by the Federal Reserve Board
under the Bank Holding Company Act. The approval of the Federal Reserve Board
was received on August 20, 1996. The Merger is also subject to certain filing
and other requirements of the Texas Department of Banking.
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 Bancorp are not aware of any governmental approvals or
compliance with banking laws and regulations that are required for the Merger
to become effective other than those described above. The parties currently
intend to seek to obtain any other approval and to take any other action that
may be required to effect the Merger. There can be no assurance that any
required approval or action can be obtained or taken prior to the Special
Meeting. The receipt of all necessary regulatory approvals is a condition to
effecting the Merger. See "--Conditions to the Merger" and "--Termination of
the Merger Agreement."
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CONDUCT OF BUSINESS PENDING THE MERGER
BY BANCORP. Bancorp and the Bank are required to maintain their
corporate existence in good standing, maintain the general character of their
businesses and conduct their businesses in the ordinary and usual manner. In
addition, without the prior written consent of Norwest, neither Bancorp nor
the Bank may (i) make any new loan or modify, restructure or renew any
existing loan (except pursuant to commitments made prior to the date of the
Merger Agreement) to any borrower if the amount of the resulting loan, when
aggregated with all other loans or extensions of credit to such person, would
exceed $100,000; (ii) enter into any material agreement, contract or
commitment exceeding $10,000 (other than banking transactions in the ordinary
course of business and in accordance with policies and procedures in effect on
the date of the Merger Agreement); (iii) make any investments except
investments by the Bank in the ordinary course of business for terms of up to
one year and in amounts of $100,000 or less; (iv) sell or otherwise dispose of
any shares of the Bank; (v) sell or otherwise dispose of any of its assets or
properties other than in the ordinary course of business; (vi) declare, set
aside, make or pay any dividend or other distribution with respect to its
capital stock (other than a dividend declared by the Bank's board of directors
in accordance with applicable law and regulation, provided that Bancorp may
declare and pay dividends out of year-to-date 1996 earnings, in accordance
with applicable law and regulation, in an aggregate amount not to exceed
$41,667 per month between December 31, 1995 and the Closing Date; (vii)
redeem, purchase or otherwise acquire, directly or indirectly, any of the
capital stock of Bancorp; or (viii) increase the compensation of any director,
officer or executive employee of Bancorp, except increases granted pursuant to
existing compensation plans and practices and any year-end bonuses awarded in
conformity with existing bonus award program. (Section 4)
BY NORWEST. Norwest is required 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 or by judicial orders, judgments and decrees applicable to them or
to their businesses or properties. (Section 5)
See Sections 4 and 5 of the Merger Agreement for additional restrictions
on the conduct of business by Bancorp and Norwest pending the Merger.
NO SOLICITATION
Bancorp and the Bank, and their respective directors, officers,
representatives and agents, are prohibited under the Merger Agreement from
directly or indirectly soliciting, authorizing the solicitation of or entering
into any discussions with any third party concerning any offer or possible
offer to (i) purchase (A) any shares of common stock, (B) any option or
warrant to purchase shares of common stock, (C) any security convertible into
shares of common stock or (D) any other equity security of Bancorp or the
Bank; (ii) make a tender or exchange offer for any shares of common stock or
other equity security of Bancorp or the Bank; (iii) purchase, lease or
otherwise acquire the assets of Bancorp or the Bank except in the ordinary
course of business; or (iv) merge, consolidate or otherwise combine with
Bancorp or the Bank. If any third party makes an offer or inquiry to Bancorp
or the Bank concerning any of the foregoing, Bancorp or the Bank, as
applicable, is required to promptly disclose such offer or inquiry (including
the terms thereof) to Norwest. (Section 4(h))
CERTAIN ADDITIONAL AGREEMENTS
BANCORP. Bancorp has also agreed under the Merger Agreement to (i) if
requested by Norwest, terminate or amend, effective as of the Effective Time
of the Merger, certain employee benefit plans of Bancorp and its subsidiaries;
(ii) establish such additional accruals and reserves as may be necessary to
conform Bancorp's accounting and credit loss reserve practices and methods to
those of Norwest and Norwest's plans with respect to the conduct of Bancorp's
business after the Effective Time of the Merger and to provide for costs and
expenses related to effecting the transactions contemplated by the Merger
Agreement; (iii) obtain and deliver
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environmental assessment reports on certain properties; (iv) obtain and
deliver title commitments and boundary surveys for each of its bank
facilities; and (v) use its best efforts to obtain and deliver to Norwest at
least 32 days prior to the Effective Time of the Merger signed representations
substantially in the form attached as Exhibit B to the Merger Agreement from
each executive officer, director of shareholder of Bancorp who may reasonably
be deemed an "affiliate" of Bancorp within the meaning of each term used in
Rule 145 of the Securities Act. (Section 4)
NORWEST. Norwest has agreed under the Merger Agreement to (i) take
certain action to maintain Bancorp's directors' and officers' liability
insurance policies in effect as of the date of the Merger Agreement; and (ii)
for a period of up to 15 days prior to the Closing, permit Bancorp and its
representatives to examine the books, records and properties of Norwest and to
interview officers, employees and agents of Norwest. (Section 5) For more
information concerning the directors' and officers' liability insurance
policies, see "--Interests of Certain Persons in the Merger."
For information concerning additional agreements and covenants of Bancorp
and Norwest, see Sections 4 and 5 of the Merger Agreement.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time of the Merger (i) by mutual written consent of the parties; (ii) by
either party by written notice to the other if the Merger has not become
effective by December 31, 1996, unless such failure of the Merger to become
effective 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 has issued a final order restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement; or (iv) by
Bancorp within five business days after the end of the Index Measurement
Period (as defined below) if both (A) the Norwest Measurement Price (as
defined below) is less than $30 and (B) the number obtained by dividing the
Norwest Measurement Price by 35.625 (the closing price of Norwest Common Stock
on the trading day immediately preceding the date of the Merger Agreement) is
less than the number obtained by dividing the Final Index Price (as defined
below) by the Initial Index Price (as defined below) and subtracting 0.15 from
such quotient. (Section 9)
For purposes of clause (iv) above:
(i) The "Company Market Capitalization" shall mean (a) the
price of one share of the common stock of a given company at the close of
the trading day immediately preceding the date of the Merger Agreement
multiplied by (b) the number of shares of common stock of such company
outstanding as of March 31, 1996 (adjusted for any stock dividend,
reclassification, recapitalization, exchange of shares or similar
transaction between March 31, 1996 and the close of the trading day
immediately preceding the date of the Merger Agreement).
(ii) The "Final Index Price" shall mean the sum of the
following, calculated for each of the companies in the Index Group: (a)
the Final Price for each such company multiplied by (b) the Weighting
Factor (as defined below) for each such company.
(iii) The "Final Price" of any company in the Index Group shall
mean the average of the daily closing prices of a share of common stock
of such company, as reported on the consolidated transaction reporting
system for the market or exchange on which such common stock is
principally traded, during the Index Measurement Period.
(iv) The "Index Group" shall mean all of those companies listed
below the common stock of which is publicly traded and as to which there
is, during the period of 20
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trading days ending on the date immediately preceding the Special Meeting
(the "Index Measurement Period"), no pending publicly announced proposal
for such company to be acquired, nor has there been any proposal by such
company publicly announced subsequent to the day before the date of the
Merger Agreement to acquire another company in exchange for stock where,
if the company to be acquired were to become a subsidiary of the
acquiring company, the company to be acquired would be a "significant
subsidiary" as defined in Rule 1-02 of Regulation S-X promulgated by the
SEC nor has there been any program publicly announced subsequent to the
date before the date of the Merger Agreement to repurchase 5% or more of
the outstanding shares of such company's common stock: BancOne
Corporation, Bank of Boston Corporation, Bank of New York, BankAmerica
Corporation, Barnett Banks, Inc., Boatmen's Bancshares, Comerica, Inc.,
CoreStates Financial Corporation, First Bank System, Inc., First Chicago
NBD Corporation, First Union Corporation, Fleet Financial, KeyCorp,
Mellon Bank Corporation, National City Corporation, Nations Bank, PNC
Financial Corporation, Signet Banking Corporation, Suntrust Banks, Inc.,
U.S. Bancorp, Wachovia Corporation and Wells Fargo.
(v) The "Initial Index Price" shall mean the sum of the
following, calculated for each of the companies in the Index Group: (a)
the closing price per share of common stock of each such company on the
trading day immediately preceding the date of the Merger Agreement
multiplied by (b) the Weighting Factor (as defined below) for each such
company.
(vi) 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 Index
Measurement Period.
(vii) The "Total Market Capitalization" shall mean the sum of
the Company Market Capitalization for each of the companies in the Index
Group.
(viii) The "Weighting Factor" for any given company shall mean
the Company Market Capitalization for such company divided by the Total
Market Capitalization.
If a Common Stock adjustment occurs with respect to the shares of Norwest
or any company in the Index Group between the date of the Merger Agreement and
the Special Meeting, the closing prices for the common stock of such company
shall be appropriately and proportionately adjusted for the purposes of the
definitions above so as to be comparable to what the price would have been if
the record date of the Common Stock adjustment had been immediately following
the Effective Time of the Merger.
AMENDMENT OF MERGER AGREEMENT
The Merger Agreement may be amended by the parties thereto, pursuant to
action taken by their respective boards of directors or pursuant to authority
delegated by their respective boards of directors, at any time before or after
approval of the Merger Agreement by Bancorp's shareholders, provided that,
after the Merger Agreement is approved by Bancorp's shareholders, no amendment
can be made to the Merger Agreement that changes in a manner materially
adverse to Bancorp's shareholders the consideration to be received by
Bancorp's shareholders in the Merger. (Section 17)
WAIVER OF PERFORMANCE OF OBLIGATIONS
Any of the parties to the Merger Agreement may, by a signed writing, give
any consent, take any action with respect to the termination of the Merger
Agreement or otherwise, or waive any of the inaccuracies in the
representations and warranties of the other party or compliance by the other
party with any of the covenants or conditions contained in the Merger
Agreement. (Section 16)
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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 Bancorp shall be entitled
to participate in those Norwest employee benefit and welfare plans specified
in the Merger Agreement. The eligible employees of Bancorp 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 Time of the Merger. Bancorp's employees
will generally continue to participate in welfare and retirement plans
maintained by Bancorp until entering Norwest's plans. Eligible Bancorp
employees will receive credit for past service for the purpose of determining
certain benefits under certain but not all of Norwest's benefit plans.
(Section 8)
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Bancorp's management and the Bancorp Board may be
deemed to have interests in the Merger in addition to their interests as
shareholders of Bancorp generally. The Bancorp Board was aware of these
interests and considered them, among other matters, in unanimously approving
the Merger Agreement and the transactions contemplated thereby.
INDEMNIFICATION, INSURANCE. In the Merger Agreement, Norwest has agreed
that all rights to indemnification and all limitations of liability in the
Bancorp Articles or Bancorp Bylaws, existing in favor of any person who is,
has been or becomes prior to the Effective Time of the Merger, a director or
officer of Bancorp or the Bank, shall survive the Merger and continue in full
force and effect. These rights to indemnification and limitations of
liability are to survive with respect to all claims arising from (i) facts or
events that occurred before the Effective Time of the Merger, or (ii) the
Merger Agreement or the transaction contemplated thereby.
Norwest has also agreed, for a period of three years after the Effective
Time of the Merger, to use its best efforts to cause to be maintained in
effect the current policies of directors' and officers' liability insurance
maintained by Bancorp (provided that Norwest may substitute therefor policies
of at least the same coverage and amounts, containing terms and conditions
which are substantially no less advantageous) with respect to claims arising
from facts or events which occurred before the Effective Time of the Merger.
However, Norwest is not obligated to expend, in order to maintain such
insurance coverage, an amount per year in excess of 125% of the amount of the
annual premiums paid as of the date hereof by Bancorp (the "Maximum Amount").
If the amount of the annual premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, Norwest is obligated to use
reasonable efforts to obtain as much comparable insurance as can be obtained
for the Maximum Amount.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the Merger that are generally applicable to Bancorp's
shareholders. The discussion is based on currently existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
promulgated and proposed thereunder, published Internal Revenue Service
rulings and pronouncements and court decisions as in effect on the date
hereof. All of the above authorities are subject to change (possibly
retroactive) by legislative, administrative or judicial action. Any such
change could alter the tax consequences described herein. The following
discussion is intended only as a summary of certain principal federal income
tax consequences of the Merger and does not purport to be a complete analysis
or listing of all of the potential tax effects relevant to a decision on
whether to vote in favor of approval of the Merger Agreement.
The parties expect the Merger to qualify as a reorganization under
Section 368(a) of the Code. Except for cash received in lieu of remaining
fractional share interest in Norwest Common Stock, holders of shares of
Bancorp Common Stock will recognize no gain or loss on
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the receipt of Norwest Common Stock in exchange therefor. The Merger's
effectiveness is conditioned upon the receipt by Bancorp of a written opinion
of Thompson & Knight, a Professional Corporation, counsel to Bancorp,
substantially to the effect that, for U.S. 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 Bancorp Common Stock upon receipt of Norwest
Common Stock except for cash received in lieu of fractional shares; and (iii)
the basis of the Norwest Common Stock received by the shareholders of Bancorp
will be the same as the basis of the Bancorp Common Stock exchanged therefor,
decreased by the tax basis allocated to any fractional share interest
exchanged for cash; and (iv) the holding period of the shares of Norwest
Common Stock received by the shareholders of Bancorp will include the holding
period of the Bancorp Common Stock exchanged therefor, provided such shares
were held as a capital asset as of the Effective Time of the Merger.
The form of the opinion of counsel, the original of which will be
delivered on the Closing Date, is filed as an exhibit to the Registration
Statement. The foregoing discussion is only a summary of the tax consequences
as described in the opinion. An opinion of counsel only represents counsel's
best legal judgment and has no binding effect or official status of any kind,
and no assurance can be given that contrary positions may not be taken by the
Internal Revenue Service (the "IRS") or a court considering the issues.
Neither Bancorp nor Norwest has requested or will request a ruling from the
IRS with regard to the federal income tax consequences of the Merger.
The foregoing tax consequences may not be applicable to Bancorp
shareholders subject to special treatment under certain federal income tax
laws, such as dealers in securities, banks, insurance companies, tax-exempt
entities, non-United States persons, and stockholders who acquired Bancorp
stock pursuant to the exercise of Bancorp options or otherwise as
compensation.
THE FOREGOING IS A GENERAL SUMMARY OF THE MATERIAL U.S. FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO BANCORP SHAREHOLDERS, WITHOUT REGARD TO THE
PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION AND
STATUS. EACH BANCORP SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING ANY SUCH SPECIFIC TAX SITUATION AND STATUS, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND THE
POSSIBLE EFFECT OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
RESALE OF NORWEST COMMON STOCK
The shares of Norwest Common Stock issuable to shareholders of Bancorp
upon the Merger becoming effective 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 Bancorp or Norwest as that term
is defined in the rules under the Securities Act. Norwest Common Stock
received by those shareholders of Bancorp who are deemed to be "affiliates" of
Bancorp 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 Bancorp generally include individuals or entities that control,
are controlled by or are under common control with, Bancorp and may include
the executive officers and directors of Bancorp as well as certain principal
shareholders of Bancorp. In the Merger Agreement, Bancorp has agreed to use
its best efforts to cause each shareholder who may reasonably be deemed to be
an affiliate of Bancorp to enter into an agreement with Norwest concerning the
sale, transfer or other disposition of the shares of Norwest Common Stock to
be received by such person in the Merger. (Section 4(l)) This Proxy
Statement-Prospectus does not cover any resales of Norwest Common Stock
received by affiliates of Bancorp.
STOCK EXCHANGE LISTING
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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 the Merger becoming effective. Consummation of the Merger
is conditioned on the authorization for listing of such shares on the NYSE and
CHX. (Section 6)
ACCOUNTING TREATMENT
Norwest intends to account for the Merger as a purchase under generally
accepted accounting principles.
EXPENSES
Except as otherwise provided in the Merger Agreement, Norwest and Bancorp
will each pay their own expenses in connection with the Merger, including fees
and expenses of their respective independent auditors and counsel.
COMPARISON OF RIGHTS OF HOLDERS OF
BANCORP COMMON STOCK AND NORWEST COMMON STOCK
GENERAL
Bancorp is incorporated under the laws of the state of Texas. Norwest is
incorporated under the laws of the state of Delaware. The rights of Bancorp's
shareholders are currently governed by the TBCA and the Bancorp Articles and
Bancorp Bylaws. If Bancorp's shareholders approve the Merger Agreement and
the Merger becomes effective, shareholders of Bancorp will become stockholders
of Norwest. For that reason, after the Effective Time of the Merger, their
rights will be governed by the DGCL and the Norwest Certificate and Norwest
Bylaws.
The following is a comparison of certain rights of holders of Bancorp
Common Stock with the rights of holders of Norwest Common Stock. It is not
intended to be complete and is qualified in its entirety by reference to the
relevant provisions of the laws and documents discussed below. Additional
information concerning the rights of holders of Norwest Common Stock is
provided in Norwest's current report on Form 8-K dated April 30, 1996 filed
with the Commission and incorporated herein by reference. See "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE."
DIRECTORS
BANCORP. The Bancorp Bylaws provide that the Bancorp Board shall consist
of six directors.
NORWEST. The Norwest Bylaws provide for a board of directors consisting
of not less than 10 nor more than 23 persons, each serving for a term of one
year or until his or her earlier death, resignation or removal. The number of
directors of Norwest is currently fixed at 14. Directors of Norwest may be
removed with or without cause by the affirmative vote of the holders of a
majority of the shares of Norwest capital stock entitled to vote thereon.
Vacancies on the Norwest Board may be filled by a majority of the remaining
directors or, in the event a vacancy is not so filled or if no director
remains, by the stockholders. Directors of Norwest are elected by plurality
of the votes of shares of Norwest capital stock entitled to vote thereon
present in person or by proxy at the meeting at which directors are elected.
The Norwest Certificate does not currently permit cumulative voting in the
election of directors. See "NORWEST CAPITAL STOCK AND RIGHTS--Common Stock."
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AMENDMENT OF ARTICLES OR CERTIFICATE OF INCORPORATION AND BYLAWS
BANCORP. Under the TBCA, certain amendments to the articles of
incorporation require the affirmative vote of the holders of at least two-
thirds of the outstanding shares entitled to vote thereon, unless any class or
series of shares is entitled to vote thereon as a class, in which event the
proposed amendment shall be adopted upon receiving the affirmative vote of the
holders of at least two-thirds of the shares within each class or series
entitled to vote thereon as a class and of at least two-thirds of the total
outstanding shares entitled to vote thereon. The Bancorp Bylaws provide that
the Bylaws may be amended by a majority of the Bancorp Board.
NORWEST. The Norwest Certificate may be amended only if the proposed
amendment is approved by the Norwest Board and thereafter approved by a
majority of the outstanding stock entitled to vote thereon and by a majority
of the outstanding stock of each class entitled to vote thereon as a class.
The Norwest Bylaws may be amended by a majority of the Norwest Board or by a
majority of the outstanding stock entitled to vote thereon. Shares of Norwest
Preferred Stock and Norwest Preference Stock currently authorized in the
Norwest Certificate may be issued by the Norwest Board without amending the
Norwest Certificate or otherwise obtaining the approval of Norwest's
stockholders. See "NORWEST CAPITAL STOCK AND RIGHTS--Preferred Stock and
Preference Stock."
SHAREHOLDER OR STOCKHOLDER APPROVAL OF MERGERS AND ASSET SALES
In addition to being subject to the laws of Texas and Delaware,
respectively, as discussed below, both Bancorp 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 PERTAINING TO NORWEST."
BANCORP. The TBCA requires certain mergers to be approved by holders of
at least two-thirds of the outstanding shares entitled to vote thereon, unless
there is a class of stock that is entitled to vote as a class, in which event
the merger must be approved by the holders of two-thirds of the outstanding
shares of each class of stock entitled to vote as a class and by the holders
of two-thirds of the outstanding shares otherwise entitled to vote; provided
that the articles of incorporation may require a vote of a different number,
not less than a majority, of the shares outstanding. The Bancorp Articles do
not provide for a different number of shares for approval of a merger. For
that reason, as described above, the affirmative vote of at least two-thirds
of the Bancorp Common Stock is required for a merger with Norwest.
NORWEST. Except as described below, the affirmative 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 sale,
lease or exchange of all or substantially all of Norwest's corporate assets.
No vote of the stockholders is required, however, in connection with a merger
in which Norwest is the surviving corporation and (i) the agreement of merger
for the merger does not amend in any respect the Norwest 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.
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APPRAISAL RIGHTS
BANCORP. Shareholders of Texas corporations are entitled to exercise
certain dissenters' rights in the event of a sale, lease, exchange, or other
disposition of all, or substantially all, of the property and assets of the
corporation, and with the exception discussed below, a merger or
consolidation. Under Section 5.11 of the TBCA, however, shareholders do not
have dissenters' rights if, in connection with a merger, the stock of the
corporation held by the shareholder is either listed on a national securities
exchange or is held of record by not less than 2,000 shareholders and,
pursuant to the plan of merger, such shareholder is not required to accept for
his shares any consideration other than (a) shares of stock of a corporation
which, immediately after the effective date of the merger, (i) are listed on a
national securities exchange or (ii) are held of record by not less than 2,000
shareholders, and (b) cash in lieu of fractional shares otherwise entitled to
be received. A Bancorp shareholder will receive merger consideration that
satisfies the provisions of subsections (a) and (b) above; however, because
the Bancorp Common Stock is not listed on a national securities exchange and
is held of record by fewer than 2,000 holders, dissenters rights will be
available to Bancorp shareholders. See "THE MERGER--Dissenters' Rights."
NORWEST. Section 262 of the DGCL provides for stockholder appraisal
rights in connection with mergers and consolidations generally; however,
appraisal rights are not available to holders of any class or series of stock
that, at the record date fixed to determine stockholders entitled to receive
notice of and to vote at the meeting to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 stockholders, so long as stockholders receive shares
of the surviving corporation or another corporation whose shares are so listed
or designated or held by more than 2,000 stockholders. Norwest Common Stock
is listed on the NYSE and the CHX and currently held by more than 2,000
stockholders. For these reasons, assuming that the other conditions described
above are satisfied, holders of Norwest Common Stock will not have appraisal
rights in connection with mergers and consolidations involving Norwest.
SPECIAL MEETINGS
BANCORP. Under the TBCA, a special meeting of shareholders of a Texas
corporation may be called by either (a) the president, the board of directors,
or such other person or persons as authorized by the articles of incorporation
or the bylaws, or (b) the holders of shares entitled to cast not less than ten
percent (10%) of all shares entitled to vote at the meeting, unless a
different percentage, not to exceed fifty percent (50%), is provided for in
the articles of incorporation.
NORWEST. Under the DGCL, special meetings of stockholders may be called
by the board of directors or by such persons as may be authorized in the
certificate of incorporation or bylaws. The Norwest Bylaws provide that a
special meeting of stockholders may be called only by the Chairman of the
Board, a Vice Chairman, the President or a majority of the Norwest Board. As
such, holders of Norwest Common Stock do not have the ability to call a
special meeting of stockholders.
ACTION WITHOUT A MEETING
BANCORP. Under the TBCA, shareholders may act without a meeting if a
consent in writing to such action is signed by all shareholders; provided,
however, that the articles of incorporation may provide that any action
required or permitted to be taken at a shareholder's meeting may be taken
without a meeting pursuant to the written consent of the holders of the number
of shares that would have been required to effect the action at an actual
meeting of the shareholders.
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NORWEST. As permitted by Section 228 of the DGCL and the Norwest
Certificate, any action required or permitted to be taken at a stockholders'
meeting may be taken without a meeting pursuant to the written consent of the
holders of the number of shares that would have been required to effect the
action at an actual meeting of the stockholders.
LIMITATION OF DIRECTOR LIABILITY
BANCORP. The Texas Miscellaneous Corporation Laws Act permits a
corporation to set limits on the extent of a director's liability. The
Bancorp Articles limit, to the fullest extent now or hereafter permitted by
the TBCA, liability of Bancorp's directors to Bancorp or its shareholders for
monetary damages for a breach of such director's fiduciary duty. This
provision presently limits a director's liability except for (1) a breach of
duty of loyalty to Bancorp or its shareholders, (2) a failure to act in good
faith that constitutes a breach of duty to Bancorp or where a director engages
in intentional misconduct or knowingly violates the law, (3) a transaction
from which the director obtains an improper benefit, and (4) an act or
omission for which liability is expressly provided for by statute.
NORWEST. The Norwest Certificate provides that a director (including an
officer who is also a director) of Norwest shall not be liable personally to
Norwest or its stockholders for monetary damages for breach of fiduciary duty
as a director, except for liability arising out of (i) any breach of the
director's duty of loyalty to Norwest or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) payment of a dividend or approval of a stock
repurchase in violation of Section 174 of the DGCL, or (iv) any transaction
from which the director derived an improper personal benefit. This provision
protects Norwest's directors against personal liability for monetary damages
from breaches of their duty of care. It does not eliminate the director's
duty of care and 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.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
BANCORP. TBCA provides that a corporation may indemnify an individual
only if the individual (i) acted in good faith, (ii) in a manner he reasonably
believed, in the case of conduct in his official capacity, was in the
corporation's best interests and, in all other cases, that his conduct was at
least not opposed to the corporation's interests, and (iii) in the case of any
criminal proceeding, had no reasonable cause to believe that his conduct was
unlawful. The Bancorp Articles provide that directors shall be indemnified,
and officers and employees may be indemnified against liabilities arising from
their service as directors, officers, (or serving at the request of Bancorp as
director, officer, partner, venturer, proprietor, trustee, employee, agent, or
similar functionary of another entity) to the fullest extent permitted by law,
including (upon receipt of a written affirmation of such individual's good
faith belief that he has met the standard of conduct required for
indemnification, and an undertaking to repay such advances if the officer or
director is found to have not met the required standard of conduct) payment in
advance of a final disposition of a director's or officer's expenses and
attorneys' fees incurred in defending any action, suit or proceeding, other
than in the case of an action, suit or proceeding brought about by Bancorp on
its own behalf against an officer. See THE MERGER"--Interests of Certain
Persons in the Merger."
NORWEST. The Norwest Certificate 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
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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 Norwest Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
DIVIDENDS
In addition to restrictions imposed under Texas and Delaware law,
respectively, as discussed below, Norwest and Bancorp are subject to Federal
Reserve Board policies regarding payment of dividends, which generally limit
dividends to operating earnings. See "CERTAIN REGULATORY CONSIDERATIONS
PERTAINING TO NORWEST."
BANCORP. Under the TBCA, a Texas corporation may make distributions only
out of surplus. Holders of Bancorp Common Stock are entitled to receive
dividends ratably when, as and if declared by the Bancorp Board from assets
legally available therefor, after payment of all dividends on Bancorp
preferred stock.
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.
PROPOSAL OF BUSINESS, NOMINATION OF DIRECTORS
BANCORP. The Bancorp Bylaws provide that special meetings of
shareholders of Bancorp may be called by the Chairman of the Board, the
President, the Board of Directors, or holders of at least ten percent of the
outstanding shares.
NORWEST. The Norwest Bylaws contain detailed advance notice and
informational procedures which must be complied with in order for a
stockholder to nominate a person to serve as a director. The Norwest Bylaws
generally require a stockholder to give notice of a proposed nominee in
advance of the stockholders meeting at which directors will be elected. In
addition, the Norwest Bylaws contain detailed advance notice and informational
procedures which must be followed in order for a Norwest stockholder to
propose an item of business for consideration at a meeting of Norwest
stockholders.
INFORMATION CONCERNING BANCORP
GENERAL
Bancorp is a Texas bank holding company, incorporated in 1986. Bancorp
maintains its principal office at 4101 North JBS Parkway, Odessa, Texas 79762.
Its telephone number is (915) 368-0931.
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Bancorp derives all of it revenues and income from the operation of Texas
Bank. Texas Bank provides a full range of commercial and consumer banking
services to individuals and small and middle market businesses in the Permian
Basin as well as Central Texas. Texas Bank operates two full service branches
in Odessa, Texas, two in Austin, Texas, and one each in Pflugerville, Dripping
Springs, Burnet, Kingsland, and Buchanan Dam, Texas.
TEXAS BANK
Texas Bank conducts a general commercial and consumer banking business,
which includes the acceptance of deposits from consumers and the origination
of commercial, real estate, installment, and other loans. Texas Bank also
provides investment services through an outside vendor, Investment
Professional Services, Incorporated. Deposit services include certificates of
deposit, individual retirement accounts and other time deposits, checking and
other demand deposit accounts, interest-bearing checking accounts, savings
accounts, and money market accounts. Loans consist of commercial loans to
small and middle market businesses, loans to individuals, and commercial real
estate loans, residential mortgage loans, and construction loans.
Although Texas Bank provides a full range of commercial and consumer
banking services, it also seeks to distinguish itself in the products and
services it offers. Texas Bank, with nine full service banking facilities,
25 drive-through lanes, and eight strategically located ATMs in the various
communities it serves, has historically provided banking services to small and
middle market businesses and individuals. Texas Bank originated in 1982 as
Texas National Bank of Odessa to develop a strong community identity and name
recognition. As part of its community focus, Texas Bank has implemented
certain banking programs specially tailored to the needs of its customers.
Texas Bank has distinguished itself in the SBA lending arena by being elevated
to "Preferred Lender" status by the SBA, which few institutions have achieved.
Texas Bank has also developed a particular market in each of its communities
related to the purchase of indirect installment loans (dealer paper). As of
December 31, 1995 this dealer paper amounted to 11.81% of Texas Bank's total
loans outstanding. This type of installment financing is attractive due to
its higher than average yields as well as relatively short maturities.
In 1990 and 1991 Texas Bank entered into purchase and assumption
agreements with the FDIC to purchase the failed Southwest National Bank,
Austin, Texas and Dripping Springs National Bank, Dripping Spring, Texas. As
part of these transactions Texas Bank assumed a substantial part of the
deposit liabilities of the failed organizations and acquired most of the
assets of those organizations. Texas Bank's winning bids on these
organizations permitted the Bank to purchase the failed banks' loans at a
discount from the outstanding loan balances. This discount has been used in
part to offset losses in the assets acquired, particularly the loan portfolio,
and in part to accrete into income and has a balance as of December 31, 1995
of approximately $937,000.
In 1995, Bancorp acquired the outstanding common stock of Lake Buchanan
State Bank, a state chartered bank in Buchanan Dam, Texas. Lake Buchanan
State Bank was merged into Texas Bank in April 1995.
NONBANKING ACTIVITIES
Bancorp does not engage in any activities or businesses other than the
ownership of Texas Bank. Texas Bank currently leases space to Investment
Professionals Incorporated ("IPI") of San Antonio, Texas, which is a full
service broker dealer in all types of securities. IPI provides a full range
of investment opportunities for customers of Texas Bank in a separately
identified area in the lobby of the Bank. Currently two brokers are employed
by IPI which work solely in the offices of Texas Bank. One employee covers
the two Odessa facilities and the other employee rotates among all seven of
the Central Texas branches. Total IPI rental income for 1995 amounted to
$104,000.
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COMPETITION
Texas Bank encounters strong competition in making loans and attracting
deposits. The state of Texas permits statewide branch banking and statewide
savings and loan branching. Moreover, Texas Bank competes with other
commercial and savings banks, savings and loan associations, credit unions,
finance companies, mutual funds, insurance companies, brokerage and investment
banking companies, and certain other nonfinancial institutions in the Permian
Basin and Central Texas area. The continued liberalization of the banking and
securities industries may also increase competitive pressures on Texas Bank.
Management of Texas Bank believes it is well positioned to compete
successfully in its primary market areas, although no assurances can be given
in this regard. Competition among financial institutions is based upon
interest rates offered on deposit accounts, interest rates charged on loans,
other credit and service charges, the quality and scope of the services
offered, the convenience of banking facilities, and, in the case of loans to
commercial borrowers, relative lending limits. In particular, Texas Bank
expects to encounter continued and increased competition in the indirect
dealer paper market, mortgage loan generation, and SBA lending areas.
Management believes, however, that Texas Bank's long-term presence, local
expertise, and ongoing commitment to the community, as well as its commitment
to quality and personalized banking services, are factors that contribute to
the Bank's competitiveness.
REGULATION AND SUPERVISION
REGULATION OF BANCORP. Bancorp is a bank holding company within the
meaning of the Bank Holding Company Act and therefore is subject to regulation
and supervision by the Federal Reserve Board. As such, Bancorp is required to
file reports with and furnish such other information as the Federal Reserve
Board may require pursuant to the Bank Holding Company Act, and to subject
itself to examination by the Federal Reserve Board.
As a bank holding company, Bancorp is required to obtain approval prior
to merging or consolidating with any other bank holding company, acquiring all
or substantially all of the assets of any bank or acquiring ownership of
shares of a bank or bank holding company if, after the acquisition, Bancorp
would directly or indirectly own or control 5% or more of the voting shares of
such bank or bank holding company.
Bancorp is also prohibited from acquiring a direct or indirect interest
in or control of more than 5% of the voting shares of any company which is not
a bank or bank holding company and from engaging directly or indirectly in
activities other than those of banking, managing or controlling banks or
furnishing services to its subsidiary banks, except that it may engage in and
may own shares of companies engaged in certain activities found by the Federal
Reserve Board to be so closely related to banking or managing and controlling
banks as to be a proper incident thereto.
Under the Bank Holding Company Act and the Federal Reserve Board's
regulations, a bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services.
REGULATION OF TEXAS BANK. Texas Bank is a state banking association and
is therefore subject to regulation, supervision, and examination by the Texas
Department of Banking (the "Banking Department") and the FDIC. Texas Bank is
also a member of the FDIC. Requirements and restrictions under the laws of
the state of Texas and the United States include the requirement that reserves
be maintained against deposits, restrictions on the nature and the amount of
loans which can be made, restrictions on the business activities in which a
bank may engage, restrictions on the payment of dividends to stockholders, and
minimum capital requirements.
There are certain limitations on the payment of dividends by Texas state
banks. At December 31, 1995, approximately $2,148,000 was available for
declaration of dividends by Texas Bank without prior regulatory approval.
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The Banking Department and the FDIC are authorized by legislation to take
various enforcement actions against any significantly undercapitalized state
bank and any state bank that fails to submit an acceptable capital restoration
plan or fails to implement a plan accepted by the FDIC. Based on its capital
ratio as of December 31, 1995, Texas Bank was classified as "well capitalized"
under the applicable regulations.
CURRENT REGULATORY ISSUES. Under the Federal Reserve Board's risk-based
capital guidelines for bank holding companies, Bancorp is required to maintain
minimum Tier 1 and total capital to risk-adjusted assets ratios of 4% and 8%,
respectively, and a minimum "leverage ratio" of 3%. At June 30, 1996 and
December 31, 1995 and 1994, Bancorp's Tier 1 and total capital to risk-
adjusted assets ratio and its leverage ratio were as follows:
<TABLE>
<CAPTION>
December 31
-----------
June 30,1996 1995 1994
------------- ---- ----
<S> <C> <C> <C>
Tier 1 to risk-adjusted assets 10.84% 9.99% 11.37%
Total capital to risk-adjusted assets 11.84% 10.96% 12.53%
Leverage ratio 8.90% 8.33% 9.23%
</TABLE>
For a general discussion of the Federal Reserve Board's risk-based capital
guidelines and the criteria applied to calculate the ratios, see "CERTAIN
REGULATORY CONSIDERATIONS PERTAINING TO NORWEST - Capital Requirements." For
information concerning similar risk-based capital ratios for Texas Bank, see
"INFORMATION CONCERNING BANCORP--Capital Resources."
Effective January 1, 1993, the FDIC imposed deposit premiums based on a
risk-based assessment system, requiring well capitalized institutions to pay
$0.23 per $100 of insured deposits. The rates increased incrementally to a
top rate of $0.31 per $100 of deposits for the weakest banks. Based on the
risk category applicable to Texas Bank through June 1995, the premium paid by
it was $0.23 per $100 of deposits.
In August 1995, the FDIC voted to reduce significantly the deposit
insurance premiums paid by institutions insured by the Bank Insurance Fund
("BIF") to a range of 4 to 31 basis points per $100 of deposits. On September
15, 1995, the FDIC refunded overpayments on insurance premiums for the months
June through September 1995, and Texas Bank was assessed a rate of 4 basis
points per $100 of deposits for the fourth quarter of 1995.
On November 14, 1995 the FDIC approved reducing the assessment rates
applicable to BIF-insured institutions to a range of zero to 27 basis points
from the previous range of 4 to 31 basis points. Deposit insurance premiums
for Subgroup A institutions were reduced to zero beginning with the January 1,
1996 assessment period. Banks within the Subgroup A category will be required
to pay $1,000 per semiannual period as mandated by statute. Texas Bank was
within the Subgroup A category as of December 31, 1995. For a general
discussion concerning the criteria applied by the FDIC to determine an
institution's insurance premium assessment rate, see "CERTAIN REGULATORY
CONSIDERATIONS PERTAINING TO NORWEST--FDIC Insurance."
In December 1991, the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") was signed into law by President Bush. FDICIA
increased the regulatory burden on financial institutions and imposed
substantial actual and incidental costs on the institutions and their
customers. See "CERTAIN REGULATORY CONSIDERATIONS PERTAINING TO NORWEST--
Federal Deposit Insurance Corporation Improvement Act of 1991."
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EMPLOYEES
Bancorp and its subsidiary, Texas Bank, had 104 full-time equivalent
employees as of June 30, 1996. None of the employees are represented by any
collective bargaining agreement and management believes its employee relations
are good. Bancorp and its subsidiary are equal opportunity employers and
provide equal employment opportunities to individuals without regard to race,
sex, age, national origin, religion, veteran status, or handicap.
PROPERTIES
Bancorp's principal executive offices are located at 4101 North JBS
Parkway, Odessa, Texas 79762, which also serves as headquarters of Texas Bank,
its wholly owned subsidiary. Texas Bank operates eight other branches in
various locations in Odessa, Texas and Central Texas. Texas Bank owns the
facilities at 4101 North JBS Parkway as well as its downtown Odessa location
at 7th and Texas in Odessa. Texas Bank also owns its drive-in facility in
Southwest Austin at 1900 William Cannon Drive, its Dripping Springs facility
at 401 Mercer, its Burnet location at 1003 Buchanan Dr., its Kingsland
location at Highway 1431 & Reynolds Street, and 5.5 acres in Pflugerville,
which is held for future expansion. Additionally, Texas Bank leases the main
lobby at 1901 W. Wm. Cannon of its Southwest Austin location, its Medical
Center location at 11149 Research Boulevard, Austin, Texas, its Pflugerville
location at 116 FM 1825 East, and its Buchanan Dam location at the corner of
Highway 1431 & Highway 29, Buchanan Dam, Texas. Each lease carries varying
terms and prices which are at or below the market rates in the areas in which
they are located. No problems are anticipated in renewing and or renegotiating
leases at this time.
LEGAL PROCEEDINGS
Bancorp and Texas Bank are parties to or otherwise involved in legal
proceedings arising through the normal course of business, such as claims to
enforce liens, claims related to making and servicing real property loans, and
other issues incident to the business of Bancorp and Texas Bank. Management
does not believe there are any proceedings threatened or pending against
Bancorp or Texas Bank which, if determined adversely, would have a material
adverse effect on the financial position or results of operations of Bancorp.
DESCRIPTION OF SECURITIES
Bancorp has authorized capital stock consisting of 1,000,000 shares of
Common Stock with a par value of $0.01 per share and 1,000,000 shares of
preferred stock with a par value of $10.00 per share. At the Record Date,
there were 860,685 shares of Common Stock outstanding. There are no
outstanding shares of any other equity security at this time.
Holders of shares of Bancorp Common Stock are entitled to one vote for
each share owned of record on all matters to be voted upon by the
shareholders. Holders of Bancorp Common Stock are entitled to share ratably in
dividends, and in the event of a liquidation, dissolution, or winding up of
Bancorp, to share pro rata, after payments of all debts and other liabilities,
all of the remaining assets of Bancorp available for distribution to its
shareholders. The holders of Bancorp Common Stock have no preemptive or other
subscription rights and there are no conversion rights or redemption or
sinking fund provisions applicable to those shares.
DIVIDENDS AND DIVIDEND POLICY
Holders of Bancorp Common Stock are entitled to receive dividends when,
as, and if declared by the Bancorp Board out of funds legally available
therefor. Bancorp's principal source of funds to pay dividends on the Bancorp
Common Stock is cash dividends it receives from Texas Bank. The payment of
dividends by Texas Bank to Bancorp is subject to certain restrictions imposed
by federal and state banking laws, regulations, and authorities. On June 24,
1996, the Bancorp Board declared a dividend of $0.29 per share on Bancorp
Common Stock
35
<PAGE>
payable to the shareholders of record as of June 24, 1996. The dividend was
paid to shareholders on June 24, 1996.
In addition, the Merger Agreement prohibits Bancorp from paying dividends
in an amount in excess of $41,667 per month from January 1, 1996 through
consummation of the Merger. The maximum amount of dividends which could be
declared and paid by Bancorp as of June 30, 1996 pursuant to such restrictions
was $250,000. The total amount of dividends available for declaration at
December 31, 1995 by Texas Bank without prior regulatory approval was
approximately $2,148,000.
HOLDERS
At June 3, 1996 all outstanding shares of Bancorp were held by nine
individuals and entities.
SECURITY OWNERSHIP OF MANAGEMENT
The table below sets forth the shares of Bancorp Common Stock
beneficially owned by each director of Bancorp, each named executive officer
of Bancorp, and by all directors and executive officers of Bancorp as a group
as of June 6, 1996.
<TABLE>
<CAPTION>
Amount and Nature Percent of
of Beneficial Common
Name Ownership Stock
----------------- -----------
<S> <C> <C>
DIRECTORS:
Bobby D. Cox 117,896 13.70%
Franklin A. Deaderick 81,656 9.49%
Herbert L. Graham 200,000 23.24%
William Phillip Graham 10,119 1.18%
R.E. Merritt 60,991 7.09%
Midnight Leasing, Inc.* 35,000 4.07%
T.G. Roden 197,191 22.91%
*A wholly-owned entity of William Phillip Graham
EXECUTIVE OFFICERS:
Richard D. Browning 117,170 13.61%
------- -----
TOTAL 820,023 95.28%
</TABLE>
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Bancorp experienced net income through June 30, 1996 of $1,638,000, as
compared to $1,144,000 for the same period ending June 30, 1995, which
represents a 43.18% increase in net income. The net income per share for the
six months ending June 30, 1996 was $1.90 compared to $1.33 for the same
period ending June 30, 1995. Net income for June 30, 1996 represents an
annualized return on equity of 21.98% compared to 18.45% for the same period
in the preceding year. This net income also represents a return on assets of
1.96% for the period ending June 30, 1996 as compared to 1.54% for the period
ending June 30, 1995. The contributing factors for the increase in 1996 was a
24.54% increase in net interest income, as well as a 24.42% increase in non
interest income, principally service charges.
Bancorp experienced net loan growth of $13,194,000 for the first six
months of 1996. Loan to deposit ratio as of June 30, 1996 was 72% compared to
65% as of December 31, 1995. Total deposits as of June 30, 1996 were
$150,977,000 as compared to deposits of $147,688,000 at December 31, 1995.
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
LOAN ANALYSIS AND RECAPS. Texas Bank has concentrated its efforts in
lending in the area of middle market businesses and individual relationships
over the past ten years. In doing so the Bank has had heavy concentration in
SBA loans as well as indirect automobile loan purchases. Accordingly Texas
Bank has been able to maintain a loan to deposit ratio in excess of 55% and
often as high as 65% over the course of the past six years with only small
declines due to unexpected growth in the deposit generating side of the Bank.
The underwriting standards of the Bank have evolved through the modification
of the loan policy and administration of lending activities through Bank
committees and have resulted in a continued improvement in the quality of the
assets carried in the loan portfolio over the course of the past ten years.
Assets with a book value of approximately $1,323,000 representing 10.76% of
Texas Bank's Tier 1 capital are currently included on the Bank's internal
watch list.
PROVISION FOR LOAN LOSSES. Provisions for loan losses are charged to
earnings to bring the total of the allowance for loan losses to a level deemed
appropriate by management based on such factors as historical experience,
volume and type of lending conducted by the Bank, the amount of non-performing
assets, regulatory policies, general economic conditions, and other factors
related to the collectibility of loans in the Bank's portfolio. On January 1,
1995, Texas Bank adopted the provisions of Statement of Financial Accounting
Standards 114 (SFAS-114), "Accounting by Creditors for Impairment of a Loan,"
as amended by the Statement of Financial Accounting Standards 118 (SFAS-118),
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures." These statements require impairment of non-performing loans to
be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, its observable market value,
or the fair value of the collateral if the loan is collateral dependent. The
provision for loan losses for the year ended December 31, 1995 was determined
in accordance with the statements, the adoption of which did not have a
significant impact on Texas Bank's financial position or its results of
operations for the year then ended. The provision for loan losses for the
year ended December 31, 1995 was $378,000, an increase of 58.16% compared to
the provision for loan losses for the year 1994. The provision for loan
losses of $239,000 in 1994 represented a decrease of 8.08% compared with the
provision for loan losses of $260,000 for 1993. All losses embedded in the
portfolios of the two failed banks acquired from the FDIC were absorbed by the
discount incorporated into Texas Bank's bid for such failed banks and have not
been charged to the allowance for loan losses. Since 1990 the economies of
central Texas and the Permian Basin have continued to improve to the point
that many of the loans which were impaired in the early 1990s have now been
moved off the balance sheet by way of foreclosure or payoff while many others
have rehabilitated themselves due to increased performance and ability to
service debt by the borrower. These improvements have far exceeded
management's expectations for the six year period and at this
37
<PAGE>
time management foresees no need to continue to increase the provision for
loan losses except in a fashion which will fully reserve for growth in the
loan portfolio in all the branches.
LOAN AND ASSET QUALITY. Loans (before purchase discounts) as of December
31, 1995 were $100,162,000, representing an increase of $23,565,000 or 30.77%
from $76,597,000 at the end of 1994. The increase was evenly spread throughout
the portfolio in the areas of commercial, commercial real estate, mortgage,
and installment loans, with only construction lending decreasing slightly over
the course of the year. The strong loan demand in both the Permian Basin and
Austin area is directly attributable to the improved economy in the two areas
and the stabilization of the oil and gas economy of the Permian Basin as well
as the real estate and high tech industries in Central Texas. The volume of
Texas Bank's loans has steadily increased since 1992 after a slight decline
from 1991 to 1992 primarily due to problem credits acquired through the two
failed bank transactions being dealt with during that year. The main growth in
the commercial area has been in the area of SBA lending due to the ability to
sell the guaranteed portion of the SBA loans into the secondary market,
creating further liquidity for the Bank. Additionally, as those loans are
generally sold at a premium over book value, additional income over and above
the normal interest income is realized.
Installment and other loans have continued to increase over the years
with the largest increase between 1993 and 1994 from $15,729,000 to
$22,238,000 and further increase to $27,749,000 in 1995. A large portion of
this growth is attributable to the indirect dealer paper which poses
additional risks in collectibility compared with the more traditional type of
loans such as residential mortgage loans. In many instances the Bank is
required to rely on the borrower's ability to repay since the collateral may
have reduced value at the time of collection. Historically Texas Bank has
taken greater losses in the indirect portfolio as indicated by the allowance
for loan loss increase over the course of the past three years from $909,443
in 1993 to $1,031,671 in 1995. Net charge offs for the year as a percentage
average loans have equated to .18%, .34%, and .39% in 1993, 1994, and 1995
respectively. As the allowance for loan losses has increased and as the loan
portfolio has improved, the coverage of the allowance as a percentage of non-
performing assets has improved from 54.6% in 1991 to 115.2% in 1995. Once
again the primary reason for improvement is based on the improvement of the
overall portfolio and the economic conditions surrounding the Bank.
Loan concentration is defined as an amount loaned to a number of
borrowers engaged in similar activities or resident in the same geographic
region which would cause them to be similarly affected by economic and other
conditions. Texas Bank on a routine basis evaluates these kinds of
concentrations for the purpose of policing its concentrations and makes
necessary adjustments in its lending practices. Such adjustments help ensure
that its lending practices clearly reflect current economic conditions, loan
to deposit ratios, and industry trends. As a result of the Bank's market
focus, Texas Bank has significant concentration in assets in the Austin
metropolitan area as well as Midland-Odessa. The following table sets forth
the composition of Texas Bank's loan portfolio by type of loan on the dates
indicated.
38
<PAGE>
<TABLE>
<CAPTION>
LOAN PORTFOLIO ANALYSIS
December 31,
------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(Dollars in thousands)
Aggregate Principal Amount
Type of Loan:
<S> <C> <C> <C> <C> <C>
Commercial $ 41,101 $30,167 $24,652 $19,318 $18,215
Real Estate Mortgage 25,533 15,358 18,027 15,161 16,130
Real Estate Construction 5,779 8,834 5,686 2,994 2,195
Installment and Other (1) 27,749 22,238 15,729 12,301 18,260
-------- ------- ------- ------- -------
Total $100,162 $76,597 $64,094 $49,774 $54,800
======== ======= ======= ======= =======
Percentage of Loan Portfolio
Type of Loan:
Commercial 41.04% 39.39% 38.46% 38.81% 33.24%
Real Estate Mortgage 25.49% 20.05% 28.13% 30.46% 29.44%
Real Estate Construction 5.77% 11.53% 8.87% 6.02% 4.00%
Installment and Other (1) 27.70% 29.03% 24.54% 24.71% 33.32%
-------- ------- ------- ------- -------
Total 100.00% 100.00% 100.00% 100.00% 100.00%
======== ======= ======= ======= =======
</TABLE>
(1) Installment and other loans includes indirect dealer paper in the amounts
of $11,838,000, $11,666,000, and $14,309,000 at December 31, 1993, 1994,
and 1995, respectively.
The following table sets for the maturities of loans outstanding (based upon
contractual dates) as of December 31, 1995.
<TABLE>
<CAPTION>
MATURITIES AND RATE SENSITIVITY OF LOANS
(Dollars in thousands)
<S> <C> <C> <C> <C>
Over 1 Year
Less than 1 Year Through 5 Years Over 5 Years
---------------- --------------- ------------
Fixed Floating Fixed Floating Fixed Floating
Rate Rate Rate Rate Rate Rate Total
Total Loans $11,460 $9,336 $50,883 $16,121 $1,864 $10,498 $100,162
</TABLE>
NONPERFORMING ASSETS. Generally, interest on loans is accrued and
credited to income based upon the principal balance outstanding. It is
management's policy to discontinue the accrual of interest income when
principal or interest is past due 90 days or more and the loan is not
adequately collateralized, or when in the opinion of management, principal or
interest is not likely to be paid in accordance with the terms of the
obligation. The Bank will generally charge-off loans after 120 days of
delinquency unless adequately collateralized and in process of collection. A
loan is considered in the process of collection if, based on a probable
specific event, management believes that the loan will be repaid or brought
current. Loans will not be returned to accrual status until future payments
of principal and interest appear certain. Interest accrued and unpaid at the
time a loan is placed on non-accrual status is charged against interest
income. Subsequent payments received are applied to the outstanding principal
balance.
Real estate acquired by the Bank as a result of foreclosure or by deed in
lieu of foreclosure is classified as OREO. Such loans are reclassified to
OREO and recorded at the
39
<PAGE>
lower of cost or fair market value less estimated selling costs, and the
estimated loss, if any, is charged to the allowance for loan losses at that
time. Further losses are recorded as charges to other expenses at the time
management believes additional deterioration in value has occurred.
The following table sets forth certain information with respect to the
Bank's impaired loans, accruing loans which are contractually past due 90 days
or more as to principal or interest, and OREO.
<TABLE>
<CAPTION>
NONPERFORMING ASSETS
(Dollars in thousands)
December 31,
------------------------------------
1995 1994 1993 1992 1991
----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Non-Accrual Loans $ 150 166 316 209 567
Accruing loans contractually past due
90 days or more 676 (1) 129 114 168 434
----- ---- ---- ---- -----
Total impaired loans 826 295 430 377 1,001
OREO 70 14 9 28 89
----- ---- ---- ---- -----
Total nonperforming assets $ 896 309 439 405 1,090
----- ---- ---- ---- -----
Total nonperforming assets to total 0.55% 0.25% 0.37% 0.37% 1.02%
assets
</TABLE>
(1) $506,000 of this amount is an SBA loan of which 82% of the principal
balance and related interest is guaranteed by the SBA.
Interest payments received on impaired loans are recorded as interest
income unless collection of the remaining recorded investment is doubtful, at
which time payments received are recorded as reductions of principal. Interest
that would have been accrued on impaired loans during 1995 was approximately
$90,000. Interest income that would have been accrued on nonaccrual loans
during 1994 and 1993 was approximately $28,000 and $37,000, respectively.
Interest income recognized during 1994 and 1995 on impaired loans was
approximately $131,000 and $22,000, respectively.
Management regularly reviews and monitors the loan portfolio in order to
identify borrowers experiencing financial difficulties. Management believes
that as of December 31, 1995, all such loans had been identified and included
in the non-accrual or 90 days past due loan totals reflected in the above
table. Management continues to emphasize maintaining a low level of
nonperforming assets and returning nonperforming assets to an earning status
as performance and conditions permit.
OREO at December 31, 1995 consisted of one residential property with a
carrying amount of $70,000. This property has an appraised value of $180,000
and is being marketed by the Bank. Based on current real estate market
conditions, management believes that the future aggregate recoveries on
disposals of OREO will exceed the net book carrying amount of such OREO as of
December 31, 1995. In the past five years OREO has not constituted a
significant balance sheet item for the Bank as no large foreclosures have
occurred nor has any property been held for any extended period of time during
the past five years. Currently Texas Bank markets its OREO in local markets
with the services of local realtors.
ALLOWANCE FOR LOAN LOSSES. In originating loans, the Bank recognizes
that credit losses will be experienced and the risk of loss will vary with,
among other things, general economic conditions, the type of loan being made,
the creditworthiness of the borrower over the term of the loan and, in the
case of a collateralized loan, the quality of the collateral for such loan.
Management maintains an allowance for loan losses based upon, among other
things, historical experience, an evaluation of economic conditions, regular
review of delinquencies, and its evaluation of loan portfolio quality. In
addition to unallocated allowances, specific allowances
40
<PAGE>
are provided for individual loans when ultimate collection is considered
questionable by management after reviewing the current status of loans which are
contractually past due and considering the net realizable value of the
collateral for the loan. On January 1, 1995, Texas Bank adopted the provisions
of SFAS-114 and SFAS-118, and determined the provision for loan losses for 1995
in accordance with the requirements of these statements. See "Provision for Loan
Losses."
Management continues to actively monitor the Bank's asset quality and to
charge off loans against the allowance for loan losses when appropriate or to
provide specific loss allowances when necessary. Although management believes it
uses the best information available to make determinations with respect to the
allowance for loan losses, future adjustments may be necessary if economic
conditions differ from the assumptions used in making the initial
determinations.
The following table sets forth an analysis of the Bank's allowance for loan
losses for the periods indicated.
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Beginning balance $ 897 909 758 595 366
Loans charged off:
Commercial 211 106 34 236 117
Real estate mortgage 22 -- 12 -- --
Installment and other 262 168 98 86 73
------ ------ ------ ------ -----
Total 495 274 144 322 190
Recoveries of loans previously charged-off:
Commercial and real estate 65 6 7 27 18
Installment and other 62 17 28 9 21
------ ------ ------ ------ -----
Total 127 23 35 36 39
------ ------ ------ ------ -----
Net loans charged-off 368 251 109 286 151
Provision for loan losses 378 239 260 449 380
Addition from acquired bank 125 -- -- -- --
------ ------ ------ ------ -----
Balance at year-end 1,032 897 909 758 595
====== ====== ====== ====== =====
Net charge-offs during year to average loans 0.39% 0.34% 0.18% 0.63% 0.32%
Allowance as percentage of nonperforming assets 115.18% 290.29% 207.06% 187.16% 54.59%
</TABLE>
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated. Management believes that the
allowance can be allocated by category only on an approximate basis. The
allocation of an allowance to each category is not necessarily indicative of
future losses and does not restrict the use of the allowance to absorb losses in
any other category.
41
<PAGE>
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
1995 1994 1993
----------------------- -------------------- ----------------------
% of Loans % of Loans % of Loans
in Each in Each in Each
Category to Category to Category to
Amount Total Loans Amount Total Loans Amount Total Loans
------ ----------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Commercial......................... $ 250 37.81% $464 40.01% $339 40.07%
Commercial real estate............. 31 33.21% 151 30.65% 121 34.90%
Installment........................ 222 28.07% 158 28.27% 9 24.40%
Credit card........................ 23 0.91% 18 1.07% - 0.63%
Unallocated........................ 506 - 106 - 333 -
------ ------- ---- ------ ---- -------
Total allowance for loan losses.... $1,032 100.00% $897 100.00% $909 100.00%
====== ======= ==== ======= ==== =======
</TABLE>
INVESTMENT ACTIVITIES. Texas Bank's investments as of December 31, 1995
consisted primarily of United States Treasury securities, federal agency
obligations, collateralized mortgage obligations, and mortgage-backed
securities. The mortgage-backed securities represent an interest in a pool of
underlying mortgages, and are all issued by United States government agencies.
These securities may be more sensitive to changes in interest rates and income
derived from such securities may be adversely affected by prepayments of
principal on the underlying mortgages. The total portfolio value of December 31,
1995 was $37,000,000 at amortized cost and a market value of $36,822,000
resulting in a net depreciation of $178,000 on the total portfolio.
The following table sets forth the book value of Texas Bank's investment
portfolio as of the dates indicated. Investment securities held to maturity are
stated at cost, adjusted for amortization of premium and accretion of discount.
Investment securities available for sale are stated at fair value in accordance
with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". See " - Accounting Matters" and Note C of the Notes to Consolidated
Financial Statements.
INVESTMENT PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------
1995 1994 1993
------------------ ----------------- -------------------
Amortized Amortized Amortized
Cost Market Cost Market Cost Market
--------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Investment securities:
Available for sale:
U.S. Treasury and
government agency
securities.................. $19,258 19,100 23,716 22,709 22,264 22,351
Other......................... 17,742 17,722 15,152 14,362 20,879 20,927
------- ------ ------ ------ ------ ------
Total available for sale.... $37,000 36,822 38,868 37,071 43,143 43,278
======= ====== ====== ====== ====== ======
</TABLE>
Since the adoption of SFAS-115 the Bank has chosen to carry most or all
of its securities in the available for sale category to allow the portfolio to
be liquidated at any point in time. Due to the short maturities of most of the
obligations as well as relatively high dependence on variable rate securities
tied to various indices, the board of directors of the Bank believes that
maintaining high liquidity in the portfolio outweighs the potential realizable
loss that the portfolio might have at any given time.
The following table sets forth the maturity distribution and weighted
average yield of the investment portfolio of Texas Bank as of December 31, 1995.
The calculation of the weighted average yields is based on yield, weighted by
the respective costs of the securities.
42
<PAGE>
INVESTMENT PORTFOLIO - MATURITY AND YIELDS
AVAILABLE FOR SALE
(Dollars in thousands)
<TABLE>
<CAPTION>
1 Year Yield 1 Year to Yield After 10 Yield
or Less % 5 Years % Years %
------- ----- --------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Maturity Distribution
U.S. Treasury and agency.... $5,000 4.59% $14,258 5.70% $ - -%
Other....................... - - - - 17,742 6.79%
------ ------- -------
Total available for sale.... $5,000 4.59% $14,258 5.70% $17,742 6.79%
====== ======= =======
</TABLE>
DEPOSIT ACTIVITIES. Deposits are attracted through the offering of a
broad variety of deposit instruments, including checking accounts, money market
accounts, regular savings accounts, term certificate accounts (including "jumbo"
certificates in denominations of $100,000 or more), and retirement savings
plans.
Texas Bank's balance of total deposits was $147,688,000 for the year
ended December 31, 1995, up from $112,984,000 at year end 1994 and up from
$106,376,000 as of December 31, 1993. The following table sets forth the year-
end balances and weighted average rates for the Bank's categories of deposits
for the periods indicated.
YEAR END DEPOSITS
(Deposit in thousands)
<TABLE>
<CAPTION>
December 31
-----------------------------------------------------------
1995 Yield 1994 Yield 1993 Yield
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Demand deposits........... $ 52,938 - $ 39,853 - $ 35,932 -
Now accounts.............. 21,998 2.10% 19,230 2.36% 17,022 2.06%
Money market.............. 21,392 2.91% 17,826 3.04% 19,321 2.49%
Savings accounts.......... 8,804 2.26% 6,724 2.17% 6,547 2.42%
Certificates of deposits.. 42,556 5.18% 29,351 4.24% 27,554 3.23%
-------- -------- --------
Total deposits.......... $147,688 $112,984 $106,376
======== ======== ========
</TABLE>
As of December 31, 1995, time deposits over $100,000 represented
$15,201,000 or 10.29% of total deposits compared with 8.48% at year end 1994 and
7.37% year end 1993. The Bank does not have nor does it solicit brokered
deposits of any type. The following table sets forth the amount of the Bank's
certificates of deposits of $100,000 or more by time remaining until maturity as
of December 31, 1995.
TIME DEPOSITS OF $100,000 OR MORE
<TABLE>
<CAPTION>
December 31
------------------------------------
(Dollars in thousands)
1995 1994
---------------- ---------------
Maturity Period Number Amount Number Amount
- --------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Personal less than 18 Months....... 104 $10,993 75 $7,723
Personal over 18 Months............ 5 945 3 300
Non-personal less than 18 Months... 24 3,063 13 1,451
Non-personal over 18 Months........ 2 200 3 100
--- ------- -- ------
Total............................ 135 $15,201 94 $9,574
=== ======= == ======
</TABLE>
43
<PAGE>
RETURN ON EQUITY AND ASSETS. The following table sets forth Texas Bank's
ratios for the periods indicated.
<TABLE>
<CAPTION>
December 31,
---------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Return on average assets 1.91% 2.00% 2.08%
Dividend payout ratio 18.48% -0- 76.21%
Return on average common equity 23.71% 25.29% 28.65%
Average common equity to average total assets 8.05% 7.91% 8.14%
</TABLE>
LIQUIDITY. Bancorp's principal source of funds consists of dividends
from Texas Bank, which derives its funds from deposits, interest and principal
payments on loans and investment securities, sales of investment securities
and borrowings. For the year ended December 31, 1995, Texas Bank realized
proceeds from sale and maturity of investments of $22,171,557, a net increase
of deposits of $16,828,122 and net cash provided by operating activities of
$3,257,752. Funds were used to acquire investment securities of $20,305,779,
and fund a net increase in loans to customers of $10,944,201. Additionally,
Bancorp paid a total of $500,000 in dividends to common shareholders in 1995.
For the year ended December 31, 1994 Texas Bank realized proceeds from sale
and maturity of investment securities of $11,701,932, net cash provided by
operating activities of $1,110,682, and net increase of deposits of
$6,608,479. These proceeds were partially offset by a purchase of investment
securities of $7,432,026 and net increase in loans to customers of
$12,214,452. During the year 1994 Bancorp paid $1,000,000 in dividends to
common shareholders.
Asset liquidity is provided by cash and assets which are readily
marketable, which can be pledged, or which will mature in the near future.
These include cash, federal funds sold, and U.S. Government-backed securities.
Texas Bank's liquidity ratio, defined as cash, U.S. Government-backed
securities, and federal funds sold as a percentage of total deposits, was
40.26%, 40.36%, and 50.15% as of December 31, 1995, 1994, 1993, respectively.
Liability liquidity is provided by access to core funding sources, principally
various customers' interest-bearing deposit accounts in Texas Bank's market
areas. The Bank does not have and does not solicit brokered deposits.
Federal funds purchased and short-term borrowings by the Bank are
additional sources of liquidity. These sources of liquidity are short-term in
nature and are used by the Bank as necessary to fund asset growth and meet
short-term liquidity needs. As of December 31, 1995 and 1994, the Bank had no
federal funds purchased, no borrowings from the Federal Reserve System, and no
borrowings on securities sold under repurchase agreements.
CAPITAL RESOURCES. Bancorp's total shareholders' equity as of December
31, 1995 was $13,548,000, an increase of $3,274,000 or 31.87% compared with
shareholders' equity of $10,274,000 on December 31, 1994. The total increase
was attributable to earnings, a change in unrealized loss on debt securities
available for sale, net of tax, and a dividend paid.
Total shareholders' equity as of December 31, 1994 was $10,274,000, an
increase of $1,154,000 or 12.65% compared with shareholders' equity of
$9,120,000 as of December 31, 1993. The total increase was attributable to
earnings and unrealized loss on debt securities available for sale, net of
tax.
The Federal Reserve Board has established certain minimum risk-based
capital standards that apply to bank holding companies. As of December 31,
1995 Bancorp's Tier 1 risk-based capital ratio was 9.99%, its total risk-based
capital ratio was 10.96% and its leverage capital ratio was 8.33%. As of
December 31, 1994 Bancorp's Tier 1 risk-based capital was 11.37%, its total-
risk based capital ratio was 12.53%, and its leverage capital ratio was 7.73%.
The following table sets forth an analysis of Bancorp's capital ratios.
44
<PAGE>
<TABLE>
<CAPTION>
RISK-BASED CAPITAL RATIOS
December 31,
------------
1995 1994 1993
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Capital:
Tier 1 risk-based capital $ 13,512 $ 11,435 $ 9,105
Tier 2 risk-based capital 1,309 1,174 1,186
-------- -------- -------
Total risk-based capital $ 14,821 $ 12,609 $10,291
======== ======== =======
Risk-weight assets $135,212 $100,611 $88,886
Capital Ratios:
Tier 1 risk-based capital 9.99% 11.37% 10.25%
Total risk-based capital 10.96% 12.53% 11.58%
Leverage ratio 8.33% 9.23% 7.73%
</TABLE>
ACCOUNTING MATTERS.
ACCOUNTING FOR LOAN IMPAIRMENT. Effective January 1, 1995 Bancorp
adopted SFAS-114 and SFAS-118. See "Provision for Loan Losses." The adoption
of these statements did not have a significant impact on Bancorp's financial
position nor its results of operations for the year ended December 31, 1995.
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES.
In May 1993, the FASB issued Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS
No. 115"). SFAS No. 115 addresses the accounting and reporting for
investments in equity securities that have readily determinable fair values
and for all investments in debt securities. Those investments are to be
classified in one of three categories: (i) debt securities that the
enterprise has the positive intent and ability to hold to maturity are
classified as "held-to-maturity securities", and are reported at amortized
cost; (ii) debt and securities that are bought and held principally for the
purpose of selling them in the near term are classified as "trading
securities" and are reported at fair value, with unrealized gains and losses
included in earnings; and (iii) debt and equity securities not classified as
either held-to-maturity securities or trading securities are classified as
"available-for-sale securities" and are reported at fair value, with
unrealized gains and losses excluded from earnings and reported in a separate
component of stockholders' equity. Bancorp adopted SFAS No. 115 as of January
1, 1994.
IMPACT OF INFLATION, CHANGING PRICES, AND MONETARY POLICIES. The
financial statements and related financial data concerning Bancorp presented
in this Proxy Statement-Prospectus have been prepared in accordance with
generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars
without considering changes in the relative purchasing power of money over
time due to inflation. The primary effect of inflation on the operation of
Bancorp is reflected in increased operating costs. Unlike most industrial
companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, changes in interest rates
have a more significant effect on the performance of a financial institution
than do the effects of changes in the general rate of inflation and changes in
prices. Interest rates do not necessarily move in the same direction or in
the same magnitude as the prices of goods and services. Interest rates are
highly sensitive to many factors which are beyond the control of the Bank,
including the influence of domestic and foreign economic conditions and the
monetary and fiscal policies of the United States government and federal
agencies, particularly the Federal Reserve Board. The Federal Reserve Board
implements national monetary policy such as seeking to curb inflation and
combat recession by its open market operations in United States government
securities, control of the discount rate applicable to borrowing by banks and
establishment of reserve requirements against bank deposits. The actions of
the Federal Reserve Board in these areas influence the growth of bank loans,
investments and deposits, and affect the interest rates charged on loans
45
<PAGE>
and paid on deposits. The nature, timing and impact of any future changes in
federal monetary and fiscal policies on Bancorp and Texas Bank and their
results of operations are not predictable.
46
<PAGE>
CERTAIN REGULATORY CONSIDERATIONS
PERTAINING TO NORWEST
GENERAL
As a bank holding company, Norwest is subject to supervision and
examination by the Federal Reserve Board. Under the Bank Holding Company Act,
a bank holding company generally may not directly or indirectly acquire the
ownership or control of more than 5% of the voting securities or all or
substantially all of the assets of any company, including a bank, without the
prior approval of the Federal Reserve Board. In addition, a bank holding
company is generally prohibited under the Bank Holding Company Act from
engaging in nonbanking activities, subject to certain exceptions. Various
proposals are pending before Congress that would allow affiliations between a
bank holding company and nonbank entities that are prohibited or restricted
under current law. Whether Congress will adopt any of these proposals, and if
so in what form, is not known at this time.
Norwest's banking and savings association subsidiaries are subject to
supervision and examination by applicable federal and state banking agencies.
The deposits of Norwest's banking subsidiaries are primarily insured by the
Bank Insurance Fund; deposits attributable to certain of Norwest's savings
associations are insured by the Savings Association Insurance Fund (the
"SAIF"). For that reason, 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 that are well secured and in the process of collection. Under these
provisions Norwest's national bank subsidiaries could have declared, as of
June 30, 1996, aggregate dividends of at least $219.6 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.
47
<PAGE>
HOLDING COMPANY STRUCTURE
Norwest is a legal entity separate and distinct from its banking and
nonbanking subsidiaries. For that reason, 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 subsidiary bank to
Norwest or any nonbank subsidiary are limited in amount to 10% of the bank's
capital and surplus and, with respect to Norwest and all such nonbank
subsidiaries, to an aggregate of 20% of such bank's capital and surplus.
Furthermore, such loans and extensions of credit are required to be secured in
specified amounts.
The Federal Reserve Board has a policy to the effect that a bank holding
company is expected to act as a source of financial and managerial strength to
each of its subsidiary banks and to commit resources to support each such
subsidiary bank. This support may be required at times when Norwest may not
have the resources to provide it. Any capital loans by Norwest to any of the
subsidiary banks are subordinate in right of payment to deposits and to
certain other indebtedness of such subsidiary bank. In addition, the Crime
Control Act of 1990 provides that in the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
A depository institution insured by the FDIC can be held liable for any
loss incurred by, or reasonably expected to be incurred by, the FDIC after
August 9, 1989 in connection with (i) the default of a commonly controlled
FDIC-insured depository institution or (ii) any assistance provided by the
FDIC to a commonly controlled FDIC-insured depository institution in danger of
default. "Default" is defined generally as the appointment of a conservator or
receiver and "in danger of default" is defined generally as the existence of
certain conditions indicating that a "default" is likely to occur in the
absence of regulatory assistance.
Federal law (12 U.S.C. (S)55) permits the OCC to order the pro rata
assessment of stockholders 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 stockholders of such national bank to cover such
impairment of capital stock by sale, to the extent necessary, of the capital
stock of any assessed stockholder 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 stockholder of most of
its subsidiary banks, is subject to such provisions.
ACQUISITIONS
Effective September 29, 1995, under the provisions of the Reigle-Neal
Interstate Banking and Branching Act of 1994 (the "Reigle-Neal Act"),
Norwest's banking subsidiaries are permitted to acquire banks located in any
state in which the acquiring subsidiary bank is located (an intrastate
merger). Effective June 1, 1997, Norwest's banking subsidiaries will be
permitted to acquire a bank located in a state other than the state in which
the acquiring subsidiary bank is located (an interstate merger) through
merger, consolidation or purchase of assets and assumption of liabilities,
unless the state in which either of the banks is located has opted out of the
interstate banking provisions of the Reigle-Neal Act. An interstate merger may
occur before June 1, 1997 if the states in which the merging banks are located
have enacted a law authorizing interstate bank mergers.
48
<PAGE>
All of Norwest's acquisitions of banking institutions and other companies
are subject to the prior approval of the Federal Reserve Board and any
applicable federal or state regulatory authorities. In addition, under the
provisions of the Reigle-Neal Act, bank mergers are subject to deposit
concentration limits of 10% nationwide and 30% in any one state, unless it is
Norwest's initial entry into the state.
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
stockholders' equity, 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. The risk-based guidelines
also specify that all intangibles, including core deposit intangibles, as well
as mortgage servicing rights ("MSRs") and purchased credit card relationships
("PCCRs"), be deducted from Tier 1 capital. The guidelines, however,
grandfather identifiable assets (other than MSRs and PCCRs) acquired on or
before February 19, 1992 and permit the inclusion of readily marketable MSRs
and PCCRs in Tier 1 capital to the extent that (i) MSRs and PCCRs do not
collectively exceed 50% of Tier 1 capital and (ii) PCCRs do not exceed 25% of
Tier 1 capital. For such purposes, MSRs and PCCRs each are included in Tier 1
capital only up to the lesser of (i) 90% of their fair market value (which
must be determined quarterly) and (ii) 100% of the remaining unamortized book
value of such assets. The OCC has adopted substantially similar regulations.
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 also subject to capital
requirements adopted by applicable regulatory agencies that are substantially
similar to the foregoing. At June 30, 1996, Norwest's Tier 1 and total capital
(the sum of Tier 1 and Tier 2 capital) to risk-adjusted assets ratios were
8.53% and 10.49%, respectively, and Norwest's leverage ratio was 6.09%.
Neither Norwest nor any subsidiary bank has been advised by the appropriate
federal regulatory agency of any specific leverage ratio applicable to it.
As a result of a federal law enacted in 1991 that required each federal
banking agency to revise its risk-based capital standards to ensure that those
standards take adequate account of interest rate risk, concentration of credit
risk and the risks of nontraditional activities, each of the federal banking
agencies has revised the risk-based capital guidelines described above to take
account of concentration of credit risk and risk of nontraditional activities.
In addition, the Federal Reserve Board, the FDIC and the OCC adopted a new
rule that amends, effective September 1, 1995, the capital standards to
include explicitly a bank's exposure to declines in the economic value of its
capital due to changes in interest rates as a factor to be considered in
evaluating a bank's interest rate exposure. Such agencies have issued for
comment a joint policy statement that describes the process to be used to
measure and assess the exposure of a bank's net economic value to changes in
interest rates. These agencies have indicated that in the second step of this
regulation process they intend to issue a proposed rule that would propose to
establish an explicit minimum capital charge for interest rate risk based on
the level of a bank's measured interest rate exposure. The agencies intend to
implement the second step
49
<PAGE>
after the agencies and the banking industry have had more experience with the
proposed supervisory and measurement process. None of Norwest, Bancorp or the
Bank believes that these recent proposals and revisions to the capital
guidelines will materially impact its operations.
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 depository institutions insured by the
Federal Deposit Insurance Corporation (the "FDIC") 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 it 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.
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
50
<PAGE>
those provisions of FDICIA intended to facilitate the early identification of
problems in financial management of depository institutions. On July 10, 1995,
the federal banking agencies published the final rules implementing three of
the safety and soundness standards required by FDICIA, including operational
and managerial standards, asset quality and earnings standards, and
compensation standards. The impact of such standards on Norwest has not yet
been fully determined, but management does not believe it will be material.
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.
FDIC INSURANCE
Each BIF member institution pays FDIC insurance premiums based on the
institution's annual assessment rate assigned to it by the FDIC. The
assessment rate is based on the institution's capitalization risk category and
"supervisory subgroup." An institution's capitalization risk category is based
on the FDIC's determination of whether the institution is well capitalized,
adequately capitalized or less than adequately capitalized. An institution's
supervisory subgroup is based on the FDIC's assessment of the financial
condition of the institution and the probability that FDIC intervention or
other corrective action will be required. 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. The FDIC
assessment rate ranges from zero to 27 cents per $100 of domestic deposits,
with Subgroup A institutions assessed at a rate of zero and Subgroup C
institutions assessed at a rate of 27 cents. The FDIC may increase or decrease
the assessment rate schedule on a semiannual basis. An increase in the rate
assessed one or more of Norwest's banking subsidiaries could have a material
adverse effect on Norwest's earnings, depending on the amount of the increase.
The FDIC is authorized to terminate a depository institution's deposit
insurance upon a finding by the FDIC that the institution's financial
condition is unsafe or unsound or that the institution has engaged in unsafe
or unsound practices or has violated any applicable rule, regulation, order or
condition enacted or imposed by the institution's regulatory agency. The
termination of deposit insurance with respect to one or more of Norwest's
subsidiary depository institutions could have a material adverse effect on
Norwest's earnings, depending on the collective size of the particular
institutions involved.
Deposits insured by the SAIF held by Norwest's bank subsidiaries as a
result of savings association acquisitions by Norwest continue to be assessed
at the applicable SAIF insurance premium rate. Current federal law provides
that the SAIF assessment rate may not be less than 0.18% from January 1, 1994
through December 31, 1997. After December 31, 1997, the SAIF assessment rate
must be a rate determined by the FDIC to be appropriate to increase the SAIF's
reserve ratio to 1.25% of insured deposits or such higher percentage as the
FDIC determines to be appropriate, but the assessment rate may not be less
than 0.15%. In order to mitigate the potential effects of a BIF/SAIF premium
disparity, Congress recently proposed legislation that
51
<PAGE>
would, among other things, recapitalize the SAIF by imposing a special one-
time assessment on SAIF deposits. The proposed legislation also contemplates
the consolidation or merger of the BIF and the SAIF into one insurance fund
after the SAIF is recapitalized. Management of Norwest does not anticipate
that the impact of the proposed legislation will be material to Norwest;
however, to provide for such a special assessment when and if imposed, Norwest
has established a reserve of $23.5 million based on an estimated insurance
premium rate of 66 cents per $100 of insured deposits, which reserve has been
funded primarily by the refund of BIF insurance premiums.
DEPOSITOR PREFERENCE
Under the FDIA, claims of holders of domestic deposits and certain claims
of administrative expenses and employee compensation against an FDIC-insured
depository institution have priority over other general unsecured claims
against the institution in the "liquidation or other resolution" of the
institution by a receiver.
EXPERTS
The consolidated financial statements of Norwest and subsidiaries as of
December 31, 1995 and 1994, and for each of the years in the three-year period
ended December 31, 1995, 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 Bancorp and subsidiaries as of
December 31, 1995 and 1994, and for each of the years in the three-year period
ended December 31, 1995, 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
report of KPMG Peat Marwick LLP includes an explanatory paragraph which refers
to Bancorp's adoption in 1995 of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan," as amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan--Income Recognition and Disclosures,"
adoption in 1994 of SFAS No. 115, "Acounting for Certain Investments in Debt
and Equity Securities," and adoption in 1993 of SFAS No. 109, "Accounting for
Income Taxes."
LEGAL OPINIONS
A legal opinion to the effect that the shares of Norwest Common Stock
offered hereby, when issued in accordance with the Merger Agreement, will be
validly issued and fully paid and nonassessable, has been rendered by Stanley
S. Stroup, Executive Vice President and General Counsel of Norwest
Corporation. At June 30, 1996, Mr. Stroup was the beneficial owner of 109,313
shares and held options, exercisable within 60 days from June 30, 1996, to
acquire 264,082 additional shares of Norwest Common Stock.
The material tax consequences of the Merger to Bancorp's shareholders
will be passed upon for Bancorp by Thompson & Knight, a Professional
Corporation, Suite 3300, 1700 Pacific Avenue, Dallas, Texas 75201.
52
<PAGE>
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, 1995, which is incorporated in this Proxy Statement-
Prospectus by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE." Shareholders of Bancorp desiring copies of such documents may
contact Norwest or Bancorp, as appropriate, at the addresses or phone numbers
indicated under "AVAILABLE INFORMATION."
53
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Directors and Stockholders
Texas Bancorporation, Inc.:
We have audited the accompanying consolidated balance sheets of Texas
Bancorporation, Inc. (the Corporation) and its wholly-owned subsidiary, Texas
Bank of Odessa (the Bank) as of December 31, 1995 and 1994 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Texas
Bancorporation, Inc. and subsidiary as of December 31, 1995 and 1994 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.
As discussed in note 1, the Corporation changed its method of accounting for
impaired loans to adopt the provisions of the Financial Accounting Standards
Board's SFAS No. 114, "Accounting by Creditors for Impairment of a Loan", as
amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan-
Income Recognition and Disclosures", on January 1, 1995. The Corporation also
changed its method of accounting for investments to adopt the provisions of the
FASB's SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", at January 1, 1994. The corporation also changed its method of
accounting for income taxes to adopt the provisions of the FASB's SFAS No. 109,
"Accounting for Income Taxes", at January 1, 1993.
/s/ KPMG Peat Marwick LLP
February 5, 1996
F-1
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Assets 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks (note 8) $ 11,329,963 7,583,364
Federal funds sold and other 11,995,000 950,000
----------------------------
Total cash and cash equivalents 23,324,963 8,533,364
----------------------------
Investment securities, partially pledged, at market value (note 2)
U.S. Treasury securities 507,500 485,468
U.S. Agency securities 36,081,697 36,435,309
Other securities 232,930 150,000
----------------------------
36,822,127 37,070,777
----------------------------
Loans (note 3) 99,206,218 75,366,655
Less:
Unearned discount (2,662,736) (2,178,309)
Allowance for possible loan losses (1,031,671) (896,756)
----------------------------
Net loans 95,511,811 72,291,590
Bank premises and equipment, net (note 4) 4,526,669 3,772,805
Accrued interest receivable 1,048,237 852,928
Other assets 909,526 1,406,023
- -------------------------------------------------------------------------------------------------
$162,143,333 123,927,487
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Consolidated Balance Sheets, Continued
December 31, 1995 and 1994
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Liabilities and Stockholders' EquitY 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Deposits:
Demand $ 52,937,812 39,853,391
Savings and individual retirement accounts 8,804,139 6,723,540
NOW and money market 43,389,916 37,056,392
Time (note 7) 42,556,373 29,350,767
----------------------------------
Total deposits 147,688,240 113,653,018
Accrued interest payable 411,757 213,984
Subordinated debentures (note 10) 277,104 277,104
Other liabilities 218,359 177,840
----------------------------------
Total liabilities 148,595,460 113,653,018
----------------------------------
Stockholders' equity (notes 6 and 12):
Preferred stock; $10.00 par value, 1,000,000
shares authorized, no shares issued - -
Common stock; $.01 par value, 1,000,000
shares authorized, 860,685 issued 8,607 8,607
Additional paid-in capital 14,860 14,860
Retained earnings 13,641,636 11,436,749
Unrealized loss on securities available for sale (117,230) (1,185,747)
----------------------------------
Total stockholders' equity 13,547,873 10,274,469
Commitments and contingencies (notes 3, 4, 9 and 11)
- --------------------------------------------------------------------------------------------
$162,143,333 123,927,487
- --------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Consolidated Statements of Earnings
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans (note 3) $ 9,393,841 7,155,829 6,349,630
Investment securities 2,251,110 2,046,921 2,121,555
Federal funds sold and other 305,161 76,160 177,766
-----------------------------------
Total interest income 11,950,112 9,278,910 8,648,951
-----------------------------------
Interest expense:
Savings and interest-bearing demand deposits 1,291,200 1,049,958 867,840
Time deposits (note 7) 1,819,982 1,042,425 921,649
Subordinated debentures (note 10) 20,647 25,538 19,470
-----------------------------------
Total interest expense 3,131,829 2,117,921 1,808,959
-----------------------------------
Net interest income 8,818,283 7,160,989 6,839,992
Provision for possible loan losses (note 3) 378,000 239,000 260,000
-----------------------------------
Net interest income after provision
for possible loan losses 8,440,283 6,921,989 6,579,992
-----------------------------------
Other income:
Service charges 1,802,132 1,569,262 1,580,215
Gain (loss) on sale of investment securities (note 2) (67,930) 6,266 413,080
Loan origination fees 277,908 409,769 424,272
Gain of sale of SBA loans 271,881 450,587 589,746
Other 585,581 367,431 265,851
-----------------------------------
Total other income 2,869,572 2,803,315 3,273,164
-----------------------------------
Other expenses:
Salaries and employee benefits (note 9) 3,412,063 2,965,170 2,646,438
Directors' bonus (note 15) - - 719,550
Occupancy expense (note 4) 1,263,842 1,088,153 1,005,685
Other operating expenses 2,441,678 2,051,107 1,667,965
-----------------------------------
Total other expenses 7,117,583 6,104,430 6,039,638
-----------------------------------
Earnings before provision for income taxes and cumulative
effect of a change in method of accounting for income
taxes 4,192,272 3,620,874 3,813,518
Provision for income taxes (note 5) 1,487,385 1,280,882 1,330,549
-----------------------------------
Earnings before cumulative effect of a change
in method of accounting for income taxes 2,704,887 2,339,992 2,482,969
Cumulative effect of a change in method of accounting
for income taxes (note 5) - - 170,112
- ------------------------------------------------------------------------------------------------
Net earnings $ 2,704,887 2,339,992 2,312,857
- ------------------------------------------------------------------------------------------------
Earnings per share $ 3.14 2.72 2.69
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
===============================================================================================================================
Unrealized
Gain (Loss)
Common Stock Additional On Securities Total
----------------- Paid-in Retained Available Stockholders'
Shares Amount Capital Earnings For Sale Equity
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 860,685 $8,607 14,860 8,548,300 - 8,571,767
Dividends declared (note 6) - - - (1,764,400) - (1,764,400)
Net earnings - - - 2,312,857 - 2,312,857
----------------------------------------------------------------------------
Balance at December 31, 1993 860,685 8,607 14,860 9,096,757 9,120,224
Unrealized gains on debt securities available for
sale at January 1, 1994 (adoption), net of tax - - - - 88,977 88,977
Net change in unrealized loss on debt securities
available for sale, net of loss - - - - (1,274,724) (1,274,724)
Net earnings - - - 2,339,992 - 2,339,992
----------------------------------------------------------------------------
Balance at December 31, 1994 860,685 8,607 14,860 11,436,749 (1,185,747) 10,274,469
Dividends paid - - - (500,000) - (500,000)
Net change in unrealized loss on debt
securities available for sale, net of tax - - - - 1,068,517 1,068,517
Net earnings - - - 2,704,887 - 2,704,887
- -------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 860,685 $8,607 14,860 13,641,636 (117,230) 13,547,873
===============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Interest received $ 11,594,898 8,595,162 7,736,559
Fees and commissions received 2,937,502 2,797,049 2,860,084
Interest paid (2,963,003) (2,058,369) (1,820,545)
Income taxes paid (1,436,834) (1,915,906) (1,176,046)
Cash paid to suppliers and employees (6,874,811) (6,307,254) (5,620,734)
----------------------------------------------
Net cash from operating activities 3,257,752 1,110,682 1,979,318
----------------------------------------------
Cash flows from investing activities:
Proceeds from principal reductions and maturities 4,594,617 5,736,592 13,071,364
Proceeds from sale of investment securities 17,576,940 5,965,340 23,044,979
Purchase of investment securities (20,305,779) (7,432,026) (36,672,862)
Net change in loans to customers (10,944,201) (12,214,452) (14,111,960)
Net cash from acquisition (note 13) 4,605,025 - -
Capital expenditures (320,877) (392,855) (150,228)
----------------------------------------------
Net cash used in investing activities (4,794,275) (8,337,401) (14,818,707)
----------------------------------------------
Cash flows from financing activities:
Net change in deposits 16,828,122 6,608,479 7,937,914
Dividend paid (500,000) (1,000,000) (764,400)
----------------------------------------------
Net cash from financing activities 16,328,122 5,608,479 7,173,514
----------------------------------------------
Net increase (decrease) in cash and cash equivalent 14,791,599 (1,618,240) (5,665,875)
Cash and cash equivalents at beginning of year 8,533,364 10,151,604 15,817,479
- -------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of $ 23,324,963 8,533,364 10,151,604
=======================================================================================================
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reconciliation of net income to net cash from operating activities:
Net income $ 2,704,887 2,339,992 2,312,857
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 505,128 388,591 372,817
Deferred tax benefit (33,560) (54,864) (111,096)
Provision for possible loan losses 378,000 239,000 260,000
Accretion of purchase discount on loans (288,125) (596,028) (972,808)
Amortization of premium on securities 6,374 11,893 42,383
Loss (gain) on sale of investment securitie 67,930 (6,266) (413,080)
Change in interest receivable (73,463) (99,613) 18,033
Change in interest payable 168,826 59,552 (11,586)
Change in other assets (260,546) (499,348) 92,647
Change in Federal income tax payable 84,111 (580,160) 324,406
Change in other liabilities (1,810) (92,067) 64,745
-----------------------------------------------------
Total adjustments 552,865 (1,229,310) (333,539)
- ----------------------------------------------------------------------------------------------------------------
Net cash from operating activities $ 3,257,752 1,110,682 1,979,318
================================================================================================================
</TABLE>
Definition of cash and cash equivalents:
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, certificates of deposit owned, amounts due from banks, federal funds
sold and investment securities with an original maturity of less than 90 days.
Generally, federal funds are sold for one-day periods.
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
ORGANIZATION
------------
The accompanying consolidated financial statements include the accounts
of Texas Bancorporation, Inc. (the Corporation) and its wholly-owned
subsidiary, Texas Bank of Odessa (the Bank). All significant intercompany
accounts and transactions have been eliminated in consolidation.
Business - The Bank provides a full range of banking services to individual
and corporate customers through its branch banks located in Austin, Burnet,
Buchanan Dam, Dripping Springs, Kingsland, Pflugerville and Odessa, Texas.
The Bank is subject to competition from other financial institutions. The
Bank is subject to the regulations of certain state and federal agencies
and undergoes periodic examinations by those regulatory authorities.
Basis of Financial Statement Presentation - The financial statements have
been prepared in conformity with generally accepted accounting principles.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses
for the period. Actual results could differ significantly from those
estimates.
Material estimates that are particularly susceptible to significant change
in the near-term relate to the determination of the allowance for loan
losses and the valuation of other real estate. In connection with the
determination of the allowances for loan losses and real estate owned,
management obtains independent appraisals for significant properties.
A substantial portion of the Bank's loans are secured by real estate in
Central and West Texas. Accordingly, the ultimate collectibility of a
substantial portion of the Bank's loan portfolio and the recovery of the
carrying amount of real estate owned are susceptible to changes in market
conditions in these areas of Texas.
F-8
(Continued)
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Note to Consolidtated Financial Statements, Continued
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
----------------------------------------------------------------------
ORGANIZATION, CONTINUED
-----------------------
Management believes that the allowances for losses on loans and real estate
owned are adequate. While management uses available information to
recognize losses on loans and real estate owned, future additions to the
allowances may be necessary based on changes in economic conditions,
particularly in Texas. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Bank's
allowances for losses on loans and real estate owned. Such agencies may
require the Bank to recognize additions to the allowances based on their
judgments about information available to them at the time of their
examination.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The following is a description of the significant accounting policies:
Investment Securities - In May 1993, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities".
Statement 115 addresses the accounting and reporting for investments in
debt and equity securities. Under Statement 115, those investments are to
be classified in three categories and accounted for as follows:
Classification Accounting
-------------- ----------
Held to maturity Amortized cost
Trading securities Fair value, with unrealized gains and losses
included in earnings
Available for sale Fair value, with unrealized gains and losses,
net of tax effect, excluded from earnings and
reported as a separate component of
stockholders' equity.
(Continued)
F-9
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
----------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
-----------------------------------------------------
The Bank adopted Statement 115 on January 1, 1994. The Bank classified all
of its securities as available for sale. The Bank's adoption of Statement
115 initially resulted in an unrealized gain, net of related tax effects,
of $88,977 being recorded as a separate component of stockholder's equity.
As of December 31, 1995, there was a net unrealized loss of $117,230
reflected in stockholders' equity.
Cost of securities sold is determined by the specific identification
method. Provisions for losses on investment securities are made when an
other than temporary impairment is anticipated by management or known to
exist, including losses on sales of securities prior to maturity.
Mortgage-backed securities and collateralized mortgage obligations
represent participating interests in pools of long-term first mortgage
loans originated and serviced by the issuer of the securities. Premiums and
discounts are amortized to income using the interest method over the
remaining life to contractual maturity, adjusted for anticipated
prepayments.
Loans and Allowance for Possible Loan Losses - It is management's policy to
charge off all known losses as they are specifically identified. In
addition, provisions to the allowance for possible loan losses are based
upon a continuing review of the loan portfolio, financial condition of the
borrowers, current economic conditions and other pertinent factors.
Management continually reviews the loan portfolio in order to identify
loans which, with respect to principal and interest, have or may become
collection problems. When a loan, in management's judgment, becomes
doubtful as to the collection of accrued interest income, it is placed on
non-accrual status. Interest payments received on non-accrual loans are
recognized as income on a cash basis.
Discounts on loans are accreted to income using a method which does not
materially differ from the interest method over the estimated lives of the
related loans. Unearned discount on installment loans are recognized during
the terms of the loans in decreasing amounts by the sum-of-the-months'-
digits method, which approximates the interest method.
(Continued)
F-10
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
----------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
-----------------------------------------------------
Loan fees and certain direct loan origination costs are deferred, and the
net fee or cost is recognized in income using the interest method over the
contractual life of the loans, adjusted for actual prepayments. Commitment
fees and costs relating to commitments whose likelihood of exercise is
remote are recognized over the commitment period on a straight-line basis.
If the commitment is subsequently exercised during the commitment period,
the remaining unamortized commitment fee at the time of exercise is
recognized over the life of the loan as an adjustment of yield. Cost is
allocated to the portion of loans sold based on the relative fair value of
the portion retained and the portion sold.
In May 1993, FASB issued Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan". Statement No. 114
addresses the accounting by creditors for impairment of certain loans. It
requires that impaired loans be measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate
or at the loan's observable market price or the fair value of the
underlying collateral if the loan is collateral dependent. Statement No.
118, issued October 1994, amended Statement No. 114 to allow a creditor to
use existing methods to recognize interest income on impaired loans. The
Corporation adopted the provisions of Statements 114 and 118 effective
January 1, 1995. The Bank's prior method of determining impairment of loans
did not differ materially from Statements 114 and 118.
Other Real Estate - Real estate acquired by foreclosure is carried at fair
value at the date of foreclosure. Prior to foreclosure, the value of the
underlying loan is adjusted to the fair value of the real estate to be
acquired through the allowance for loan losses, if necessary. After
foreclosure, foreclosed assets are carried at the lower of fair value minus
estimated selling costs or cost. Operating expenses of such properties, net
of related income, and gains and losses on their disposition are included
in other operating expenses.
(Continued)
F-11
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
----------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
-----------------------------------------------------
Bank Premises and Equipment - Bank premises and equipment are stated at
cost less accumulated depreciation and amortization. Depreciation expense
is computed principally on the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are amortized on the
straight-line method over the shorter of the estimated useful lives of the
improvements or the terms of the related leases.
Federal Income Taxes - In February 1992, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes". Statement 109 requires a change from the
deferred method of accounting for income taxes of APB Opinion 11 to the
asset and liability method of accounting for income taxes. Under the asset
and liability method of Statement 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. 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 Statement 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. The adoption of Statement 109 in 1993 resulted in a
cumulative effect adjustment for the change in method of accounting for
income taxes of an approximate $170,000 expense.
Earnings Per Share - Earnings per share is based on dividing net income by
the weighted average number of shares of common stock outstanding during
the period.
F-12
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(2) INVESTMENT SECURITIES
---------------------
The Bank classifies all of its debt securities as available for sale. The
available for sale securities are carried at market value with the
unrealized gains and losses excluded from earnings and reported as a
separate component of stockholders' equity, net of income tax effect.
Amortized cost and approximate market value of investment securities as of
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Amortized Gross Unrealized Market
----------------
Cost Gains Losses Value
--------- ------- ------- -----
<S> <C> <C> <C> <C>
U.S. Treasury notes $ 502,557 4,943 - 507,500
Federal Home Loan Bank bonds 11,254,989 3,561 115,800 11,142,750
Student Loan Marketing Association bonds 1,000,000 - 17,000 983,000
Federal Home Loan Mortgage
Corporation (FHLMC) bonds 5,500,000 6,500 - 5,506,500
Federal Farm Credit Bank Bonds 1,000,000 - 40,000 960,000
Collateralized mortgage obligations:
FNMA variable rate 8,199,959 - 46,058 8,153,901
FHLMC variable rate 472,324 - 6,121 466,203
GNMA variable rate 8,836,990 32,353 - 8,869,343
Texas Independent Bank stock 232,930 - - 232,930
----------- ------ ------- ----------
$36,999,749 47,357 224,979 36,822,127
=========== ====== ======= ==========
</TABLE>
(Continued)
F-13
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- -------------------------------------------------------------------------------
(2) INVESTMENT SECURITIES, CONTINUED
--------------------------------
Amortized cost and approximate market value of investment securities as of
December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Amortized Gross Unrealized Market
Cost Gains Losses Value
----------- --------------------- -----
<S> <C> <C> <C> <C>
U.S. Treasury notes $ 498,610 - 13,142 485,468
Federal Home Loan Bank bonds 11,218,307 697 442,264 10,776,740
Federal National Mortgage
Association (FNMA) debentures 7,998,457 - 352,127 7,646,330
Student Loan Marketing Association bonds 1,000,000 - 16,250 983,750
Federal Home Loan Mortgage
Corporation (FHLMC) bonds 2,000,000 - 180,000 1,820,000
Federal Farm Credit Bank Bonds 1,000,000 - 3,750 996,250
Collateralized mortgage obligations:
FNMA variable rate 9,778,799 - 517,032 9,261,767
FHLMC variable rate 473,044 - 18,595 454,449
GNMA variable rate 4,750,146 - 254,123 4,496,023
Texas Independent Bank stock 150,000 - - 150,000
----------- ----- ---------- ----------
$ 38,867,363 697 1,797,283 37,070,777
=========== ===== ========= ==========
</TABLE>
Investment securities with a carrying amount of $9,000,000 at December 31,
1995 were pledged as collateral for public deposits and other purposes as
required or permitted by law.
(Continued)
F-14
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(2) INVESTMENT SECURITIES, CONTINUED
--------------------------------
The following is a summary of the contractual maturities of investment
securities. Actual maturities may differ from contractual maturities because
issuers may have the right to call or prepay obligations with or without
prepayment penalties.
<TABLE>
<CAPTION>
Amortized Market
Matures In Cost Value
---------- --------- ------
<S> <C> <C>
One year or less $ 5,000,000 4,965,000
One year through five years 14,257,546 14,134,750
---------- ----------
19,257,546 19,099,750
Collateralized mortgage obligations 17,509,273 17,489,447
---------- ----------
$36,766,819 36,589,197
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Gross gains and losses on the sales of investment securities were as follows:
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Gross gains $ 22,504 49,391 423,080
Gross losses (90,434) (43,125) (10,000)
------ ------ -------
Gain (loss) on sale of investment securities $ (67,930) 6,266 413,080
====== ====== =======
</TABLE>
F-15
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(3) LOANS
-----
Major classifications of loans at December 31, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
1995 1994
------------ ----------
<S> <C> <C>
Commercial and financial $ 41,101,017 30,166,722
Real estate mortgage 25,532,731 15,357,803
Real estate construction 5,779,000 8,834,000
Installment and other loans 27,749,499 22,238,835
------------ ----------
100,162,247 76,597,360
Less: purchase discounts 956,029 1,230,705
------------ ----------
$ 99,206,218 75,366,655
============ ==========
</TABLE>
Certain assets and liabilities of two failed banks in the Austin area were
acquired from the FDIC. The Bank has adopted a cost recovery method of
income recognition related to the discount on acquired loans for which
collectibility of the contractual loan amount is in question and is
recognizing the discount to income using the interest method over the
estimated life of the loan when collectibility is probable. Charge-offs in
excess of the discount are then charged to the allowance for loan loss.
The remaining discount allocated to loans at December 31, 1995 and 1994 is
$937,000 and $1,194,000, respectively. The remaining purchase discount is
from other purchased loans. The amount of discount recognized as interest
income in 1995, 1994 and 1993 was approximately $288,125, $596,000, and
$973,000, respectively. Additional purchase discounts resulted from
purchases of other loans acquired by the Bank.
At December 31, 1995 and 1994, the Bank was servicing approximately
$29,900,000 and $25,333,000, respectively, of principal balance of loans
which were sold with Small Business Administration guarantees.
(Continued)
F-16
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(3) LOANS, CONTINUED
----------------
The recorded investment in loans which an impairment has been recognized
consists of loans which income is recognized on the cash basis (nonaccrual
loans) was $150,000 and $166,000 at December 31, 1995 and 1994,
respectively. The related allowance for loan losses on these loans is
$30,000 at December 31, 1995. If interest on these loans had been accrued,
income would have been increased by approximately $30,000 in 1995, $12,000
in 1994, and $9,000 in 1993. The average balances of impaired loans was
approximately $150,000 during 1995. Interest income recognized on impaired
loans during 1995 was $5,000. At December 31, 1995, there were no
commitments to lend additional funds to borrowers whose loans are
classified nonaccrual.
Letters of credit and commitments to fund loans totaling $8,300,000 were
outstanding at December 31, 1995. If the counterparties to the
aforementioned off-balance sheet commit-ments failed to perform, the Bank
could suffer losses. However, the aforementioned off-balance sheet
commitments are subject to the Bank's internal loan policies and are
generally secured by deposits in the Bank, real property or equipment and
inventory.
Loans to officers and directors of the Bank totaled approximately
$2,374,000 at December 31, 1995 and were approximately $3,394,000 at
December 31, 1994. These loans were made at substantially the same terms
available to other customers of the Bank.
Transactions in the allowance for possible loan losses were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of the year $ 896,756 909,443 758,335
Balance from acquired bank 125,479 - -
Provision for possible loan losses 378,000 239,000 260,000
Recoveries 126,671 22,736 34,687
---------- --------- ---------
1,526,906 1,171,179 1,053,022
Less loans charged off 495,235 274,423 143,579
---------- --------- ---------
Balance at end of year $1,031,671 896,756 909,443
========== ========= =========
</TABLE>
F-17
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(4) BANK PREMISES AND EQUIPMENT
---------------------------
A summary of bank premises and equipment at December 31, 1995 and 1994
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land and improvements $2,075,943 1,470,852
Bank buildings 2,424,825 2,059,565
Furniture, fixtures and equipment 2,457,733 1,763,462
--------- ---------
6,958,501 5,293,879
Less accumulated depreciation and amortization (2,431,832) (1,521,074)
--------- ---------
$4,526,669 3,772,805
========= =========
</TABLE>
The Bank is obligated under noncancelable operating leases for certain of
its banking facilities. The future minimum lease payments as of December
31, 1995 are as follows:
<TABLE>
<CAPTION>
Year Ending December 31:
------------------------
<S> <C>
1996 $157,000
1997 66,000
1998 66,000
</TABLE>
Rent expense for the years ended December 31, 1995, 1994 and 1993 was
$241,801, 196,075 and $164,051, respectively.
(5) FEDERAL INCOME TAXES
--------------------
As discussed in note 1, the Corporation adopted statement 109 as of
January 1, 1993. The cumulative impact of the change in method of
accounting for income taxes was a $170,112 expense when adopted.
(Continued)
F-18
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(5) FEDERAL INCOME TAXES, CONTINUED
-------------------------------
Income tax expense consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal:
Current $1,456,945 1,277,292 1,375,550
Deferred (33,560) (54,864) (111,096)
State franchise tax income component 64,000 58,454 66,095
---------- --------- ---------
$1,487,385 1,280,882 1,330,549
========== ========= =========
Total income taxes were allocated as follows:
1995 1994 1993
---- ---- ----
Income from continuing operations $1,487,385 1,280,882 1,330,549
Stockholders' equity, for unrealized
holding loss on investment securities
recognized for financial reporting
purposes 548,027 (610,839) -
---------- --------- ---------
$2,035,412 670,043 1,330,549
========== ========= =========
</TABLE>
Federal income tax amounts included in the accompanying financial
statements are reflected on a consolidated basis. The actual Federal
income tax expense differs from the "expected" tax expense computed by
applying the U.S. Federal corporate income tax rate of 34% to earnings
before provision for income taxes and extraordinary item as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Computed tax expense at statutory rate $1,425,373 1,231,097 1,296,596
Increase (decrease) in taxes resulting from:
Other 10,222 - (27,218)
Non-deductible expenses 9,550 11,207 17,549
State franchise tax-income component 42,240 38,578 43,622
---------- --------- ---------
$1,487,385 1,280,882 1,330,549
========== ========= =========
(Continued)
</TABLE>
F-19
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(5) FEDERAL INCOME TAXES, CONTINUED
-------------------------------
The tax effect of temporary differences that give rise to significant
portions of the deferred tax liability at December 31, 1995 and 1994 are
as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Book basis of fixed assets in excess of tax basis $(128,138) (153,514)
Excess of organizational cost for book purposes
is greater than amount for tax purposes (1,623) (8,346)
Other, net (8,635) (5,366)
--------- -------
Deferred tax liabilities (138,396) (167,226)
--------- -------
Unrealized loss on securities available for sale 62,812 610,839
Writedowns of other real estate owned 34,094 -
Book allowances for possible losses in excess of bad
debt reserve for tax purpose 133,387 117,224
--------- -------
Deferred tax assets 230,293 728,063
Valuation allowance - -
--------- --------
Net deferred tax asset $ 91,897 560,837
========= ========
</TABLE>
There is no valuation allowance for deferred tax assets as of December 31,
1995 and 1994. The deferred asset is included in other assets in 1995 and
1994 in the accompanying consolidated balance sheet. The Corporation
believes that it is more likely than not it will be able to realize its
remaining deferred tax assets through future earnings or reversal of
temporary differences generating deferred tax liabilities.
F-20
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(6) REGULATORY MATTERS
------------------
Capital Requirements
--------------------
The Bank is currently required to meet certain minimum regulatory capital
guidelines for state banks utilizing risk-based capital and leverage
capital frameworks. At December 31, 1995, the Bank was required to have a
minimum ratio of Tier 1 capital to total risk-adjusted assets of not less
than 4%, a ratio of combined Tier 1 and Tier 2 capital to total risk-
adjusted assets of not less than 8%, and a leverage ratio of not less than
4%. The State Banking Regulator (State) requires a leverage of capital
ratio of 6%. Tier 1 capital includes only common stockholders' equity,
common stock warrants and perpetual preferred stock. Tier 2 capital
includes other capital elements such as limited life preferred stock,
subordinated debt and the allowance for loan losses. The allowance for
loan losses may be included only to the extent of 1.25% of risk-adjusted
assets. Any excess of the allowance for loan losses over these limits is
treated as a reduction in the total risk-based asset amount in the risk-
based capital calculation. The leverage ratio is the ratio of Tier 1
capital to total assets reduced for any intangible assets. At December 31,
1995, the Bank had a Tier 1 capital ratio to risk adjusted assets ratio of
9.92% a combined Tier 1 and Tier 2 capital to total risk adjusted assets
ratio of 10.68% and a leverage ratio of 8.36% based on regulatory capital
guidelines.
As a state bank, the Bank is subject to dividend restrictions as set forth
by the Federal Deposit Insurance Corporation.
The Corporation declared and paid a $500,000 dividend in 1995, declared
and paid a $764,400 dividend in 1993 and declared a $1,000,000 dividend in
1993 which was paid to shareholders' on January 4, 1994.
F-21
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(7) TIME DEPOSITS
-------------
Included in time deposits are certificates of deposit in amounts of
$100,000 or more. These certificates and their remaining maturities at
December 31, 1995 and 1994 are approximately as follows:
<TABLE>
<CAPTION>
1995 1994
----------- ---------
<S> <C> <C>
Three months or less $ 5,295,000 4,505,000
Four through twelve months 8,761,000 4,669,000
Twelve months through thirty-six months 1,145,000 400,000
----------- ---------
$15,201,000 9,574,000
=========== =========
</TABLE>
Interest expense on these deposits was approximately $611,000, $324,000
and $257,000 for the year ended December 31, 1995, 1994 and 1993,
respectively.
(8) RESTRICTED CASH BALANCES
------------------------
Aggregate reserves (in the form of vault cash and deposits with the
Federal Reserve Bank) of approximately $2,582,000 were maintained to
satisfy Federal regulatory requirements at December 31, 1995.
(9) EMPLOYEE BENEFIT PLANS
----------------------
The Bank established an employee benefit plan qualifying under Section
401(k) of the Internal Revenue Code for all eligible employees. Employees
become eligible upon meeting certain age and service requirements. The
Bank has not made any contributions to the plan.
The Bank also has established a self-insured health plan for all eligible
employees. The health plan is administered by a third-party administrator
and is reinsured for individual participant and total plan costs on an
annual basis. Health plan expenses for the years ended December 31, 1995,
1994 and 1993 was approximately $213,000, $224,000, and $148,000,
respectively.
F-22
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(10) SUBORDINATED DEBENTURES
-----------------------
The Corporation had $277,104 in subordinated debentures outstanding at
December 31, 1995 and 1994 which bear interest at 1% plus average yield on
10 year U.S. Treasury bond rate payable semi-annually. Principal is due on
the subordinated debentures as follows: 2002 - $138,552 and 2003 -
$138,552.
(11) CONTINGENCIES
-------------
The Corporation is involved in various claims and legal actions that have
arisen in the ordinary course of business. It is management's opinion that
liabilities, if any, arising from these actions would not have material
adverse effect on the financial condition of the Bank.
(12) PARENT COMPANY
--------------
The condensed parent company only financial statements of Texas
Bancorporation, Inc. are shown below:
Balance Sheets
(Parent Only)
December 31
1995 1994
---- ----
Assets
------
<TABLE>
<CAPTION>
<S> <C> <C>
Cash and certificates of deposit in Bank $ 36,196 (440)
Investment in Bank 13,442,331 10,259,423
Due from Bank and other assets 353,052 299,192
----------- ----------
$13,831,579 10,558,175
=========== ==========
</TABLE>
(Continued)
F-23
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(12) PARENT COMPANY, CONTINUED
-------------------------
<TABLE>
<CAPTION>
1995 1994
---- ----
Liabilities and Stockholders' Equity
------------------------------------
<S> <C> <C>
Liabilities:
Subordinated debentures $ 277,104 277,104
Other liabilities 6,602 6,602
----------- ----------
283,706 283,706
----------- ----------
Stockholders' equity:
Common stock 8,607 8,607
Capital surplus 14,860 14,860
Retained earnings 13,641,636 11,436,749
Unrealized loss on securities available for sale (117,230) (1,185,747)
----------- ----------
Total stockholders' equity 13,547,873 10,274,469
----------- ----------
$13,831,579 10,558,175
=========== ==========
</TABLE>
Statements of Earnings
(Parent Only)
For the Years Ended December 31
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- ---------
<S> <C> <C> <C>
Dividend income $710,000 25,000 2,140,000
-------- ------- ---------
Expenses:
Directors' fees 97,599 72,000 72,000
Interest expense 20,647 25,538 19,470
Other expenses 62,820 74,345 10,181
-------- ------- ---------
Total expenses 181,066 171,883 101,651
-------- ------- ---------
</TABLE>
(Continued)
F-24
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(12) PARENT COMPANY, CONTINUED
-------------------------
Statements of Earnings, Continued
(Parent Only)
For the Years Ended December 31
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Earnings (loss) before Equity in Earnings of Bank $ 528,934 (146,883) 2,038,349
Equity in earnings of bank, net of dividends paid 2,114,391 2,428,435 239,947
---------- --------- ---------
Earnings before taxes 2,643,325 2,281,552 2,278,296
Income tax benefit 61,562 58,440 34,561
---------- --------- ---------
Net earnings $2,704,887 2,339,992 2,312,857
========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Statements of Cash Flows
(Parent Only)
For the Years Ended December 31
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flow from operating activities:
Net earnings $2,704,887 2,339,992 2,312,857
---------- --------- ---------
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Equity in earnings of Bank (2,114,391) 2,339,992 (239,947)
Decrease (increase) in due from
Bank and other assets (53,860) 1,548,01 (1,498,742)
Decrease in other liabilities - (464,033) 194,091
---------- -------- ---------
(2,168,251) (1,344,454) 1,544,598
========== ========== =========
Net cash provided by operating activities 536,636 995,538 768,259
---------- --------- ---------
(Continued)
</TABLE>
F-25
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(12) PARENT COMPANY, CONTINUED
-------------------------
Statements of Cash Flows, Continued
(Parent Only)
For the Years Ended December 31
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- ---------
<S> <C> <C> <C>
Cash flow from financing activities:
Dividend paid $(500,000) (1,000,000) (764,400)
--------- --------
Net cash used in financing activities (500,000) (1,000,000) (764,400
--------- --------
Net increase (decrease) in cash and cash equivalents 36,636 (4,462) 3,859
Cash and cash equivalents at beginning of year (440) 4,022 163
--------- ---------- --------
Cash and cash equivalents at end of year $ 36,196 (440) 4,022
========= ========== ========
</TABLE>
(13) BANK ACQUISITION
----------------
Texas Bancorporation, Inc. acquired the outstanding common stock of Lake
Buchanan State Bank, a state chartered bank in Burnet, Texas (the Acquired
Bank). The Acquired Bank was merged into the Bank. This acquisition and
merger was consummated in April 1995.
The acquisition of Lake Buchanan State Bank has been recorded under the
purchase method of accounting. Accordingly, all assets acquired and
liabilities assumed have been recorded at their fair value as of the date
of acquisition.
(Continued)
F-26
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(13) BANK ACQUISITION, CONTINUED
---------------------------
The components of the excess of cost over net assets acquired at April 28,
1995 from Lake Buchanan State Bank follows:
<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents $ 6,054,695
Investment securities 72,468
Loans, net 12,365,895
Fixed assets 508,179
Accrued interest receivable 121,847
Other assets 215,355
-----------
Fair value of assets acquired $19,338,439
-----------
Deposits $17,876,028
Accrued interest payable 28,947
Other liabilities 22,283
-----------
Fair value of liabilities assumed 17,927,258
-----------
Excess of assets acquired over liabilities assumed 1,411,181
Amount paid 1,449,670
-----------
Excess of cost over net assets acquired $ 38,489
===========
</TABLE>
The excess of amount paid over net assets acquired of $38,490 has been
classified as goodwill. The amount allocated to goodwill will be amortized
using the straight-line method over ten years.
F-27
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" (Statement 107), requires that the
Bank disclose estimated fair values for its financial instruments as of
December 31, 1995:
<TABLE>
<CAPTION>
Carrying Estimated
Amount Fair Value
------------ -----------
<S> <C> <C>
Financial assets:
Total cash and cash equivalents $ 23,324,963 23,324,963
Investment securities 36,822,127 36,822,127
Loans receivable 95,511,811 98,044,000
------------ -----------
Total financial assets $155,658,901 158,191,090
============ ===========
Financial liabilities:
Deposits $147,688,240 147,769,270
Subordinated debentures 277,104 277,104
------------ -----------
Total financial liabilities $147,965,344 148,046,374
============ ===========
</TABLE>
Fair value estimates, methods, and assumptions are set forth below for the
Bank's financial instruments.
Cash and Cash Equivalents
-------------------------
The carrying amounts for cash and cash equivalents approximate fair value
because they mature in less than 90 days and do not present unanticipated
credit concerns.
(Continued)
F-28
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
----------------------------------------------
Investments and Mortgage-Backed Securities
------------------------------------------
The fair value of longer-term investments and mortgage-backed securities
is estimated based on bid prices published in financial newspapers or bid
quotations received from securities dealers.
Loans
-----
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as commercial, real
estate, and installment. Each loan category is further segmented into
fixed and adjustable rate interest terms and by performing and
nonperforming categories.
The fair value of performing loans is calculated by discounting scheduled
cash flows through the estimated maturity using estimated market discount
rates that reflect the credit and interest rate risk inherent in the loan.
Fair value for significant nonperforming loans is based on recent external
appraisals. If appraisals are not available, estimated cash flows are
discounted using a rate commensurate with the risk associated with the
estimated cash flows. Assumptions regarding credit risk, cash flows, and
discount rates are judgmentally determined using available market informa-
tion and specific borrower information.
Average maturity represents the expected average cash flow period, which
in some instances is different than the stated maturity.
Management has made estimates of fair value discount rates that it
believes to be reasonable. However, because there is no market for many of
these financial instruments, management has no basis to determine whether
the fair value presented above would be indicative of the value negotiated
in an actual sale.
(Continued)
F-29
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
----------------------------------------------
Deposit Liabilities
-------------------
The fair value of deposits with no stated maturity, such a non-interest
bearing demand deposits, savings, and NOW and money market accounts, is
equal to the amounts payable on demand as of December 31, 1995. The fair
value of certificates of deposit and individual retirement accounts are
based on the discounted value of contractual cash flows. The discount rate
is estimated using the rates currently offered for deposits of similar
remaining maturities.
The fair value estimates do not include the benefit that results from the
low-cost funding provided by the deposit liabilities compared to the cost
of borrowing funds in the market.
Subordinated Debentures
-----------------------
The fair value of subordinated debentures equal to the stated amount
because the debentures adjust to estimated market rates on a semiannual
basis.
Commitments to Extend Credit, Standby Letters of Credit, and Financial
----------------------------------------------------------------------
Guarantees Written
------------------
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. For fixed rate loan commitments, fair value also considers
the difference between current levels of interest rates and the committed
rates. The fair value of financial guarantees written and letters of credit
is based on fees currently charged for similar agreements or on the
estimated cost to terminate them or otherwise settle the obligations with
the counterparties. The carrying amount and fair value of the
aforementioned off-balance sheet items is not material.
(Continued)
F-30
<PAGE>
TEXAS BANCORPORATION, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
- --------------------------------------------------------------------------------
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
----------------------------------------------
Limitations
-----------
Fair value estimates are made at specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Bank's entire holdings of a particular
financial instrument. Because no market exists for a significant portion
of the Bank's financial instruments, fair value estimates are based on
judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and
other factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly
affect the estimates.
Fair value estimates are based on existing on-and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that
are not considered financial instruments. Other significant assets and
liabilities that are not considered financial assets or liabilities
include the deferred tax assets, bank premises and equipment, and
goodwill. In addition, the tax ramifications related to the realization of
the unrealized gains and losses can have a significant effect on fair
value estimates and have not been considered in the aforementioned
estimates.
(15) DIRECTORS' BONUS EXPENSE
------------------------
In 1993, the Corporation paid a $647,550 directors' bonus for all
directors of the Bank for their involvement in Board of Directors'
meetings and Board committees since 1986. The Corporation also paid
directors' fees of $72,000 for all directors of the Corporation for 1993.
The Corporation and Bank's directors' fees have been included in salaries
and employees benefits in the 1994 and 1995 consolidated statements of
earnings.
F-31
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
<PAGE>
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as of
the 3rd day of June, 1996, by and between TEXAS BANCORPORATION, INC.
("Bancorp"), a Texas 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 Bancorp (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
Bancorp of the par value of $0.01 per share ("Bancorp Common Stock") outstanding
immediately prior to the time the Merger becomes effective in accordance with
the provisions of the Merger Agreement into shares of voting Common Stock of
Norwest of the par value of $1-2/3 per share ("Norwest Common Stock"),
NOW, THEREFORE, to effect such reorganization and in consideration of the
premises and the mutual covenants and agreements contained herein, the parties
hereto do hereby represent, warrant, covenant and agree as follows:
1. BASIC PLAN OF REORGANIZATION
(a) Merger. Subject to the terms and conditions contained herein, a wholly-
owned subsidiary of Norwest (the "Merger Co.") will be merged by statutory
merger with and into Bancorp pursuant to the Merger Agreement, with Bancorp as
the surviving corporation, in which merger each share of Bancorp Common Stock
outstanding immediately prior to the Effective Time of the Merger (as defined
below) (other than shares as to which statutory dissenters' appraisal rights
have been exercised) will be converted into and exchanged for the number of
shares of Norwest Common Stock determined by dividing 762,500 by the number of
shares of Bancorp Common Stock then outstanding.
(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 Bancorp Common Stock shall
be converted pursuant to subparagraph (a), above, will be appropriately and
proportionately adjusted so that the number of such shares of
<PAGE>
Norwest Common Stock into which a share of Bancorp Common Stock shall be
converted will equal the number of shares of Norwest Common Stock which holders
of shares of Bancorp 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 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 it or Articles of
Merger or a Certificate of Merger shall be filed with the Secretary of State of
the State of Texas 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 regulatory
approval of the Merger, the expiration of all required waiting periods and the
meeting of shareholders held to approve the Merger. 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. Odessa, Texas time on the Effective Date of the
Merger. At the Effective Time of the Merger on the Effective Date of the Merger,
the separate existence of Merger Co. shall cease and Merger Co. will be merged
with and into Bancorp 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 BANCORP. Bancorp represents and
warrants to Norwest as follows:
(a) Organization and Authority. Bancorp is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas, 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 Bancorp and the Bancorp 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. Bancorp is registered as a bank
holding company with the Federal Reserve Board under the Bank Holding Company
Act
-2-
<PAGE>
of 1956, as amended (the "BHC Act"). Bancorp has furnished Norwest true and
correct copies of its articles of incorporation and by-laws, as amended.
(b) Bancorp's Subsidiaries. Schedule 2(b) sets forth a complete and
correct list of all of Bancorp's subsidiaries as of the date hereof
(individually a "Bancorp Subsidiary" and collectively the "Bancorp
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
Bancorp. No equity security of any Bancorp 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 Bancorp 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 the Texas Business
Corporation Act and the Texas Banking Act, all of such shares so owned by
Bancorp 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 Bancorp Subsidiary is a corporation or state 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), Bancorp 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 Bancorp consists of
1,000,000 of preferred shares, $10.00 par value, of which as of the close of
business on March 31, 1996, no shares were outstanding and 1,000,000 shares of
common stock, $0.01 par value, of which as of the close of business on March 31,
1996, 860,685 shares were outstanding and no shares were held in the treasury.
The maximum number of shares of Bancorp Common Stock (assuming for this purpose
that phantom shares and other share-equivalents constitute Bancorp 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 860,685. All of the outstanding shares of capital stock of Bancorp
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 Bancorp or any Bancorp Subsidiary
to issue, sell or otherwise dispose of, or to purchase, redeem or otherwise
acquire, any shares of capital stock of Bancorp or any Bancorp Subsidiary. Since
March 31, 1996 no shares of Bancorp capital stock have been purchased, redeemed
or otherwise acquired, directly or indirectly, by Bancorp or any Bancorp
Subsidiary and no dividends or other distributions have been declared, set
aside, made or paid to the shareholders of Bancorp.
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(d) Authorization. Bancorp 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 Bancorp and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Bancorp. Subject to such approvals of shareholders and of
government agencies and other governing boards having regulatory authority over
Bancorp as may be required by statute or regulation, this Agreement and the
Merger Agreement are valid and binding obligations of Bancorp enforceable
against Bancorp in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors and
contracting parties generally and except as enforceability may be subject to
general principles of equity.
Except as set forth on Schedule 2(d), neither the execution, delivery and
performance by Bancorp of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor compliance
by Bancorp 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 Bancorp or any Bancorp 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 Bancorp or
any Bancorp Subsidiary is a party or by which it may be bound, or to which
Bancorp or any Bancorp Subsidiary or any of the properties or assets of Bancorp
or any Bancorp Subsidiary may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in the next paragraph, to the best
knowledge of Bancorp, violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to Bancorp or any Bancorp
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, the Texas Banking Act or the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR Act"), and filings required to effect
the Merger under Texas 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 Bancorp of the transactions contemplated by
this Agreement and the Merger Agreement.
(e) Bancorp Financial Statements. The consolidated balance sheets of
Bancorp and Bancorp's Subsidiaries as of December 31, 1995 and 1994 and related
consolidated
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statements of income, shareholders' equity and cash flows for the three years
ended December 31, 1995, together with the notes thereto, certified by KPMG Peat
Marwick LLP, and the unaudited consolidated statements of financial condition of
Bancorp and Bancorp's Subsidiaries as of March 31, 1996 and the related
unaudited consolidated statements of income, shareholders' equity and cash flows
for the three (3) months then ended (collectively, the "Bancorp 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 Bancorp and Bancorp's
Subsidiaries at the dates and the consolidated results of operations and cash
flows of Bancorp and Bancorp's Subsidiaries for the periods stated therein.
(f) Reports. Since December 31, 1990, Bancorp and each Bancorp 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
Securities and Exchange Commission (the "SEC"), including, but not limited to,
Forms 10-K, Forms 10-Q and proxy statements, (ii) the Federal Reserve Board,
(iii) the Federal Deposit Insurance Corporation (the "FDIC"), (iv) the United
States Comptroller of the Currency (the "Comptroller") and (v) any applicable
state securities or banking authorities. All such reports and statements filed
with any such regulatory body or authority are collectively referred to herein
as the "Bancorp Reports". As of their respective dates, the Bancorp Reports, as
amended, 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 Bancorp Reports have been made available to
Norwest by Bancorp.
(g) Properties and Leases. Except as may be reflected in the Bancorp
Financial Statements and except for any lien for current taxes not yet
delinquent, Bancorp and each Bancorp 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 Bancorp's
consolidated balance sheet as of March 31, 1996 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 Bancorp or any
Bancorp Subsidiary pursuant to which Bancorp or such Bancorp 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 Bancorp or
such Bancorp Subsidiary or any event which, with notice or lapse of time or
both, would constitute such a material default. Substantially all Bancorp's and
each Bancorp Subsidiary's buildings and equipment in regular use have been well
maintained and are in good and serviceable condition, reasonable wear and tear
excepted.
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(h) Taxes. Except as set forth in Schedule 2(h), each of Bancorp and the
Bancorp Subsidiaries has filed all federal, state, county, local and foreign tax
returns, including information returns, required to be filed by it, and paid all
taxes owed by it, including those with respect to income, withholding, social
security, unemployment, workers compensation, franchise, ad valorem, premium,
excise and sales taxes, and no taxes shown on such returns to be owed by it or
assessments received by it are delinquent. The federal income tax returns of
Bancorp and the Bancorp Subsidiaries for the fiscal year ended December 31,
1992, 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 Bancorp nor any
Bancorp Subsidiary is a party to any pending action or proceeding, nor to
Bancorp'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 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 Bancorp or any Bancorp
Subsidiary which has not been settled, resolved and fully satisfied. Each of
Bancorp and the Bancorp Subsidiaries has paid all taxes owed or which it is
required to withhold from amounts owing to employees, creditors or other third
parties. The consolidated balance sheet as of March 31, 1996, referred to in
paragraph 2(e) hereof, includes adequate provision for all accrued but unpaid
federal, state, county, local and foreign taxes, interest, penalties,
assessments or deficiencies of Bancorp and the Bancorp Subsidiaries with respect
to all periods through the date thereof.
(i) Absence of Certain Changes. Since December 31, 1995 there has been no
change in the business, financial condition or results of operations of Bancorp
or any Bancorp 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 Bancorp and the Bancorp Subsidiaries taken as a whole.
(j) Commitments and Contracts. Except as set forth on Schedule 2(j),
neither Bancorp nor any Bancorp 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 Bancorp or such Bancorp 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;
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(iv) any contract not made in the ordinary course of business
containing covenants which limit the ability of Bancorp or any Bancorp
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, Bancorp or any Bancorp 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; or
(vii) any agreement or commitment with respect to the Community
Reinvestment Act with any state or federal bank regulatory authority or any
other party; or
(viii) any current or past agreement, contract or understanding with
any current or former director, officer, employee, consultant, financial
adviser, broker, dealer, or agent providing for any rights of
indemnification in favor of such person or entity.
(k) Litigation and Other Proceedings. Bancorp has furnished Norwest copies
of (i) all attorney responses to the request of the independent auditors for
Bancorp with respect to loss contingencies as of December 31, 1995 in connection
with the Bancorp Financial Statements, and (ii) a written list of legal and
regulatory proceedings filed against Bancorp or any Bancorp Subsidiary since
said date. Neither Bancorp nor any Bancorp Subsidiary is a party to any pending
or, to the best knowledge of Bancorp, threatened, claim, action, suit,
investigation or proceeding, or is subject to any order, judgment or decree,
except for matters which, in the aggregate, will not have, or cannot reasonably
be expected to have, a material adverse effect on the business, financial
condition or results of operations of Bancorp and the Bancorp Subsidiaries taken
as a whole.
(l) Insurance. Bancorp and each Bancorp Subsidiary is presently insured,
and during each of the past five calendar years (or during such lesser period of
time as Bancorp has owned such Bancorp 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. Bancorp and each Bancorp 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
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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 Bancorp or such Bancorp Subsidiary; all
such permits, licenses, certificates of authority, orders and approvals are in
full force and effect and, to the best knowledge of Bancorp, no suspension or
cancellation of any of them is threatened; and all such filings, applications
and registrations are current. The conduct by Bancorp and each Bancorp
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 Bancorp nor any Bancorp 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 Bancorp or any Bancorp Subsidiary
which reasonably could be expected to have a material adverse effect on the
business or properties of Bancorp and the Bancorp Subsidiaries taken as a whole.
(n) Labor. No work stoppage involving Bancorp or any Bancorp Subsidiary is
pending or, to the best knowledge of Bancorp, threatened. Neither Bancorp nor
any Bancorp 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 Bancorp or such Bancorp
Subsidiary. Employees of Bancorp and the Bancorp 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 Bancorp no officer or director of Bancorp or any
Bancorp 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 Bancorp or any Bancorp Subsidiary.
Schedule 2(o) sets forth a correct and complete list of any loan from
Bancorp or any Bancorp 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
Bancorp's or such Bancorp Subsidiary's Board of Directors.
(p) Bancorp 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 Bancorp or any Bancorp Subsidiary acts as the plan
sponsor as defined in ERISA Section 3(16)(B), and with respect to which any
material liability under ERISA or otherwise exists or may be incurred by
Bancorp or any Bancorp
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Subsidiary are those set forth on Schedule 2(p) (the "Plans"). No Plan is a
"multi-employer plan" within the meaning of Section 3(37) of ERISA.
(ii) Each Plan is and has been in all material respects operated and
administered in accordance with its provisions and applicable law. Except
as set forth on Schedule 2(p), Bancorp or the Bancorp 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. Bancorp 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), and to the best knowledge
of Bancorp, no Plan, if any, 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
Bancorp, 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 Bancorp and the Bancorp Subsidiaries taken
as a whole.
(v) No Plan, if any, which is subject to Title IV of ERISA or any
trust created thereunder has been terminated, nor have there been any
"reportable events" as that term is defined in Section 4043 of ERISA, with
respect to any Plan, other than those events which may result from the
transactions contemplated by this Agreement and the Merger Agreement.
(vi) No Plan, if any, or any trust created thereunder has incurred
any "accumulated funding deficiency", as such term is defined in Section
412 of the Code (whether or not waived), since the effective date of ERISA.
(vii) Except as disclosed in Schedule 2(p), neither the execution and
delivery of this Agreement and the Merger Agreement nor the consummation of
the transactions contemplated hereby and thereby will (i) result in any
material payment (including, without limitation, severance, unemployment
compensation,
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golden parachute or otherwise) becoming due to any director or employee or
former employee of Bancorp or any Bancorp 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 Bancorp and
the Bancorp Subsidiaries supplied or to be supplied by Bancorp for inclusion in
(i) a Registration Statement on Form S-4 to be filed with the SEC by Norwest for
the purpose of registering the shares of Norwest Common Stock to be exchanged
for shares of Bancorp Common Stock pursuant to the provisions of the Merger
Agreement (the "Registration Statement"), (ii) the proxy statement to be mailed
to Bancorp'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 documents are filed with the SEC or any regulatory
authority and, in the case of the Registration Statement, when it becomes
effective and, with respect to the Proxy Statement, when mailed, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading or, in the case
of the Proxy Statement or any amendment thereof or supplement thereto, at the
time of the meeting of shareholders referred to in paragraph 4(c), be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for such meeting. All documents which Bancorp and
the Bancorp 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. Neither Bancorp nor any Bancorp Subsidiary
is under any obligation, contingent or otherwise, which will survive the Merger
by reason of any agreement to register any of its securities under the
Securities Act.
(s) Brokers and Finders. Neither Bancorp nor any Bancorp 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 Bancorp or any Bancorp Subsidiary in connection with this
Agreement and the Merger Agreement or the transactions contemplated hereby and
thereby.
(t) Fiduciary Activities. Neither Bancorp nor any Bancorp subsidiary has
ever had any accounts for which it has acted as a fiduciary including but not
limited to accounts for which it has served as trustee, agent, custodian,
personal representative, guardian, conservator or investment advisor.
(u) No Defaults. Neither Bancorp nor any Bancorp Subsidiary is in default,
nor has any event occurred which, with the passage of time or the giving of
notice, or both,
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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 Bancorp and the Bancorp Subsidiaries, taken as a whole. To the best of
Bancorp's knowledge, all parties with whom Bancorp or any Bancorp Subsidiary has
material leases, agreements or contracts or who owe to Bancorp or any Bancorp
Subsidiary material obligations other than with respect to those arising in the
ordinary course of the banking business of the Bancorp 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 Bancorp or any Bancorp 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 Bancorp's
knowledge, threatened against Bancorp or any Bancorp Subsidiary the result of
which has had or could reasonably be expected to have a material adverse effect
upon Bancorp and Bancorp's Subsidiaries taken as a whole; to the best of
Bancorp's knowledge there is no reasonable basis for any such proceeding, claim
or action; and to the best of Bancorp's knowledge neither Bancorp nor any
Bancorp 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. Bancorp 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 Bancorp 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. Norwest has
furnished Bancorp true and correct copies of its certificate of incorporation
and by-laws, as in effect on the date hereof.
(b) Norwest Subsidiaries. Schedule 3(b) sets forth a complete and correct
list as of December 31, 1995, of Norwest's Significant Subsidiaries (as defined
in Regulation S-X promulgated by the SEC) (individually a "Norwest Subsidiary"
and collectively the "Norwest Subsidiaries"), all shares of the outstanding
capital stock of each of which, except as set forth in Schedule 3(b), are owned
directly or indirectly by Norwest. No equity security of any Norwest Subsidiary
is or may be required to be issued to any person
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or entity other than Norwest by reason of any option, warrant, scrip, right to
subscribe to, call or commitment of any character whatsoever relating to, or
security or right convertible into, shares of any capital stock of such
subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any Norwest Subsidiary is bound to issue additional shares
of its capital stock, or options, warrants or rights to purchase or acquire any
additional shares of its capital stock. Subject to 12 U.S.C. (S) 55 (1982), all
of such shares so owned by Norwest are fully paid and nonassessable and are
owned by it free and clear of any lien, claim, charge, option, encumbrance or
agreement with respect thereto. Each Norwest Subsidiary is a corporation or
national banking association duly organized, validly existing, duly qualified to
do business and in good standing under the laws of its jurisdiction of
incorporation, and has corporate power and authority to own or lease its
properties and assets and to carry on its business as it is now being conducted.
(c) Capitalization. The authorized capital stock of Norwest consists of
(i) 5,000,000 shares of Preferred Stock, without par value, of which as of the
close of business on December 31, 1995, 1,127,125 shares of 10.24% Cumulative
Preferred Stock, at $100 stated value, 980,000 shares of Cumulative Tracking
Preferred Stock, at $200 stated value, 12,984 shares of ESOP Cumulative
Convertible Preferred Stock, at $1,000 stated value, and 24,572 shares of 1995
ESOP Cumulative Convertible Preferred Stock, at $1,000 stated value, were
outstanding; (ii) 4,000,000 shares of Preference Stock, without par value, of
which as of the close of business on December 31, 1995, no shares were
outstanding; and (iii) 500,000,000 shares of Common Stock, $1-2/3 par value, of
which as of the close of business on December 31, 1995, 352,760,457 shares were
outstanding and 5,571,696 shares were held in the treasury. All of the
outstanding shares of capital stock of Norwest have been duly and validly
authorized and issued and are fully paid and nonassessable.
(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, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors and
contracting parties generally and except as enforceability may be subject to
general principles of equity.
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,
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<PAGE>
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the creation
of, any lien, security interest, charge or encumbrance upon any of the
properties or assets of Norwest or any Norwest Subsidiary under any of the
terms, conditions or provisions of (x) its certificate of incorporation or by-
laws or (y) any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Norwest or
any Norwest Subsidiary is a party or by which it may be bound, or to which
Norwest or any Norwest Subsidiary or any of the properties or assets of Norwest
or any Norwest Subsidiary may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in the next paragraph, to the best
knowledge of Norwest, violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to Norwest or any Norwest
Subsidiary or any of their respective properties or assets.
Other than in connection with or in compliance with the provisions of the
Securities Act, the Exchange Act, the securities or blue sky laws of the various
states or filings, consents, reviews, authorizations, approvals or exemptions
required under the BHC Act, Texas Banking Act or the HSR Act, and filings
required to effect the Merger under Texas 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, 1995 and 1994 and related
consolidated statements of income, stockholders' equity and cash flows for the
three years ended December 31, 1995, together with the notes thereto, certified
by KPMG Peat Marwick LLP and included in Norwest's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 (the "Norwest 10-K") as filed with
the SEC, and the unaudited consolidated balance sheets of Norwest and its
subsidiaries as of March 31, 1996 and the related unaudited consolidated
statements of income and cash flows for the three (3) months then ended included
in Norwest's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1996, 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, 1990, Norwest and each Norwest Subsidiary
has filed all reports, registrations and statements, together with any required
amendments thereto, that it was required to file with (i) the SEC, including,
but not limited to, Forms 10-K, Forms 10-Q and proxy statements, (ii) the
Federal Reserve Board, (iii) the FDIC, (iv) the Comptroller and (v) any
applicable state securities or banking authorities. All such reports and
statements filed with any such regulatory body or authority are collectively
referred to herein as the "Norwest Reports". As of their respective dates, the
Norwest Reports complied in all material respects with all the rules and
regulations promulgated by
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the SEC, the Federal Reserve Board, the FDIC, the Comptroller and any applicable
state securities or banking authorities, as the case may be, and did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(g) Properties and Leases. Except as may be reflected in the Norwest
Financial Statements and except for any lien for current taxes not yet
delinquent, Norwest and each Norwest Subsidiary has good title free and clear of
any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Norwest's
consolidated balance sheet as of March 31, 1996 included in Norwest's Quarterly
Report on Form 10-Q for the period then ended, and all real and personal
property acquired since such date, except such real and personal property has
been disposed of in the ordinary course of business. All leases of real property
and all other leases material to Norwest or any Norwest Subsidiary pursuant to
which Norwest or such Norwest Subsidiary, as lessee, leases real or personal
property, are valid and effective in accordance with their respective terms, and
there is not, under any such lease, any material existing default by Norwest or
such Norwest Subsidiary or any event which, with notice or lapse of time or
both, would constitute such a material default. Substantially all Norwest's and
each Norwest Subsidiary's buildings and equipment in regular use have been well
maintained and are in good and serviceable condition, reasonable wear and tear
excepted.
(h) Taxes. Each of Norwest and the Norwest Subsidiaries has filed all
material federal, state, county, local and foreign tax returns, including
information returns, required to be filed by it, and paid or made adequate
provision for the payment of all taxes owed by it, including those with respect
to income, withholding, social security, unemployment, workers compensation,
franchise, ad valorem, premium, excise and sales taxes, and no taxes shown on
such returns to be owed by it or assessments received by it are delinquent. The
federal income tax returns of Norwest and the Norwest Subsidiaries for the
fiscal year ended December 31, 1979, and for all fiscal years prior thereto, are
for the purposes of routine audit by the Internal Revenue Service closed because
of the statute of limitations, and no claims for additional taxes for such
fiscal years are pending. Except only as set forth on Schedule 3(h), (i) neither
Norwest nor any Norwest Subsidiary is a party to any pending action or
proceeding, nor to Norwest's knowledge is any such action or proceeding
threatened by any governmental authority, for the assessment or collection of
taxes, interest, penalties, assessments or deficiencies which could reasonably
be expected to have any material adverse effect on Norwest and its subsidiaries
taken as a whole, and (ii) no issue has been raised by 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.
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(i) Absence of Certain Changes. Since December 31, 1995, 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
May 1, 1996 neither Norwest nor any Norwest Subsidiary is a party or subject to
any of the following (whether written or oral, express or implied):
(i) any labor contract or agreement with any labor union;
(ii) any contract not made in the ordinary course of business
containing covenants which materially limit the ability of Norwest or any
Norwest Subsidiary to compete in any line of business or with any person or
which involve any material restriction of the geographical area in which,
or method by which, Norwest or any Norwest Subsidiary may carry on its
business (other than as may be required by law or applicable regulatory
authorities);
(iii) any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K.
(k) Litigation and Other Proceedings. Neither Norwest nor any Norwest
Subsidiary is a party to any pending or, to the best knowledge of Norwest,
threatened, claim, action, suit, investigation or proceeding, or is subject to
any order, judgment or decree, except for matters which, in the aggregate, will
not have, or cannot reasonably be expected to have, a material adverse effect on
the business, financial condition or results of operations of Norwest and its
subsidiaries taken as a whole.
(l) Insurance. Norwest and each Norwest Subsidiary is presently insured or
self insured, and during each of the past five calendar years (or during such
lesser period of time as Norwest has owned such Norwest Subsidiary) has been
insured or self-insured, for reasonable amounts with financially sound and
reputable insurance companies against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured and has maintained all insurance required by applicable law and
regulation.
(m) Compliance with Laws. Norwest and each Norwest Subsidiary has all
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties or assets and to carry on its business as presently
conducted and that are material to the business of Norwest or such Subsidiary;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect, and to the best knowledge of Norwest, no suspension or
cancellation of any of them is threatened; and all such filings, applications
and registrations are current. The conduct by Norwest and each Norwest
Subsidiary of its
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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 May 1, 1996, the only "employee benefit plans" within the
meaning of Section 3(3) of ERISA for which Norwest or any Norwest
Subsidiary acts as plan sponsor as defined in ERISA Section 3(16)(B) with
respect to which any liability under ERISA or otherwise exists or may be
incurred by Norwest or any Norwest Subsidiary are those set forth on
Schedule 3(o) (the "Norwest Plans"). No Norwest Plan is a "multi-employer
plan" within the meaning of Section 3(37) of ERISA.
(ii) Each Norwest Plan is and has been in all material respects
operated and administered in accordance with its provisions and applicable
law. Except as set forth on Schedule 3(o), Norwest or the Norwest
Subsidiaries have received favorable determination letters from the
Internal Revenue Service under the provisions of TEFRA, 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 Plan year,
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exceed the value of the assets of the Norwest Plans allocable to such
vested or accrued benefits.
(iv) Except as set forth on Schedule 3(o), and to the best knowledge
of Norwest, no Norwest Plan or any trust created thereunder, nor any
trustee, fiduciary or administrator thereof, has engaged in a "prohibited
transaction", as such term is defined in Section 4975 of the Code or
Section 406 of ERISA or violated fiduciary standards under Part 4 of Title
I of ERISA, which could subject, to the best knowledge of Norwest, such
Norwest Plan or trust, or any trustee, fiduciary or administrator thereof,
or any party dealing with any such Norwest Plan or trust, to the tax or
penalty on prohibited transactions imposed by said Section 4975 or would
result in material liability to Norwest and its subsidiaries taken as a
whole.
(v) Except as set forth on Schedule 3(o), no Norwest Plan which is
subject to Title IV of ERISA or any trust created thereunder has been
terminated, nor have there been any "reportable events" as that term is
defined in Section 4043 of ERISA with respect to any Norwest Plan, other
than those events which may result from the transactions contemplated by
this Agreement and the Merger Agreement.
(vi) No Norwest Plan or any trust created thereunder has incurred any
"accumulated funding deficiency", as such term is defined in Section 412 of
the Code (whether or not waived), during the last five Norwest Plan years
which would result in a material liability.
(vii) Neither the execution and delivery of this Agreement and the
Merger Agreement nor the consummation of the transactions contemplated
hereby and thereby will (i) result in any material payment (including,
without limitation, severance, unemployment compensation, golden parachute
or otherwise) becoming due to any director or employee or former employee
of Norwest under any Norwest Plan or otherwise, (ii) materially increase
any benefits otherwise payable under any Norwest Plan or (iii) result in
the acceleration of the time of payment or vesting of any such benefits to
any material extent.
(p) Registration Statement, etc. None of the information regarding Norwest
and its subsidiaries supplied or to be supplied by Norwest for inclusion in (i)
the Registration Statement, (ii) the Proxy Statement, or (iii) any other
documents to be filed with the SEC or any regulatory authority in connection
with the transactions contemplated hereby or by the Merger Agreement will, at
the respective times such documents are filed with the SEC or any regulatory
authority and, in the case of the Registration Statement, when it becomes
effective and, with respect to the Proxy Statement, when mailed, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading or, in the case
of the Proxy Statement or any amendment thereof or supplement thereto, at the
time of the meeting of shareholders referred to in paragraph 4(c), be false or
misleading with respect to any
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material fact, or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation of
any proxy for such meeting. All documents which Norwest and the Norwest
Subsidiaries are responsible for filing with the SEC and any other regulatory
authority in connection with the Merger will comply as to form in all material
respects with the provisions of applicable law.
(q) Brokers and Finders. Neither Norwest nor any Norwest Subsidiary nor
any of their respective officers, directors or employees has employed any broker
or finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted directly
or indirectly for Norwest or any Norwest Subsidiary in connection with this
Agreement and the Merger Agreement or the transactions contemplated hereby and
thereby.
(r) No Defaults. Neither Norwest nor any Norwest Subsidiary is in default,
nor has any event occurred which, with the passage of time or the giving of
notice, or both, would constitute a default under any material agreement,
indenture, loan agreement or other instrument to which it is a party or by which
it or any of its assets is bound or to which any of its assets is subject, the
result of which has had or could reasonably be expected to have a material
adverse effect upon Norwest and its subsidiaries taken as a whole. To the best
of Norwest's knowledge, all parties with whom Norwest or any Norwest Subsidiary
has material leases, agreements or contracts or who owe to Norwest or any
Norwest Subsidiary material obligations other than with respect to those arising
in the ordinary course of the banking business of the Norwest Subsidiaries are
in compliance therewith in all material respects.
(s) Environmental Liability. There is no legal, administrative, or other
proceeding, claim, or action of any nature seeking to impose, or that could
result in the imposition, on Norwest or any Norwest Subsidiary of any liability
relating to the release of hazardous substances as defined under any local,
state or federal environmental statute, regulation or ordinance including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, pending or to the best of Norwest's
knowledge, threatened against Norwest or any Norwest Subsidiary, the result of
which has had or could reasonably be expected to have a material adverse effect
upon Norwest and its subsidiaries taken as a whole; to the best of Norwest's
knowledge there is no reasonable basis for any such proceeding, claim or action;
and to the best of Norwest's knowledge neither Norwest nor any Norwest
Subsidiary is subject to any agreement, order, judgment, or decree by or with
any court, governmental authority or third party imposing any such environmental
liability.
(t) Merger Co. As of the Closing Date, Merger Co. will be a corporation
duly organized, validly existing, duly qualified to do business and in good
standing under the laws of its jurisdiction of incorporation, and will have
corporate power and authority to own or lease its properties and assets and to
carry on its business. Merger Co. will have corporate power and authority to
enter into the Merger Agreement and to carry out its obligations thereunder.
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4. COVENANTS OF BANCORP. Bancorp 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, Bancorp, and each Bancorp
Subsidiary will: maintain its corporate existence in good standing; maintain the
general character of its business and conduct its business in its ordinary and
usual manner; extend credit in accordance with existing lending policies, except
that it shall not, without the prior written consent of Norwest (which consent
requirement shall be deemed to be waived as to any loan approval request to
which Norwest has made no response by the end of the second business day
following receipt of the request), make any new loan or modify, restructure or
renew any existing loan (except pursuant to commitments made prior to the date
of this Agreement) to any borrower if the amount of the resulting loan, when
aggregated with all other loans or extensions of credit to such person, would be
in excess of $100,000; maintain proper business and accounting records in
accordance with generally accepted principles; maintain its properties in good
repair and condition, ordinary wear and tear excepted; maintain in all material
respects presently existing insurance coverage; use its best efforts to preserve
its business organization intact, to keep the services of its present principal
employees and to preserve its good will and the good will of its suppliers,
customers and others having business relationships with it; use its best efforts
to obtain any approvals or consents required to maintain existing leases and
other contracts in effect following the Merger; comply in all material respects
with all laws, regulations, ordinances, codes, orders, licenses and permits
applicable to the properties and operations of Bancorp and each Bancorp
Subsidiary the non-compliance with which reasonably could be expected to have a
material adverse effect on Bancorp and the Bancorp 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 after reasonable notice. 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 Bancorp herein expressed.
(b) Except as otherwise contemplated or required by this Agreement, from
the date hereof until the Effective Time of the Merger, Bancorp and each Bancorp
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 one (1) year and in amounts of $100,000 or less; amend or
terminate any Plan except as required by law; make any contributions to
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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 subsidiary's
Board of Directors in accordance with applicable law and regulation; provided,
however, that Bancorp may declare and pay dividends out of year-to-date 1996
earnings, in accordance with applicable law and regulation, in an aggregate
amount not to exceed $41,667 per month between December 31, 1995 and the Closing
Date; redeem, purchase or otherwise acquire, directly or indirectly, any of the
capital stock of Bancorp; increase the compensation of any officers, directors
or executive employees, except pursuant to existing compensation plans and
practices (including bonus plans), provided, however, that Bancorp may, in
addition, accrue and pay bonuses in accordance with Schedule 4(b) attached
hereto; sell or otherwise dispose of any shares of the capital stock of any
Bancorp Subsidiary; or sell or otherwise dispose of any of its assets or
properties other than in the ordinary course of business.
(c) The Board of Directors of Bancorp will duly call, and will cause to be
held not later than twenty-five (25) business days following the effective date
of the Registration Statement referred to in paragraph 5(c) hereof, a meeting of
its shareholders and will direct that this Agreement and the Merger Agreement be
submitted to a vote at such meeting. It is anticipated that the shareholder
meeting would be held no more than 21 days prior to the anticipated Closing
Date. The Board of Directors of Bancorp will (i) cause proper notice of such
meeting to be given to its shareholders in compliance with the Texas 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) Bancorp will furnish or cause to be furnished to Norwest all the
information concerning Bancorp and its subsidiaries required for inclusion in
the Registration Statement referred to in paragraph 5(c) hereof, or any
statement or application made by Norwest to any governmental body in connection
with the transactions contemplated by this Agreement. Any financial statement
for any fiscal year provided under this paragraph must include the audit opinion
and the consent of KPMG Peat Marwick LLP to use such opinion in such
Registration Statement.
(e) Bancorp 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 Bancorp to carry out the transactions contemplated
by this Agreement and will cooperate with Norwest to obtain all such approvals
and consents required of Norwest. Bancorp shall provide to Norwest, as soon as
reasonably practicable, all nonconfidential portions of applications filed with
and correspondence to or from regulatory authorities related to the consummation
of the transactions contemplated herein.
(f) Bancorp will use its best efforts to deliver to the Closing all
opinions, certificates and other documents required to be delivered by it at the
Closing.
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(g) Bancorp will hold in confidence all documents and information
concerning Norwest and its subsidiaries furnished to Bancorp 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 Bancorp'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 Bancorp, in the public
domain, or later acquired by Bancorp 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 Bancorp, nor any Bancorp 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 Bancorp or any Bancorp Subsidiary, (ii) to make a tender or exchange
offer for any shares of such common stock or other equity security, (iii) to
purchase, lease or otherwise acquire the assets of Bancorp or any Bancorp
Subsidiary except in the ordinary course of business, or (iv) to merge,
consolidate or otherwise combine with Bancorp or any Bancorp Subsidiary. If any
corporation, partnership, person or other entity or group makes an offer or
inquiry to Bancorp or any Bancorp Subsidiary concerning any of the foregoing,
Bancorp or such Bancorp Subsidiary will promptly disclose such offer or inquiry,
including the terms thereof, to Norwest.
(i) Bancorp 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) Bancorp and each Bancorp Subsidiary will take all action necessary or
required (i) to terminate or amend, if requested by Norwest, all qualified
pension and welfare benefit plans and all non-qualified benefit plans and
compensation arrangements as of the Effective Date of the Merger to facilitate
the merger of such plans with Norwest plans without gaps in coverage for
participants in the plans and without duplication of costs caused by the
continuation of such plans after coverage is available under Norwest plans, and
(ii) to submit application, if required, to the Internal Revenue Service for a
favorable determination letter for each of the Plans which is subject to the
qualification requirements of Section 401(a) of the Code prior to the Effective
Date of the Merger.
(k) Neither Bancorp nor any Bancorp Subsidiary shall take any action which
with respect to Bancorp would disqualify the Merger as a "pooling of interests"
for accounting purposes.
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(l) Bancorp shall use its best efforts to obtain and deliver at least 32
days prior to the Effective Date of the Merger signed representations
substantially in the form attached hereto as Exhibit B to Norwest by each
executive officer, director or shareholder of Bancorp who may reasonably be
deemed an "affiliate" of Bancorp within the meaning of such term as used in Rule
145 under the Securities Act.
(m) Bancorp shall establish such additional accruals and reserves as may be
necessary to conform Bancorp's accounting and credit loss reserve practices and
methods to those of Norwest and Norwest's plans with respect to the conduct of
Bancorp's business following the Merger and to provide for the costs and
expenses relating to the consummation by Bancorp of the Merger and the other
transactions contemplated by this Agreement.
(n) Bancorp shall obtain, at its sole expense, Phase I environmental
assessments for each owned 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. Bancorp 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. Bancorp shall obtain a survey and assessment of all potential
asbestos containing material in owned or leased properties (other than OREO
property) and a written report of the results shall be delivered to Norwest
within four weeks of execution of the definitive agreement.
(o) Bancorp shall obtain, at its sole expense, commitments for title
insurance and boundary surveys for each owned bank facility which shall be
delivered to Norwest no later than four (4) weeks from the date of this
Agreement.
5. COVENANTS OF NORWEST. Norwest covenants and agrees with Bancorp 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 Bancorp all the information concerning Norwest
required for inclusion in a proxy statement or statements to be sent to the
shareholders of Bancorp, or in any statement or application made by Bancorp to
any governmental body in connection with the transactions contemplated by this
Agreement. From the date hereof
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to the Closing Date, Norwest shall deliver to Bancorp, when reasonably
available, Norwest's Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and Annual Report on Form 10-K, as filed with the SEC.
(c) Unless otherwise agreed by the parties hereto, 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 Bancorp 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 Bancorp shareholders, at the time of the Bancorp 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
Bancorp or any Bancorp 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 Bancorp 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 paid and
nonassessable. The shares of Norwest Common Stock to be delivered to the
shareholders of Bancorp 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 Bancorp to obtain all such
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approvals and consents required by Bancorp. Norwest shall provide to Bancorp, as
soon as reasonably practicable, all nonconfidential portions of applications
filed with and correspondence to or from regulatory authorities related to the
consummation of the transactions contemplated herein.
(h) Norwest will hold in confidence all documents and information
concerning Bancorp and Bancorp'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 Bancorp (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 Bancorp.
(i) Norwest will file any documents or agreements required to be filed in
connection with the Merger under the Texas 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 Bancorp 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 Bancorp notice of receipt of the regulatory
approvals referred to in paragraph 7(e).
(m) Norwest shall use its best efforts to obtain and deliver to Bancorp,
prior to the Effective Date of the Merger, signed representations from the
directors and executive officers of Norwest to the effect that, except for de
minimus dispositions which will not disqualify the Merger as a pooling of
interests, they will not dispose of shares of Norwest or Bancorp during the
period commencing 30 days prior to the Effective Date and ending upon
publication by Norwest of financial results including at least 30 days of
combined operations of Bancorp and Norwest.
(n) For a period not exceeding fifteen days prior to the Closing Date,
Norwest will permit Bancorp 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
Bancorp or its representatives shall in any way affect, diminish or terminate
any of the representations, warranties or covenants of Norwest herein expressed.
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(o) With respect to the indemnification of directors and officers and with
respect to officers' and directors' insurance, Norwest agrees as follows:
(i) Norwest shall ensure that all rights to indemnification and all
limitations of liability existing in favor of any person who is now, or has
been at any time prior to the date hereof, or who becomes prior to the
Effective Time of the Merger, a director or officer of Bancorp or any
Bancorp Subsidiary, (an "Indemnified Party" and, collectively, the
"Indemnified Parties") in Bancorp's Articles of Incorporation or By-laws or
similar governing documents of any Bancorp Subsidiary, as applicable in the
particular case and as in effect on the date hereof, shall, with respect to
claims arising from (A) facts or events that occurred before the Effective
Time of the Merger, or (B) this Agreement or any of the transactions
contemplated by this Agreement, whether in any case asserted or arising
before or after the Effective Time of the Merger, survive the Merger and
shall continue in full force and effect. Nothing contained in this
paragraph 5(o)(i) shall be deemed to preclude the liquidation,
consolidation or merger of Bancorp or any Bancorp Subsidiary, in which case
all of such rights to indemnification and limitations on liability shall be
deemed to survive and continue as contractual rights notwithstanding any
such liquidation or consolidation or merger; provided, however, that in the
event of liquidation or sale of substantially all of the assets of Bancorp,
Norwest shall guarantee, to the extent of the net asset value of Bancorp or
any Bancorp Subsidiary as of the Effective Date of the Merger, the
indemnification obligations of Bancorp or any Bancorp Subsidiary to the
extent of indemnification obligations of Bancorp and the Bancorp
Subsidiaries described above. Notwithstanding anything to the contrary
contained in this paragraph 5(o)(i), nothing contained herein shall require
Norwest to indemnify any person who was a director or officer of Bancorp or
any Bancorp Subsidiary to a greater extent than Bancorp or any Bancorp
Subsidiary is, as of the date of this Agreement, required to indemnify any
such person.
(ii) any Indemnified Party wishing to claim indemnification under
paragraph 5(o)(i), upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Norwest thereof, but the
failure to so notify shall not relieve Norwest of any liability it may have
to such Indemnified Party. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time of the Merger), (A) Norwest shall have the right to assume the defense
thereof and Norwest shall not be liable to any Indemnified Party for any
legal expenses of other counsel or any other expenses subsequently incurred
by such Indemnified Party in connection with the defense thereof, except
that if Norwest elects not to assume such defense or counsel for the
Indemnified Party advises that there are issues which raise conflicts of
interest between Norwest and the Indemnified Party, the Indemnified Party
may retain counsel satisfactory to them, and Norwest shall pay the
reasonable fees and expenses of such counsel for the Indemnified Party
promptly as statements therefor are received; provided, however, that
Norwest shall be obligated pursuant to this subparagraph (ii) to pay for
only one firm of counsel for all Indemnified Parties in
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any jurisdiction unless the use of one counsel for such Indemnified Parties
would present such counsel with a conflict of interest and (B) such
Indemnified Party shall cooperate in the defense of any such matter.
(iii) for a period of three years after the Effective Time of the
Merger, Norwest shall use its best efforts to cause to be maintained in
effect the current policies of directors' and officers' liability insurance
maintained by Bancorp (provided that Norwest may substitute therefor
policies of at least the same coverage and amount containing terms and
conditions which are substantially no less advantageous) with respect to
claims arising from facts or events which occurred before the Effective
Time of the Merger; provided, however, that in no event shall Norwest be
obligated to expend, in order to maintain or provide insurance coverage
pursuant to this paragraph 5(o)(iii), any amount per annum in excess of
125% of the amount of the annual premiums paid as of the date hereof by
Bancorp for such insurance (the "Maximum Amount") and provided further
that, prior to the Effective Time of the Merger, Bancorp shall notify the
appropriate directors' and officers' liability insurers of the Merger and
of all pending or threatened claims, actions, suits, proceedings or
investigations asserted or claimed against any Indemnified Party, or
circumstances likely to give rise thereto, in accordance with terms and
conditions of the applicable policies. If the amount of the annual
premiums necessary to maintain or procure such insurance coverage exceeds
the Maximum Amount, Norwest shall use reasonable efforts to maintain the
most advantageous policies of directors' and officers' insurance obtainable
for an annual premium equal to the Maximum Amount.
(iv) if Norwest or any of its successors or assigns (A) shall
consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such
consolidation or Merger or (B) shall transfer all or substantially all of
its properties and assets to any individual, corporation or other entity,
then and in each such case, proper provision shall be made so that the
successors and assigns of Norwest shall assume the obligations set forth in
this paragraph 5(o).
(v) the provisions of this paragraph 5(o) are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his
or her heirs and representatives.
6. CONDITIONS PRECEDENT TO OBLIGATION OF BANCORP. The obligation of
Bancorp 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 Bancorp:
(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
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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) Bancorp 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 Bancorp required for approval of a plan of merger in accordance with the
provisions of Bancorp's Articles of Incorporation and the Texas 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 Bancorp 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) Bancorp shall have received an opinion, dated the Closing Date, of
counsel to Bancorp, 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 Bancorp 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 Bancorp will be the
same as the basis of Bancorp Common Stock exchanged therefor; and (iv) the
holding period of the shares of Norwest Common Stock received by the
shareholders of Bancorp will include the holding period of the Bancorp Common
Stock, provided such shares of Bancorp Common Stock were held as a capital asset
as of the Effective Time of the Merger.
(i) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order, and no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been
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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 Bancorp and the Bancorp Subsidiaries taken as a whole as if
made at the Time of Filing.
(b) Bancorp 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 Bancorp required for approval of a plan of merger in accordance with the
provisions of Bancorp's Articles of Incorporation and the Texas 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 Bancorp, 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 Bancorp or any Bancorp Subsidiary that, in the good faith judgment
of Norwest, is unreasonably burdensome to Norwest.
(f) Bancorp and each Bancorp Subsidiary shall have obtained any and all
material consents or waivers from other parties to loan agreements, leases or
other contracts material to Bancorp's or such subsidiary's business required for
the consummation of the Merger, and Bancorp and each Bancorp Subsidiary shall
have obtained any and all material permits, authorizations, consents, waivers
and approvals required for the lawful consummation by it of the Merger.
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(g) No court or governmental authority of competent jurisdiction shall
have issued an order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(h) Neither Bancorp nor any Bancorp Subsidiary shall have taken any
action which with respect to Bancorp would disqualify the Merger as a "pooling
of interests" for accounting purposes and Norwest shall have received from KPMG
Peat Marwick an opinion to that effect.
(i) At any time since the date hereof the total number of shares of
Bancorp Common Stock outstanding and subject to issuance upon exercise (assuming
for this purpose that phantom shares and other share-equivalents constitute
Bancorp Common Stock) of all warrants, options, conversion rights, phantom
shares or other share-equivalents, other than any option held by Norwest, shall
not have exceeded 860,685.
(j) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order, and no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened or be unresolved. Norwest shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
(k) Norwest shall have received from the Chief Executive Officer and Chief
Financial Officer of Bancorp 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 Bancorp 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 Bancorp;
(ii) the amounts reported in the interim quarterly financial
statements of Bancorp agree with the general ledger of Bancorp;
(iii) the annual and quarterly financial statements of Bancorp and
the Bancorp 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 unaudited consolidated
financial statements of Bancorp and the Bancorp Subsidiaries as may be
included in the Registration Statement to a date 5 days prior to the
effective date of the Registration Statement or 5 days prior to the
Closing, there are no increases in
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long-term debt, changes in the capital stock or decreases in stockholders'
equity of Bancorp and the Bancorp 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 Bancorp and the Bancorp 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 Bancorp and the Bancorp 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 Bancorp and the
Bancorp Subsidiaries and have found them to be in agreement with financial
records and analyses prepared by Bancorp included in the annual and
quarterly financial statements, except as disclosed in such letters.
(l) Bancorp and the Bancorp Subsidiaries considered as a whole shall not
have sustained since December 31, 1995 any material loss or interference with
their business from any civil disturbance or any fire, explosion, flood or other
calamity, whether or not covered by insurance.
(m) There shall be no reasonable basis for any proceeding, claim or action
of any nature seeking to impose, or that could result in the imposition on
Bancorp or any Bancorp 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 Bancorp and its subsidiaries taken as a whole.
(n) Since March 31, 1996, 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 of Bancorp and the Bancorp 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).
8. EMPLOYEE BENEFIT PLANS. Each person who is an employee of Bancorp or
any Bancorp Subsidiary as of the Effective Date of the Merger ("Bancorp
Employees") shall
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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 Bancorp 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
(with full credit for years of past service to Bancorp and the Bancorp
Subsidiaries, to the extent credited under the respective employee welfare
benefit plans of Bancorp and Bancorp Subsidiaries, and not subject to pre-
existing condition exclusions, except with respect to the Norwest Long Term Care
Plan) and shall enter each plan not later than the first day of the calendar
quarter which begins at least 32 days after the Effective Date of the Merger
(provided, however, that it is Norwest's intent that the transition from the
Bancorp plans to the Norwest plans be facilitated without gaps in coverage to
the participants and without duplication in costs to Norwest):
Medical Plan
Dental Plan
Vision Plan
Short Term Disability Plan
Long Term Disability Plan
Long Term Care Plan
Flexible Benefits Plan
Basic Group Life Insurance Plan
Group Universal Life Insurance Plan
Dependent Group Life Insurance Plan
Business Travel Accident Insurance Plan
Accidental Death and Dismemberment Plan
Severance Pay Plan
Vacation Program
For the purpose of determining each Bancorp Employee's benefit for the year in
which the Merger occurs under the Norwest vacation program, vacation taken by a
Bancorp Employee in the year in which the Merger occurs will be deducted from
the total Norwest benefit.
(b) Employee Retirement Benefit Plans.
Each Bancorp 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 Bancorp and
the Bancorp Subsidiaries for the purpose of satisfying any eligibility and
vesting periods applicable to the SIP, to the extent credited under the
respective employee retirement benefit plans of Bancorp and the Bancorp
Subsidiaries), 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.
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Each Bancorp 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 December 31, 1996
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 Bancorp 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 Bancorp, within five business days after the end of the Index
Measurement Period (as defined in subparagraph (c)(ii) below), if both of
the following conditions are satisfied:
(A) the Norwest Measurement Price (as defined in subparagraph
(c)(ii) below) is less than $30; and
(B) the number obtained by dividing the Norwest Measurement Price
by the closing price of Norwest Common Stock on the trading day
immediately preceding the date of this Agreement is less than the
number obtained by dividing the Final Index Price (as defined in
subparagraph (c) below) by the Initial Index Price (as defined in
subparagraph (c) below) and subtracting 0.15 from such quotient.
(b) Termination of this Agreement under this paragraph 9 shall not
release, or be construed as so releasing, either party hereto from any liability
or damage to the other party hereto arising out of the breaching party's wilful
and material breach of the warranties and representations made by it, or wilful
and material failure in performance of any of its covenants, agreements, duties
or obligations arising hereunder, and the obligations under paragraphs 4(g),
5(h) and 10 shall survive such termination.
(c) For purposes of this paragraph 9:
(i) The "Company Market Capitalization" shall mean (a) the price of
one share of the common stock of a given company at the close of the
trading day immediately preceding the date of this Agreement multiplied by
(b) the
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number of shares of common stock of such company outstanding as of March
31, 1996 (adjusted for any stock dividend, reclassification,
recapitalization, exchange of shares or similar transaction between March
31, 1996 and the close of the trading day immediately preceding the date of
this Agreement).
(ii) The "Index Group" shall mean all of those companies listed on
Exhibit C the common stock of which is publicly traded and as to which
there is, during the period of 20 trading days ending on the day
immediately preceding the meeting of the shareholders of Bancorp held to
vote on this Agreement and the Merger Agreement (the "Index Measurement
Period"), no pending publicly announced proposal for such company to be
acquired, nor has there been any proposal by such company publicly
announced subsequent to the day before the date of this Agreement to
acquire another company in exchange for stock where, if the company to be
acquired were to become a subsidiary of the acquiring company, the company
to be acquired would be a "significant subsidiary" as defined in Rule 1-02
of Regulation S-X promulgated by the SEC nor has there been any program
publicly announced subsequent to the day before the date of this Agreement
to repurchase 5% or more of the outstanding shares of such company's common
stock. 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 Index
Measurement Period.
(iii) The "Initial Index Price" shall mean the sum of the following,
calculated for each of the companies in the Index Group: (a) the closing
price per share of common stock of each such company on the trading day
immediately preceding the date of this Agreement multiplied by (b) the
Weighting Factor (as defined below) for each such company.
(iv) The "Final Index Price" shall mean the sum of the following,
calculated for each of the companies in the Index Group: (a) the Final
Price for each such company multiplied by (b) the Weighting Factor (as
defined below) for each such company.
(v) The "Final Price" of any company in the Index Group shall mean
the average of the daily closing prices of a share of common stock of such
company, as reported on the consolidated transaction reporting system for
the market or exchange on which such common stock is principally traded,
during the Index Measurement Period.
(vi) The "Total Market Capitalization" shall mean the sum of the
Company Market Capitalization for each of the companies in the Index Group.
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(vii) The "Weighting Factor" for any given company shall mean the
Company Market Capitalization for such company divided by the Total Market
Capitalization.
If a Common Stock Adjustment occurs with respect to the shares of Norwest
or any company in the Index Group between the date of this Agreement and the
Bancorp shareholder meeting date, the closing prices for the common stock of
such company shall be appropriately and proportionately adjusted for the
purposes of the definitions above so as to be comparable to what the price would
have been if the record date of the Common Stock Adjustment had been immediately
following the Effective Time of the Merger.
10. EXPENSES. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by Bancorp and Bancorp Subsidiaries shall be borne by
Bancorp, 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 Bancorp:
Texas Bancorporation, Inc.
4101 North Parkway
Odessa, TX 79762
Attention: Richard Browning, Chairman & CEO
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With a copy to:
Thompson & Knight, a Professional Corporation
1700 Pacific Avenue, Suite 3300
Dallas, TX 75201
Attention: O. Paul Corley, Jr.
or to such other address with respect to a party as such party shall notify the
other in writing as above provided.
14. COMPLETE AGREEMENT. This Agreement and the Merger Agreement contain
the complete agreement between the parties hereto with respect to the Merger and
other transactions contemplated hereby and supersede all prior agreements and
understandings between the parties hereto with respect thereto.
15. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
16. WAIVER AND OTHER ACTION. Either party hereto may, by a signed
writing, give any consent, take any action pursuant to paragraph 9 hereof or
otherwise, or waive any inaccuracies in the representations and warranties by
the other party and compliance by the other party with any of the covenants and
conditions herein.
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
Bancorp 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.
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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NORWEST CORPORATION TEXAS BANCORPORATION, INC.
By: /s/ Ken Murray By: /s/ Richard D. Browning
Its: Executive Vice President Its: Chairman and Chief Executive Officer
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EXHIBIT A
AGREEMENT AND PLAN OF MERGER
BETWEEN
TEXAS BANCORPORATION, INC.
a Texas corporation
(the surviving corporation)
AND
[MERGER CO.]
a Texas corporation
(the merged corporation)
This Agreement and Plan of Merger dated as of __________, 1996, between
TEXAS BANCORPORATION, INC., a Texas corporation (hereinafter sometimes called
"Bancorp" and sometimes called the "surviving corporation") and [MERGER CO.], a
Texas corporation ("Merger Co.") (said corporations being hereinafter sometimes
referred to as the "constituent corporations"),
WHEREAS, Merger Co., a wholly-owned subsidiary of Norwest Corporation, was
incorporated by Articles of Incorporation filed in the office of the Secretary
of State of the State of Texas on _______, 19__, and said corporation is now a
corporation subject to and governed by the provisions of the Texas 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, Bancorp was incorporated by Articles of Incorporation filed in the
office of the Secretary of State of the State of Texas on ________, 19__ and
said corporation is now a corporation subject to and governed by the provisions
of the Texas Business Corporation Act. Bancorp has authorized capital stock of
1,000,000 shares of Preferred Stock, par value $10.00 per share ("Bancorp
Preferred Stock") of which no shares were outstanding and no shares were held in
the treasury as of ___________ , 19__ and 1,000,000 shares of Common Stock, par
value $0.01 per share ("Bancorp Common Stock") of which 860,685 shares were
outstanding and no shares were held in the treasury as of ___________ , 19__;
and
WHEREAS, Norwest Corporation and Bancorp are parties to an Agreement and
Plan of Reorganization dated as of __________ , 1996 (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 Bancorp, with Bancorp continuing as the surviving corporation, on
the terms and conditions hereinafter set forth in accordance with the provisions
of the Texas 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 Merger Co., in consideration of the premises and of the mutual
covenants and agreements contained herein and of the benefits to accrue to the
parties hereto, have agreed and do hereby agree that Merger Co. shall be merged
with and into Bancorp pursuant to the laws of the State of Texas, and do hereby
agree upon, prescribe and set forth the terms and conditions of the merger of
Merger Co. with and into Bancorp, the mode of carrying said merger into effect,
the manner and basis of converting the shares of Bancorp Common Stock into
shares of common stock of Norwest of the par value of $1-2/3 per share ("Norwest
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<PAGE>
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
Bancorp, one of the constituent corporations, which shall be the surviving
corporation, and the separate existence of Merger Co. shall cease and the name
of the surviving corporation shall be ________________.
SECOND: The Articles of Incorporation of Bancorp at the time of merger
shall be amended as set forth below and, as so amended, shall be the Articles of
Incorporation of the surviving corporation until further amended according to
law:
[Amend to change name, number of directors, etc.]
THIRD: The By-Laws of Bancorp at the time of merger shall be and remain
the By-Laws of the surviving corporation until amended according to the
provisions of the Articles of Incorporation of the surviving corporation or of
said By-Laws.
FOURTH: The directors of Merger Co. at the time of merger shall be and
remain the directors of the surviving corporation and shall hold office from the
time of merger until their respective successors are elected and qualify.
FIFTH: The officers of Merger Co. at the time of merger shall be and
remain the officers of the surviving corporation and shall hold office from the
time of merger until their respective successors are elected or appointed and
qualify.
SIXTH: The manner and basis of converting the shares of Bancorp Common
Stock into cash or shares of Norwest Common Stock shall be as follows:
1. Each of the shares of Bancorp 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 762,500 by the number of
shares of Bancorp Common Stock then outstanding.
2. As soon as practicable after the merger becomes effective, each holder
of a certificate for shares of Bancorp Common Stock outstanding immediately
prior to the time of merger shall be entitled, upon surrender of such
certificate for cancellation to the surviving corporation or to Norwest
Bank Minnesota, National Association, as the designated agent of the
surviving corporation (the "Agent"), to receive a new certificate for the
number of whole shares of Norwest Common Stock to which such holder shall
be entitled on the basis set forth in paragraph 1 above. Until so
surrendered each certificate which, immediately prior to the time of
merger, represented shares of Bancorp Common Stock shall not be
transferable on the 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 Bancorp Common Stock have been converted on
the basis above set forth; provided, however, until the holder of such
certificate for Bancorp 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
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become payable to holders of record of Norwest Common Stock between the
effective date of merger and the date of such exchange.
3. If between the date of the Reorganization Agreement and the time of
merger, shares of Norwest Common Stock shall be changed into a different
number of shares or a different class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or if a stock dividend thereon shall be declared
with a record date within such period, then the number of shares of Norwest
Common Stock, if any, into which a share of Bancorp Common Stock shall be
converted on the basis above set forth, will be appropriately and
proportionately adjusted so that the number of such shares of Norwest
Common Stock into which a share of Bancorp Common Stock shall be converted
will equal the number of shares of Norwest Common Stock which the holders
of shares of Bancorp Common Stock would have received pursuant to such
reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or stock dividend had the record date therefor been
immediately following the time of merger.
4. No fractional shares of Norwest Common Stock and no certificates or
scrip certificates therefor shall be issued to represent any such
fractional interest, and any holder of a fractional interest shall be paid
an amount of cash equal to the product obtained by multiplying the
fractional share interest to which such holder is entitled by the average
of the closing prices of a share of Norwest Common Stock as reported by the
consolidated tape of the New York Stock Exchange for each of the five (5)
trading days immediately preceding the meeting of shareholders held to vote
on the merger.
5. Each share of Merger Co. Common Stock issued and outstanding at the
time of merger shall be converted into and exchanged for one (1) share 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 Texas;
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 Bancorp in accordance with the Texas 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 Texas 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 Bancorp and by the Secretary or an Assistant Secretary of
Bancorp, and shall be filed in the office of the Secretary of State of
the State of Texas in accordance with the Texas 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.
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EIGHTH: At the time of merger:
1. The separate existence of Merger Co. shall cease, and the corporate
existence and identity of Bancorp shall continue as the surviving
corporation.
2. The merger shall have the other effects prescribed by Section 5.06 of
the Texas 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 Bancorp 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
Texas.
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 Texas, 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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Agreement and Plan
of Merger to be signed in their respective corporate names by the undersigned
officers and their respective corporate seals to be affixed hereto, pursuant to
authority duly given by their respective Boards of Directors, all as of the day
and year first above written.
TEXAS BANCORPORATION, INC.
By: _________________________________
Its: _________________________________
(Corporate Seal)
Attest:
__________________________
Secretary
[MERGER CO.]
By: ________________________________
Its: ________________________________
(Corporate Seal)
Attest:
___________________________
Secretary
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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 Texas
Bancorporation, Inc., a Texas corporation ("Bancorp").
Pursuant to an Agreement and Plan of Reorganization, dated as of ________,
1996, (the "Reorganization Agreement"), between Bancorp and Norwest Corporation,
a Delaware corporation ("Norwest") it is contemplated that a wholly-owned
subsidiary of Norwest will merge with and into Bancorp (the "Merger") and as a
result, I will receive in exchange for each share of Common Stock, par value
$0.01 per share, of Bancorp ("Bancorp 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 Bancorp Common Stock or Norwest Common Stock held by me during the 30
days prior to the Effective Time of the Merger.
I will not offer to sell, transfer or otherwise dispose of any of the
shares of Norwest Common Stock issued to me pursuant to the Merger (the "Stock")
except (a) in compliance with the applicable provisions of Rule 145, (b) in a
transaction that is otherwise exempt from the registration requirements of the
Securities Act, or (c) in an offering registered under the Securities Act.
I will not sell, transfer or otherwise dispose of the Stock or in any way
reduce my risk relative to any shares of Norwest Common Stock issued to me
pursuant to the Merger until such time as financial results covering at least 30
days of post-Merger combined operations of Bancorp and Norwest have been
published.
I consent to the endorsement of the Stock issued to me pursuant to the
Merger with a restrictive legend which will read substantially as follows:
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"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."
Norwest's transfer agent shall be given an appropriate stop transfer order
and shall not be required to register any attempted transfer of the shares of
the Stock, unless the transfer has been effected in compliance with the terms of
this letter agreement.
It is understood and agreed that this letter agreement shall terminate and
be of no further force and effect and the restrictive legend set forth above
shall be removed by delivery of substitute certificates without such legend, and
the related stop transfer restrictions shall be lifted forthwith, if (a) (i) any
such shares of Stock shall have been registered under the Securities Act for
sale, transfer or other disposition by me or on my behalf and are sold,
transferred or otherwise disposed of, or (ii) any such shares of Stock are sold
in accordance with the provisions of paragraphs (c), (e), (f) and (g) of Rule
144 promulgated under the Securities Act, or (iii) I am not at the time an
affiliate of Norwest and have been the beneficial owner of the Stock for at
least two years (or such other period as may be prescribed thereunder) and
Norwest has filed with the Commission all of the reports it is required to file
under the Securities Exchange Act of 1934, as amended, during the preceding
twelve months, or (iv) I am not and have not been for at least three months an
affiliate of Norwest and have been the beneficial owner of the Stock for at
least three years (or such other period as may be prescribed by the Securities
Act, and the rules and regulations promulgated thereunder), or (v) Norwest shall
have received an opinion of counsel acceptable to Norwest to the effect that the
stock transfer restrictions and the legend are not required, and (b) financial
results covering at least 30 days of post-Merger combined operations of Norwest
and Bancorp have been published.
I have carefully read this letter agreement and the Reorganization
Agreement and have discussed their requirements and other applicable limitations
upon my ability to offer to sell, transfer or otherwise dispose of shares of
Bancorp Common Stock, Norwest Common Stock or the Stock, to the extent I felt
necessary, with my counsel or counsel for Bancorp.
Sincerely,
_________________________
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<PAGE>
EXHIBIT C
BancOne Corporation
Bank of Boston Corporation
Bank of New York
BankAmerica Corporation
Barnett Banks, Inc.
Boatmen's Bancshares
Comerica, Inc.
CoreStates Financial Corporation
First Bank System, Inc.
First Chicago NBD Corporation
First Union Corporation
Fleet Financial
KeyCorp
Mellon Bank Corporation
National City Corporation
Nations Bank
PNC Financial Corporation
Signet Banking Corporation
Suntrust Banks, Inc.
U.S. Bancorp
Wachovia Corporation
Wells Fargo
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APPENDIX B
TEXAS BUSINESS CORPORATION ACT
ARTICLES 5.11, 5.12 AND 5.13
<PAGE>
ART. 5.11 RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN CORPORATE
ACTIONS
A. Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party
if shareholder approval is required by Article 5.03 or 5.16 of
this Act and the shareholder holds shares of a class or series
that was entitled to vote thereon as a class or otherwise:
(2) Any sale, lease, exchange or other disposition (not
including any pledge, mortgage, deed of trust or trust indenture
unless otherwise provided in the articles of incorporation) of
all, or substantially all, the property and assets, with or
without good will, of a corporation requiring the special
authorization of the shareholders as provided by this Act;
(3) Any plan of exchange pursuant to Article 5.02 of this
Act in which the shares of the corporation of the class or series
held by the shareholder are to be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of
merger in which there is a single surviving or new domestic or
foreign corporation, or from any plan of exchange, if (1) the
shares held by the shareholder are part of a class shares of
which are listed on a national securities exchange, or are held
of record by not less than 2,000 holders, on the record date
fixed to determine the shareholders entitled to vote on the plan
of merger or the plan of exchange, and (2) the shareholder is not
required by the terms of the plan of merger or the plan of
exchange to accept for his shares any consideration other than
(a) shares of a corporation that, immediately after the effective
time of the merger or exchange, will be part of a class or series
of shares of which are (i) listed, or authorized for listing upon
official notice of issuance, on a national securities exchange,
or (ii) held of record by not less than 2,000 holders, and (b)
cash in lieu of fractional shares otherwise entitled to be
received.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Amended by Acts 1957, 55th Leg., p. 111, ch. 54, (S) 10; Acts
1973, 63rd Leg., p. 1508, ch. 545, (S) 36, eff. Aug. 27, 1973;
Acts 1989, 71st Leg., ch. 801, (S) 34, eff. Aug. 28, 1989; Acts
1991, 72nd Leg., ch. 901, (S) 32, eff. Aug 26, 1991.
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ART. 5.12 PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE ACTIONS
A. Any shareholder of any domestic corporation who has the right to
dissent from any of the corporate actions referred to in Article
5.11 of this Act may exercise that right to dissent only by
complying with the following procedures:
(1) (a) With respect to proposed corporate action that is
submitted to a vote of shareholders at a meeting, the shareholder
shall file with the corporation, prior to the meeting, a written
objection to the action, setting out that the shareholder's right
to dissent will be exercised if the action is effective and
giving the shareholder's address, to which notice thereof shall
be delivered or mailed in that event. If the action is effected
and the shareholder shall not have voted in favor of the action,
the corporation, in the case of action other than a merger, or
the surviving or new corporation (foreign or domestic) or other
entity that is liable to discharge the shareholder's right of
dissent, in the case of a merger, shall, within ten (10) days
after the action is effected, deliver or mail to the shareholder
written notice that the action has been effected, and the
shareholder may, within ten (10) days from the delivery or
mailing of the notice, make written demand on the existing,
surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, for payment of the fair value of the
shareholder's shares. The fair value of the shares shall be the
value thereof as of the day immediately preceding the meeting,
excluding any appreciation or depreciation in anticipation of the
proposed action. The demand shall state the number and class of
the shares owned by the shareholder and the fair value of the
shares as estimated by the shareholder. Any shareholder failing
to make demand within the ten (10) day period shall be bound by
the action.
(b) With respect to proposed corporate action that is
approved pursuant to Section A of Article 9.10 of this Act, the
corporation, in the case of action other than a merger, and the
surviving or new corporation (foreign or domestic) or other
entity that is liable to discharge the shareholder's right of
dissent, in the case of a merger, shall, within ten (10) days
after the date the action is effected, mail to each shareholder
of record as of the effective date of the action notice of the
fact and date of the action and that the shareholder may exercise
the shareholder's right to dissent from the action. The notice
shall be accompanied by a copy of this Article and any articles
or documents filed by the Corporation with the Secretary of State
to effect the action. If the shareholder shall not have
consented to the taking of the action, the shareholder may,
within twenty (20) days after the mailing of the notice, make
written demand on the existing, surviving, or
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<PAGE>
new corporation (foreign or domestic) or other entity, as the
case may be, for payment of the fair value of the shareholder's
shares. The fair value of the shares shall be the value thereof
as of the date the written consent authorizing the action was
delivered to the corporation pursuant to Section A of Article
9.10 of this Act, excluding any appreciation or depreciation in
anticipation of the action. The demand shall state the number and
class of shares owned by the dissenting shareholder and the fair
value of the shares as estimated by the shareholder. Any
shareholder failing to make demand within the twenty (20) day
period shall be bound by the action.
(2) Within twenty (20) days after receipt by the existing,
surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, of a demand for payment made by a
dissenting shareholder in accordance with Subsection (1) of this
Section, the corporation (foreign or domestic) or other entity
shall deliver or mail to the shareholder a written notice that
shall either set out that the corporation (foreign or domestic)
or other entity accepts the amount claimed in the demand and
agrees to pay that amount within ninety (90) days after the date
on which the action was effected, and, in the case of shares
represented by certificates, upon the surrender of the
certificates duly endorsed, or shall contain an estimate by the
corporation (foreign or domestic) or other entity of the fair
value of the shares, together with an offer to pay the amount of
that estimate within ninety (90) days after the date on which the
action was effected, upon receipt of notice within sixty (60)
days after that date from the shareholder that the shareholder
agrees to accept that amount and, in the case of shares
represented by certificates, upon the surrender of the
certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the
corporate action was effected, the value of the shares is agreed
upon between the shareholder and the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case
may be, payment for the shares shall be made within ninety (90)
days after the date on which the action was effected and, in the
case of shares represented by certificates, upon surrender of the
certificates duly endorsed. Upon payment of the agreed value,
the shareholder shall cease to have any interest in the shares or
in the corporation.
B. If, within the period of sixty (60) days after the date on which
the corporate action was effected, the shareholder and the
existing, surviving, or new corporation (foreign or domestic) or
other entity, as the case may be, do not so agree, then the
shareholder or the corporate (foreign or domestic) or other
entity may, within sixty (60) days after the expiration of the
sixty (60) day period, file a petition in any court of competent
jurisdiction in the county in
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which the principal office of the domestic corporation is
located, asking for a finding and determination of the fair value
of the shareholder's shares. Upon the filing of any such petition
by the shareholder, service of a copy thereof shall be made upon
the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of
the clerk of the court in which the petition was filed a list
containing the names and addresses of all shareholders of the
domestic corporation who have demanded payment for their shares
and with whom agreements as to the value of their shares have not
been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation
(foreign or domestic) or other entity, the petition shall be
accompanied by such a list. The clerk of the court shall give
notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or
domestic) or other entity and to the shareholders named on the
list at the addresses therein stated. The forms of the notices by
mail shall be approved by the court. All shareholders thus
notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the
court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this
Article and have become entitled to the valuation of and payment
for their shares, and shall appoint one or more qualified
appraisers to determine that value. The appraisers shall have
power to examine any of the books and records of the corporation
the shares of which they are charged with the duty of valuing,
and they shall make a determination of the fair value of the
shares upon such investigation as to them may seem proper. The
appraisers shall also afford a reasonable opportunity to the
parties interested to submit to them pertinent evidence as to the
value of the shares. The appraisers shall also have such power
and authority as may be conferred on Masters in Chancery by the
Rules of Civil Procedure or by the order of their appointment.
D. The appraisers shall determine the fair value of the shares of
the shareholders adjudged by the court to be entitled to payment
for their shares and shall file their report of that value in the
office of the clerk of the court. Notice of the filing of the
report shall be given by the clerk to the parties in interest.
The report shall be subject to exceptions to be heard before the
court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the
shareholders entitled to payment for their shares and shall
direct the payment of that value by the existing, surviving, or
new corporation (foreign or domestic) or other entity, together
with interest thereon, beginning 91 days after the date on which
the applicable corporate action from which the shareholder
elected to dissent was effected to the date
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<PAGE>
of such judgment, to the shareholders entitled to payment. The
judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by
certificates only upon, and simultaneously with, the surrender to
the existing, surviving, or new corporation (foreign or domestic)
or other entity, as the case may be, of duly endorsed
certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those
shares or in the corporation. The court shall allow the
appraisers a reasonable fee as court costs, and all court costs
shall be allotted between the parties in the manner that the
court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be,
pursuant to the payment of the agreed value of the shares or
pursuant to payment of the judgment entered for the value of the
shares, as in this Article provided, shall, in the case of a
merger, be treated as provided in the plan of merger and, in all
other cases, may be held and disposed of by the corporation as in
the case of other treasury shares.
F. The provisions of this Article shall not apply to a merger if, on
the date of filing of the articles of merger, the surviving
corporation is the owner of all the outstanding shares of the
other corporations, domestic or foreign, that are parties to the
merger.
G. In the absence of fraud in the transaction, the remedy provided
by this Article to a shareholder objecting to any corporate
action referred to in Article 5.11 of this Act is the exclusive
remedy for the recovery of the value of his shares or money
damages to the shareholder with respect to the action. If the
existing, surviving, or new corporation (foreign or domestic) or
other entity, as the case may be, complies with the requirements
of this Article, any shareholder who fails to comply with the
requirements of this Article shall not be entitled to bring suit
for the recovery of the value of his shares or money damages to
the shareholder with respect to the action.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Amended by Acts 1967, 60th Leg., p. 1721, ch. 657 (S) 12, eff.
June 17, 1967; Acts 1983, 68th Leg., p. 2570, ch. 442 (S) 9, eff.
Sept. 1, 1983; Acts 1987, 70th Leg., ch. 93, (S) 27, eff. Aug.
31, 1987; Acts 1989, 71st Leg., ch. 801, (S) 35, eff. Aug 28,
1989; Acts 1993, 73rd Leg., ch 215, (S) 2.16, eff. Sept. 1, 1993.
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<PAGE>
ART. 5.13 PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS
A. Any shareholder who has demanded payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act shall not
thereafter be entitled to vote or exercise any other rights of a
shareholder except the right to receive payment for his shares
pursuant to the provisions of those articles and the right to
maintain an appropriate action to obtain relief on the ground
that the corporate action would be or was fraudulent, and the
respective shares for which payment has been demanded shall not
thereafter be considered outstanding for the purposes of any
subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting
shareholder, the corporation shall make an appropriate notation
thereof in its shareholder records. Within twenty (20) days
after demanding payment for his shares in accordance with either
Article 5.12 or 5.16 of this Act, each holder of certificates
representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such
demand has been made. The failure of holders of certificated
shares to do so shall, at the option of the corporation,
terminate such shareholder's rights under Articles 5.12 and 5.16
of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated
shares for which payment has been demanded or shares represented
by a certificate on which notation has been so made shall be
transferred, any new certificate issued therefor shall bear
similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares
shall acquire by such transfer no rights in the corporation other
than those which the original dissenting shareholder had after
making demand for payment of the fair value thereof.
C. Any shareholder who has demanded payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act may
withdraw such demand at any time before payment for his shares or
before any petition has been filed pursuant to Article 5.12 or
5.16 of this Act asking for a finding and determination of the
fair value of such shares, but no such demand may be withdrawn
after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If,
however, such demand shall be withdrawn as hereinbefore provided,
or if pursuant to Section B of this Article the corporation shall
terminate the shareholder's rights under Article 5.12 or 5.16 of
this Act, as the case may be, or if no petition asking for a
finding and determination of fair value of such shares by a court
shall have been filed within the time provided in Article 5.12 or
-6-
<PAGE>
5.16 of this Act, as the case may be, or if after the
hearing of a petition filed pursuant to Article 5.12 or 5.16, the
court shall determine that such shareholder is not entitled to
the relief provided by those articles, then, in any such case,
such shareholder and all persons claiming under him shall be
conclusively presumed to have approved and ratified the corporate
action from which he dissented and shall be bound thereby, the
right of such shareholder to be paid the fair value of his shares
shall cease, and his status as a shareholder shall be restored
without prejudice to any corporate proceedings which may have
been taken during the interim, and such shareholder shall be
entitled to receive any dividends or other distributions made to
shareholders in the interim.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955.
Amended by Acts 1967, 60th Leg., p. 1723, ch. 657, (S) 13, eff.
June 17, 1967; Acts 1983, 68th Leg., p. 2573, ch. 442, (S) 10,
eff. Sept. 1, 1983; Acts 1993, 73rd Leg., ch. 215, (S) 2.17, eff.
Sept. 1, 1993.
-7-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes indemnification
of directors and officers of a Delaware corporation under certain circumstances
against expenses, judgments and the like in connection with an action, suit or
proceeding. Article Fourteenth of Norwest's Restated Certificate of
Incorporation provides for broad indemnification of directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits: Parenthetical references to exhibits in the description of Exhibits
3.1, 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.2, 4.1 and 4.2 below are
incorporated by reference from such exhibits to the indicated reports
of Norwest filed with the Securities and Exchange Commission under
File No. 1-2979.
2.1 -- Agreement and Plan of Reorganization dated June 3, 1996 between
Texas Bancorporation, Inc. and Norwest Corporation (included in Proxy
Statement-Prospectus as Appendix A).
3.1 -- Restated Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 3(b) to Norwest's Current Report on Form 8-K
dated June 28, 1993 and Exhibit 3 to Norwest's Current Report on Form
8-K dated July 3, 1995).
3.1.1 -- Certificate of Designations of Powers, Preferences, and Rights of
Norwest ESOP Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 4 to Norwest's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994).
3.1.2 -- Certificate of Designations of Powers, Preferences, and Rights of
Norwest Cumulative Tracking Preferred Stock (incorporated by reference
to Exhibit 3 to Norwest's Current Report on Form 8-K dated January 9,
1995).
3.1.3 -- Certificate of Designations of Powers, Preferences, and Rights of
Norwest 1995 ESOP Cumulative Convertible Preferred Stock (incorporated
by reference to Exhibit 4 to Norwest's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995).
3.1.4 -- Certificate of Designations with respect to the 1996 ESOP Cumulative
Convertible Preferred Stock (incorporated by reference to Exhibit 3 to
Norwest's Current Report on Form 8-K dated February 26, 1996).
3.2 -- By-Laws, as amended (incorporated by reference to Exhibit 4(c) to
Norwest's Quarterly Report on Form 10-Q for the quarter ended March
31, 1991).
II-1
<PAGE>
4 - Rights Agreement, dated as of November 22, 1988, between Norwest
Corporation and Citibank, N.A. (incorporated by reference to Exhibit 1
to Norwest's Form 8-A dated December 6, 1988).
4.1 - Certificate of Adjustment, dated July 21, 1989, to Rights Agreement
(incorporated by reference to Exhibit 3 to Norwest's Form 8 dated July
21, 1989).
4.2 - Certificate of Adjustment, dated June 28, 1993, to Rights Agreement
(incorporated by reference to Exhibit 4 to Norwest's Form 8-A/A dated
June 29, 1993).
5 - Opinion of Stanley S. Stroup, counsel to Norwest.
8 - Form of Opinion of Thompson & Knight, a Professional Corporation
23.1 - Consent of Stanley S. Stroup (included as part of Exhibit 5 filed
herewith).
23.2 - Consent of KPMG Peat Marwick LLP.
23.3 - Consent of KPMG Peat Marwick LLP.
23.4 - Consent of Thompson & Knight, a Professional Corporation.
24 - Powers of Attorney.
99 - Form of proxy for Special Meeting of Shareholders of Texas
Bancorporation, Inc.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
posteffective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent posteffective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
((S)230.424(b) of this chapter) if, in the aggregate,
II-2
<PAGE>
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such posteffective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a posteffective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
II-3
<PAGE>
the changes in volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement. such director, officer, or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
posteffective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 August 26, 1996.
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, the Registration
Statement has been signed on August 26, 1996 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
- ------------------------------
John T. Thornton Financial Officer
(Principal Financial Officer)
/s/ Michael A. Graf Senior Vice President and Controller
- ------------------------------
Michael A. Graf (Principal Accounting Officer)
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 )
BENJAMIN F. MONTOYA )
IAN M. ROLLAND )
MICHAEL W. WRIGHT )
- --------------------
*Richard M. Kovacevich, by signing his name hereto, does hereby sign this
document on behalf of each of the directors named above pursuant to powers of
attorney duly executed by such persons.
/s/ Richard M. Kovacevich
------------------------------------------
Richard M. Kovacevich
Attorney-in-Fact
II-5
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit Form of
Number Description* Filing
- ------ ------------ -------
<S> <C> <C>
2.1 Agreement and Plan of Reorganization dated June 3, 1996
between Texas Bancorporation, Inc. and Norwest Corporation
(included in Proxy Statement-Prospectus as Appendix A).
3.1 Restated Certificate of Incorporation, as amended
(incorporated by reference to Exhibit 3(b) to Norwest's
Current Report on Form 8-K dated June 28, 1993 and Exhibit
3 to Norwest's Current Report on Form 8-K dated July 3,
1995).
3.1.1 Certificate of Designations of Powers, Preferences,
and Rights of Norwest ESOP Cumulative Convertible Preferred
Stock (incorporated by reference to Exhibit 4 to Norwest's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1994).
3.1.2 Certificate of Designations of Powers, Preferences, and
Rights of Norwest Cumulative Tracking Preferred Stock
(incorporated by reference to Exhibit 3 to Norwest's
Current Report on Form 8-K dated January 9, 1995).
3.1.3 Certificate of Designations of Powers, Preferences, and
Rights of Norwest 1995 ESOP Cumulative Convertible
Preferred Stock (incorporated by reference to Exhibit 4
to Norwest's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995).
3.1.4 Certificate of Designations with respect to the 1996 ESOP
Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 3 to Norwest's Current Report on Form
8-K dated February 26, 1996).
3.2 By-Laws, as amended (incorporated by reference to Exhibit
4(c) to Norwest's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1991).
4 Rights Agreement, dated as of November 22, 1988, between
Norwest Corporation and Citibank, N.A. (incorporated by
reference to Exhibit 1 to Norwest's Form 8-A dated
December 6, 1988).
4.1 Certificate of Adjustment, dated July 21, 1989, to Rights
Agreement (incorporated by reference to Exhibit 3 to
Norwest's Form 8 dated July 21, 1989).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Form of
Number Description* Filing
- ------- ----------- -------
<S> <C> <C>
4.2 Certificate of Adjustment, dated June 28, 1993, to Rights
Agreement (incorporated by reference to Exhibit 4 to
Norwest's Form 8-A/A dated June 29, 1993).
5 Opinion of Stanley S. Stroup, counsel to Norwest. Electronic
Transmission
8 Form of Opinion of Thompson & Knight, Electronic
a Professional Corporation Transmission
23.1 Consent of Stanley S. Stroup (included as part of Exhibit 5
filed herewith).
23.2 Consent of KPMG Peat Marwick LLP. Electronic
Transmission
23.3 Consent of KPMG Peat Marwick LLP. Electronic
Transmission
23.4 Consent of Thompson & Knight, a Professional Electronic
Corporation. Transmission
24 Powers of Attorney Electronic
Transmission
99 Form of proxy for Special Meeting of Shareholders of Electronic
Texas Bancorporation, Inc. Transmission
</TABLE>
- -------------------------
* Parenthetical references to exhibits in the description of Exhibits 3.1,
3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.2, 4.1 and 4.2 are incorporated by reference
from such exhibits to the indicated reports of Norwest filed with the SEC
under File No. 1-2979.
<PAGE>
EXHIBIT 5
[LETTERHEAD OF STANLEY S. STROUP]
August 26, 1996
Board of Directors
Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-1000
Ladies and Gentlemen:
In connection with the proposed registration under the Securities
Act of 1933, as amended, of up to 800,000 shares of common stock, par value
$1-2/3 per share (the "Shares"), of Norwest Corporation, a Delaware
corporation (the "Corporation"), which are proposed to be issued by the
Corporation in connection with the merger (the "Merger") of a wholly-owned
subsidiary of the Corporation with Texas Bancorporation, Inc., a Texas
corporation, I have examined such corporate records and other documents,
including the Registration Statement on Form S-4 relating to the Shares,
and have reviewed such matters of law as I have deemed necessary for this
opinion, and I advise you that in my opinion:
1. The Corporation is a corporation duly organized and existing
under the laws of the State of Delaware.
2. All necessary corporate action on the part of the Corporation
has been taken to authorize the issuance of the Shares in connection with
the Merger, and, when issued as described in the Registration Statement,
the Shares will be legally and validly issued, fully paid and
nonassessable.
I consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Stanley S. Stroup
<PAGE>
EXHIBIT 8
____________, 1996
Texas Bancorporation, Inc.
4101 North Parkway
Odessa, Texas 79762
Norwest Corporation
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Re: Agreement and Plan of Reorganization by and Between Texas
---------------------------------------------------------
Bancorporation, Inc. and Norwest Corporation
--------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Texas Bancorporation, Inc. ("Bancorp"), a
corporation organized and existing under the laws of the State of Texas, in
connection with the proposed merger of [Merger Co.], a corporation organized and
existing under the laws of the state of _______________ ("Merger Co."), and
wholly-owned subsidiary of Norwest Corporation ("Norwest"), with and into
Bancorp, with Bancorp as the surviving corporation (the "Merger"). The Merger
will be effected pursuant to the Agreement and Plan of Reorganization by and
between Bancorp and Norwest dated as of June 3, 1996 (the "Agreement"). In our
capacity as counsel to Bancorp, our opinion has been requested with respect to
certain of the federal income tax consequences of the proposed Merger.
In rendering this opinion, we have examined (i) the Internal Revenue Code
of 1986, as amended (the "Code") and Treasury regulations, (ii) the legislative
history of applicable sections of the Code, and (iii) appropriate Internal
Revenue Service and court decisional authority. In addition, we have relied
upon certain information made known to us as more fully described below. All
capitalized terms used herein without definition shall have the respective
meanings specified in the Agreement, and unless otherwise specified, all section
references herein are to the Code.
INFORMATION RELIED UPON
-----------------------
In rendering the opinions expressed herein, we have examined such
documents as we have deemed appropriate, including:
(1) the Agreement;
(2) the Registration Statement on Form S-4 filed by Norwest with the
Securities and Exchange Commission under the Securities Act of 1933,
on ______________, 1996, including the Proxy Statement/Prospectus for
the special meeting of the stockholders of Bancorp;
(3) such additional documents as we have considered relevant.
In our examination of such documents, we have assumed, with your consent,
that all documents submitted to us as photocopies faithfully reproduce the
originals thereof, that such originals are authentic, that all such documents
have been or will be duly executed to the extent required, and that all
statements set forth in such documents are accurate.
<PAGE>
We have also obtained such additional information and representations as we
have deemed relevant and necessary through consultation with various officers
and representatives of Norwest and Bancorp and through certificates provided by
the management of Norwest and the management of Bancorp.
You have advised us that the proposed transaction will give Norwest a
strong presence in markets served by Bancorp and enable the combined
organization to realize certain operating efficiencies. To achieve these goals,
the following will occur pursuant to the Agreement:
(1) Subject to the terms and conditions of this Agreement, at the
Effective Time, Merger Co. shall be merged with and into Bancorp in accordance
with the laws of the State of Texas. Bancorp shall be the Surviving Corporation
resulting from the Merger and shall become a wholly-owned Subsidiary of Norwest
and shall continue to be governed by the laws of the State of Texas. The Merger
shall be consummated pursuant to the terms of the Agreement, which has been
approved and adopted by the respective Boards of Directors of Norwest, Merger
Co. and Bancorp and by the sole stockholder of Merger Co.
(2) At the Effective Time, by virtue of the Merger, and without any
action on the part of Norwest, Bancorp, Merger Co. or the stockholders of any of
the foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of Norwest Common Stock issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding from
and after the Effective Time.
(b) Each share of Merger Co. Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one share of the Surviving Corporation Common Stock.
(c) Each share of Bancorp Common Stock issued and outstanding at
the Effective Time shall cease to be outstanding and shall be converted into and
exchanged for the number of shares of Norwest Common Stock determined by
dividing 775,000 by the number of shares of Bancorp Common Stock then
outstanding (the "Common Stock Exchange Ratio").
(3) In the event Norwest changes the number of shares of Norwest
Common Stock, issued and outstanding prior to the Effective Time as a result of
a stock split, stock dividend, or similar recapitalization with respect to such
stock and the record date therefor (in the case of a stock dividend) or the
effective date thereof (in the case of a stock split or similar recapitalization
for which a record date is not established) shall be prior to the Effective
Time, the Common Stock Exchange Ratio shall be proportionately adjusted.
(4) Notwithstanding any other provision of the Agreement, each holder
of shares of Bancorp Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Norwest Common
Stock (after taking into account all certificates delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of Norwest Common Stock multiplied by the
average of the closing prices of a share of Norwest Common Stock as reported by
the consolidated tape of the New York Stock Exchange for each of the five (5)
trading days ending on the day immediately preceding the meeting of shareholders
required by paragraph 4(c) of the Agreement.
(5) Any holder of shares of Bancorp Common Stock who perfects his
dissenters' rights in accordance with and as contemplated by Texas Business
Corporation Act (the "TBCA") shall be entitled to receive the value of such
shares in cash as determined pursuant to such provision of Law; provided, that
no such payment shall be made to any dissenting shareholder unless and until
<PAGE>
such dissenting shareholder has complied with the applicable provisions of the
TBCA and surrendered to Norwest the certificate or certificates representing the
shares for which payment is being made.
We have also assumed that the following statements are true on the date
hereof and will be true on the date on which the Merger is consummated:
(1) The fair market value of the Norwest Common Stock and cash, if
any, received by each stockholder of Bancorp will, in each instance, be
approximately equal to the fair market value of the Bancorp Common Stock
surrendered in exchange therefor.
(2) There is no plan or intention by any of the stockholders of
Bancorp who own one percent (1%) or more of the outstanding Bancorp Common
Stock, and to the best of the knowledge of the management of Bancorp, there is
no plan or intention on the part of the remaining stockholders of Bancorp to
sell, exchange, or otherwise dispose of a number of shares of Norwest Common
Stock received in the Merger that would reduce the Bancorp stockholders'
ownership of Norwest Common Stock to a number of shares having a value, as of
the date of the Merger, of less than fifty percent (50%) of the value of all of
the formerly outstanding stock of Bancorp immediately prior to the Merger. For
purposes of this assumption, shares of Bancorp Common Stock exchanged for cash
or other property, surrendered by dissenters, or exchanged for cash in lieu of
fractional shares of Norwest Common Stock will be treated as outstanding Bancorp
Common Stock on the date of the Merger. Moreover, shares of Bancorp Common
Stock held by Bancorp stockholders and otherwise sold, redeemed, or disposed of
prior or subsequent to the Merger will be considered in making this
representation.
(3) Following the Merger, Bancorp will hold at least ninety percent
(90%) of the fair market value of its net assets and at least seventy percent
(70%) of the fair market value of its gross assets held immediately prior to the
Merger and at least ninety percent (90%) of the fair market value of Merger
Co.'s net assets and at least seventy percent (70%) of the fair market value of
Merger Co.'s gross assets held immediately prior to the Merger. For purposes of
this assumption, amounts paid by Bancorp or Merger Co. to dissenters, amounts
paid by Bancorp or Merger Co. to stockholders who receive cash or other
property, amounts used by Bancorp or Merger Co. to pay reorganization expenses,
and all redemptions and distributions (except for regular, normal dividends)
made by Bancorp will be included as assets of Bancorp or Merger Co.,
respectively, immediately prior to the Merger. Also for purposes of this
assumption, assets disposed of in contemplation of the Merger will be considered
as assets held by Bancorp immediately prior to the Merger.
(4) Prior to the Merger, Norwest will be in control of Merger Co. For
purposes of this assumption and those set forth below in paragraphs (5), (7),
(12), and (13), "control" means ownership of eighty percent (80%) of the total
combined voting power of all classes of stock entitled to vote and at least
eighty percent (80%) of the total number of all other classes of stock.
(5) Bancorp has no plan or intention to issue additional shares of its
stock that would result in Norwest losing control of Bancorp.
(6) Norwest has no plan or intention to reacquire any of its Common
Stock issued in the Merger.
(7) Norwest will not liquidate Bancorp; merge Bancorp with or into
another corporation; sell or otherwise dispose of the stock of Bancorp except
for transfers of stock to corporations controlled by Norwest; or cause Bancorp
to sell or otherwise dispose of any of its assets or of any of the assets
acquired from Merger Co., except for dispositions made in the ordinary course of
business or transfers of assets to a corporation controlled by Norwest.
(8) Merger Co. will have no liabilities assumed by Bancorp, and will
not transfer to Bancorp any assets subject to liabilities, in the Merger.
<PAGE>
(9) Following the Merger, Bancorp will continue its historic business
or use a significant portion of its historic business assets in a business.
(10) Norwest, Merger Co., Bancorp, and the stockholders of Bancorp
will pay their respective expenses, if any, incurred in connection with the
Merger.
(11) There is no intercorporate indebtedness existing between Norwest
and Bancorp or between Merger Co. and Bancorp that was issued, acquired, or will
be settled at a discount.
(12) Pursuant to the Merger, shares of Bancorp Common Stock
representing control of Bancorp will be exchanged solely for voting Common Stock
of Norwest. For purposes of this assumption, shares of Bancorp Common Stock
exchanged for cash or other property originating with Norwest will be treated as
outstanding Bancorp Common Stock on the date of the Agreement.
(13) At the time of the Merger, Bancorp will not have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any person could acquire stock in Bancorp that, if exercised or
converted, would affect Norwest's acquisition or retention of control of
Bancorp.
(14) Norwest does not own, nor has it owned during the past five
years, any shares of the stock of Bancorp.
(15) None of Norwest, Merger Co. nor Bancorp is an "investment
company." For purposes of the foregoing, an "investment company" is a
corporation that is a regulated investment company, a real estate investment
trust, or a corporation fifty percent (50%) or more of the value of whose total
assets are stock and securities and eighty percent (80%) or more of the value of
whose total assets are assets held for investment. In making the 50-percent and
80-percent determinations under the preceding sentence, stock and securities in
any subsidiary corporation shall be disregarded and the parent corporation shall
be considered a subsidiary if the parent owns 50 percent or more of the combined
voting power of all classes of stock entitled to vote, or 50 percent or more of
the total value of shares of all classes of stock outstanding.
(16) On the date of the Merger, the fair market value of the assets of
Bancorp will exceed the sum of its liabilities, plus the amount of liabilities,
if any, to which the assets are subject.
(17) Bancorp is not under the jurisdiction of a court in a case under
Title 11 of the United States Code or a receivership, foreclosure or similar
proceeding in a federal or state court.
(18) The payment of cash to Bancorp stockholders in lieu of fractional
shares of Norwest Common Stock is solely for the purpose of avoiding the expense
and inconvenience of issuing and transferring fractional shares and does not
represent separately bargained for consideration. The total cash consideration
that will be paid to Bancorp stockholders in lieu of fractional shares of
Norwest Common Stock will not exceed one percent (1%) of the total consideration
issued in the Merger to the stockholders of Bancorp in exchange for their shares
of Bancorp Common Stock. The fractional share interest of each Bancorp
stockholder will be aggregated, and no stockholder of Bancorp will receive cash
in an amount equal to or greater than the value of one full share of Norwest
Common Stock.
(19) None of the compensation received by any stockholder-employees of
Bancorp will be separate consideration for, or allocable to, any of their shares
of Bancorp Common Stock. None of the shares of Norwest Common Stock received by
any stockholder-employees will be separate consideration for, or allocable to,
any employment agreement. Any compensation paid to a Bancorp stockholder-
employee who continues as an employee of Norwest subsequent to the Merger will
be for services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services.
<PAGE>
(20) The Agreement represents the entire understanding of Norwest,
Bancorp, and Merger Co. with respect to the Merger.
OPINIONS
--------
Based solely on the information submitted and the representations set
forth above, we are of the opinion that:
(1) Provided the proposed merger of Merger Co. with and into Bancorp
qualifies as a statutory merger under the Texas Business Corporation Act, and
since (a) after the proposed transaction, Bancorp will hold substantially all of
its assets and substantially all of the assets of Merger Co. and (b) in the
transaction, the Bancorp stockholders will exchange an amount of stock
constituting control of Bancorp solely for Norwest Common Stock, the proposed
merger will constitute a reorganization within the meaning of section
368(a)(1)(A) of the Code. The reorganization will not be disqualified by reason
of the fact that Norwest Common Stock is used in the transaction (section
368(a)(2)(E)). For purposes of this opinion, "substantially all" means at least
90 percent (90%) of the fair market value of the net assets and at least 70
percent (70%) of the fair market value of the gross assets of Bancorp held
immediately prior to the proposed transaction. Norwest, Merger Co., and Bancorp
will each be "a party to a reorganization" within the meaning of section 368(b)
of the Code.
(2) No gain or loss will be recognized by Norwest upon the receipt of
Bancorp Common Stock solely in exchange for Merger Co. Common Stock.
(3) No gain or loss will be recognized by Merger Co. on the transfer
of its assets to Bancorp solely in exchange for shares of Bancorp Common Stock.
(4) No gain or loss will be recognized by Bancorp upon the receipt of
the assets of Merger Co. in exchange for shares of Bancorp Common Stock.
(5) The stockholders of Bancorp will recognize no gain or loss upon
the receipt of Norwest Common Stock solely in exchange for their Bancorp Common
Stock.
(6) The basis of the Norwest Common Stock received by the Bancorp
stockholders in the proposed transaction will, in each instance, be the same as
the basis of the Bancorp Common Stock surrendered in exchange therefor.
(7) The holding period of the Norwest Common Stock received by the
Bancorp stockholders will, in each instance, include the period during which the
Bancorp Common Stock surrendered in exchange therefor was held, provided that
the Bancorp Common Stock was held as a capital asset on the date of the
exchange.
(8) The payment of cash to Bancorp stockholders in lieu of fractional
share interests of Norwest Common Stock will be treated for federal income tax
purposes as if the fractional shares were distributed as part of the exchange
and then were redeemed by Norwest. These cash payments will be treated as
having been received as distributions in full payment in exchange for the stock
redeemed. Generally any gain or loss recognized upon such exchange will be
capital gain or loss, provided the fractional share would constitute a capital
asset in the hands of the exchanging stockholder.
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have examined, the additional information that we have obtained, and the
statements set out herein, which we have assumed are true on the date the Merger
is consummated. Our opinions cannot be relied upon if any of the facts contained
in such documents
<PAGE>
or if such additional information is, or later becomes, inaccurate, or if any of
the statements set out herein is, or later becomes, inaccurate. Finally, our
opinions are limited to the tax matters specifically covered thereby, and we
have not been asked to address, nor have we addressed, any other tax
consequences of the proposed Merger, including, but not limited to, the tax
consequences of the recognition of deferred intercompany transactions and
adjustments necessary by reason of a change in accounting method.
This opinion is being provided solely for the use of Texas
Bancorporation, Inc., Norwest Corporation, and the stockholders of Texas
Bancorporation, Inc.
We hereby consent to the use of this opinion and to the references
made to the firm under the captions "Summary -- The Merger -- Certain Federal
Income Tax Consequences", "The Merger -- Certain Federal Income Tax
Consequences" and "Legal Matters" in the Proxy Statement/Prospectus constituting
part of the Registration Statement on Form S-4 of Norwest.
Very truly yours,
THOMPSON & KNIGHT,
a Professional Corporation
By:____________________________
J. Y. Robb III
Attorney
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF KPMG PEAT MARWICK LLP MINNEAPOLIS]
Independent Auditors' Consent
-----------------------------
The Board of Directors
Norwest Corporation:
We consent to the use of our report dated January 17, 1996 incorporated herein
by reference and to the reference to our firm under the heading "EXPERTS" in the
prospectus. Our report refers to Norwest Corporation's adoption in 1995 of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 122, "Accounting for Mortgage Servicing Rights, an amendment of
FASB Statement No. 65."
/s/ KPMG Peat Marwick LLP
August 26, 1996
Minneapolis, Minnesota
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF KPMG PEAT MARWICK LLP-AUSTIN]
Independent Auditors' Consent
The Board of Directors
Texas Bancorporation, Inc.:
We consent to the use of our report dated February 5, 1996 included herein and
to the reference to our firm under the heading "Experts" in the prospectus. Our
report refers to Texas Bancorporation, Inc.'s adoption in 1995 of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No.
118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures," adoption in 1994 of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," and adoption in 1993 of SFAS No.
109, "Accounting for Income Taxes."
/s/ KPMG PEAT MARWICK LLP
Austin, Texas
August 23, 1996
<PAGE>
EXHIBIT 23.4
[LETTERHEAD OF THOMPSON & KNIGHT,
A PROFESSIONAL CORPORATION]
August 20, 1996
Texas Bancorporation, Inc.
4101 North Parkway Boulevard
Odessa, Texas 79762
Norwest Corporation
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Re: Agreement and Plan of Reorganization By and Between
Texas Bancorporation, Inc. and Norwest Corporation
Ladies and Gentlemen:
We have acted as counsel to Texas Bancorporation, Inc. ("Bancorp"), a
corporation organized and existing under the laws of the state of Texas, in
connection with the proposed merger of a wholly-owned subsidiary of Norwest
Corporation ("Norwest"), with and into Bancorp, with Bancorp as the surviving
corporation (the "Merger"). The Merger will be effected pursuant to the
Agreement and Plan of Reorganization by and between Bancorp and Norwest dated as
of June 3, 1996 (the "Agreement"). In our capacity as counsel to Bancorp, our
opinion has been requested with respect to certain of the federal income tax
consequences of the proposed Merger.
We have provided to Bancorp and Norwest the form of such opinion and we
hereby consent to the use of the form of such opinion and to the references made
to the firm under the captions "Summary--The Merger--Federal Income Tax
Consequences" and "Legal Matters" in the Proxy Statement-Prospectus constituting
part of the Registration Statement on Form S-4 of Norwest filed in connection
with the Merger.
Very truly yours,
THOMPSON & KNIGHT,
a Professional Corporation
By
-------------------------
J. Y. Robb III
Attorney
<PAGE>
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 800,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Texas Bancorporation,
Inc. and its subsidiaries, and to file the same, with all exhibits thereto and
other supporting documents, with said Commission, granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform any and
all acts necessary or incidental to the performance and execution of the powers
herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of July, 1996.
/s/ David A. Christensen
------------------------
David A. Christensen
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 800,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Texas Bancorporation,
Inc. and its subsidiaries, and to file the same, with all exhibits thereto and
other supporting documents, with said Commission, granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform any and
all acts necessary or incidental to the performance and execution of the powers
herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of July, 1996.
/s/ Gerald J. Ford
------------------
Gerald J. Ford
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 800,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Texas Bancorporation,
Inc. and its subsidiaries, and to file the same, with all exhibits thereto and
other supporting documents, with said Commission, granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform any and
all acts necessary or incidental to the performance and execution of the powers
herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of July, 1996.
/s/ Pierson M. Grieve
---------------------
Pierson M. Grieve
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 800,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Texas Bancorporation,
Inc. and its subsidiaries, and to file the same, with all exhibits thereto and
other supporting documents, with said Commission, granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform any and
all acts necessary or incidental to the performance and execution of the powers
herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of July, 1996.
/s/ Charles M. Harper
---------------------
Charles M. Harper
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 800,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Texas Bancorporation,
Inc. and its subsidiaries, and to file the same, with all exhibits thereto and
other supporting documents, with said Commission, granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform any and
all acts necessary or incidental to the performance and execution of the powers
herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of July, 1996.
/s/ William A. Hodder
---------------------
William A. Hodder
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 800,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Texas Bancorporation,
Inc. and its subsidiaries, and to file the same, with all exhibits thereto and
other supporting documents, with said Commission, granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform any and
all acts necessary or incidental to the performance and execution of the powers
herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of July, 1996.
/s/ Lloyd P. Johnson
--------------------
Lloyd P. Johnson
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 800,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Texas Bancorporation,
Inc. and its subsidiaries, and to file the same, with all exhibits thereto and
other supporting documents, with said Commission, granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform any and
all acts necessary or incidental to the performance and execution of the powers
herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of July, 1996.
/s/ Reatha Clark King
---------------------
Reatha Clark King
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 800,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Texas Bancorporation,
Inc. and its subsidiaries, and to file the same, with all exhibits thereto and
other supporting documents, with said Commission, granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform any and
all acts necessary or incidental to the performance and execution of the powers
herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of July, 1996.
/s/ Richard M. Kovacevich
-------------------------
Richard M. Kovacevich
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 800,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Texas Bancorporation,
Inc. and its subsidiaries, and to file the same, with all exhibits thereto and
other supporting documents, with said Commission, granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform any and
all acts necessary or incidental to the performance and execution of the powers
herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of July, 1996.
/s/ Richard S. Levitt
---------------------
Richard S. Levitt
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 800,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Texas Bancorporation,
Inc. and its subsidiaries, and to file the same, with all exhibits thereto and
other supporting documents, with said Commission, granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform any and
all acts necessary or incidental to the performance and execution of the powers
herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of July, 1996.
/s/ Richard D. McCormick
------------------------
Richard D. McCormick
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 800,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Texas Bancorporation,
Inc. and its subsidiaries, and to file the same, with all exhibits thereto and
other supporting documents, with said Commission, granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform any and
all acts necessary or incidental to the performance and execution of the powers
herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of July, 1996.
/s/ Cynthia H. Milligan
-----------------------
Cynthia H. Milligan
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 800,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Texas Bancorporation,
Inc. and its subsidiaries, and to file the same, with all exhibits thereto and
other supporting documents, with said Commission, granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform any and
all acts necessary or incidental to the performance and execution of the powers
herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of July, 1996.
/s/ Benjamin F. Montoya
-----------------------
Benjamin F. Montoya
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 800,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Texas Bancorporation,
Inc. and its subsidiaries, and to file the same, with all exhibits thereto and
other supporting documents, with said Commission, granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform any and
all acts necessary or incidental to the performance and execution of the powers
herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of July, 1996.
/s/ Ian M. Rolland
------------------
Ian M. Rolland
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 800,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of Texas Bancorporation,
Inc. and its subsidiaries, and to file the same, with all exhibits thereto and
other supporting documents, with said Commission, granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform any and
all acts necessary or incidental to the performance and execution of the powers
herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 23rd day of July, 1996.
/s/ Michael W. Wright
---------------------
Michael W. Wright
<PAGE>
EXHIBIT 99
TEXAS BANCORPORATION, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints _______________, _________________, and
____________ as proxies to vote all shares of Common Stock the undersigned is
entitled to vote at the Special Meeting of Shareholders of Texas Bancorporation,
Inc. ("Bancorp") to be held at the offices of Bancorp located at 4101 North
Parkway Boulevard, Odessa, Texas on _______, 1996, or at any adjournment
thereof, as follows, hereby revoking any proxy previously given:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Reorganization dated June 3, 1996 (the "Merger Agreement") between Bancorp
and Norwest Corporation ("Norwest") pursuant to which a wholly-owned subsidiary
of Norwest will merge with Bancorp and Bancorp will become a wholly-owned
subsidiary of Norwest (the "Consolidation"), all upon the terms and subject to
the conditions set forth in the Merger Agreement, a copy of which is included as
Appendix A in the accompanying Proxy Statement-Prospectus; and to authorize such
further action by the board of directors and officers of Bancorp as may be
necessary or appropriate to carry out the intent and purposes of the Merger.
FOR [_] AGAINST [_] ABSTAIN [_]
2. In his discretion on such matters as may properly come before the
meeting or any adjournment thereof; all as set out in the Notice and Proxy
Statement-Prospectus relating to the meeting.
Shares represented by this proxy will be voted as directed by the
shareholder. The Board of Directors recommends a vote "FOR" proposal 1. If no
direction is supplied, the proxy will be voted "FOR" proposal 1.
Dated: __________________________, 1996.
_______________________________________
(Please sign exactly as name appears at left.)
_______________________________________
(If stock is owned by more than one person,
all owners should sign. Persons signing as
executors, administrators, trustees, or in
similar capacities should so indicate.)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
