<PAGE>
As filed with the Securities and Exchange Commission on April 26, 1996
Registration No. 333-02615
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
AMENDMENT NO. 1
To
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
_____________________
NORWEST CORPORATION
(Exact name of registrant as specified in its charter)
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<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 John J. Spidi
Norwest Corporation Malizia, Spidi, Sloane & Fisch, P.C.
Norwest Center One Franklin Square, Suite 700 East
Sixth and Marquette 1301 K Street, N.W.
Minneapolis, Minnesota 55479-1026 Washington, D.C. 20005
_____________________
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. [_]
<PAGE>
REGIONAL BANK OF COLORADO, NATIONAL ASSOCIATION
1542 RAILROAD AVENUE, P.O. BOX 752
RIFLE, GARFIELD COUNTY, COLORADO 81650
April 30, 1996
Dear Shareholder:
A special meeting of shareholders of Regional Bank of Colorado, National
Association ("Regional") will be held on May 30, 1996 to consider and vote upon
a proposal to approve the agreement and plan of reorganization dated December
20, 1995 (the "Consolidation Agreement") between Regional and Norwest
Corporation ("Norwest") pursuant to which a wholly-owned subsidiary of Norwest
will be consolidated with Regional (the "Consolidation").
If the Consolidation Agreement is approved and the Consolidation becomes
effective, Regional will become a wholly-owned subsidiary of Norwest and,
subject to the rights of dissenting shareholders, holders of Regional common
stock will receive shares of Norwest common stock, all upon the terms and
subject to the conditions set forth in the Consolidation Agreement. If the
Consolidation Agreement is not approved or the Consolidation otherwise does not
become effective, Regional will continue to operate as a separate entity and a
going concern.
Regional's board of directors has unanimously approved the Consolidation
Agreement as being advisable and in the best interests of Regional's
shareholders and recommends that you vote for approval of the Consolidation
Agreement. Alex Sheshunoff & Co. Investment Banking, Regional's financial
advisor in connection with the Consolidation, has rendered an opinion to
Regional's board of directors that as of the date hereof the consideration to be
received by Regional's shareholders in the Consolidation is fair from a
financial point of view.
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 Consolidation and
discusses the background of and reasons for the Consolidation. 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
Consolidation Agreement. If you attend the meeting, you may vote in person if
you wish, even though you have previously returned your proxy.
Gary S. Ward
Chairman of the Board
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REGIONAL BANK OF COLORADO, NATIONAL ASSOCIATION
1542 RAILROAD AVENUE, P.O. BOX 752
RIFLE, GARFIELD, COLORADO 81650
(970) 625-3223
___________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 30, 1996
___________________________
A special meeting (the "Special Meeting") of shareholders of Regional Bank
of Colorado, National Association, a national banking association ("Regional"),
will be held at the offices of Regional Bank of Colorado, N.A., 1542 Railroad
Avenue, Rifle, Colorado, on May 30, 1996, at 3:00 p.m., local time, for the
following purposes:
1. To consider and vote upon a proposal to approve the agreement and
plan of reorganization dated December 20, 1995 (the "Consolidation
Agreement") between Regional and Norwest Corporation ("Norwest"). The
Consolidation Agreement provides for the consolidation of a wholly-owned
subsidiary of Norwest with Regional and for Regional to become a wholly-
owned subsidiary of Norwest. A copy of the Consolidation Agreement 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 Regional at the close of
business on April 30, 1996 will be entitled to vote at the Special Meeting
or any adjournments thereof.
Your attention is directed to the Proxy Statement-Prospectus accompanying
this notice for a more complete statement regarding the matters to be acted
upon at the Special Meeting.
By Order of the Board of Directors
Geraldine R. Newell
Secretary
April 30, 1996
________________________________________________________________________________
PLEASE COMPLETE, SIGN AND DATE YOUR PROXY AND PROMPTLY MAIL IT IN
THE ENCLOSED ENVELOPE.
YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE PROXY
STATEMENT-PROSPECTUS AT ANY TIME BEFORE IT IS EXERCISED. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
PLEASE DO NOT SEND IN ANY SHARE CERTIFICATES AT THIS TIME.
________________________________________________________________________________
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REGIONAL BANK OF COLORADO, NATIONAL ASSOCIATION
PROXY STATEMENT
FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 30, 1996
______________________________________
NORWEST CORPORATION
PROSPECTUS
COMMON STOCK
______________________________________
This Proxy Statement-Prospectus is being furnished to the holders of the
common stock, par value $20.00 per share ("Regional Common Stock"), of
Regional Bank of Colorado, National Association, a national banking
association ("Regional"), in connection with the solicitation of proxies by
the board of directors of Regional (the "Regional Board") for a special
meeting of Regional's shareholders to be held on May 30, 1996 (the "Special
Meeting").
At the Special Meeting, Regional's shareholders will consider and vote
upon a proposal to approve the agreement and plan of reorganization dated
December 20, 1995 (including all exhibits thereto, the "Consolidation
Agreement") between Regional and Norwest Corporation, a Delaware corporation
("Norwest"), pursuant to which a wholly-owned subsidiary of Norwest will be
consolidated with Regional (the "Consolidation"). If the Consolidation
Agreement is approved and the Consolidation becomes effective, Regional will
become a wholly-owned subsidiary of Norwest and holders of Regional Common
Stock will receive shares of Norwest's common stock, par value $1-2/3 per
share ("Norwest Common Stock"). A copy of the Consolidation 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-
02615) (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 Consolidation. 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 April 24,
1996 was $36 3/8 per share.
All information concerning Norwest contained in this Proxy Statement-
Prospectus has been provided by Norwest, and all information concerning
Regional contained in this Proxy Statement-Prospectus has been provided by
Regional.
This Proxy Statement-Prospectus and the accompanying form of proxy are
first being mailed to shareholders of Regional on or about April 30,
1996.
________________________________
THE SHARES OF NORWEST COMMON STOCK OFFERED BY THIS PROXY STATEMENT-PROSPECTUS
ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECUR-
ITIES 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 April 30, 1996.
<PAGE>
TABLE OF CONTENTS
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Page
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<S> <C>
AVAILABLE INFORMATION....................................................
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..........................
EXPLANATORY NOTE AND DEFINITIONS OF CERTAIN TERMS........................
SUMMARY
Parties to the Consolidation........................................
Special Meeting and Vote Required...................................
The Consolidation...................................................
Market Information..................................................
Comparison of Rights of Holders of Regional Capital Stock and
Norwest Common Stock...............................................
Comparative Per Common Share Data...................................
Selected Financial Data.............................................
MEETING INFORMATION......................................................
General.............................................................
Record Date; Voting Rights; Vote Required...........................
Voting and Revocation of Proxies....................................
Solicitation of Proxies.............................................
THE CONSOLIDATION........................................................
General.............................................................
Background of and Reasons for the Consolidation.....................
Opinion of Regional's Financial Advisor.............................
Consolidation Consideration.........................................
Dissenters' Rights..................................................
Surrender of Certificates...........................................
Conditions to the Consolidation.....................................
Regulatory Approvals................................................
Conduct of Business Pending the Consolidation.......................
No Solicitation.....................................................
Termination of the Consolidation Agreement..........................
Amendment of the Consolidation Agreement............................
Waiver of Performance of Obligations................................
Effect on Employee Benefit Plans....................................
Interests of Certain Persons in the Consolidation...................
Certain U.S. Federal Income Tax Consequences........................
Resale of Norwest Common Stock......................................
Stock Exchange Listing..............................................
Accounting Treatment................................................
Expenses............................................................
NORWEST CAPITAL STOCK AND RIGHTS.........................................
General.............................................................
Norwest Common Stock................................................
Norwest Preferred Stock; Norwest Preference Stock...................
Rights Plan.........................................................
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2
<PAGE>
<TABLE>
<S> <C>
Dividend Reinvestment and Optional Cash Payment Plan................
Shares Registered under the Securities Act..........................
COMPARISON OF RIGHTS OF HOLDERS OF REGIONAL CAPITAL STOCK................
AND NORWEST COMMON STOCK.................................................
General.............................................................
Directors...........................................................
Amendment of Articles or Certificate of Incorporation and Bylaws....
Shareholder or Stockholder Approval of Consolidation 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........................
INFORMATION CONCERNING REGIONAL..........................................
General.............................................................
Properties..........................................................
Legal Proceedings...................................................
Market Information..................................................
Dividends...........................................................
Security Ownership of Management and Certain Beneficial Owners......
Management's Discussion and Analysis of Financial Condition and
Results of Operations..............................................
Regulation and Supervision..........................................
Other Regulatory Limitations........................................
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.........................
FINANCIAL STATEMENTS OF REGIONAL.........................................
</TABLE>
APPENDIX A AGREEMENT AND PLAN OF REORGANIZATION
APPENDIX B OPINION OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING
APPENDIX C UNITED STATES CODE, TITLE 12, SECTION 215
APPENDIX D BANKING CIRCULAR 259
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, Norwest files 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 Seven World Trade
Center, Suite 1300, New York, New York 10048 and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained at prescribed rates by writing to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
Reports, proxy statements and other information 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, Regional 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 HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS, AND IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN MADE OR AUTHORIZED BY NORWEST OR REGIONAL. THIS PROXY STATEMENT-
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO PURCHASE, THE NORWEST COMMON STOCK OFFERED BY THIS PROXY STATEMENT-
PROSPECTUS, NOR DOES IT CONSTITUTE THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT-
PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF NORWEST OR REGIONAL SINCE THE DATE OF THIS PROXY STATEMENT-
PROSPECTUS OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
4
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES BY REFERENCE NORWEST
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 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 BY MAY 22, 1996.
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 Current Reports on Form 8-K dated
January 17, 1996, February 20, 1996, as amended by Form 8-K/A, February 26,
1996 and April 22, 1996; and (iii) 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.
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
Regional is a national banking association chartered under the laws of
the United States. Regional is governed by the National Banking Act and its
articles of association and bylaws (as amended and in effect as of the date of
this Proxy Statement-Prospectus, the "National Banking Act," "Regional
Articles" and "Regional 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
National Bank Act uses the term "shareholder" to refer to a holder of capital
stock of a national banking association. 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 Regional Common Stock and the term "stockholder" to refer to a
holder of Norwest Common Stock.
As used in this Proxy Statement-Prospectus, unless the context otherwise
requires, "Norwest" means Norwest Corporation and its consolidated
subsidiaries.
6
<PAGE>
SUMMARY
The following summary of certain information relating to the
Consolidation 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
Regional are urged to read this Proxy Statement-Prospectus and the appendices
hereto in their entirety.
PARTIES TO THE CONSOLIDATION
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 December 31, 1995, Norwest had consolidated total assets of $72.1
billion, total deposits of $42.0 billion and total stockholders' equity of
$5.3 billion. Based on total assets at December 31, 1995, Norwest was the
13th largest commercial banking organization in the United States.
Norwest regularly explores opportunities for acquisitions of financial
institutions and related businesses. Management of 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,"
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "CERTAIN REGULATORY
CONSIDERATIONS PERTAINING TO NORWEST."
REGIONAL. Regional is a national banking association which was initially
chartered under the laws of Colorado in 1981 as the Regional Bank of Rifle.
It became a national banking association in 1991 and changed its name to
Regional Bank of Colorado, National Association in 1994. Its principal
executive offices are located at 1542 Railroad Avenue, Rifle, Colorado 81650,
and its telephone number is (970) 625-
7
<PAGE>
3223. At December 31, 1995, Regional had total assets of $58.0 million, total
deposits of $52.9 million and stockholders' equity of $4.9 million. Regional
is regulated by the Office of the Comptroller of the Currency ("OCC") and its
deposits are insured up to applicable limits under the Bank Insurance Fund
("BIF") of the Federal Deposit Insurance Corporation ("FDIC"). Regional
attracts deposits from the general public and invests such deposits in real
estate loans, consumer loans, construction loans and commercial loans.
Regional also utilizes deposits to purchase investment securities issued by
the U.S. government and its agencies, and other permitted investments. At
December 31, 1995, Regional operated three banking offices in Colorado.
SPECIAL MEETING AND VOTE REQUIRED
SPECIAL MEETING. The Special Meeting will be held on May 30, 1996, at
3:00 p.m., local time, at the offices of Regional Bank of Colorado, N.A., 1542
Railroad Avenue, Rifle, Colorado for the purpose of voting on a proposal to
approve the Consolidation Agreement. Only holders of record of Regional Common
Stock at the close of business on April 30, 1996 (the "Record Date") will be
entitled to receive notice of and to vote at the Special Meeting. At such
date, there were 24,366 shares of Regional Common Stock outstanding. Each
share of Regional Common Stock is entitled to one vote. For additional
information relating to the Special Meeting, see "MEETING INFORMATION."
VOTE REQUIRED. Approval of the Consolidation Agreement requires the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of Regional Common Stock. Directors and executive officers of Regional
and their affiliates beneficially owned an aggregate of 10,715, or
approximately 43.98%, of the shares of Regional Common Stock outstanding on
the Record Date. For additional information concerning the number of shares
of Regional Common Stock held by Regional's management, see "INFORMATION
CONCERNING REGIONAL--Security Ownership of Management and Certain Beneficial
Owners." If at least two-thirds of the votes eligible to be cast do not vote
in favor of approval of the Consolidation Agreement, Regional 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 Consolidation
Agreement. MEMBERS OF REGIONAL'S MANAGEMENT INTEND TO VOTE ALL SHARES OF
REGIONAL COMMON STOCK HELD IN THEIR INDIVIDUAL CAPACITIES IN FAVOR OF APPROVAL
OF THE CONSOLIDATION AGREEMENT. See "MEETING INFORMATION--Record Date; Voting
Rights; Vote Required."
THE CONSOLIDATION
EFFECT OF THE CONSOLIDATION. If the Consolidation Agreement is approved
and the Consolidation becomes effective, a wholly-owned subsidiary of Norwest
will be consolidated with Regional and Regional, as the surviving corporation
in the Consolidation, will become a wholly-owned subsidiary of Norwest. In
the Consolidation, outstanding shares of Regional Common Stock will be
automatically converted into the right to receive 14.569 shares of Norwest
Common Stock (the "Exchange Ratio"). In lieu of issuing fractional shares of
Norwest Common Stock, Norwest will pay cash to the holders of Regional Common
Stock who would otherwise be entitled to receive fractional shares. See "THE
CONSOLIDATION--Consolidation Consideration."
RECOMMENDATION OF REGIONAL'S BOARD OF DIRECTORS. At a meeting of the
Regional Board held on December 20, 1995, after considering the terms and
conditions
8
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of the Consolidation Agreement and obtaining the advice of its financial
advisor, the Regional Board unanimously approved the Consolidation Agreement.
The Regional Board believes that the Consolidation is advisable and in the
best interests of Regional and its shareholders and recommends that
shareholders of Regional vote "FOR" approval of the Consolidation Agreement.
For a discussion of the circumstances surrounding the Consolidation and the
factors considered by the Regional Board in making its recommendation, see
"THE CONSOLIDATION--Background of and Reasons for the Consolidation."
OPINION OF REGIONAL'S FINANCIAL ADVISOR. The Regional Board retained
Alex Sheshunoff & Co. Investment Banking ("Sheshunoff") to act as financial
advisor in connection with the Consolidation. Sheshunoff has delivered its
written opinion to the Regional Board dated as of the date of this Proxy
Statement-Prospectus that the consideration to be received by the shareholders
of Regional in the Consolidation is fair from a financial point of view. The
opinion of Sheshunoff is attached as Appendix B to this Proxy Statement-
Prospectus. Shareholders are urged to read such opinion in its entirety for a
description of the procedures followed, matters considered and limitations on
the reviews undertaken in connection therewith. For additional information,
see "THE CONSOLIDATION--Opinion of Regional's Financial Advisor."
CONDITIONS TO THE CONSOLIDATION; TERMINATION OF THE CONSOLIDATION
AGREEMENT. The obligations of Norwest and Regional to effect the
Consolidation are subject to the satisfaction or, if permissible under the
Consolidation Agreement, waiver of a number of conditions, in addition to
approval of the Consolidation Agreement by Regional's shareholders. The
Consolidation Agreement allows one or more parties to the Consolidation to
terminate the Consolidation Agreement if one or more of these conditions are
not satisfied or waived. The Consolidation Agreement may also be terminated
at any time prior to the Consolidation becoming effective by mutual consent of
Norwest and Regional, by either Norwest or Regional if the Consolidation has
not been effected on or before September 30, 1996 provided the failure of the
Consolidation to become effective by such date is not due to the failure of
the party seeking to terminate to perform or observe in all material respects
its covenants and agreements under the Consolidation Agreement, or by Regional
within five business days after the Special Meeting if the average of the
closing prices per share of Norwest Common Stock for the 20 consecutive
trading days ending on the day before the Special Meeting is less than $25.
See "THE CONSOLIDATION--Conditions to the Consolidation" and "--Termination of
the Consolidation Agreement."
REGULATORY APPROVALS. The Consolidation is subject to the approval of
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), the OCC and the state of Colorado. Applications have been filed with
the Federal Reserve Board, OCC and the state of Colorado requesting approval
of the Consolidation; however, there can be no assurances that the necessary
regulatory approvals will be obtained or as to the timing of or conditions
placed on such approvals. See "THE CONSOLIDATION--Regulatory Approvals."
EFFECTIVE TIME AND CLOSING OF THE CONSOLIDATION. The Consolidation will
become effective at 11:59, Minneapolis, Minnesota time (the "Effective Time of
the Consolidation"), on the date specified in the certificate of approval
issued by the OCC. Norwest and Regional anticipate that the closing of the
Consolidation (the "Closing") will occur within 10 business days following
satisfaction or waiver of all conditions set forth in the Consolidation
Agreement. See "THE CONSOLIDATION--Conditions to the Consolidation."
9
<PAGE>
NO SOLICITATION. Regional has agreed under the Consolidation Agreement
that neither it nor any of its directors, officers, representatives or agents,
will directly or indirectly solicit, authorize the solicitation of or enter
into any discussions with any third party concerning certain transactions
involving the purchase of stock of Regional, acquisition of Regional pursuant
to a tender or exchange offer, a merger, consolidation or other business
combination or the purchase, lease or other acquisition of the assets of
Regional except in the ordinary course of business. See "THE CONSOLIDATION--
No Solicitation."
INTERESTS OF CERTAIN PERSONS IN THE CONSOLIDATION. As of the Record
Date, Regional's directors and executive officers beneficially owned a total
of 10,715 shares of Regional Common Stock (representing 43.98% of all
outstanding shares of Regional Common Stock on such date). In the
Consolidation, the directors and executive officers will receive the same
consideration for their shares of Regional Common Stock as the other
shareholders of Regional. For information concerning the number of shares of
Regional Common Stock held by the directors and executive officers of
Regional, see "INFORMATION CONCERNING REGIONAL--Security Ownership of
Management and Certain Beneficial Owners." Certain members of Regional's
management and the Regional Board have certain interests in the Consolidation
that are in addition to their interest as stockholders of Regional generally.
See "THE CONSOLIDATION-Interests of Certain Persons in the Consolidation."
DIRECTORS AND OFFICERS OF REGIONAL AFTER THE CONSOLIDATION. Following
the Effective Time of the Consolidation, Norwest will be the sole shareholder
of Regional and, for that reason, subject to the Ward Employment Agreement (as
defined below), will be in a position to elect or appoint all of the directors
and officers of Regional. See "THE CONSOLIDATION--Interests of Certain
Persons in the Consolidation."
DISSENTERS' RIGHTS. Federal law provides that a shareholder of a
national banking association who dissents from a merger is generally entitled
to receive payment of the appraised value of his or her stock. See "THE
CONSOLIDATION--Dissenters' Rights."
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES. The Consolidation is
intended to be a tax-free reorganization so that no gain or loss will be
recognized by Regional's shareholders, except with respect to cash received
for any fractional shares. The Consolidation's effectiveness is conditioned
upon the receipt by Regional of a written opinion of its legal counsel to the
effect that, for U.S. federal income tax purposes, the Consolidation will
qualify as a tax-free reorganization. See "THE CONSOLIDATION--Certain U.S.
Federal Income Tax Consequences."
THE U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE CONSOLIDATION MAY BE
DIFFERENT FOR PARTICULAR TYPES OF REGIONAL SHAREHOLDERS OR IN LIGHT OF EACH
REGIONAL SHAREHOLDER'S PERSONAL INVESTMENT CIRCUMSTANCES. FOR THAT REASON,
REGIONAL SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE U. S. FEDERAL INCOME TAX CONSIDERATIONS THAT MAY BE RELEVANT TO THEM IN
CONNECTION WITH THE CONSOLIDATION, AS WELL AS THE APPLICATION TO THEM OF ANY
STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.
10
<PAGE>
ACCOUNTING TREATMENT. Management of Norwest anticipates that the
Consolidation will be accounted for as a purchase under generally accepted
accounting principles. See "THE CONSOLIDATION--Accounting Treatment."
MARKET INFORMATION
On December 19, 1995, the last business day preceding public announcement
of the Consolidation Agreement, and on April 24, 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 $34.13 and $36.38, respectively. There is no public market for the
Regional 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
Consolidation, which will be a period of several weeks. The market value per
share of the Norwest Common Stock that Regional shareholders ultimately
receive in the Consolidation 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 Consolidation. Regional shareholders are advised to
obtain current market quotations for Norwest Common Stock.
COMPARISON OF RIGHTS OF HOLDERS OF REGIONAL COMMON STOCK AND NORWEST COMMON
STOCK
As of the date of this Proxy Statement-Prospectus, the rights of
Regional's shareholders are governed by federal law and the Regional Articles
and Regional Bylaws. At the Effective Time of the Consolidation, Regional's
shareholders will become stockholders of Norwest. As such, their rights will
thereafter be governed principally by the DGCL and the Norwest Certificate and
Norwest Bylaws. See "COMPARISON OF RIGHTS OF HOLDERS OF REGIONAL COMMON 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
Regional Common Stock on a historical and a pro forma equivalent basis giving
effect to the Consolidation using the purchase method of accounting. The data
for Norwest are derived from the consolidated historical financial statements
of Norwest, including the related notes thereto, incorporated by reference
into this Proxy Statement-Prospectus and should be read in conjunction with
such historical financial statements and related notes. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE." The data for Regional are derived from the
historical financial statements of Regional, including the related notes
thereto, included in this Proxy Statement-Prospectus and should be read in
conjunction with such historical financial statements and related notes. 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
Consolidation become effective prior to the periods indicated.
11
<PAGE>
COMPARATIVE PER COMMON SHARE DATA
---------------------------------
<TABLE>
<CAPTION>
Norwest Common Stock Regional Common Stock
------------------------- -------------------------
Pro Forma Pro Forma
Historical Combined Historical Equivalent
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
BOOK VALUE (1):
December 31, 1995 14.20 14.20 199.82 206.90
DIVIDENDS DECLARED (2):
Year Ended
December 31, 1995 0.900 0.900 11.00 13.11
NET INCOME (3):
Year Ended
December 31, 1995 2.73 2.73 40.22 39.77
</TABLE>
___________________________
(1) The pro forma combined book value per share of Norwest Common Stock is
based upon the historical total combined common stockholders' and
shareholders' equity for Norwest and Regional divided by total pro forma
common shares of the combined entities assuming conversion of the
outstanding Regional Common Stock at the Exchange Ratio of 14.569 shares of
Norwest Common Stock for each share of Regional Common Stock. The data
assume 24,366 outstanding shares of Regional Common Stock. The aggregate
number of shares of Norwest Common Stock assumed to be issued in the
Consolidation is 355,000. See "THE CONSOLIDATION--Terms of the
Consolidation." The pro forma equivalent book value per share of Regional
represents the pro forma combined amount multiplied by the Exchange Ratio.
(2) Assumes no changes in cash dividends per share. The pro forma equivalent
dividends per share of Regional Common Stock represent cash dividends
declared per share of Norwest Common Stock multiplied by the Exchange
Ratio.
(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 Regional divided by the average pro forma common and common
equivalent shares of the combined entities. The pro forma equivalent net
income per share of Regional Common Stock represents the pro forma combined
net income per share multiplied by the Exchange Ratio.
SELECTED FINANCIAL DATA
The following table sets forth certain selected historical financial
information for Norwest. The income statement and balance sheet data for
Norwest included in the selected financial data for each of the five years in
the period ended December 31, 1995 are derived from the audited consolidated
financial statements of Norwest for such five-year period. The table should be
read in conjunction with the consolidated financial statements of Norwest, and
the related notes thereto, included in documents incorporated herein by
reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
NORWEST CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------
1995 1994 1993(1) 1992(2) 1991
---- ---- ------- ------- ----
(In millions except per share amounts)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
---------------------
Interest income $ 5,717.3 4,393.7 3,946.3 3,806.4 4,025.9
Interest expense 2,448.0 1,590.1 1,442.9 1,610.6 2,150.3
--------- -------- -------- -------- --------
Net interest income 3,269.3 2,803.6 2,503.4 2,195.8 1,875.6
Provision for credit losses 312.4 164.9 158.2 270.8 406.4
Non-interest income 1,865.0 1,638.3 1,585.0 1,273.7 1,064.0
Non-interest expenses 3,399.1 3,096.4 3,050.4 2,553.1 2,041.5
--------- -------- -------- -------- --------
Income before income taxes 1,422.8 1,180.6 879.8 645.6 491.7
Income tax expense 466.8 380.2 266.7 175.6 73.4
--------- -------- -------- -------- --------
Income before cumulative effect
of a change in accounting method 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 $ 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 $ 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 $ 2.76 2.45 1.89 1.19 1.33
========= ======== ======== ======== ========
Fully diluted:
Before cumulative effect of a
change in accounting method $ 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 $ 2.73 2.41 1.86 1.19 1.32
========= ======== ======== ======== ========
Dividends declared per common share $ 0.900 0.765 0.640 0.540 0.470
BALANCE SHEET DATA
------------------
At period end:
Total assets $72,134.4 59,315.9 54,665.0 50,037.0 45,974.5
Long-term debt 13,676.8 9,186.3 6,850.9 4,553.2 3,686.6
Total stockholders' equity 5,312.1 3,846.4 3,760.9 3,371.8 3,192.3
</TABLE>
__________________
(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>
MEETING INFORMATION
GENERAL
This Proxy Statement-Prospectus is being furnished to holders of Regional
Common Stock in connection with the solicitation of proxies by the Regional
Board for use at the Special Meeting to be held on May 30, 1996 and at any
adjournments or postponements thereof. At the Special Meeting, shareholders of
Regional will consider and vote upon a proposal to approve the Consolidation
Agreement. The Regional 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 Consolidation 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 Regional Board has fixed the close of business on April 30, 1996 as
the record date for the determination of shareholders of Regional entitled to
receive notice of and to vote at the Special Meeting (the "Record Date"). On
the Record Date, there were 24,366 shares of Regional Common Stock
outstanding. Each holder of Regional Common Stock is 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 outstanding shares of Regional Common Stock will
constitute a quorum for the transaction of business at the Special Meeting.
Approval of the Consolidation Agreement will require the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Regional
Common Stock. Directors and executive officers of Regional and their
affiliates beneficially owned on the Record Date an aggregate of 10,715, or
approximately 43.98%, of the outstanding shares of Regional Common Stock.
MEMBERS OF REGIONAL'S MANAGEMENT INTEND TO VOTE ALL SHARES OF REGIONAL COMMON
STOCK HELD IN THEIR INDIVIDUAL CAPACITIES IN FAVOR OF APPROVAL OF THE
CONSOLIDATION AGREEMENT. For additional information concerning the number of
shares of Regional Common Stock and Regional Preferred Stock held by
Regional's management, see "INFORMATION CONCERNING REGIONAL--Security
Ownership of Management and Certain Beneficial Owners."
VOTING AND REVOCATION OF PROXIES
Shares of Regional 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 Regional Common Stock represented by such proxy will
be voted FOR approval of the Consolidation 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 Regional prior
to or at the Special Meeting or by voting the shares subject to the proxy in
person at the Special
14
<PAGE>
Meeting. Attendance at the Special Meeting will not in and of itself
constitute a revocation of a proxy.
A proxy may indicate that all or a portion of the shares represented
thereby are not being voted with respect to a specific proposal. This could
occur, for example, when a broker is not permitted to vote shares held in
street name on certain proposals in the absence of instructions from the
beneficial owner. Shares that are not voted with respect to a specific
proposal will be considered as not present for such proposal, even though such
shares will be considered present for purposes of determining a quorum and
voting on other proposals. Abstentions on a specific proposal will be
considered as present but will not be counted as voting in favor of such
proposal. The proposal to approve the Consolidation Agreement must be
approved by the holders of at least two-thirds of the shares of Regional
Common Stock outstanding on the Record Date. Because the proposal to approve
the Consolidation 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
Regional may solicit proxies from the shareholders of Regional, 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. Regional will bear its own expenses in connection with any
solicitation of proxies for the Special Meeting. See "THE CONSOLIDATION--
Expenses."
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE TO
THE SHAREHOLDERS OF REGIONAL. 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
REGIONAL IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
15
<PAGE>
THE CONSOLIDATION
This section of the Proxy Statement-Prospectus describes certain aspects
of the Consolidation. The following description does not purport to be
complete and is qualified in its entirety by reference to the Consolidation
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 Consolidation Agreement in its entirety.
GENERAL
At the Effective Time of the Consolidation, a wholly-owned subsidiary of
Norwest will be consolidated with Regional, with Regional being the surviving
corporation in the Consolidation. Following the Consolidation, Regional will
be a wholly-owned subsidiary of Norwest. Except with respect to fractional
shares as discussed below, if the Consolidation Agreement is approved and the
Consolidation becomes effective, shareholders of Regional will receive shares
of Norwest Common Stock for their shares of Regional Common Stock. See "--
Consolidation Consideration." Following the Effective Time of the
Consolidation, Norwest will be the sole shareholder of Regional. Shares of
Norwest Common Stock issued and outstanding immediately before the Effective
Time of the Consolidation will remain issued and outstanding immediately after
the Effective Time of the Consolidation.
The market price for Norwest Common Stock will fluctuate between the date
of this Proxy Statement-Prospectus and the Effective Time of the
Consolidation. The market value of the shares of Norwest Common Stock that
shareholders of Regional receive at the Effective Time of the Consolidation
may be more or less than the market value of the shares on the date of this
Proxy Statement-Prospectus.
BACKGROUND OF AND REASONS FOR THE CONSOLIDATION
On April 7, 1995, Dennis Erickson and Ken Kranz, representatives of
Norwest Bank Colorado, National Association met, at their request, with Gary
S. Ward, President of Regional, at Regional's principal office in Rifle,
Colorado. The Norwest representatives inquired whether Regional had
considered an acquisition by another bank. Mr. Ward advised the Norwest
representatives that this possibility had been previously discussed but no
decision had been made.
On July 3, 1995, Kenneth Murray, Executive Vice President of Norwest,
submitted a letter to Regional expressing Norwest's interest in acquiring all
of the outstanding shares of Regional Common Stock in exchange for Norwest
Common Stock. At the July 11, 1995 loan committee meeting of the Regional
Board, the committee was informed of the letter and advised of Norwest's
request to have its representatives meet with the full Regional Board and
Sidney "Sam" Azeez, an advisory member of the Regional Board and beneficial
owner of approximately 28% of the outstanding shares of Regional Common Stock.
On July 12, 1995, Mr. Ward contacted Mr. Azeez and shared with him the
contents of the letter of inquiry from Norwest. Also on that date, Mr. Ward
discussed the contents of the letter with Regional's legal counsel.
A meeting was then held at Glenwood Springs, Colorado on July 27, 1995.
Those in attendance included entire Regional Board; Sam Azeez; Regional's
legal counsel;
16
<PAGE>
George McGoven, an independent investment counselor retained by Sam Azeez; and
Linda Collins and Kirk Simpson of Norwest. The meeting was a general question
and answer session exploring the possibilities of an acquisition of Regional
by Norwest.
Following this meeting, management of Regional initiated a review of
financial information of Norwest from available public sources and began to
evaluate the merits of an acquisition by Norwest. In response to a request
from Norwest on August 18, 1995, Regional executed a confidentiality agreement
and provided detailed information to Norwest concerning Regional's operations
in order for Norwest to prepare a formal proposal to acquire Regional.
Negotiations were undertaken by Regional and Norwest which resulted in a
proposal dated September 22, 1995. The basis for the acquisition in the
proposal was an exchange of all of Regional's stock for 355,000 shares of
Norwest Common Stock. This proposal was approved by the Regional Board on
September 28, 1995. A due diligence examination was conducted by Norwest on
October 10, 1995.
On October 19, 1995, Regional retained special counsel to assist
management in negotiating the terms of the Consolidation Agreement by which
the acquisition would be governed. On December 4, 1995, Regional engaged
Sheshunoff to evaluate the fairness of the proposed transaction and to deliver
an opinion of the fairness of the Consolidation to Regional's shareholders.
This evaluation was soon completed and an opinion that the transaction was
fair and equitable from a financial point of view to all Regional shareholders
was rendered effective December 20, 1995. On that date, the Regional Board
approved the Consolidation Agreement, including a provision for shareholder
ratification and confirmation.
The Regional Board believes that the terms of the Consolidation
Agreement, which are the product of arms-length negotiations between Norwest
and Regional, are in the best interests of Regional and its shareholders. In
the course of reaching its determination, the Regional Board consulted with
legal counsel with respect to its legal duties, the terms of the Consolidation
Agreement and the issues related thereto; with its financial advisor with
respect to the financial aspects and fairness of the transaction; and with
senior management regarding, among other things, operational matters.
In reaching its determination to approve the Consolidation Agreement, the
Regional Board considered all factors it deemed material, which include the
following:
(a) The Regional Board analyzed information with respect to the
financial condition, results of operations, businesses and prospects of
Regional. In this regard, the Regional Board analyzed the options of selling
Regional or continuing on a stand-alone basis. The range of values on a sale
basis were determined to generally exceed the present value of Regional shares
on a stand-alone basis under business strategies which could be reasonably
implemented by Regional.
(b) The Regional Board considered the written opinion of Sheshunoff
that, as of December 20, 1995, the Exchange Ratio was fair to Regional
shareholders from a financial point of view. See "THE CONSOLIDATION-- Opinion
of Regional's Financial Advisor."
(c) The Regional Board considered the current operating
environment, including, but not limited to, the continued merger and
increasing competition in the banking and financial services industries, the
prospect for further changes in these
17
<PAGE>
industries, and the importance of being able to capitalize on developing
opportunities in these industries. This information has been periodically
reviewed by the Regional Board at its regular meetings and was also discussed
between the Regional Board and Regional's various advisors.
(d) The Regional Board considered the other terms of the
Consolidation Agreement and exhibits, including the tax-free nature of the
transaction.
(e) The Regional Board considered the detailed financial analyses
and other information with respect to Regional and Norwest discussed by
Sheshunoff, as well as the Regional Board's own knowledge of Regional, Norwest
and their respective businesses. In this regard, the latest publicly-
available financial and other information for Regional and Norwest were
analyzed, including a comparison of publicly-available financial and other
information for other similar institutions.
(f) The Regional Board considered the value of Regional Common
Stock with Regional continuing as a stand-alone entity compared to the effect
of Regional combining with Norwest in light of the factors summarized above
and the current economic and financial environment, including, but not limited
to, other possible strategic alternatives, the results of the contacts and
discussions between Regional and its financial advisor and various third
parties and the belief of the Regional Board and management that the
Consolidation offered the best transaction available to Regional and its
shareholders.
(g) The Regional Board considered the likelihood of the
Consolidation being approved by the appropriate regulatory authorities,
including factors such as market share analyses, Norwest's Community
Reinvestment Act rating at that time and the estimated pro forma financial
impact of the Consolidation on Norwest.
The foregoing discussion of the information and factors considered by the
Regional Board is not intended to be exhaustive, but constitutes the material
factors considered by the Regional Board. In reaching its determination to
approve and recommend the Consolidation Agreement, the Regional Board did not
assign any relative or specific weights to the foregoing factors, and
individual directors may have weighed factors differently. After deliberating
with respect to the Consolidation and the other transactions contemplated by
the Consolidation Agreement, considering, among other things, the matters
discussed above and the opinion of Sheshunoff referred to above, the Regional
Board approved and adopted the Consolidation Agreement and the transactions
contemplated thereby as being in the best interests of Regional and its
stockholders.
FOR THE REASONS SET FORTH ABOVE, THE REGIONAL BOARD HAS UNANIMOUSLY
APPROVED THE CONSOLIDATION AGREEMENT AS ADVISABLE AND IN THE BEST INTERESTS OF
REGIONAL AND REGIONAL'S SHAREHOLDERS AND RECOMMENDS THAT THE SHAREHOLDERS OF
REGIONAL VOTE FOR THE APPROVAL OF THE CONSOLIDATION AGREEMENT.
OPINION OF REGIONAL'S FINANCIAL ADVISOR
In December 1995, Regional retained Sheshunoff, an investment banking
firm based in Austin, Texas, on the basis of its experience, to render a
written fairness opinion (the "Opinion") to the Regional Board. Sheshunoff
has been in the business of consulting for the banking industry for twenty
years, including the appraisal and valuation
18
<PAGE>
of banking institutions and their securities in connection with mergers and
acquisitions and equity offerings. Sheshunoff has a long history of
familiarity and involvement with the banking industry nationwide, as well as
familiarity with the Colorado market and recent transactions in this market.
Sheshunoff reviewed the negotiated terms of a draft of the Consolidation
Agreement dated December 6, 1995, including corporate governance matters.
On December 20, 1995, in connection with the Regional Board's
consideration of the Consolidation Agreement, Sheshunoff issued the Opinion to
the Regional Board that, in its opinion as investment bankers, the terms of
the Consolidation as provided in the Consolidation Agreement are fair and
equitable, from a financial perspective, to Regional and its stockholders.
Sheshunoff has updated the Opinion as of the date of this Proxy Statement-
Prospectus. A copy of the Opinion is attached as an exhibit to this Proxy
Statement-Prospectus and should be read in its entirety by Regional
stockholders. Sheshunoff's written opinion does not constitute an endorsement
of the Consolidation or a recommendation to any stockholder as to how such
stockholder should vote.
In rendering the Opinion, Sheshunoff reviewed certain publicly available
information concerning Regional and Norwest. Sheshunoff considered many
factors in making its evaluation. In arriving at the Opinion regarding the
fairness of the transaction, Sheshunoff reviewed: (i) the Consolidation
Agreement; (ii) the most recent external auditor's reports to the Regional
Board; (iii) the November 30, 1995 balance sheet and income statement for
Regional, the September 30, 1995 balance sheet and income statement for
Norwest and the audited December 31, 1994 balance sheet and income statement
for Norwest; (iv) the Rate Sensitivity Analysis report for Regional; (v)
Regional's most recent listing of marketable securities showing rate, maturity
and market value as compared to book value; (vi) Regional's internal loan
classification list; (vii) the budget and projected operating plan of
Regional; (viii) a listing of unfunded letters of credit and any other off-
balance sheet risks for Regional; (ix) the minutes of the Regional Board
meeting; (x) the most recent Regional Board report; (xi) the listing and
description of significant real properties for Regional; (xii) material leases
on real and personal property for Regional; (xiii) the directors and officers
liability and blanket bond insurance policies for Regional; and (xiv) market
conditions and current trading levels of outstanding equity securities of both
organizations. Sheshunoff conducted an on-site review of Regional and held
telephone conversations with the management of Norwest to discuss each
organization's historical performance and current financial condition.
Sheshunoff had previously performed an on-site review of Norwest.
In reaching the Opinion, Sheshunoff analyzed the total purchase price on
a fair market value basis using standard evaluation techniques (as discussed
below) including comparable sales multiples (market value), net present value,
cash flow analysis, return on investment and the price as a percentage of
total assets based on certain assumptions of projected growth, earnings and
dividends and a range of discount rates from 10% to 15%. Sheshunoff also
considered as one of the methods of determining the fairness of the
transaction, the projected pro forma impact on Regional's earnings per share
and equity per share (appreciation/dilution analysis), which was based upon
stand-alone financial projections for both Regional and Norwest compared with
pro forma financial projections.
In performing its analysis, Sheshunoff relied upon financial projections
for Regional which were prepared and furnished by the management of Regional.
Norwest's projections were prepared by Sheshunoff based on its review of
publicly available information, discussions with the management of Norwest and
a prior on-site
19
<PAGE>
due diligence review of Norwest. Regional and Norwest do not publicly disclose
internal management projections of the type provided to Sheshunoff in
connection with its review of the Consolidation. Such projections were not
prepared with a view towards public disclosure. The projections were based on
numerous variables and assumptions which are inherently uncertain, including
without limitation, factors related to general economic and competitive
conditions. Accordingly, actual results could vary significantly from those
set forth in such projections.
In addition, Sheshunoff discussed with the management of Regional and
Norwest the relative operations performance and future prospects of each
organization, primarily with respect to the current level of their earnings
and future expected operating results, giving weight to Sheshunoff's
assessment of the future of the banking industry and each organization's
performance within the industry. Sheshunoff compared the results of operation
of Regional with the results of operation of a peer group comprised of all
Colorado banks with total assets of $50 to $99 million (52 banks). Sheshunoff
compared the results of operation of Norwest with the results of operation of
a national peer group comprised of all bank holding companies with total
assets of $10 billion and over (63 holding companies).
Many variables affect the value of banks, not the least of which is the
uncertainty of future events, so that the relative importance of the valuation
variables differ in different situations, with the result that appraisal
theorists argue about which variables are the most appropriate ones on which
to focus. However, most appraisers agree that the primary financial variables
to be considered are earnings, equity, dividends or dividend-paying capacity,
assets quality and cash flow. In addition, in most instances, if not all,
value is further tempered by non-financial factors such as marketability,
voting rights or block size history of past sales of the banking company's
stock, nature and relationship of the other shareholdings in the bank, and
special ownership or management considerations.
Net asset value is the value of the net equity of a bank, including every
kind of property and value. This approach normally assumes liquidation on the
date of appraisal with the recognition of securities gains or losses, real
estate appreciation or depreciation, adjustments to the loan loss reserve,
discounts to the loan portfolio and changes in the net value of other assets.
As such, it is not the best approach to use when valuing a going concern,
because it is based on historical costs and varying accounting methods. Even
if the assets and liabilities are adjusted to reflect prevailing prices and
yields (which is often of limited accuracy because readily available data is
often lacking), it still results in a liquidation value for the concern.
Furthermore, since this method does not take into account the values
attributable to the going concern such as the interrelationship among the
company's assets and liabilities, customer relations, market presence, image
and reputation, and staff expertise and depth, little weight is given by
Sheshunoff to the net asset value method of valuation.
Market value is generally defined as the price, established on an "arms-
length" basis, at which knowledgeable, unrelated buyers and sellers would
agree. The market value is frequently used to determine the price of a
minority block of stock when both the quantity and the quality of the
----
"comparable" data are deemed sufficient. However, the relative thinness of
the specific market for the stock of the banking company being appraised may
result in the need to review alternative markets for comparative pricing
determined by comparison to the average price to earnings, price to equity and
dividend yield of local or regional publicly-traded bank issues, adjusting for
significant differences in financial criteria and for any lack of
marketability or liquidity. The market value in
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connection with the evaluation of control of a bank is determined by the
previous sales of banks in the state or region. In valuing a business
enterprise, when sufficient comparable trade data is available, the market
value deserves greater weighting than the net asset value and similar emphasis
as the investment value as discussed below.
Sheshunoff maintains substantial files concerning the prices paid for
banking institutions nationwide. The database includes transactions involving
Colorado banking organizations which sold in 1995 and over the past five
years. The database provides comparable pricing and financial performance
data for banking organizations sold or acquired. Organized by different peer
groups, the data present averages of financial performance and purchase price
levels, thereby facilitating a valid comparative purchase price analysis. In
analyzing the transaction value of Regional, Sheshunoff has considered the
market approach and has evaluated price to equity and price to earnings
multiples of Arizona, Colorado, New Mexico and Utah banking organizations that
sold for 100% stock from January 1, 1994 through December 18, 1995. The
following table provides the 10 banking organizations that sold for 100% stock
in Arizona, Colorado, New Mexico and Utah from January 1, 1994 through
December 18, 1995:
<TABLE>
<CAPTION>
Purchase Price Purchase Price Purchase Price to
Seller City State to Equity (x) to Earnings (x) Total Assets (%)
<S> <C> <C> <C> <C> <C>
First Denver Corp. Denver CO 1.87 14.97 11.35
First American NB (1) Chandler AZ 1.69 9.75 11.26
First Western Bncp Moab UT 2.28 9.81 26.69
First Community Bksh Fort Morgan CO 1.93 13.63 11.61
Goldenbanks of Colo (1) Golden CO 2.62 13.24 18.67
Parker Bankshares (1) Parker CO 2.76 9.99 18.09
OmniBancorp Denver CO 2.32 14.31 26.68
Ken-Caryl Inv. Co. (1) Littleton CO 2.57 11.17 16.28
American Republic (1) Belen NM 1.71 15.99 14.35
Copper Bancshares (1) Silver City NM 1.32 7.90 12.36
WEIGHTED AVERAGES 2.19X 13.20X 19.23%
</TABLE>
__________________
(1) Norwest was the purchaser in the transaction.
Comparable Sales Multiples. Sheshunoff calculated an "Adjusted Book
Value" of $434.74 per share based on Regional's November 30, 1995 equity and
the average price to equity multiple of 2.19x for Arizona, Colorado, New
Mexico and Utah banking organizations that sold for 100% stock from January 1,
1994 through December 18, 1995. Sheshunoff calculated an "Adjusted Earnings
Value" of $555.85 per share based on Regional's estimated 1995 earnings and
the average price to earnings multiple of 13.20x for Arizona, Colorado, New
Mexico and Utah banking organizations that sold for 100% stock from January 1,
1994 through December 18, 1995. The financial performance characteristics of
the regional banking organizations vary, sometimes substantially, from those
of Regional. When the variance is significant for relevant performance
factors, adjustments to the price multiples are appropriate when comparing
them to the transaction value.
The investment value is sometimes referred to as the income value or
earnings value. One investment value method frequently used estimates the
present value of an enterprise's future earnings, or cash flow. Another
popular investment value method is to determine the level of current annual
benefits (earnings, cash flow, dividends, etc.), and then capitalize one or
more of the benefit types using an appropriate capitalization rate such as an
earnings or dividend yield. Yet another method of calculating investment
value is a cash flow analysis of the ability of a banking company to service
acquisition
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debt obligations (at a certain price level) while providing sufficient
earnings for reasonable dividends and capital adequacy requirements. In
connection with the cash flow analysis, the return on investment that would
accrue to a prospective buyer at the transaction value is calculated. The
investment value methods which were analyzed in connection with this
transaction were the net present value analysis, the cash flow analysis and
the return on investment analysis, which are discussed below:
Net Present Value Analysis. The investment or earnings value of any
banking organization's stock is an estimate of the present value of the future
benefits, usually earnings, cash flow or dividends, which will accrue to the
stock. An earnings value is calculated using an annual future earnings stream
over a period of time of not less than ten years and the residual value of the
earnings stream after ten years, assuming no earnings growth, and an
appropriate capitalization rate (the net present value discount rate).
Sheshunoff's computations were based on an analysis of the banking industry,
the economic and competitive situations in Regional's market area, its current
financial condition and historical levels of growth and earnings. Using a net
present value discount rate of 12%, an acceptable discount rate considering
the risk-return relationship most investors would demand for an investment of
this type as of the valuation date, the "Net Present Value of Future Earnings"
equaled $522.93 per share.
Cash Flow Analysis. The cash flow method assumes the formation of a one-
bank holding company with maximum leverage according to Federal Reserve System
guidelines and analyzes the ability of the bank to retire holding company
acquisition debt within a reasonable period of time maintaining adequate
capital. Using this method Sheshunoff arrived at a value of $695.00 per
share.
Return on Investment Analysis. Return on investment analysis (ROI) also
assumes the formation of a one-bank holding company using maximum regulatory
leverage and analyzes the ten year ROI of a 33.33% equity investment at the
transaction value of $480.79 per share for Regional compared to a liquidation
at book value in the year 2005 and a sale at ten times projected earnings for
the year 2005. This ROI analysis provides a benchmark for assessing the
validity of the transaction value of a majority block of stock. The ROI
analysis is one approach to valuing a going concern, and is indirectly
impacted by the earnings stream, dividend payout levels and levels of debt, if
any. Other financial and nonfinancial factors indirectly affect the ROI;
however, these factors more directly influence the level of ROI an investor
would demand from an investment in a majority block of stock of a specific
bank at a certain point in time. The ROI assuming liquidation at book value in
2005 equaled 11.15% and the ROI assuming sale at ten times projected earnings
in 2005 equaled 19.26%.
Transaction Value as a Percentage of Total Assets. Furthermore, a price
level indicator, the transaction value as a percentage of total assets, may be
used to confirm the validity of the transaction value. The transaction value
as a percentage of total assets facilitates a truer price level comparison
with comparable banking organizations, regardless of the differing levels of
equity capital and earnings. In this instance, a transaction value of $480.79
per share results in a transaction value as a percentage of total assets of
20.32%.
Finally, another test of appropriateness for the transaction value of a
majority block of stock is the net present value-to-transaction value ratio.
Theoretically, an earnings stream may be valued through the use of a net
present value analysis. In Sheshunoff's experience with majority block
community bank stock valuations, it has determined that a relationship does
exist between the net present value of an "average"
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community banking organization and the transaction value of majority block of
the banking organization's stock. The net present value-to-transaction value
ratio equals 108.76% for Regional. There are many other factors to consider,
when valuing a going concern, which do not directly impact the earnings stream
and the net present value but which do exert a degree of influence over the
fair market value of a going concern. These factors include, but are not
limited to, the general condition of the industry, the economic and
competitive situations in the market area and the expertise of the management
of the organization being valued.
Projected Impact on Regional Stockholders. Sheshunoff considered this
transaction as a merger rather than a purchase. Consideration was given to
the levels of book value and earnings per share appreciation or dilution
percentages between the merger partners over the next three to five years
after consummation. To justify the fairness of the transaction for Regional
stockholders, it is important to project, based upon realistic projections of
future performance, a positive impact for Regional stockholders. It is
important to note that the appreciation/dilution analysis is one of the
methods utilized by Sheshunoff. The projected appreciation/dilution analysis
supports Sheshunoff's Opinion as to the fairness of the transaction to
Regional's stockholders from a financial point of view. This analysis does
not address future shareholder transactions involving Norwest stock after
consummation of the transaction.
Neither Regional nor Norwest imposed any limitations upon the scope of
the investigation to be performed by Sheshunoff in formulating the Opinion.
In rendering the Opinion, Sheshunoff did not independently verify the asset
quality and financial condition of Regional or Norwest, but instead relied
upon the data provided by or on behalf of Regional and Norwest to be true and
accurate in all material respects.
For its services as independent financial analyst for the Consolidation,
including the rendering of the Opinion, Regional has paid Sheshunoff aggregate
fees of $18,000. Prior to being retained for this assignment, Sheshunoff
provided professional services and products to Regional and Norwest. The
revenues derived from such services and products were insignificant when
compared to the firm's total gross revenues.
CONSOLIDATION CONSIDERATION
Except with respect to fractional shares as described below, if the
Consolidation Agreement is approved and the Consolidation becomes effective,
each share of Regional Common Stock outstanding immediately prior to the
Effective Time of the Consolidation will be automatically converted into
14.569 shares of Norwest Common Stock. Norwest will not issue any fractional
shares of Norwest Common Stock in the Consolidation. Norwest will pay cash to
each holder of Regional Common Stock who would otherwise be entitled to
receive a fractional 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 closing price per share of Norwest Common
Stock as reported on the consolidated tape of the NYSE over the five
consecutive trading day period ending on the trading day immediately preceding
the date of the Special Meeting.
DISSENTERS' RIGHTS
Title 12, Section 215, of the United States Code provides that any
shareholder of either of the parties to a consolidation involving a national
bank who objects to the
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proposed consolidation has the right to receive payment in cash of the value
of such shareholder's shares as of the effective date of the consolidation, if
and when the consolidation is consummated, subject to certain conditions.
These conditions, in the case of a shareholder of Regional, are that: (i) the
shareholder must vote against approval of the Consolidation at the Special
Meeting or give notice in writing at, or prior to, the Special Meeting to the
presiding officer that such shareholder dissents from the proposed
Consolidation; (ii) the shareholder must, within 30 days after the effective
date of the Consolidation, make a written request for payment to the surviving
bank; and (iii) the written request must be accompanied by surrender of the
shareholder's stock certificate(s). Any shareholder of Regional who votes
against the Consolidation at the Special Meeting, or who gives notice in
writing at, or prior to, the Special Meeting to the presiding officer that
such shareholder dissents, will be notified in writing of the Effective Time
of the Consolidation. Failure to comply with each of the foregoing conditions
will result in the loss of the appraisal rights described herein.
The value of the shares of any dissenting shareholder shall be determined
by an appraisal made by a committee of three persons, one to be selected by
the majority vote of the dissenting shareholders, one by the board of
directors of the surviving bank, and the third by the two so chosen. The
valuation agreed upon by any two of the three appraisers shall govern. If the
value so fixed is not satisfactory to any dissenting shareholder, that
shareholder may, within five days after being notified of the appraised value
of such shareholder's shares, appeal to the OCC, who shall cause a reappraisal
to be made which shall be final and binding as to the value of such shares.
If a shareholder dissents and, within 90 days from the Effective Time of the
Consolidation, one or more of the appraisers is not selected as above provided
for any reason, or the appraisers fail to determine the value of such shares,
the OCC shall, upon written request of any interested party, cause an
appraisal to be made which shall be final and binding on all parties. The
expenses of the OCC in making the reappraisal or the appraisal, as the case
may be, shall be paid by the surviving bank. The value of the shares
ascertained shall be promptly paid to the dissenting shareholder by the
surviving bank.
The foregoing summary does not purport to be a complete statement of the
provisions of Section 215 and is qualified in its entirety by reference to the
relevant provisions of Section 215, the text of which is attached hereto as
Appendix C. Any shareholder of Regional who desires to exercise dissenters'
appraisal rights should carefully review and comply with the relevant
provisions of Section 215. DISSENTERS' RIGHTS WILL BE LOST IF THE PROCEDURAL
REQUIREMENTS OF SECTION 215 ARE NOT FULLY AND PRECISELY SATISFIED.
Attached hereto as Appendix D is a copy of Banking Circular 259 regarding
the valuation methods used by the Comptroller to estimate the value of a
bank's shares when the OCC is involved in the appraisal of shares held by
dissenting shareholders. The results of appraisals performed by the OCC
between January 1, 1985 and September 30, 1991 are also summarized in Appendix
D. EACH SHAREHOLDER OF REGIONAL SHOULD FULLY CONSIDER APPENDIX D BEFORE
DECIDING WHETHER TO EXERCISE DISSENTERS' RIGHTS.
SURRENDER OF CERTIFICATES
Promptly following the Effective Time of the Consolidation, Norwest Bank
Minnesota, National Association, acting in the capacity of exchange agent for
Norwest
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(the "Exchange Agent"), will mail to each holder of record of shares of
Regional 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 REGIONAL 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
Regional 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
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 Consolidation will be
deemed issued as of the Effective Time of the Consolidation. No dividends in
respect of the Norwest Common Stock with a record date after the Effective
Time of the Consolidation will be paid to the former shareholders of Regional
entitled to receive certificates for shares of Norwest Common Stock until such
shareholders surrender their certificates representing shares of Regional
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 Consolidation 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 Consolidation, 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 CONSOLIDATION
The effectiveness of the Consolidation is subject to the satisfaction as
of the Effective Time of the Consolidation or, if permissible under the
Consolidation Agreement, waiver of a number of conditions.
CONDITIONS TO THE OBLIGATIONS OF BOTH PARTIES. Conditions to the
obligations of both parties to effect the Consolidation include but are not
limited to the following: (i) the approval of the Consolidation Agreement by
the requisite vote of Regional's shareholders; (ii) the receipt of all
requisite regulatory approvals; and (iii) the absence of any order of a court
or agency of competent jurisdiction restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Consolidation Agreement.
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CONDITIONS TO THE OBLIGATION OF NORWEST. Conditions to the obligation of
Norwest to effect the Consolidation include but are not limited to the
following: (i) the total number of shares of Regional Common Stock (including
phantom shares and other share equivalents) outstanding or subject to issuance
upon exercise of any warrants, options, conversion rights, phantom shares or
other common share equivalents shall not have exceeded 24,366 shares at any
time from the date of the Consolidation Agreement until the Effective Time of
the Consolidation; (ii) the receipt by Norwest of a certificate from
Regional's chief executive officer and chief financial officer concerning the
financial information of Regional included in this Proxy Statement-Prospectus;
(iii) Regional shall not have sustained since December 31, 1994 any material
loss or interference with their respective businesses from any civil
disturbance or any fire, explosion, flood or other calamity, whether or not
covered by insurance; (iv) the absence of any reasonable basis for any
proceeding, claim or action seeking to impose or that could result in the
imposition on Regional or any of its subsidiaries of any liability arising
from the release of hazardous substances under any local, state, federal or
foreign environmental statute, regulation or ordinance which has had or could
reasonably be expected to have a material adverse effect on Regional and its
subsidiaries taken as a whole; and (v) the absence, since September 30, 1995,
of any change (other than changes in banking laws or regulations that affect
the banking industry generally or changes in the general level of interest
rates) or any circumstance which has had or might reasonably be expected to
have a material adverse effect on the financial condition, results of
operations, business, or prospects of Regional. Under the terms of the
Consolidation Agreement, the receipt by Norwest of an opinion of Regional's
independent auditors that the Consolidation qualifies for pooling of interests
accounting treatment is also a condition to Norwest's obligation to effect the
Consolidation; however, Norwest intends to account for the Consolidation as a
purchase and therefore anticipates waiving this condition.
CONDITIONS TO THE OBLIGATION OF REGIONAL. Conditions to the obligation
of Regional to effect the Consolidation include but are not limited to the
following: (i) the receipt of an opinion of counsel to Regional at the
Closing regarding certain federal income tax consequences of the
Consolidation; and (ii) the receipt by the Regional Board of an opinion from
Sheshunoff that the consideration to be received by Regional's shareholders in
the Consolidation is fair from a financial point of view. See "THE
CONSOLIDATION--Opinion of Regional's Financial Advisor" and "--Certain U.S.
Federal Income Tax Consequences."
For a complete description of all of the conditions to the obligations of
the parties to effect the Consolidation, see Sections 6 and 7 of the
Consolidation Agreement.
REGULATORY APPROVALS
The Consolidation is subject to prior approval by the Federal Reserve
Board, the OCC and the state of Colorado. Norwest has filed an application
with the Federal Reserve Board, the OCC and the state of Colorado requesting
approval of the Consolidation; however, there can be no assurances that the
necessary regulatory approvals will be obtained or as to the timing of or
conditions placed on such approvals.
The approval of any application merely implies satisfaction of regulatory
criteria for approval, which do not include review of the Consolidation 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 Consolidation.
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Norwest and Regional are not aware of any governmental approvals or
compliance with banking laws and regulations that are required for the
Consolidation 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 Consolidation. 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 Consolidation. See "--Conditions to
the Consolidation" and "--Termination of the Consolidation Agreement."
CONDUCT OF BUSINESS PENDING THE CONSOLIDATION
BY REGIONAL. Regional is required to maintain its corporate existence in
good standing, maintain the general character of its business and conduct its
business in the ordinary and usual manner. In addition, without the prior
written consent of Norwest, Regional shall not (i) make any new loan or
modify, restructure or renew any existing loan (except pursuant to commitments
made prior to the date of the Consolidation 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 $350,000; (ii) enter into
any material agreement, contract or commitment exceeding $25,000 (other than
banking transactions in the ordinary course of business and in accordance with
policies and procedures in effect on the date of the Consolidation Agreement);
(iii) make any investments except 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 its capital stock; (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, provided that if the Effective Time of the
Consolidation is after the record date for the regular cash dividend, if any,
declared on Norwest Common Stock for the second quarter of 1996, Regional may
declare and pay cash dividends on Regional Common Stock in an amount not to
exceed, in the aggregate, the amount that would have been received by the
holders of 355,000 shares of Norwest Common Stock between such record date and
the Effective Time of the Consolidation; (vii) redeem, purchase or otherwise
acquire, directly or indirectly, any of the capital stock of Regional; or
(viii) increase the compensation of any director, officer or executive
employee of Regional other than pursuant to compensation plans and practices
in effect as of the date of the Consolidation Agreement, provided that
Regional may pay bonuses to its officers in January 1996 based on Regional's
earnings for the year ended December 31, 1995 (if accrued no later than
December 31, 1995) in an amount not to exceed, in the aggregate, $75,000.
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.
See Sections 4 and 5 of the Consolidation Agreement for additional
restrictions on the conduct of the business of Regional and Norwest pending
the Consolidation.
NO SOLICITATION
Regional has agreed under the Consolidation Agreement that neither it nor
any of its directors, officers, representatives or agents, will directly or
indirectly solicit, authorize
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<PAGE>
the solicitation of or enter 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 Regional; (ii) make a tender or exchange offer for any
shares of common stock or other equity security of Regional; (iii) purchase,
lease or otherwise acquire the assets of Regional except in the ordinary
course of business; or (iv) merge, consolidate or otherwise combine with
Regional. If any third party makes an offer or inquiry to Regional concerning
any of the foregoing, Regional is required to promptly disclose such offer or
inquiry (including the terms thereof) to Norwest.
CERTAIN ADDITIONAL AGREEMENTS
REGIONAL. Regional has also agreed under the Consolidation Agreement
to (i) if requested by Norwest, terminate or amend, effective as of the
Effective Time of the Consolidation, certain employee benefit plans of
Regional and its subsidiaries; (ii) establish such additional accruals and
reserves as may be necessary to conform Regional's accounting and credit loss
reserve practices and methods to those of Norwest and Norwest's plans with
respect to the conduct of Regional's business after the Effective Time of the
Consolidation and to provide for costs and expenses related to effecting the
transactions contemplated by the Consolidation Agreement; (iii) obtain and
deliver environmental assessment reports on certain properties; and (iv)
obtain and deliver title commitments and boundary surveys for each of its bank
facilities.
NORWEST. Norwest has agreed under the Consolidation Agreement to (i)
take certain action with respect to the indemnification rights of the
directors and officers of Regional; and (ii) for a period of up to 15 days
prior to the Closing, permit Regional and its representatives to examine the
books, records and properties of Norwest and to interview officers, employees
and agents of Norwest. For more information concerning the obligations of
Norwest with respect to the indemnification rights of Regional's directors and
officers and certain other related matters, see "--Interests of Certain
Persons in the Consolidation."
For information concerning additional agreements and covenants of
Regional and Norwest, see Sections 4 and 5 of the Consolidation Agreement.
TERMINATION OF THE CONSOLIDATION AGREEMENT
BY EITHER PARTY. The Consolidation Agreement may be terminated at any
time prior to the Effective Time of the Consolidation (i) by mutual written
consent of the parties; (ii) by either party by written notice to the other if
the Consolidation has not become effective by September 30, 1996, unless such
failure of the Consolidation 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
Consolidation 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 Consolidation Agreement; or (iv) by either party upon
written notice to the other if a Takeover Proposal (as defined below)
constitutes a Superior Proposal (as defined below), provided that Regional
will not be permitted to terminate the Consolidation Agreement in the event of
the situation described in this clause (iv) unless it has not breached certain
restrictions against solicitation and it delivers to Norwest simultaneously
with such notice a termination fee of
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$250,000. A "Takeover Proposal" means a bona fide proposal or offer by a
person or entity to make a tender or exchange offer, or to engage in a merger,
consolidation or other business combination involving Regional or to acquire
in any manner a substantial equity interest in, or all or substantially all of
the assets of, Regional. A "Superior Proposal" means a Takeover Proposal that
the Regional Board shall determine in good faith, after taking into account
the written advice of its outside legal counsel, that failure to accept such
proposal or offer could reasonably be expected to violate its fiduciary duties
under applicable law.
BY NORWEST. Norwest may terminate the Consolidation Agreement if (i) the
Regional Board fails to recommend approval of the Consolidation Agreement or
withdraws or modifies in a manner materially adverse to Norwest its approval
or recommendation for approval of the Consolidation Agreement, or (ii) after
an agreement to engage in or the occurrence of an Acquisition Event (as
defined below) or after a third party shall have made a proposal to Regional
or Regional's shareholders to engage in an Acquisition Event, the transactions
contemplated by the Consolidation Agreement are not approved at the Special
Meeting. An Acquisition Event means any of the following: (a) a merger,
consolidation or similar transaction involving Regional or any successor to
Regional, (b) a purchase, lease or other acquisition in one or a series of
related transactions of assets of Regional representing 25% or more of the
consolidated assets of Regional, or (c) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or any similar
transaction) in one or a series of related transactions of beneficial
ownership of securities representing 25% or more of the voting power of
Regional in each case with or by a person or entity other than Norwest or an
affiliate of Norwest. If the Consolidation Agreement is terminated by Norwest
pursuant to either (i) or (ii) above, Regional will be required to pay Norwest
a termination fee of $250,000 if prior to such termination or within 12 months
thereafter (a) Regional or any successor to Regional shall have entered into
an agreement to engage in an Acquisition Event or an Acquisition Event shall
have occurred, or (b) the Regional Board shall have authorized or approved an
Acquisition Event or shall have publicly announced an intention to authorize
or approve or shall have recommended that Regional's shareholders approve or
accept any Acquisition Event.
BY REGIONAL. Regional may also terminate the Consolidation Agreement
within five business days after the Special Meeting if the Norwest Measurement
Price is less than $25.
AMENDMENT OF CONSOLIDATION AGREEMENT
The Consolidation 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 Consolidation Agreement by Regional's
shareholders, provided that, after the Consolidation Agreement is approved by
Regional's shareholders, no amendment can be made to the Consolidation
Agreement that changes in a manner materially adverse to Regional's
shareholders the consideration to be received by Regional's shareholders in
the Consolidation.
WAIVER OF PERFORMANCE OF OBLIGATIONS
Any of the parties to the Consolidation Agreement may, by a signed
writing, give any consent, take any action with respect to the termination of
the Consolidation Agreement or otherwise, or waive any of the inaccuracies in
the representations and
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warranties of the other party or compliance by the other party with any of the
covenants or conditions contained in the Consolidation Agreement.
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EFFECT ON EMPLOYEE BENEFIT PLANS
The Consolidation Agreement provides that, subject to any eligibility
requirements applicable to such plans, employees of Regional shall be entitled
to participate in those Norwest employee benefit and welfare plans specified
in the Consolidation Agreement. The eligible employees of Regional 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 Consolidation.
Regional's employees will generally continue to participate in welfare and
retirement plans maintained by Regional until entering Norwest's plans.
Eligible Regional employees will receive credit for past service for the
purpose of determining certain benefits under certain but not all of Norwest's
benefit plans.
INTERESTS OF CERTAIN PERSONS IN THE CONSOLIDATION
The directors and executive officers of Regional beneficially owned a
total of 10,715 shares of Regional Common Stock (representing 43.98% of all
outstanding shares of Regional Common Stock) on the Record Date. Pursuant to
the Consolidation Agreement, the directors and executive officers will receive
the same consideration for their shares of Regional Common Stock as the other
shareholders of Regional.
Certain members of Regional's management and the Regional Board have
certain interests in the Consolidation that are in addition to their interest
as stockholders of Regional generally. Pursuant to an agreement dated June 1,
1986, between Regional and Gary S. Ward (the "Employment Agreement"), Mr. Ward
would be entitled to all accrued and unused vacation pay and three months
gross salary if his employment is terminated for any reason other than
performance. Regional is required to pay Mr. Ward any unused vacation pay if
Mr. Ward terminates the contract for any reason. Under the terms of the
Employment Agreement, salary and bonuses for Mr. Ward are reviewed annually by
the Regional Board. The Employment Agreement is terminable by either party
upon written notice subject to the above disclosed severance pay.
Norwest will ensure that all rights to indemnification and all
limitations of liability existing in favor of directors and officers of
Regional in Regional's Articles of Association and Bylaws shall continue in
full force and effect. In addition, for a period of three years after the
Effective Time of the Consolidation, Norwest will use all reasonable efforts
to cause all directors and officers of Regional to continue to be covered by
Regional's directors and officers liability insurance policy at an annual cost
not to exceed 125% of Regional's premium payment for Regional's currently
policy.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain federal income tax consequences
of the Consolidation that are generally applicable to Regional's shareholders.
The discussion is based on currently existing provisions of the Code, existing
regulations thereunder (including final, temporary or proposed) and current
administrative rulings and court decisions, all of which are subject to
change. Any such change, which may or may not be retroactive, 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
Consolidation and does not purport to be a complete analysis or listing of the
all of the potential tax effects relevant to a decision on whether to vote in
favor of approval of the Consolidation Agreement.
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The parties expect the Consolidation to qualify as a reorganization under
Section 368(a) of the Code. Except for cash received in lieu of a fractional
share interest in Norwest Common Stock, holders of shares of Regional Common
Stock will recognize no gain or loss on the receipt of Norwest Common Stock.
The Consolidation's effectiveness is conditioned upon the receipt by Regional
of a written opinion of GRA, Thompson, White & Co., P.C., Regional's
independent auditors, substantially to the effect that, for U.S. federal
income tax purposes: (i) the Consolidation 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 Regional 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 Regional will be the same as the basis of the Regional
Common Stock exchanged therefor; and (iv) the holding period of the shares of
Norwest Common Stock received by the shareholders of Regional will include the
holding period of the Regional Common Stock, provided such shares of Regional
Common Stock were held as a capital asset as of the Effective Time of the
Consolidation.
The opinion of counsel, 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 Regional nor Norwest has
requested or will request a ruling from the IRS with regard to the federal
income tax consequences of the Consolidation.
THE FOREGOING IS A GENERAL SUMMARY OF THE MATERIAL U.S. FEDERAL INCOME
TAX CONSEQUENCES OF THE CONSOLIDATION TO REGIONAL SHAREHOLDERS, WITHOUT REGARD
TO THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S TAX SITUATION
AND STATUS. EACH REGIONAL 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 Regional
upon the Consolidation 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 Regional or Norwest as
that term is defined in the rules under the Securities Act. Norwest Common
Stock received by those shareholders of Regional who are deemed to be
"affiliates" of Regional 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 Regional generally include individuals or
entities that control, are controlled by or are under common control with,
Regional and may include the executive officers and directors of Regional as
well as certain principal shareholders of Regional. In the Consolidation
Agreement, Regional has agreed to use its best efforts to cause each executive
officer, director or shareholder who may reasonably be deemed an affiliate of
Regional to represent to Norwest that such affiliate will not sell, transfer
or otherwise dispose of the shares of Norwest Common Stock to be
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received by such person in the Consolidation except in compliance with the
applicable provisions of the Securities Act and the rules and regulations
promulgated thereunder. This Proxy Statement-Prospectus does not cover any
resales of Norwest Common Stock received by affiliates of Regional.
STOCK EXCHANGE LISTING
The Consolidation 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 Consolidation becoming effective. The Consolidation's
effectiveness is conditioned on the authorization for listing of such shares
on the NYSE and CHX.
ACCOUNTING TREATMENT
Any provision of the Consolidation Agreement notwithstanding, management
of Norwest anticipates that the Consolidation will be accounted for as a
purchase under generally accepted accounting principles.
EXPENSES
Except as otherwise provided in the Consolidation Agreement, Norwest and
Regional will each pay their own expenses in connection with the
Consolidation, including fees and expenses of their respective independent
auditors and counsel.
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NORWEST CAPITAL STOCK AND RIGHTS
--------------------------------
The following description of certain aspects of the capital stock of
Norwest and certain rights of Norwest's stockholders is not intended to be
complete and is qualified in its entirety by reference to Article FOURTH of
the Norwest Certificate and other documents incorporated by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "COMPARISON OF RIGHTS OF
HOLDERS OF REGIONAL CAPITAL STOCK AND NORWEST COMMON STOCK."
GENERAL
Norwest is authorized to issue a total of 509,000,000 shares of capital
stock, consisting of 500,000,000 shares of Norwest Common Stock, 5,000,000
shares of preferred stock without par value ("Norwest Preferred Stock") and
4,000,000 shares of preference stock without par value ("Norwest Preference
Stock"). As of December 31, 1995, Norwest had issued (i) 358,332,153 shares
of Norwest Common Stock, of which 352,760,457 shares were outstanding and
5,571,696 shares were held as treasury shares, and (ii) 2,119,681 shares of
Norwest Preferred Stock, consisting of 1,127,125 shares of 10.24% Cumulative
Preferred Stock, 980,000 shares of Cumulative Tracking Preferred Stock (of
which 25,000 shares were held by a subsidiary of Norwest), 12,984 shares of
ESOP Cumulative Convertible Preferred Stock and 24,572 shares of 1995 ESOP
Cumulative Convertible Preferred Stock. On January 2, 1996, all of the
outstanding shares of 10.24% Cumulative Preferred Stock and related depositary
shares were redeemed at the $100 stated value. On February 27, 1996, Norwest
issued 59,000 shares of its 1996 ESOP Cumulative Preferred Stock. Norwest had
not issued any shares of Norwest Preference Stock as of the date of this Proxy
Statement-Prospectus.
Norwest's board of directors (the "Norwest Board") has designated
1,250,000 shares of Norwest Preferred Stock as Series A Junior Participating
Preferred Stock (the "Norwest Junior Preferred Shares") and reserved the
Norwest Junior Preferred Shares for issuance pursuant to a rights agreement
dated November 22, 1988 between Norwest and Citibank, N.A., as the rights
agent. See"--Rights Plan." Norwest had not issued any Norwest Junior
Preferred Shares as of the date of this Proxy Statement-Prospectus.
NORWEST COMMON STOCK
Each share of Norwest Common Stock entitles the holder thereof to one
vote on all matters submitted to a vote of stockholders. Holders of Norwest
Common Stock do not have any cumulative voting rights. For that reason,
holders of a majority of the shares of Norwest Common Stock entitled to vote
in any election of directors of Norwest may elect all of the directors
standing for election. Holders of Norwest Common Stock are entitled to
receive ratably such dividends, if any, as may be declared by the Norwest
Board out of funds legally available therefor, subject to (i) preferential
dividend rights of all then outstanding shares of Norwest Preferred Stock and
Norwest Preference Stock, (ii) certain legal restrictions on the ability of
Norwest's banking and savings association subsidiaries to distribute funds to
Norwest and (iii) such restrictions as may be imposed on Norwest from time to
time pursuant to debt or credit facilities or otherwise. See "CERTAIN
REGULATORY CONSIDERATIONS PERTAINING TO NORWEST." Holders of Norwest Common
Stock do not have any preemptive rights to purchase additional securities
issued by Norwest or rights to convert their shares of Norwest Common Stock
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into other securities of Norwest. Upon the liquidation, dissolution or
winding up of Norwest, subject to the prior rights of all then outstanding
shares of Norwest Preferred Stock and Norwest Preference Stock, holders of
Norwest Common Stock are entitled to receive ratably the assets of Norwest
available after the payment of all debts and other liabilities. All
outstanding shares of Norwest Common Stock are duly authorized, validly issued
and nonassessable. Norwest Bank Minnesota, National Association, a subsidiary
of Norwest, is the transfer agent and registrar for shares of Norwest Common
Stock.
Each share of Norwest Common Stock includes, and each share of Norwest
Common Stock issued in the Consolidation will include, a right to purchase one
four-hundredth of a Norwest Junior Preferred Share. See "--Rights Plan"
The rights, preferences and privileges of holders of Norwest Common Stock
are subject to, and may be adversely affected by, the rights of holders of
Norwest Preferred Stock or Norwest Preference Stock. See "--Norwest Preferred
Stock; Norwest Preference Stock."
NORWEST PREFERRED STOCK; NORWEST PREFERENCE STOCK
The Norwest Board is authorized to issue shares of Norwest Preferred
Stock and Norwest Preference Stock in one or more series and to fix the
relative rights, preferences, privileges and restrictions thereof, including
dividend rates, conversion rights, voting rights, terms of redemption,
liquidation preferences, and the designation of any series and the number of
shares constituting such series, all without any vote or other action on the
part of stockholders; provided, however, that holders of Norwest Preference
Stock will not be entitled to more than one vote per share. The Norwest Board
may issue shares of Norwest Preferred Stock and Norwest Preference Stock at
any time and from time to time without any vote or other action on the part of
stockholders.
The ability of the Norwest Board to issue shares of Norwest Preferred
Stock or Norwest Preference Stock, although providing flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire, or
discouraging a third party from acquiring, a majority of the outstanding
voting stock of Norwest. For a discussion of other provisions of the Norwest
Certificate or Norwest Bylaws that may delay, deter or prevent a tender offer
or other takeover attempt, see "--Rights Plan" below.
RIGHTS PLAN
Norwest has in effect a rights plan (the "Rights Plan") pursuant to which
each share of Norwest Common Stock now outstanding, and each share of Norwest
Common Stock to be issued in the Consolidation, have attached to it one
Preferred Stock purchase right (a "Right") entitling the holder thereof to
purchase one four-hundredth of a Norwest Junior Preferred Share at a price of
$175.00 per one one-hundredth of a Norwest Junior Preferred Share, subject to
adjustment in accordance with the terms of the Rights Agreement. The Rights
are not separable from, and trade automatically with, the shares of Norwest
Common Stock to which they are attached. No separate certificates for the
Rights will be issued. The Rights are exercisable only upon the occurrence of
certain specified events as described below. All rights expire November 23,
1998, unless earlier exercised by the holders thereof or redeemed or extended
by Norwest. Until exercised, the Rights in and of themselves do not confer any
rights on their holders as stockholders of Norwest, including but not limited
to the right to vote or receive dividends. Subject to
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certain limited exceptions, the Norwest Board may amend or otherwise modify
the provisions of the Rights and the Rights Plan without any vote or other
action on the part of the holders of the Rights.
The Rights are exercisable only if a person or group acquires or
announces an offer to acquire 25% or more (the "Triggering Percentage") of the
outstanding shares of Norwest Common Stock. The Norwest Board may, without
any vote or other action on the part of stockholders, reduce the Triggering
Percentage to no less than 15% at any time prior to the Rights becoming
exercisable. The Rights have certain additional rights that will be triggered
upon the occurrence of specified events:
(1) If a person or group acquires at least the Triggering Percentage
of Norwest Common Stock, the Rights permit the holders thereof, other than
such person or group, to acquire shares of Norwest Common Stock at 50% of such
shares' market value at the time. This feature will not apply, however, if a
person or group that owns less than the Triggering Percentage acquires at
least 85% of the outstanding shares of Norwest Common Stock pursuant to a cash
tender offer for 100% of the outstanding shares of Norwest Common Stock.
(2) After a person or group acquires at least the Triggering
Percentage of Norwest Common Stock but before such person or group acquires
50% of the outstanding shares of Norwest Common Stock, the Norwest Board may
exchange each Right, other than Rights owned by such acquiror, for one share
of Norwest Common Stock or one four-hundredth of a Junior Preferred Share.
(3) In the event of certain business combinations involving Norwest
or the sale of 50% or more of the assets or earning power of Norwest, the
Rights permit the holders thereof to purchase the stock of the acquiror at 50%
of such shares' market value.
Each Junior Preferred Share will have 400 votes, voting together with
shares of Norwest Common Stock. Each Junior Preferred Share will be entitled
to a preferential quarterly dividend payment equal to the greater of $1.00 per
share or 400 times the dividend declared per share of Norwest Common Stock. In
the event of a merger, consolidation or other transaction in which Norwest
Common stock is exchanged, each Junior Preferred Share will be entitled to
receive 400 times the amount received per share of Norwest Common Stock. In
the event of liquidation of Norwest, the holders of the Junior Preferred
Shares will be entitled to a preferential liquidation payment equal to the
greater of $400 per share plus accrued and unpaid dividends or 400 times the
payment made per share of Norwest Common Stock. The Junior Preferred Shares
will not be redeemable. The rights of the Junior Preferred Shares are
protected by customary antidilution provisions.
The Norwest Board may redeem the Rights in whole, but not in part, at a
price of $.0025 per Right (the "Redemption Price") at any time prior to the
acquisition by a person or group of at least the Triggering Percentage of the
outstanding shares of Norwest Common Stock. The Norwest Board may effect the
redemption at such time, upon such terms and subject to such conditions as the
Norwest Board in its sole discretion may deem necessary or advisable.
Immediately upon redemption of the Rights, all rights of the holders thereof
(including the right to exercise the Rights) will terminate except for the
right to receive the Redemption Price.
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The operation of the Rights Plan may result in immediate substantial
dilution to, or otherwise materially adversely affect, any person or group
that acquires the Triggering Percentage of Norwest Common Stock or otherwise
triggers a provision of the Rights Plan. For that reason, the existence of
the Rights Plan may have the effect of delaying, deterring or preventing a
takeover of Norwest.
DIVIDEND REINVESTMENT AND OPTIONAL CASH PAYMENT PLAN
Norwest has in effect a Dividend Reinvestment and Optional Cash Payment
Plan that entitles participants to reinvest dividends on Norwest Common Stock
held by them in additional shares of Norwest Common Stock and, subject to
certain dollar limits, purchase additional shares of Norwest with voluntary
cash payments. The price at which shares of Norwest Common Stock are
purchased under the plan is equal to the fair market value of the Norwest
Common Stock (as calculated in accordance with the provisions of the plan) at
the time of purchase. All stockholders of Norwest (including former
shareholders of Regional who receive shares of Norwest Common Stock in the
Consolidation) are entitled to participate in the plan as currently in effect.
SHARES REGISTERED UNDER THE SECURITIES ACT
Pursuant to shelf registration statements filed with the Commission,
Norwest has registered under the Securities Act an indeterminate number of
securities (the "Shelf Securities"), which Norwest may issue as, among other
securities, Norwest Preferred Stock or securities convertible into Norwest
Common Stock or Norwest Preferred Stock. As of April 25, 1996, Norwest had
available for issuance Shelf Securities having an aggregate initial public
offering price of up to $6.05 billion. The Norwest Board may issue the Shelf
Securities at any time and from time to time without any vote or other action
on the part of stockholders.
No prediction can be made as to the effect, if any, that future sales of
shares of Norwest's capital stock will have on the market price of the Norwest
Common Stock prevailing from time to time. Sales of substantial amounts of
capital stock in the public market, or the perception that such sales could
occur, could adversely affect the prevailing market price of Norwest Common
Stock. Future sales of Norwest's capital stock may result in dilution to
existing stockholders.
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COMPARISON OF RIGHTS OF HOLDERS OF REGIONAL CAPITAL STOCK
AND NORWEST COMMON STOCK
GENERAL
The rights of Regional's shareholders are currently governed by the
National Bank Act and the Regional Articles and Regional Bylaws. If
Regional's shareholders approve the Consolidation Agreement and the
Consolidation becomes effective, shareholders of Regional will become
stockholders of Norwest. For that reason, after the Effective Time of the
Consolidation, 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 Regional
Common Stock and Regional Preferred 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. For additional information concerning the rights of holders
of Norwest Common Stock, see "NORWEST CAPITAL STOCK AND RIGHTS."
DIRECTORS
REGIONAL. The Regional Articles provide that the Regional Board shall
consist of not less than five nor more than 25 persons, with the current
number set at seven. The number of directors within the range set forth in the
Regional Articles may be changed by resolution of a majority of the full
Regional Board or by resolution of a majority of the shareholders at any
annual or special meeting. Changes in the size of the range of the Regional
Board may be made by an amendment to the Regional Articles which must be
approved by a majority of the outstanding shares. The Regional Articles
provide that at a meeting of shareholders called expressly to remove
directors, any director may be removed by a vote of the shareholders. The
Regional Articles provide for the filling of vacancies by a majority vote of
the Regional Board.
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."
AMENDMENT OF ARTICLES OF ASSOCIATION OR CERTIFICATE OF INCORPORATION AND
BYLAWS
REGIONAL. The Regional Articles may be amended by the vote of the
holders of a majority of the shares of Regional Common Stock. The Regional
Bylaws may be amended by a majority vote of the shareholders of Regional.
Subject to repeal or
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change by action of a majority of the shareholders, the Regional Board may
amend the Regional Bylaws except for certain provisions relating to duties,
term of office, reimbursement or indemnification of directors.
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 CONSOLIDATIONS AND ASSET SALES
In addition to being subject to federal banking laws and the laws of
Delaware, respectively, both Regional and Norwest, as a national banking
association and a bank holding company, respectively, 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."
REGIONAL. Under federal law, a plan of consolidation involving Regional
would require its adoption by a majority of the Regional Board, and
ratification and confirmation by the affirmative vote of shareholders owning
at least two-thirds of its capital stock outstanding. Except as described
below, the affirmative vote of holders of two-thirds of the outstanding shares
of Regional Common Stock entitled to vote thereon is required to approve a
merger or consolidation involving Regional or the sale, lease or exchange of
all or substantially all of Regional's corporate assets. No vote of the
shareholders is required, however, in connection with a merger in which
Regional is the surviving corporation and (i) the agreement of merger does not
amend in any respect the Regional Articles, (ii) each share of Regional
capital stock outstanding immediately before the merger is to be an identical
outstanding share of Regional capital stock after the merger, and (iii) the
voting power of the number of voting shares outstanding immediately after the
merger, plus the voting power of the shares issuable as a result of the
merger, will not exceed by more than 20% the voting power of the total number
of voting shares of Regional outstanding immediately before the merger.
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
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
REGIONAL. Shareholders of a national bank are entitled to dissent from,
and receive payment of the fair value of their shares in the event of, a
merger or consolidation with another national bank or state bank where the
resulting entity will be a national bank. See the more detailed discussion
under "THE CONSOLIDATION"--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
REGIONAL. The Regional Articles provide that a special meeting of
shareholders may be called by at least one third of the Regional Board or
shareholders holding in the aggregate 25% or more of the outstanding shares
entitled to vote at the meeting.
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
REGIONAL. The Regional Articles and Bylaws do not provide for
shareholder action without a meeting.
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
REGIONAL. Neither the Regional Articles nor the Regional Bylaws limit
the liability of members of the Regional Board.
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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
REGIONAL. The Regional Articles require indemnification of directors,
officers and employees to the fullest extent permitted by OCC regulations.
Federal banking law provides for indemnification of directors, officers,
employees and agents for expenses (including attorney's fees) actually and
reasonably incurred in connection with the defense or settlement of any
threatened, pending or completed action or suit which such director, officer,
employee or agent is a party or potential party by reason of the performance
of their official duties.
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 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.
41
<PAGE>
DIVIDENDS
In addition to restrictions imposed under the National Bank Act and
Delaware law, respectively, Norwest and Regional are subject to Federal
Reserve Board and other regulatory policies regarding payment of dividends,
which generally limit dividends to operating earnings. See "INFORMATION
CONCERNING REGIONAL--Dividends" and "CERTAIN REGULATORY CONSIDERATIONS
PERTAINING TO NORWEST."
REGIONAL. Regional is subject to various statutory restrictions on its
ability to pay dividends. The payment of dividends by Regional is also
limited by other factors such as requirements to maintain adequate capital
above regulatory guidelines.
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 DIRECTOR
REGIONAL. The Regional Articles generally provide that any shareholder
desiring to make a nomination for the election of directors at a meeting of
shareholders must submit written notice to Regional and the OCC at least 14
days but less than 50 days in advance of the meeting, together with certain
information relating to the nomination. Failure to comply with these advance
notice requirements will preclude such nominations from being considered at
the meeting. However, if less than 21 days notice of the meeting is given,
such written notice by the shareholder must be delivered not later than the
7th day following the day on which notice of the meeting was mailed to
shareholders. The Regional Articles and Regional Bylaws do not provide for
the submission of proposals for new business.
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.
42
<PAGE>
INFORMATION CONCERNING REGIONAL
GENERAL
Regional is a national banking association which was initially chartered
under the laws of Colorado in 1981 as the Regional Bank of Rifle. It became a
national banking association in 1991 and changed its name to Regional Bank of
Colorado, National Association in 1994. It conducts it business from three
offices located Colorado. Regional is primarily engaged in attracting
deposits from the general public and investing such deposits in real estate
loans, consumer loans, construction loans and commercial loans. Regional also
utilizes such deposits to invest in investment securities issued by the U.S.
government and agencies thereof, and other investments permitted by applicable
laws and regulations.
Regional offers a full line of commercial banking services to its
customers, including checking accounts, savings programs, night depository
services, automated teller machines, NOW accounts, drive-up and walk-in teller
facilities, and certificates of deposit. Regional is subject to extensive
regulation, supervision and examination by the OCC, its principal regulator,
and the FDIC, which insures its deposits. It is a member of the Federal
Reserve Bank of Kansas City. At December 31, 1995, Regional had total assets
of $58.0 million, total deposits of $52.9 million and stockholders' equity of
$4.9 million.
PROPERTIES
The principal executive office of Regional is located at 1542 Railroad
Avenue, Rifle, Colorado 81650. The telephone number at that address is (970)
625-3223. In addition, Regional conducts its business from two branch offices
one of which is leased and one of which is owned.
LEGAL PROCEEDINGS
Regional is a defendant in a civil proceeding in the District Court of
Garfield County, Colorado (Robert Loague, et al, v. Regional Bank of Rifle, et
---------------------------------------------------
al.). Plaintiffs calim damages suffered from alleged negligent maintenance of
---
a heating unit in residential housing owned by Regional at the time of the
claimmed injury. Reginal has denied the essential elements of the claims, and
the case is set for trial October 1, 1996 in Glenwood Springs, Colorado.
Regional is insured against the primary claims up to $1,000,000 by St. Paul
Fire and Marine Insurance Company. However, the outcome of jury trials is
unpredictable and cannot be determined with certainty.
MARKET INFORMATION
There is presently no active trading market for Regional's Common Stock,
although sale transactions occur from time to time. As of the Record Date,
Regional had approximately 65 shareholders of record.
DIVIDENDS
During the two most recent fiscal years, Regional has made the following
dividend payments:
January 24, 1994 $7.50 per share
43
<PAGE>
January 17, 1995 $8.00 per share
July 18, 1995 $3.00 per share
The payment of dividends by Regional is subject to the applicable
restrictions contained in the National Bank Act and the OCC's Interpretive
Rulings. The National Bank Act provides that a national bank cannot pay
dividends that would impair its capital or at a time when it has sustained
losses which equal or exceed its undivided profits then on hand, and at a time
in an amount greater than its net profits then on hand less its losses and bad
debts. "Bad debts" mean all debts due to the national bank on which interest
is past due and unpaid for a period of six months, unless such debts are well
secured and in the process of collection. In addition, if, in the particular
circumstances, the OCC determines that the payment of dividends would
constitute an unsafe or unsound banking practice, the OCC may, among other
things, issue a cease-and-desist order prohibiting the payment of dividends.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to beneficial
ownership of Regional Common Stock as of April 30, 1996 by: (i) all persons
known to Regional to own beneficially more than five (5%) percent of Regional
Common Stock; (ii) all directors of Regional; and (iii) all of Regional's
officers and directors as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
<S> <C> <C>
Arthur L. & Margaret A. Jarboe 1,837 7.54
0506 294 Road
Rifle, Colorado 81650
John F. Scarpa 1,937 7.95
Bayport One
Verone Boulevard, Suite 400
West Atlantic City, NJ 08232
Advisory Director
-----------------
Sidney Azeez 6,841 28.08%
Bayport One
Verone Boulevard, Suite 400
West Atlantic City, NJ 08232
Directors and Executive Officers
----------------------------------
Gary S. Ward 1,508 6.19
P.O. Box 1123
Rifle, Colorado 81660
Donald L. Currie 394 1.62
4926 331 Road
Silt, Colorado 81652
Walter M. George 268 1.10
1110 Arnold Court
Rifle, Colorado 81650
Richard C. Jolley 352 1.45
1288 245 Road
New Castle, Colorado 81647
</TABLE>
44
<PAGE>
<TABLE>
<S> <C> <C>
Geraldine R. Newell 259 1.06
P.O. Box 5
Carbondale, Colorado 81623
Harry Odgers 967 3.97
315 Will Avenue
Rifle, Colorado 81650
John W. Savage, Jr. 25 0.10
P.O. Box 1926
Rifle, Colorado 81650
All Directors and Executive 10,715 43.98
Officers as a Group (12 persons)
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is management's discussion and analysis of Regional's
results of operations for the years ended December 31, 1995 and 1994 and its
financial condition as of December 31, 1995. The discussion is presented in
order to provide a more complete understanding of Regional's financial
statements and other selected financial data presented elsewhere herein.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994. Regional's net
income for 1995 totaled $980 thousand, an increase of $159 thousand or 19.4%
over 1994 net income of $821 thousand. The increase was due to a $289
thousand increase in net interest income, a $134 thousand increase in other
operating income and a $57 thousand decrease in income tax expense. These
factors were offset by a $321 thousand increase in operating expenses. The
increase in net interest income was caused by a $7.84 million increase in
interest earning assets which exceeded a $6.54 million increase in interest
bearing liabilities. This was partially offset by the increase in rates on
interest bearing deposits which exceeded the increase in rates on interest
earning assets.
Regional's 1995 earnings performance produced a return on average
stockholders' equity of 21.96% and a return on average assets of 1.82%. This
compares to a return on average stockholders' equity of 21.64% and a return on
average assets of 1.79% in 1994.
NET INTEREST INCOME. On a tax-equivalent basis, net interest margin was
5.29% for the year ended December 31, 1995 as compared to 5.98% for the year
ended December 31, 1994. The decrease in net interest margin is due to rates
increasing on interest bearing deposits which exceeded the increase in rates
on interest earning assets. The net yield on average interest-earning assets
was 6.22% and 6.67%, respectively, for 1995 and 1994. Tax-equivalent interest
income was $4.61 million for 1995 as compared to $3.68 million for the year
ended December 31, 1994. The cost of average interest-bearing liabilities was
4.06% in 1995 compared to 2.89% for 1994.
PROVISION FOR LOAN LOSSES. The quality of Regional's loan portfolio is
monitored on an ongoing basis. Regional has written loan policies which help
provide for consistent loan underwriting and the basis for prudent loan
decisions. Credit decisions are based on the ability of the borrowers to
repay the loan and the value and liquidity of underlying collateral. Loan
officers are charged with the responsibility of reviewing
45
<PAGE>
existing loans on an ongoing basis, identifying potential problem credits and
developing action plans to collect and reduce problem loans.
The allowance for loan losses is established through a provision for loan
losses charged to operations. The allowance is determined based on
management's evaluation of the loan portfolio in light of economic conditions,
changes in the nature and volume of the loan portfolio, loan loss experience
of prior years, and other relevant factors. Management reviews the allowance
on a monthly basis to determine whether additional provisions should be made
to the allowance after considering the above factors.
There can be no assurance that management will not decide to increase the
allowance for loan losses or that regulators, when reviewing Regional's loan
portfolios in the future, will not request Regional to increase such
allowance, either of which could adversely affect bank earnings. Further,
there can be no assurance that Regional's actual loan losses will not exceed
its allowance for loan losses.
Regional's provision for loan losses was $96 thousand for each of the
years ended December 31, 1995 and 1994.
OTHER INCOME AND OTHER EXPENSES. Regional's noninterest income is
reflected in the other income section in the Statements of Income. Other
income consists mainly of service charges on deposit accounts and service fees
on checking accounts. Other income was $617 thousand in 1995, an increase of
$134 thousand or 27.7% compared to $483 thousand for 1994. The increase in
other income is due to increases in the number of deposit accounts subject to
service charges during the two years ended December 31, 1995 and 1994.
Other expenses for 1995 totaled $2.09 million for an increase of $321
thousand or 18.1% compared to 1994. Salaries and employee benefits, which
represents 53.8% of total other expenses in 1995 increased $214 thousand or
23.4%. The expense increases reflect rapidly rising insurance costs related
to employee benefits, annual cost-of-living increases to employees and
additional staffing attributable to Regional's growth.
CAPITAL RESOURCES. At December 31, 1995, stockholders' equity was $4.87
million, a $765 thousand or 18.6% increase over December 31, 1994 due to net
income of $980 thousand, dividends paid of $268 thousand and a $53 thousand
adjustment associated with the net unrealized gain in securities available for
sale.
Regional is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on Regional's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, Regional
must meet specific capital guidelines that involve quantitative measures of
Regional's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. Regional's capital amounts
and classifications are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require Regional to maintain minimum ratios of total and Tier I
capital (as defined in the regulations) to risk-weighted assets (as defined)
of 8% and 4%, respectively, and of Tier I capital (as defined) to average
assets (as defined) of 4%. As of December 31, 1995,
46
<PAGE>
Regional met all capital adequacy requirements to which it is subject.
Regional's total capital to risk-weighted assets was 13.24%, Tier I capital to
risk-weighted assets was 11.99% and the Tier I capital ratio was 8.42%.
As of December 31, 1995, Regional was categorized as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized Regional must maintain minimum total risk-
based, Tier I risk-based, and Tier I capital ratios of 10%, 6% and 5%,
respectively. There are no conditions or events since December 31, 1995 that
management believes have changed the institution's category.
EFFECTS OF INFLATION AND CHANGING PRICES. The primary impact of
inflation on Regional's operations is increased asset yields, deposit costs
and operating overhead. Unlike most industrial companies, virtually all of
the assets and liabilities of a financial institution are monetary in nature.
As a result, interest rates generally have a more significant impact on a
financial institution's performance than the effects of general levels of
inflation. Although interest rates do not necessarily move in the same
direction or to the same extent that prices of goods and services move,
increases in inflation generally have resulted in increased interest rates.
The effects of inflation can magnify the growth of assets, and if significant,
would require that equity capital increase at a faster rate than would
otherwise be necessary.
FUNDING SOURCES AND LIQUIDITY MANAGEMENT. One of the principal functions
of asset/liability management is to provide for adequate liquidity. Liquidity
is the ability to ensure that sufficient funds are available to satisfy
contractual liabilities, to meet fluctuating loan demand and withdrawal
requirements of depositors, and to meet other operating needs. Regional
depends on its financial strength, asset quality, and the stability of its
deposit base to ensure adequate liquidity. In the ordinary course of
business, cash flows needed to meet liquidity requirements are generated from
Regional's interest and fee income, repayment of loan balances, and the
regularly scheduled maturities and cash flows of other earning assets.
Regional is required to maintain average reserve balances with the Federal
Reserve Bank or as cash on hand. As of December 31 1995, this reserve
requirement was approximately $483,000.
47
<PAGE>
SELECTED STATISTICAL DISCLOSURE
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
---------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-----------------------
1995 1994
<S> <C> <C>
For the period:
Interest income $ 4,581 $ 3,658
Interest expense 1,547 913
-------------- --------
Net interest income 3,034 2,745
Provision for credit losses 96 96
Other income 617 483
Other expense 2,091 1,770
-------------- --------
Income before income taxes 1,464 1,362
Income tax expense 484 541
-------------- --------
Net income $ 980 $ 821
============== ========
Net income per share $40.22 $33.69
Dividend declared per common share 11.00 7.50
At period end:
Total assets $57,950 $49,637
Total stockholders' equity 4,869 4,104
</TABLE>
48
<PAGE>
SELECTED STATISTICAL DISCLOSURE
DAILY AVERAGE BALANCE SHEET AND RELATED YIELDS AND RATES
THREE-YEAR SUMMARY OF OPERATIONS
(DOLLARS IN THOUSANDS)
----------------------
<TABLE>
<CAPTION>
1995 1994
DAILY DAILY
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Federal funds sold $ 2,532 $ 143 5.65% $ 968 $ 35 3.62%
Investment securities:
Taxable 7,948 433 5.45 8,048 422 5.24
Nontaxable (2) 1,206 92 7.63 819 63 7.69
Loans (1) (2) 37,627 3,945 10.48 31,636 3,159 9.99
------- ------ ------- ------
Total interest earning assets 49,313 4,613 9.35 41,471 3,679 8.87
------ ------
Cash and due from banks 2,682 2,604
Allowance for loan losses (510) (443)
Premises and equipment, net 1,721 1,545
Other assets 687 584
------- -------
Total assets $53,893 $45,761
======= =======
LIABILITIES:
Interest bearing deposits:
Money market accounts $ 6,897 225 3.26 $ 7,691 220 2.86
NOW accounts 8,161 157 1.92 8,405 161 1.91
Savings accounts 4,876 130 2.67 4,667 115 2.46
Time certificates under $100,000 12,660 706 5.58 7,479 278 3.72
Time certificates over $100,000 5,514 328 5.95 3,259 134 4.11
Federal funds purchased and other
liabilities 25 1 4.00 89 5 5.62
------- ------ ------- ------
Total interest bearing liabilities 38,133 1,547 4.06 31,590 913 2.89
------ ------
Noninterest bearing deposits 11,124 10,293
Accrued interest and other liabilities 174 84
------- -------
Total liabilities 49,431 41,967
STOCKHOLDERS' EQUITY 4,462 3,794
------- -------
Total liabilities and stockholders'
equity $53,893 $45,761
======= =======
NET INTEREST INCOME $3,066 $2,766
====== ======
NET INTEREST MARGIN 5.29% 5.98%
===== ====
NET YIELD ON INTEREST
EARNING ASSETS 6.22% 6.67%
===== ====
</TABLE>
(1) Loans are net of unearned discount. Nonaccrual loans are included in
average amounts outstanding. Loan fees are included in interest income as
follows: 1995 - $261, 1994 - $306.
(2) Interest income on tax exempt loans and securities includes the effect of
taxable equivalent adjustments in adjusting interest to a fully taxable basis.
A 34% tax rate was used.
49
<PAGE>
SELECTED STATISTICAL DISCLOSURE
CHANGES IN RATE AND VOLUME ON A TAX-EQUIVALENT BASIS
(DOLLARS IN THOUSANDS)
----------------------
The following table illustrates the changes in Regional's net interest income
due to changes in volume and changes in interest rate on a full tax-equivalent
basis.
<TABLE>
<CAPTION>
1995 Compared with 1994
-------------------------
Yield/
Volume Rate Total
<S> <C> <C> <C>
INCREASE (DECREASE) IN:
Interest income -
Federal funds sold $ 57 $ 51 $ 108
Taxable investment securities (5) 16 11
Nontaxable investment securities 30 (1) 29
Loans 598 188 786
----- ----- -----
Total 680 254 934
----- ----- -----
Interest expense -
Money market accounts 23 (28) (5)
NOW accounts 5 (1) 4
Savings accounts (5) (10) (15)
Time certificates of deposit under (193) (235) (428)
$100,000
Time certificates of deposit (93) (101) (194)
$100,000 or more
Federal funds purchased and other 3 1 4
liabilities ----- ----- -----
Total (260) (374) (634)
----- ----- -----
INCREASE IN NET INTEREST INCOME $ 420 $(120) $ 300
===== ===== =====
</TABLE>
The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of change in each. Interest income on tax-exempt loans and
securities includes the effect of taxable equivalent adjustments in adjusting
interest to a fully taxable basis. A 34% tax rate was applied to both years.
50
<PAGE>
SELECTED STATISTICAL DISCLOSURE
INVESTMENTS
(DOLLARS IN THOUSANDS)
----------------------
The following table sets forth the book value of the securities in Regional's
portfolio by type at the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1995 1994
<S> <C> <C>
U.S. Treasury $ 4,248 $ 3,037
U.S. Agency 5,452 3,490
State and political subdivisions 1,627 1,105
Mortgage-backed securities 365 405
Other 134 173
------------- ----------
Total securities $11,826 $ 8,210
============= ==========
</TABLE>
51
<PAGE>
SELECTED STATISTICAL DISCLOSURE
INVESTMENTS
(DOLLARS IN THOUSANDS)
----------------------
The following table sets forth the book value, maturity and approximate yields
of the securities in Regional's portfolio by type at December 31, 1995.
<TABLE>
<CAPTION>
TYPE AND MATURITY Yield Amount
<S> <C> <C>
U.S. Treasury:
One year or less 4.81% $ 1,600
Over one through five years 5.67 2,648
Over five through ten years - -
Over ten years - -
--------- --------
Total 5.35% $ 4,248
========= ========
U.S. Agency:
One year or less 5.60% $ 1,544
Over one through five years 5.75 3,908
Over five through ten years - -
Over ten years - -
--------- --------
Total 5.71% $ 5,452
========= ========
States and political subdivisions:
One year or less 6.33% $ 225
Over one through five years 4.67 1,297
Over five through ten years 5.56 105
Over ten years - -
--------- --------
Total 4.96% $ 1,627
========= ========
Mortgage-backed securities:
One year or less -% $ -
Over one through five years 8.23 36
Over five through ten years 5.75 329
Over ten years - -
--------- --------
Total 5.99% $ 365
========= ========
Other:
One year or less 7.86% $ 32
Over one through five years 8.03 102
Over five through ten years - -
Over ten years - -
--------- --------
Total 7.99% $ 134
========= ========
Total investments in securities:
One year or less 5.30% $ 3,401
Over one through five years 5.59 7,991
Over five through ten years 5.70 434
Over ten years - -
--------- --------
Total 5.51% $11,826
========= ========
</TABLE>
Regional does not hold securities of any single issuer (other than the U.S.
Government) that total more than 10% of stockholders' equity.
52
<PAGE>
SELECTED STATISTICAL DISCLOSURE
LOANS
(DOLLARS IN THOUSANDS)
----------------------
The table below sets forth the composition of Regional's loan portfolio at the
dates indicated.
<TABLE>
<CAPTION>
1995 1994
AMOUNT % AMOUNT %
<S> <C> <C> <C> <C>
Commercial and agricultural $12,515 33.3% $ 9,761 27.7%
Installment and other 11,197 29.8 9,335 26.5
Real estate - mortgage 9,651 25.7 10,197 28.9
Real estate - construction 4,317 11.5 6,069 17.2
Credit cards 433 1.1 368 1.1
------- ----- ------- -----
Total loans 38,113 101.4 35,730 101.4
Less allowance for loan losses (528) (1.4) (486) (1.4)
------- ----- ------- -----
Loans, net $37,585 100.0% $35,244 100.0%
======= ===== ======= =====
</TABLE>
53
<PAGE>
SELECTED STATISTICAL DISCLOSURE
LOAN MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES AT
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
----------------------
<TABLE>
<CAPTION>
MATURING
MATURING AFTER ONE
IN ONE YEAR MATURING
YEAR OR THROUGH AFTER FIVE TOTAL
LESS FIVE YEARS YEARS
<S> <C> <C> <C> <C>
Commercial and agricultural $ 5,888 $ 5,197 $ 1,430 $12,515
Installment and other 2,300 8,020 877 11,197
Real estate - mortgage 2,758 6,105 788 9,651
Real estate - construction 3,218 1,099 - 4,317
Credit cards 433 - - 433
------- ------- ------- -------
$14,597 $20,421 $ 3,095 $38,113
======= ======= ======= =======
<CAPTION>
DUE IN DUE AFTER
ONE YEAR ONE YEAR TOTAL
<S> <C> <C> <C>
Loans at fixed interest rates $13,150 $22,391 $35,541
Loans at variable interest rates 1,447 1,125 2,572
------- ------- -------
$14,597 $23,516 $38,113
======= ======= =======
</TABLE>
54
<PAGE>
SELECTED STATISTICAL DISCLOSURE
NONPERFORMING ASSETS
(DOLLARS IN THOUSANDS)
----------------------
The following table sets forth information concerning Regional's nonperforming
assets as of the dates indicated.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1994
<S> <C> <C>
Nonperforming loans:
Nonaccrual loans $ 4 $ 29
Accruing loans 90 days past due 3 -
Restructured loans - -
--------- --------
Total nonperforming loans 7 29
Other real estate owned - -
--------- --------
Total nonperforming assets $ 7 $ 29
========= ========
Allowance for loan losses $ 528 $ 486
========= ========
</TABLE>
The loan portfolio is internally reviewed and classified by management based
upon all available information. Loans with identified credit weaknesses are
reviewed by Regional's Loan Committee monthly. If there is a serious doubt
regarding a borrower's ability to comply with present loan repayment terms,
the loan is immediately placed on nonaccrual. The accrual of interest income
is generally discontinued when a loan becomes ninety days past due as to
principal and interest.
A loan is listed as past due if it is not listed as nonaccrual and the
interest and/or principal is past due 90 days, regardless of the reason.
Management considers the collectibility of these loans to be reasonably
possible.
Loans are renegotiated in some instances to provide a reduction or deferral of
interest or principal because of a deterioration in the financial condition of
a borrower. Once a loan is placed in this category, it remains until the
terms are no longer more favorable than those of other customers.
55
<PAGE>
SELECTED STATISTICAL DISCLOSURE
LOANS
(DOLLARS IN THOUSANDS)
----------------------
The following table sets forth information regarding changes in Regional's
allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1995 1994
<S> <C> <C>
Balance of allowance for loan losses at beginning of period $ 486 $ 405
------------- -------------
Charge-offs:
Commercial, agricultural and other (41) (16)
Installment (32) (31)
Real estate - -
Credit card (12) (7)
------------- -------------
Total charge-offs (85) (54)
------------- -------------
Recoveries:
Commercial, agricultural and other 12 18
Installment 16 20
Real estate - -
Credit card 3 1
------------- -------------
Total recoveries 31 39
------------- -------------
Net charge-offs (54) (15)
Provision charged to operations 96 96
Transfer - -
------------- -------------
Balance of allowance for loan losses at end of period $ 528 $ 486
============= =============
AS A PERCENT OF AVERAGE TOTAL LOANS
Net charge-offs .14% .05%
Provision for possible loan losses .26 .30
Allowance for loan losses 1.40 1.54
AS A PERCENT OF NONPERFORMING LOANS
Allowance for loan losses 7,542.86 1,675.86
</TABLE>
The allowance for loan losses is established through a provision for loan
losses charged to operations. The allowance is determined based on
management's evaluation of the loan portfolio in light of economic conditions,
changes in the nature and volume of the loan portfolio, loan loss experience
of prior years, and other relevant factors. The provision for loan losses
which is charged to operations is, therefore, based upon the size of the loan
portfolio, the amount of loans charged off (net of recoveries), and upon
management's estimation of potential future losses.
56
<PAGE>
SELECTED STATISTICAL DISCLOSURE
ALLOWANCE FOR LOAN LOSSES
(DOLLARS IN THOUSANDS)
----------------------
The following table sets forth the allowance for loan losses by loan category,
based upon management's assessment of the risk associated with such
categories, at the dates indicated and summarizes the percentage of gross
loans in each category to total gross loans. Management does not specifically
allocate a portion of the allowance for loan losses to individual loan
categories. As a result, the allowance for loan losses has been apportioned
among the separate loan categories based on the relative size of each
portfolio.
<TABLE>
<CAPTION>
1995 1994
PERCENT OF PERCENT OF
LOANS LOANS
IN EACH IN EACH
AMOUNT CATEGORY AMOUNT CATEGORY
OF TO TOTAL OF TO TOTAL
ALLOWANCE LOANS ALLOWANCE LOANS
<S> <C> <C> <C> <C>
Commercial and agricultural $ 173 33% $ 133 27%
Installment and other 155 29 127 26
Real estate - mortgage 134 25 139 28
Real estate - construction 60 11 82 17
Credit card 6 2 5 2
----- --- ----- ---
Total $ 528 100% $ 486 100%
===== === ===== ===
</TABLE>
57
<PAGE>
SELECTED STATISTICAL DISCLOSURE
DEPOSITS
--------
At December 31, 1995, outstanding time certificates of deposit in excess of
$100,000 totaled $5,774,000 with a maturity distribution as follows:
<TABLE>
<S> <C>
Under three months $2,878,000
Three to six months 1,462,000
Six to twelve months 843,000
Over twelve months 591,000
</TABLE>
SELECTED STATISTICAL DISCLOSURE
RETURN ON EQUITY AND ASSETS
---------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994
<S> <C> <C>
Return on average assets 1.82% 1.79%
Return on average stockholders' equity 21.96 21.64
Average stockholders' equity to average 8.28 8.29
assets
Dividend payment ratio 27.35 22.26
</TABLE>
REGULATION AND SUPERVISION
GENERAL. Regional is a national banking association and its deposit
accounts are insured up to applicable limits by the FDIC. Regional is subject
to extensive regulation by the OCC, as its chartering agency, and the FDIC, as
the deposit insurer. Regional is also a member of the Federal Reserve System
and is subject to the regulations and rulings adopted by the Federal Reserve.
Regional must file reports with the OCC and the FDIC concerning its activities
and financial condition, in addition to obtaining regulatory approval prior to
entering into certain transactions such as mergers with or acquisitions of
other financial institutions. There are periodic examinations by the OCC and
the FDIC to test Regional's compliance with various regulatory requirements.
This regulation and supervision establishes a comprehensive framework of
activities in which an institution can engage and is intended primarily for
the protection of the insurance fund and depositors. The regulatory structure
also gives the regulatory authorities extensive discretion in connection with
their supervisory and enforcement activities and examination policies. Any
change in such regulation by the OCC, the FDIC or Congress could have a
material adverse impact on Regional and its operations. Certain of the
regulatory requirements applicable to Regional are referred to below.
FEDERAL RESERVE SYSTEM. As a member of the Federal Reserve System,
Regional is required to subscribe for stock in the Reserve Bank in an amount
equal to 6% of paid-in capital stock and surplus, excluding undivided profits
or retained earnings. One-half of this amount must be paid in full and one-
half is subject to the call of the Reserve Bank.
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<PAGE>
The Reserve Bank serves as a reserve or central bank for member banks
within its assigned district. It performs services specifically for the
benefit of member banks relating to custody of member bank reserves, issuance
of Federal notes, discounts and advances for member banks, open-market
transactions, fiscal services for the federal government and check clearing
and other service functions for member banks.
Under certain policies, member banks may borrow from the Reserve Bank at
the then current federal discount rate, which is generally lower than market
rates of interest. These are short-term loans, with maturities generally
ranging from several days to several months. Member banks pledge government or
government agency securities or certain types of loans to secure Reserve Bank
advances. Federal Reserve regulations require banks to exhaust other
reasonable alternative sources of credit before borrowing from the Reserve
Bank.
National banks, as members of the Federal Reserve System, are also
subject to certain restrictions regarding securities activities, affiliations
with securities firms, transactions with affiliates and loans to directors,
officers and controlling persons.
The Federal Reserve regulations require all depository institutions to
maintain non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The Federal Reserve
regulations generally require that reserves of 3% must be maintained against
aggregate transaction accounts of $51.9 million or less (subject to adjustment
by the Federal Reserve) and an initial reserve of $1.6 million plus 10%
(subject to adjustment by the Federal Reserve between 8% and 14%) against that
portion of total transaction accounts in excess of $51.9 million. The first
$4.3 million of otherwise reservable balances (subject to adjustments by the
Federal Reserve) are exempted from the reserve requirements. Regional is in
compliance with the foregoing requirements. Because required reserves must be
maintained in the form of either vault cash, a non-interest-bearing account at
a Federal Reserve Bank or a pass-through account as defined by the Federal
Reserve, the effect of this reserve requirement is to reduce Regional's
interest-earning assets.
The monetary policies of the Federal Reserve have had a significant
effect on the operating results of commercial banks in the past and are
expected to continue to do so in the future. In view of continuing changes in
regulations affecting commercial banks and other actions and proposed actions
by the Federal government and its monetary and fiscal authorities, including
proposed changes in the structure of banking in the United States and general
economic conditions, no prediction can be made as to future changes in
interest rates, credit availability, deposit levels, loan demand, or the
overall performance of banks generally and of Regional in particular.
INVESTMENTS. A national bank is subject to restrictions as to the type
and amount of investments in which it may invest. A national bank is not
authorized to invest in the stock of any corporation except as permitted by
law. A national bank is authorized to invest in investment securities, under
certain restrictions and limitations prescribed by the OCC; however, no
investment of any one obligor may exceed 10% of the bank's unimpaired capital
and unimpaired surplus. Investment securities consist of marketable
obligations of any person or entity. A national bank may invest in, on an
unlimited basis, the obligations of the United States, general obligations of
any state or political subdivision thereof, obligations of the FNMA and
certain other public or quasi-public agencies specified in the National Bank
Act.
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<PAGE>
REGULATORY CAPITAL REQUIREMENTS. Regional is subject to capital adequacy
rules and guidelines issued by the OCC. These rules and guidelines require
Regional to maintain certain minimum ratios of capital to adjusted total
assets and/or risk-weighted assets. At December 31, 1995, Regional met all
regulatory capital requirements.
The OCC's capital regulations establish a minimum 3.0% Tier I leverage
capital requirement for the most highly-rated banks, with an additional
cushion of at least 100 to 200 basis points for all other banks, which
effectively will increase the minimum Tier I leverage ratio for such other
banks to 4.0%, 5.0% or more. Under the OCC's regulation, the highest-rated
banks are those that the OCC determines are not anticipating or experiencing
significant growth and have well diversified risk, including no undue interest
rate risk exposure, excellent asset quality, high liquidity, good earnings
and, in general, which are considered a strong banking organization, rated
composite 1 under the Uniform Financial Institutions Rating System.
A bank which has less than the minimum leverage capital requirement
shall, within 60 days of the date as of which it fails to comply with such
requirement, submit to the OCC for review and approval a reasonable plan
describing the means and timing by which the bank shall achieve its minimum
leverage capital requirement. A bank which fails to file such plan with the
OCC is deemed to be operating in an unsafe and unsound manner, and could
subject the bank to a cease-and-desist order from the OCC. The OCC's
regulation also provides that any insured depository institution with a ratio
of Tier I capital to total assets that is less than 2.0% is deemed to be
operating in an unsafe or unsound condition pursuant to Section 8(a) of the
Federal Deposit Insurance Act and is subject to potential termination of
deposit insurance. However, such an institution will not be subject to an
enforcement proceeding thereunder solely on account of its capital ratios if
it has entered into and is in compliance with a written agreement with the OCC
to increase its Tier I leverage capital ratio to such level as the OCC deems
appropriate and to take such other action as may be necessary for the
institution to be operated in a safe and sound manner. The OCC's capital
regulation also provides, among other things, for the issuance by the OCC or
its designee(s) of a capital directive, which is a final order issued to a
bank that fails to maintain minimum capital to restore its capital to the
minimum leverage capital requirement within a specified time period. Such
directive is enforceable in the same manner as a final cease-and-desist order.
FDICIA requires, among other things, each federal banking agency to
revise its risk-based capital standards for insured institutions to ensure
that those standards take adequate account of interest-rate-risk ("IRR"),
concentration of credit risk, and the risks of nontraditional loans. Exposure
to IRR is measured as the effect that a specified change in market interest
rates would have on the net economic value of a bank. The change in an
institution's net economic value is defined as the change in the present value
of its assets minus the change in the present value of its liabilities plus
the change in the present value of its off-balance-sheet positions. The
banking agencies propose to measure an institution's exposure using either a
supervisory model or the bank's own internal model. During each examination
or at the request of the bank, the banking agency, under its sole discretion,
will examine the bank's internal measure of interest rate risk to determine if
it is acceptable to the agency using several specified criteria. Otherwise,
the bank's measured exposure will be calculated under the supervisory model.
The alternative methods for determining IRR consist of (i) the minimum capital
standard approach, pursuant to which certain institutions would be required to
hold capital to cover their excess exposure, which is defined as the aggregate
dollar decline in the net economic value of the institution, as measured
either by the supervisory or the internal bank model, that exceeds the
proposed supervisory threshold of one percent of
60
<PAGE>
total assets and (ii) the risk assessment approach, pursuant to which the
level of measured IRR would be just one of several factors that examiner would
consider when determining a bank's IRR and the need for additional capital,
which would be based on the examiner's judgment after taking into account
guidance provided by the federal banking agencies.
REAL ESTATE INVESTMENT. In addition to the authority to invest, either
directly or through a subsidiary, in real estate that will be used in a
national bank's present or future business, a national bank may invest in real
estate, and construct improvements thereon, for the purpose of leasing the
improvements for use by a municipality for public facilities, provided the
lessee becomes the owner of the facility at the termination of the lease. A
national bank may, through a service corporation and subject to the approval
of the Federal Reserve, invest in real estate and lease such real estate,
subject to certain conditions such as the term and rate of return, provided
the lease is the functional equivalent of a loan.
LOANS TO ONE BORROWER. A national bank may not extend credit to any one
borrower, including affiliated parties, in an amount in excess of 15% of the
bank's unimpaired capital and unimpaired surplus with an additional 15% for
loans secured by readily marketable collateral. There are certain limited
exceptions to this limitation for loans secured by qualifying collateral.
DIVIDENDS. The payment of dividends on the common stock of a national
bank is subject to the applicable restrictions contained in the National Bank
Act and the OCC's Interpretive Rulings. See "CERTAIN REGULATORY
CONSIDERATIONS PERTAINING TO NORWEST--Dividend Restrictions" for information
concerning such restrictions.
FDICIA. On December 19, 1991, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") was signed into law. FDICIA contains
significant provisions requiring the federal regulatory agencies to take
"prompt corrective action" against undercapitalized financial institutions.
Under FDICIA, financial institutions are assigned to one of the following five
categories, depending upon the amount of their capital: well-capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized or
critically undercapitalized. For a more detailed discussion of the five
capital tiers established by FDICIA, see "CERTAIN REGULATORY CONSIDERATIONS
PERTAINING TO NORWEST--Federal Deposit Insurance Corporation Improvement Act
of 1991." Under applicable regulations, Regional is a well-capitalized
institution as of the date of this Proxy Statement-Prospectus.
EXAMINATION OF FINANCIAL INSTITUTIONS. FDICIA provides that if an
insured depository institution receives a less than satisfactory examination
rating for asset quality, management, earnings or liquidity, the examining
agency may deem such financial institution to be engaging in an unsafe or
unsound practice. The potential consequences of being found to have engaged
in an unsafe or unsound practice are significant, because under FDICIA the
appropriate federal regulatory agency may: (i) if the financial institution is
well-capitalized, reclassify the financial institution as adequately
capitalized; (ii) if the financial institution is adequately capitalized, take
any of the prompt corrective actions authorized for undercapitalized financial
institutions and impose restrictions on capital distributions and management
fees; and (iii) if the financial institution is undercapitalized, take any of
the prompt corrective actions authorized for significantly undercapitalized
financial institutions.
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<PAGE>
DEPOSIT INSURANCE AND ASSESSMENTS. The deposits of Regional are insured
by the BIF administered by the FDIC, in general, to a maximum of $100,000 per
insured depositor. Under FDICIA and FDIC regulations, Regional is required to
pay annual assessments to the FDIC for deposit insurance. For more
information concerning FDIC assessment rates, see "CERTAIN REGULATORY
CONSIDERATIONS PERTAINING TO NORWEST--FDIC Insurance."
INTEREST RATES. The rate of interest a bank may charge on certain
classes of loans is limited by state and federal law. At certain times in the
past, these limitations, in conjunction with national monetary and fiscal
policies that affect the interest rates paid by banks on deposits and
borrowings, have resulted in reductions of net interest margins on certain
classes of loans. Such circumstances may recur in the future, although the
trend to recent federal and state legislation has been to eliminate
restrictions on the rates of interest which may be charged on some types of
loans and to allow maximum rates on other types of loans to be determined by
market factors.
In addition to limiting the rate of interest chargeable by banks on
certain loans, federal law imposes additional restrictions on a national
bank's lending activities. For example, under federal law the maximum amount
that a national bank may lend to one borrower (and certain related entities of
such borrower) generally is limited to 15% of the bank's unimpaired capital
and unimpaired surplus, plus an additional 10% for loans fully secured by
readily marketable collateral. These are certain exceptions to the general
rule including loans fully secured by government securities or deposit
accounts in Regional.
OTHER REGULATORY LIMITATIONS
The investments and activities of Regional are subject to substantial
regulation by the OCC and the FDIC, including without limitation investments
in subsidiaries, investments for their own account (including limitations on
investments in junk bonds and equity securities), investments in loans, loans
to officers, directors and affiliates, security requirements, truth-in-
lending, community reinvestment, the types of interest bearing deposit
accounts which they can offer, trust department operations, issuance of
securities, branching and mergers and acquisitions.
62
<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 BHCA, 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 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 BHCA 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
BIF; 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 December 31, 1995, aggregate dividends of at least $274.1 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
63
<PAGE>
statements which provide that FDIC-insured banks and bank holding companies
should generally pay dividends only out of current operating earnings.
HOLDING COMPANY STRUCTURE
Norwest is a legal entity separate and distinct from its banking and
nonbanking subsidiaries. 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.
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<PAGE>
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.
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.
CAPITAL REQUIREMENTS
Under the Federal Reserve Board's risk-based capital guidelines for bank
holding companies, the minimum ratio of total capital to risk-adjusted assets
(including certain off-balance sheet items, such as stand-by letters of
credit) is 8%. At least half of the total capital is to be comprised of
common stock, minority interests and noncumulative perpetual preferred stock
("Tier 1 capital"). The remainder ("Tier 2 capital") may consist of hybrid
capital instruments, perpetual debt, mandatory convertible debt securities, a
limited amount of subordinated debt, other preferred stock, and a limited
amount of the allowance for credit losses. 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
65
<PAGE>
also subject to capital requirements adopted by applicable regulatory agencies
that are substantially similar to the foregoing. At December 31, 1995,
Norwest's Tier 1 and total capital (the sum of Tier 1 and Tier 2 capital) to
risk-adjusted assets ratios were 8.11% and 10.18%, respectively, and Norwest's
leverage ratio was 5.65%. 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 recently 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 rule that would 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 after the agencies and the banking industry have had more
experience with the proposed supervisory and measurement process. Norwest
does not believe 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 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 its meets all of its minimum capital requirements as described
above. An insured depository institution will be considered undercapitalized
if it fails to meet any minimum required measure, significantly
undercapitalized if it has a risk-adjusted total capital ratio of less than
6%, risk-adjusted Tier 1 capital ratio of less than 3% or a leverage ratio of
less than 3% and critically undercapitalized if it fails to maintain a level
of tangible equity equal to at least 2% of total assets. An insured
depository institution may be deemed to be in a capitalization category that
is lower than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
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<PAGE>
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 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
67
<PAGE>
pay an interest rate on any deposits in excess of 75 basis points over certain
prevailing market rates. There are no such restrictions on a bank that is well
capitalized. At December 31, 1995 all of Norwest's banking subsidiaries were
well capitalized and therefore were not subject to these restrictions.
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 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 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.
68
<PAGE>
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 herein by reference to Norwest's Annual
Report for the year ended December 31, 1995, have been so incorporated herein
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, and upon the authority of said firm as experts in
accounting and auditing.
The financial statements of Regional as of December 31, 1995 have been
included in this Proxy Statement-Prospectus in reliance upon the report of
GRA, Thompson, White & Co., P.C., independent certified public accountants,
and upon the authority of said firm as experts in accounting and auditing.
GRA, Thompson, White & Co., P.C. will also pass upon certain tax consequences
of the Consolidation to Regional's shareholders.
LEGAL OPINIONS
--------------
A legal opinion to the effect that the shares of Norwest Common Stock
offered hereby, when issued in accordance with the Consolidation Agreement,
will be validly issued and fully paid and nonassessable, has been rendered by
Stanley S. Stroup, Executive Vice President and General Counsel of Norwest
Corporation. At December 31, 1995, Mr. Stroup was the beneficial owner of
107,753 shares and held options to acquire 247,410 additional shares of
Norwest Common Stock.
MANAGEMENT OF NORWEST AND ADDITIONAL INFORMATION
Certain information relating to the executive compensation, voting
securities and the principal holders thereof, certain relationships and
related transactions, and other related matters concerning Norwest is included
or incorporated by reference in its Annual Report on Form 10-K for the year
ended December 31, 1995, which is incorporated in this Proxy Statement-
Prospectus by reference. "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Shareholders of Regional desiring copies of such documents may contact Norwest
at the addresses or phone numbers indicated under "AVAILABLE INFORMATION"
above.
69
<PAGE>
[LETTERHEAD OF GRA, THOMPSON, WHITE & CO., P.C.]
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Regional Bank of Colorado, N.A.
Rifle, Colorado
We have audited the accompanying balance sheet of Regional Bank of Colorado,
N.A., as of December 31, 1995, and the related statements of income,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Regional Bank of Colorado, N.A.
at December 31, 1995, and the results of its operations and cash flows for the
year then ended, in conformity with generally accepted accounting principles.
/s/ GRA, THOMPSON, WHITE & CO., P.C.
Englewood, Colorado
January 12, 1996
F-1
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
ASSETS
<S> <C>
Cash and due from banks $ 4,008,880
Federal funds sold 1,905,000
-----------
Total cash and cash equivalents 5,913,880
-----------
Interest-bearing deposits with banks 7,447
Securities held to maturity 10,027,022
Securities available for sale 1,798,535
Restricted equity securities 215,150
Loans, net 37,584,840
Premises and equipment, net 1,763,571
Accrued interest receivable 530,959
Other assets 108,872
-----------
$57,950,276
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $52,882,100
Accrued interest payable 89,311
Other liabilities 109,967
-----------
Total liabilities 53,081,378
-----------
Stockholders' equity
Common stock, $20 par value;
27,000 shares authorized;
24,366 shares issued and outstanding 487,320
Capital surplus 487,320
Retained earnings 3,907,541
Net unrealized loss on securities
available for sale (13,283)
-----------
Total stockholders' equity 4,868,898
-----------
$57,950,276
===========
</TABLE>
The accompanying notes are an integral part
of these financial statements
F-2
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
(Unaudited)
-----------------------
<S> <C> <C>
Interest income:
Loans, including fees $3,944,590 $3,158,926
Federal funds sold 143,461 35,285
Investment securities 493,270 463,957
-----------------------
Total interest income 4,581,321 3,658,168
-----------------------
Interest expense:
Deposits 1,546,217 908,676
Other 926 4,530
-----------------------
Total interest expense 1,547,143 913,206
-----------------------
Net interest income 3,034,178 2,744,962
Provision for loan losses 96,000 96,000
-----------------------
Net interest income after provision for
loan losses 2,938,178 2,648,962
-----------------------
Other income:
Service charges 550,418 441,476
Other operating income 66,127 41,206
-----------------------
Total other income 616,545 482,682
-----------------------
Other expenses:
Compensation and benefits 1,125,692 911,921
Occupancy expense 287,306 239,985
Federal Deposit Insurance premium 57,503 83,577
Other operating expenses 620,312 534,433
-----------------------
Total other expenses 2,090,813 1,769,916
-----------------------
Income before income taxes 1,463,910 1,361,723
Income tax expense 483,799 540,723
-----------------------
Net Income $ 980,111 $ 821,005
=======================
</TABLE>
The accompanying notes are an integral part
of these financial statements
F-3
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN (LOSS)
ON SECURITIES TOTAL
COMMON CAPITAL RETAINED AVAILABLE FOR STOCKHOLDERS'
STOCK SURPLUS EARNINGS SALE EQUITY
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $487,320 $487,320 $2,557,196 $ - $3,531,836
Net income (unaudited) - - 821,005 - 821,005
Dividends - $7.50 per share
(unaudited) - - (182,745) - (182,745)
Initial adoption of SFAS
No. 115 (unaudited) - - - 27,289 27,289
Net change in unrealized gain
(loss) on securities
available for sale
(unaudited) - - - (93,100) (93,100)
------------------------------------------------------------------
Balance, December 31, 1994
(unaudited) 487,320 487,320 3,195,456 (65,811) 4,104,285
Net income - - 980,111 - 980,111
Dividends - $11.00 per share - - (268,026) - (268,026)
Net change in unrealized gain
(loss) on securities
available for sale - - - 52,528 52,528
------------------------------------------------------------------
Balance, December 31, 1995 $487,320 $487,320 $3,907,541 $(13,283) $4,868,898
==================================================================
</TABLE>
The accompanying notes are an integral part
of these financial statements
F-4
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1994
(Unaudited)
-------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 980,111 $ 821,005
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 145,902 121,005
Provision for loan losses 96,000 96,000
Net loss on sale of investment securities - 2,458
Net loss on sale and disposals of fixed
assets 3,877 -
Net amortization of premiums and discounts
on investment securities (8,547) 6,980
Change in:
Accrued interest receivable (151,072) (64,088)
Other assets 3,990 87,027
Accrued interest payable and other
liabilities 63,549 (75,289)
-------------------------
Net cash provided by operating activities 1,133,810 995,098
-------------------------
INVESTING ACTIVITIES
Net decrease in interest-bearing deposits 92,553 198,000
Purchases of investment
securities held to maturity (7,180,043) (1,622,171)
Purchases of investment
securities available for sale - (538,252)
Proceeds from sales, maturities
and paydowns of investment
securities held to maturity 2,755,834 1,699,965
Proceeds from sales, maturities
and paydowns of investment
securities available for sale 900,000 552,354
Purchase of restricted equity securities (150,900) -
Net increase in loans (2,436,746) (9,633,144)
Acquisitions of premises and equipment (227,486) (265,104)
Proceeds from sale of premises
and equipment 9,250 -
-------------------------
Net cash used in investing activities $(6,237,538) $(9,608,352)
-------------------------
</TABLE>
The accompanying notes are an integral part
of these financial statements
F-5
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1994
(Unaudited)
------------------------
<S> <C> <C>
FINANCING ACTIVITIES
Increase in deposits $7,445,708 $ 7,183,449
Dividends paid (268,026) (182,745)
------------------------
Net cash provided by
financing activities 7,177,682 7,000,704
------------------------
Net increase (decrease) in cash
and cash equivalents 2,073,954 (1,612,550)
Cash and cash equivalents,
beginning of period 3,839,926 5,452,476
------------------------
Cash and cash equivalents,
end of period $5,913,880 $ 3,839,926
========================
Supplemental disclosure of cash
flow information:
Interest paid $1,513,307 $ 894,960
Income taxes paid 582,240 534,056
Supplemental schedule of noncash
investing activities:
Designation of investment securities as
available for sale at adoption of
SFAS No. 115 - 2,767,055
Equity adjustment for net unrealized
loss in securities available for sale 52,528 (93,100)
</TABLE>
The accompanying notes are an integral part
of these financial statements
F-6
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. NATURE OF OPERATIONS
Regional Bank of Colorado, N.A. "Bank" operates under a national bank
charter and provides full banking services. The Bank is subject to
regulation by the Office of the Comptroller of the Currency and the
Federal Deposit Insurance Corporation. The area served by Regional Bank
of Colorado, N.A. is the western region of Colorado and services are
provided at its main office in Rifle, Colorado and its branch offices
in Parachute and Carbondale, Colorado.
b. ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
c. CASH EQUIVALENTS
Cash equivalents include noninterest bearing deposits, amounts due from
banks and Federal funds sold.
d. INVESTMENT SECURITIES
Prior to January 1, 1994, all investment securities were stated at
cost, adjusted for amortization of premiums or accretion of discounts
and permanent declines in market value. Effective January 1, 1994, the
Bank adopted Statement of Financial Accounting Standard (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities which
requires that investments be classified in three categories and
accounted for as follows: held to maturity securities reported at
amortized cost, trading securities reported at fair value, with
unrealized gains and losses included in earnings, and available for
sale securities reported at fair value, with unrealized gains and
losses shown as a separate component of stockholders' equity.
Restricted equity securities are reported at the lower of cost or
estimated fair value.
Gains and losses on sales of securities are determined on a specific
identification method.
F-7
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
e. LOANS
Loans are stated at outstanding principal balances. Interest income on
loans is credited to operations based on the principal amount
outstanding.
Loans are placed on nonaccrual status when management believes that the
borrower's financial condition, after giving consideration to economic
and business conditions and collection efforts, is such that collection
of interest is doubtful.
Interest income is recognized on the accrual method. The accrual of
interest is reduced or discontinued if collectibility of such is
considered doubtful, and all previously accrued but unpaid interest is
reversed at that time.
f. ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the allowance
for loan losses when management believes that the collectibility of the
principal is unlikely. The allowance is an amount that management
believes will be adequate to absorb losses on existing loans that may
become uncollectible, based on evaluations of the collectibility of
loans and prior loan loss experience. The evaluations take into
consideration such factors as changes in the nature and volume of the
loan portfolio, overall portfolio quality, review of specific problem
loans, and current economic conditions and trends that may affect the
borrower's ability to pay.
g. PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed using straight-line and
accelerated methods based on the estimated useful lives of the related
assets.
h. INCOME TAXES
The Bank accounts for income taxes in accordance with the provisions of
SFAS No. 109, Accounting for Income Taxes. Amounts provided for income
taxes are based on income reported for financial statement purposes at
current tax rates after excluding non-taxable income such as interest
on municipal securities. Such amounts include deferred income taxes
which result from temporary differences in the recognition of income
and expenses in different accounting periods for tax and financial
reporting purposes. These deferred taxes are computed using the asset
and liability method as prescribed by SFAS No. 109.
F-8
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994 (UNAUDITED)
2. INVESTMENT SECURITIES
The amortized cost and estimated fair value of investments in debt securities
at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------------------------------------------
<S> <C> <C> <C> <C>
HELD TO MATURITY:
U.S. Treasury securities $ 2,449,339 $31,601 $ $ 2,480,940
U.S. Agency securities 5,452,088 25,061 - 5,468,123
Obligations of states and (9,026)
political subdivisions 1,626,762 23,465 1,648,281
Mortgage-backed (1,946)
securities 365,121 2,018 367,139
Other 133,712 3,839 - 137,551
--------------------------------------------------
Totals $10,027,022 $85,984 $(10,972) $10,102,034
==================================================
AVAILABLE FOR SALE:
U.S. Treasury securities $ 1,820,311 $ 675 $(22,451) $ 1,798,535
==================================================
</TABLE>
The book value and estimated fair value of investments in restricted equity
securities at December 31, 1995 amounted to $215,150.
F-9
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994 (UNAUDITED)
2. INVESTMENT SECURITIES (CONTINUED)
The amortized cost and estimated market value of debt securities at December
31, 1995, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
---------------------- -----------------------------
ESTIMATED ESTIMATED
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---------------------- -----------------------------
<S> <C> <C> <C> <C>
Due in one year or less $1,202,000 $1,190,233 $ 2,171,726 $ 2,175,309
Due after one year
through five years 618,311 608,302 7,153,320 7,213,600
Due after five years
through ten years - - 206,522 216,602
Due after ten years - - 130,333 129,384
-------------------------------------------------------
1,820,311 1,798,535 9,661,901 9,734,895
Mortgage-backed
securities - - 365,121 367,139
-------------------------------------------------------
$1,820,311 $1,798,535 $10,027,022 $10,102,034
=======================================================
</TABLE>
At December 31, 1995, investment securities with carrying values aggregating
approximately $5,928,000, and market values of approximately $5,963,000 were
pledged as collateral on public funds on deposit and for other purposes
required by law or written agreement.
F-10
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994 (UNAUDITED)
3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The carrying amounts at December 31, 1995, by category consisted of the
following:
<TABLE>
<S> <C>
Loans:
Commercial and agricultural $12,514,725
Installment and other 11,197,033
Real Estate - mortgage 9,651,046
Real Estate - construction 4,316,772
Credit cards 432,793
-----------
38,112,369
Allowance for loan losses (527,529)
-----------
Net loans $37,584,840
===========
</TABLE>
An analysis of the changes in the allowance for loan losses follows:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Balance at beginning of year $485,929
Provision credited to income 96,000
Loan recoveries 30,619
Loan charge-offs (85,019)
Transfer -
--------
Balance at end of year $527,529
========
</TABLE>
All floating rate loans reprice at least quarterly and total approximately
$1,971,000 at December 31, 1995.
The aggregate amount of loans on which the accrual of interest had been
reduced or discontinued amounted to approximately $4,000 and $29,000 at
December 31, 1995 and 1994, respectively.
F-11
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994 (UNAUDITED)
4. BANK PREMISES AND EQUIPMENT
A summary of bank premises and equipment at December 31, 1995 follows:
Land $ 231,990
Buildings and improvements 1,290,976
Furniture, fixtures and equipment 855,936
Bank automobiles 14,276
-----------
2,393,178
Accumulated depreciation (629,607)
-----------
$ 1,763,571
===========
5. DEPOSITS
Deposits as of December 31, 1995 are summarized as follows:
Demand:
Noninterest-bearing $12,576,362
-----------
Interest-bearing:
NOW 8,102,380
Money market 6,924,742
-----------
15,027,122
-----------
Savings 5,098,143
Time 20,180,473
-----------
$52,882,100
===========
Time deposits include certificates of deposit of $100,000 and over totaling
approximately $5,774,000 as of December 31, 1995. Interest expense on these
accounts totaled approximately $328,000 for 1995.
Remaining maturities of time deposits at December 31, 1995 are as follows:
Less than one year $17,338,773
One to three years 2,841,700
-----------
$20,180,473
===========
F-12
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994 (UNAUDITED)
6. INCOME TAXES
Income tax expense is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
(unaudited)
---------------------
<S> <C> <C>
Current tax expense:
Federal $458,380 $442,430
State 50,024 44,423
---------------------
Total current expense 508,404 486,853
Deferred tax expense:
Federal (22,270) 49,031
State (2,335) 4,839
---------------------
Total deferred expense (24,605) 53,870
---------------------
Total income tax expense $483,799 $540,723
=====================
</TABLE>
The sources of temporary differences which gave rise to deferred tax assets and
liabilities at December 31, 1995, are summarized as follows:
<TABLE>
<CAPTION>
DEFERRED DEFERRED
TAX TAX
ASSET LIABILITIES
----------------------
<S> <C> <C>
Difference between tax basis and book
basis of accrual items $ - $168,300
Depreciation - 79,800
Excess book provision for loan losses
over tax provision 179,900 -
Unrealized loss on investments
available for sale 8,500 -
Other 19,475 -
---------------------
207,875 248,100
---------------------
Net deferred tax liability $ 40,225
========
</TABLE>
F-13
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994 (UNAUDITED)
6. INCOME TAXES (CONTINUED)
A reconciliation of expected federal tax expense to actual tax expense is
summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
----------------------------------
AMOUNT % AMOUNT %
----------------------------------
<S> <C> <C> <C> <C>
Expected federal tax expense $498 34.0 $463 34.0
State taxes net of federal benefit 36 2.5 36 2.6
Tax-exempt interest (20) (1.4) (11) (0.8)
Other (30) (2.1) 53 3.9
----------------------------------
Total $484 33.0% $541 39.7%
==================================
</TABLE>
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
Financial instruments which represent off-balance-sheet credit risk consist
of open commitments to extend credit in the normal course of business which
are not reflected in the accompanying financial statements.
At December 31, 1995, open commitments to extend credit and letters of
credit amounted to approximately $5,639,000. Such agreements require the
Bank to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses. Since many of the
commitments are expected to expire without being fully drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained (if deemed necessary
by the Bank upon extension of credit) is based on management's credit
evaluation of the customer. Collateral held varies, but may include
accounts receivable, inventory, property, plant and equipment, and income-
producing commercial properties.
8. BUSINESS AND CREDIT CONCENTRATIONS
Most of the Bank's business activity is with customers located within
Garfield County, Colorado and contiguous counties. Credit risk is therefore
dependent primarily upon economic conditions in Western Colorado. However,
the loans have been granted to a wide variety of borrowers and management
does not believe that any significant concentrations of credit exist with
respect to groups of borrowers that would be similarly affected by changes
in economic or other conditions. Concentrations of credit by type of loan
are set forth in Note 3.
F-14
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994 (UNAUDITED)
9. LEASE COMMITMENTS
Rental expense related to premises and equipment amounted to approximately
$13,000 and $8,000 for the years ended December 31, 1995 and 1994,
respectively. The Bank is obligated under a noncancellable operating lease
agreement which ends August 31, 1997. Future minimum rental payments of the
operating lease at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31 AMOUNT
----------- -------
<S> <C>
1996 $12,000
1997 8,000
-------
$20,000
=======
</TABLE>
10. RELATED PARTY TRANSACTIONS
Certain directors, executive officers and principal stockholders of
Regional Bank of Colorado, N.A. and businesses in which they have
significant interests, maintain normal depository arrangements with the
Bank and have borrowed funds from the Bank. In management's opinion, these
arrangements are all on substantially the same terms, including interest
rates and collateral, as those prevailing for comparable transactions with
unrelated parties and do not involve more than the normal risk of
collectibility or present other unfavorable features.
At December 31, 1995, direct loans to such parties aggregated approximately
$533,000 and deposits of such parties with the Bank amounted to
approximately $506,000.
11. INTEREST RATE RISK
Changes in prevailing interest rates can cause changes in the Bank's net
interest margin and in the market value of assets. Changes in interest
rates cannot be predicted and, historically, interest rates have sometimes
been subject to periodic, volatile changes. There can be no assurance that
such interest rate changes will not occur in the future.
F-15
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994 (UNAUDITED)
12. RESTRICTIONS ON DIVIDENDS
The Bank, as a national bank, is subject to the dividend restrictions set
forth by the Comptroller of the Currency. Under such restrictions, the Bank
may not, without the prior approval of the Comptroller of the Currency,
declare dividends in excess of the sum of the current year's earnings (as
defined) plus the retained earnings (as defined) from the prior two years.
13. REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain off-
balance-sheet items as calculated under regulatory accounting practices.
The Bank's capital amounts and classifications are also subject to
qualitative judgments by the regulators about components, risk weightings,
and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum ratios of total and Tier I capital (as
defined in the regulations) to risk-weighted assets (as defined) of 8% and
4%, respectively, and Tier I capital (as defined) to average assets (as
defined) of 4%. As of December 31, 1995, the Bank met all capital adequacy
requirements to which it is subject. The Bank's total capital to risk-
weighted assets was 13.24%, Tier I capital to risk-weighted assets was
11.99% and the Tier I capital ratio was 8.42%.
As of December 31, 1995, the Bank was categorized as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as
well capitalized the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I capital ratios of 10%, 6% and 5%, respectively.
There are no conditions or events since December 31, 1995 that management
believes have changed the institution's category.
14. RETIREMENT PLAN
The Bank has adopted a profit sharing/deferred compensation retirement plan
under Section 401 of the Internal Revenue Code. The plan provides, among
other things, that qualifying participants may elect to have up to 6% of
their compensation excluded from gross income for the year in which the
contribution to the plan is made. The Bank will make matching contributions
of 100% of the participant elective deferrals. As of December 31 of each
year, the Bank may make an additional profit sharing contribution on behalf
of all participants as determined by the Board of Directors.
To be eligible to participate, an employee must be a salaried employee, be
at least age 20 1/2 and have completed six months of service with the Bank.
The employee contribution and Bank matching contribution will be 100%
vested at all times. The profit sharing contributions, if any, will be on a
vesting schedule from three to seven years.
Retirement expense for 1995 and 1994 totaled approximately $38,000 and
$12,000, respectively.
F-16
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994 (UNAUDITED)
15. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of the estimated fair value of financial
instruments are made in accordance with the requirements of SFAS No. 107,
Disclosures about Fair Value of Financial Instruments. The estimated fair
value amounts have been determined by the Bank using available market
information and valuation methodologies. However, considerable judgment is
necessarily required to interpret market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material impact on the estimated fair value
amounts. SFAS No. 107 excludes certain financial instruments and all non-
financial instruments including intangible assets from its disclosure
requirements. Therefore the aggregate fair value amounts presented herein
are not indicative of the underlying value of the Bank.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:
CASH AND CASH EQUIVALENTS
The current carrying amount is a reasonable estimate of fair value.
INVESTMENT SECURITIES
An estimate of the fair value for investment securities, including
mortgage-backed securities, is made utilizing quoted market data for
publicly traded securities, where available. A third-party pricing service
that specializes in "matrix pricing" and modeling techniques provides
estimated fair values for securities not actively traded.
LOANS
The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.
DEPOSITS
The fair value of demand deposits, savings accounts and money market
deposits is the amount payable on demand at the reporting date. The fair
value of fixed-maturity certificates of deposit is estimated by discounting
the future cash flows using the rates currently offered for deposits of
similar remaining maturities.
F-17
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994 (UNAUDITED)
15. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair value of commitments 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 customers. For
fixed-rate loan commitments, fair value also considers the difference
between current levels of interest rates and the committed rates. The
estimated fair value of letters of credit is based on the fees currently
charged for similar agreements. These instruments were determined to have
no positive or negative market value adjustments and are not listed in the
following table.
The estimated fair value of the Company's financial instruments is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
CARRYING FAIR
AMOUNT VALUE
-----------------
<S> <C> <C>
(In thousands)
Financial assets:
Cash and cash equivalents $ 5,914 $ 5,914
Held to maturity securities
(Note 2) 10,027 10,102
Available for sale securities
(Note 2) 1,799 1,799
Restricted equity securities 215 215
Loans, net of allowance 37,585 38,077
Financial liabilities:
Deposits (Note 5) 52,882 52,923
</TABLE>
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1995. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of the financial statements since that date and,
therefore, current estimates of fair value may differ significantly from
the amounts presented.
16. SUBSEQUENT EVENT
On December 20, 1995, Regional Bank of Colorado, N.A. entered into a merger
agreement with Norwest Corporation. The merger agreement calls for the
stockholders of Regional Bank of Colorado, N.A. to exchange their stock for
shares of Norwest common stock. Included in the merger agreement are
various conditions which, among other things, restrict Regional Bank of
Colorado, N.A. from paying any dividends or distributions to stockholders
and impose certain limitations on the Bank's lending and investment
decisions. The merger is contingent upon approval of various regulatory
agencies and the stockholders of Regional Bank of Colorado, N.A. and, if
approved, is expected to be consummated by June 30, 1996.
F-18
<PAGE>
REGIONAL BANK OF COLORADO, N.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994 (UNAUDITED)
17. PENDING LITIGATION
The Bank is currently named as a defendant in a lawsuit. The suit is not
specific as to the amount of damages sought by the plaintiffs. The Bank
intends to vigorously defend this lawsuit. As the suit has not gone to
trial and the parties have engaged in settlement discussions, it is
difficult, in the opinion of management and the Bank's attorney, to
determine the estimate of the loss. Therefore, no reserve has been recorded
by the Bank.
18. RESTRICTED CASH BALANCES
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank or as cash on hand. As of December 31, 1995, this reserve
requirement was approximately $483,000.
F-19
<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 20th day of December, 1995, by and between REGIONAL BANK OF COLORADO,
NATIONAL ASSOCIATION ("Regional"), a national banking association, and NORWEST
CORPORATION ("Norwest"), a Delaware corporation.
WHEREAS, the parties hereto desire to effect a reorganization whereby a
wholly-owned subsidiary of Norwest will consolidate with Regional (the
"Consolidation") pursuant to an agreement and plan of consolidation (the
"Consolidation 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 Regional of the par value of $20.00 per share
("Regional Common Stock") outstanding immediately prior to the time the
Consolidation becomes effective in accordance with the provisions of the
Consolidation 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) Consolidation. Subject to the terms and conditions contained herein,
-------------
a wholly-owned subsidiary of Norwest ("Norwest Bank") will be consolidated with
Regional pursuant to the Consolidation Agreement, with Regional as the surviving
corporation, in which consolidation each share of Regional Common Stock
outstanding immediately prior to the Effective Time of the Consolidation (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 355,000 by the number
of shares of Regional Common Stock then outstanding.
(b) Norwest Common Stock Adjustments. If, between the date hereof and the
--------------------------------
Effective Time of the Consolidation, 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 Regional
Common Stock shall be converted pursuant to subparagraph (a), above, will be
appropriately and proportionately adjusted so that the number of such shares of
Norwest Common Stock into which a share of Regional
A-1
<PAGE>
Common Stock shall be converted will equal the number of shares of Norwest
Common Stock which holders of shares of Regional Common Stock would have
received pursuant to such Common Stock Adjustment had the record date therefor
been immediately following the Effective Time of the Consolidation.
(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 Consolidation. Subject to the terms and
----------------------------------
conditions set forth herein, the closing of the Consolidation will occur on a
mutually agreeable date, which date shall be not later than 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 Consolidation to be completed as soon as practicable after
the receipt of final regulatory approval of the Consolidation and the expiration
of all required waiting periods. The Consolidation shall be effective at 11:59
p.m., Minneapolis, Minnesota time (the "Effective Time of the Consolidation") on
the date specified in the certificate of approval to be issued by the
Comptroller of the Currency of the United States, under the seal of his office,
approving the Consolidation (the "Effective Date of the Consolidation").
The closing of the transactions contemplated by this Agreement and the
Consolidation 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 REGIONAL. Regional represents and
warrants to Norwest as follows:
(a) Organization and Authority. Regional is a national banking
--------------------------
association duly organized, validly existing and in good standing under the laws
of the United States, 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 Regional and the Regional 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. Regional has
furnished Norwest true and correct copies of its articles of association and
by-laws, as amended.
A-2
<PAGE>
(b) Regional's Subsidiaries. Schedule 2(b) sets forth a complete and
-----------------------
correct list of all of Regional's subsidiaries as of the date hereof
(individually a "Regional Subsidiary" and collectively the "Regional
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
Regional. No equity security of any Regional 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 Regional Subsidiary is bound to issue additional
shares of its capital stock, or any option, warrant or right to purchase or
acquire any additional shares of its capital stock. Subject to 12 U.S.C. (S)
55, all of such shares so owned by Regional 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 Regional Subsidiary is a corporation or
national banking association duly organized, validly existing, duly qualified to
do business and in good standing under the laws of its jurisdiction of
incorporation, and has corporate power and authority to own or lease its
properties and assets and to carry on its business as it is now being conducted.
Except as set forth on Schedule 2(b), Regional 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 Regional consists of
--------------
27,000 shares of common stock, $20.00 par value, of which as of the close of
business on September 30, 1995, 24,366 shares were outstanding and no shares
were held in the treasury. The maximum number of shares of Regional Common Stock
(assuming for this purpose that phantom shares and other share-equivalents
constitute Regional Common Stock) that would be outstanding as of the Effective
Date of the Consolidation if all options, warrants, conversion rights and other
rights with respect thereto were exercised is 24,366. All of the outstanding
shares of capital stock of Regional have been duly and validly authorized and
issued and, subject to 12 U.S.C. (S) 55, 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 Regional or any Regional Subsidiary to issue, sell or
otherwise dispose of, or to purchase, redeem or otherwise acquire, any shares of
capital stock of Regional or any Regional Subsidiary. Except as set forth in
Schedule 2(c). since September 30, 1995 no shares of Regional capital stock have
been purchased, redeemed or otherwise acquired, directly or indirectly, by
Regional or any Regional Subsidiary and no dividends or other distributions have
been declared, set aside, made or paid to the shareholders of Regional.
(d) Authorization. Regional has the corporate power and authority to
-------------
enter into this Agreement and the Consolidation Agreement and, subject to any
required approvals of its shareholders and regulatory authorities, to carry out
its obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and the
A-3
<PAGE>
Consolidation Agreement by Regional and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Regional. Subject to such approvals of shareholders and of
government agencies and other governing boards having regulatory authority over
Regional as may be required by statute or regulation, this Agreement and the
Consolidation Agreement are valid and binding obligations of Regional
enforceable against Regional in accordance with their respective terms, except
as enforceability may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium, and other similar laws and court decisions of
general application relating to, limiting or affecting the enforcement of
creditors' rights generally, and by general principles of equity.
Except as set forth on Schedule 2(d), neither the execution, delivery and
performance by Regional of this Agreement or the Consolidation Agreement, nor
the consummation of the transactions contemplated hereby and thereby, nor
compliance by Regional 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 Regional or any Regional Subsidiary
under any of the terms, conditions or provisions of (x) its articles of
association or by-laws or (y) any material note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
Regional or any Regional Subsidiary is a party or by which it may be bound, or
to which Regional or any Regional Subsidiary or any of the properties or assets
of Regional or any Regional Subsidiary may be subject, or (ii) subject to
compliance with the statutes and regulations referred to in the next paragraph,
to the knowledge of Regional, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to Regional or any
Regional 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 Bank Holding Company Act of 1956, as amended (the "BHC Act")
or the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"), and
filings required to effect the Consolidation under the National Bank Act, 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
Regional of the transactions contemplated by this Agreement and the
Consolidation Agreement.
(e) Regional Financial Statements. The consolidated balance sheets of
-----------------------------
Regional and Regional's Subsidiaries as of December 31, 1993 and related
consolidated statements of income, shareholders' equity and cash flows for the
three years ended December 31,
A-4
<PAGE>
1993, together with the notes thereto, certified by GRA Thompson, White & Co.,
P.A. and the unaudited consolidated balance sheet of Regional and Regional's
Subsidiaries as of December 31, 1994 and the statements of financial condition
of Regional and Regional's Subsidiaries as of September 30, 1995 and the related
unaudited consolidated statements of income for the nine (9) months then ended
(collectively, the "Regional 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 Regional and Regional's Subsidiaries at the dates and the
consolidated results of operations and cash flows of Regional and Regional's
Subsidiaries for the periods stated therein.
(f) Reports. Since December 31, 1990, Regional and each Regional
-------
Subsidiary has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with (i) the
Securities and Exchange Commission (the "SEC"), including, but not limited to,
Forms 10-K, Forms 10-Q and proxy statements, (ii) the Federal Reserve Board,
(iii) the Federal Deposit Insurance Corporation (the "FDIC"), (iv) the United
States Comptroller of the Currency (the "Comptroller") and (v) any applicable
state securities or banking authorities. All such reports and statements filed
with any such regulatory body or authority are collectively referred to herein
as the "Regional Reports". As of their respective dates, the Regional Reports
complied in all material respects with all the rules and regulations promulgated
by the SEC, the Federal Reserve Board, the FDIC, the Comptroller and applicable
state securities or banking authorities, as the case may be, and were accurate
in all material respects. Copies of all the Regional Reports have been made
available to Norwest by Regional.
(g) Properties and Leases. Except as set forth in Schedule 2(g), except
---------------------
as may be reflected in the Regional Financial Statements and except for any lien
for current taxes not yet delinquent, Regional and each Regional 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 Regional's consolidated balance sheet as of September 30, 1995 for
the period then ended, and to 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 Regional or any Regional Subsidiary pursuant to which Regional or
such Regional 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 Regional or such Regional Subsidiary or any event
which, with notice or lapse of time or both, would constitute such a material
default. Substantially all Regional's and each Regional 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 Regional and the Regional Subsidiaries has filed all
-----
federal, state, county, local and foreign tax returns, including information
returns, required to be
A-5
<PAGE>
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 Regional and the Regional Subsidiaries for the
fiscal year ended December 31, 1991, 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
Regional nor any Regional Subsidiary is a party to any pending action or
proceeding, nor to the knowledge of Regional 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 Regional or any Regional Subsidiary which has not been settled,
resolved and fully satisfied. Each of Regional and the Regional 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 September 30, 1995, 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 Regional and the
Regional Subsidiaries with respect to all periods through the date thereof.
(i) Absence of Certain Changes. Since December 31, 1994 there has been no
--------------------------
change in the business, financial condition or results of operations of Regional
or any Regional 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 Regional and the Regional Subsidiaries taken as a whole.
(j) Commitments and Contracts. Except as set forth on Schedule 2(j),
-------------------------
neither Regional nor any Regional 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 Regional or such Regional 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;
A-6
<PAGE>
(iv) any contract containing covenants which limit the ability of
Regional or any Regional 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, Regional or any Regional 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.
(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. Regional has furnished Norwest
--------------------------------
copies of (i) all attorney responses to the request of the independent auditors
for Regional with respect to loss contingencies as of December 31, 1994 in
connection with the Regional Financial Statements as soon as such responses
become available, and (ii) a written list of legal and regulatory proceedings
filed against Regional or any Regional Subsidiary since said date. Neither
Regional nor any Regional Subsidiary is a party to any pending or, to the
knowledge of Regional, 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 Regional and the Regional Subsidiaries taken as a whole.
(l) Insurance. Regional and each Regional Subsidiary is presently
---------
insured, and during each of the past five calendar years (or during such lesser
period of time as Regional has owned such Regional 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. Regional and each Regional Subsidiary has all
--------------------
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties and assets and to carry on its business as presently
conducted and that are material to the
A-7
<PAGE>
business of Regional or such Regional Subsidiary; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect
and, to the knowledge of Regional, no suspension or cancellation of any of them
is threatened; and all such filings, applications and registrations are current.
The conduct by Regional and each Regional 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 Regional nor
any Regional 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 Regional
or any Regional Subsidiary which reasonably could be expected to have a material
adverse effect on the business or properties of Regional and the Regional
Subsidiaries taken as a whole.
(n) Labor. No work stoppage involving Regional or any Regional Subsidiary
-----
is pending or, to the knowledge of Regional, threatened. Neither Regional nor
any Regional Subsidiary is involved in, or to the knowledge of Regional,
threatened with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding which could materially and adversely affect the
business of Regional or such Regional Subsidiary. Employees of Regional and the
Regional 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 knowledge of Regional no officer or director of Regional
or any Regional 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 Regional or any Regional Subsidiary.
Schedule 2(o) sets forth a correct and complete list of any loan from
Regional or any Regional 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
Regional's or such Regional Subsidiary's Board of Directors.
(p) Regional 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 Regional or any Regional Subsidiary acts as the plan
sponsor as defined in ERISA Section 3(16)(B), and with respect to which any
liability under ERISA or otherwise exists or may be incurred by Regional or
any Regional Subsidiary are
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<PAGE>
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), Regional or the Regional 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. Regional 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 knowledge of
Regional, no Plan or any trust created thereunder, nor any trustee,
fiduciary or administrator thereof, has engaged in a "prohibited
transaction", as such term is defined in Section 4975 of the Code or
Section 406 of ERISA or violated any of the fiduciary standards under Part
4 of Title I of ERISA which could subject, to the best knowledge of
Regional, 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 Regional and the Regional Subsidiaries
taken as a whole.
(v) No Plan which is subject to Title IV of ERISA or any trust
created thereunder has been terminated, nor have there been any "reportable
events" as that term is defined in Section 4043 of ERISA, with respect to
any Plan, other than those events which may result from the transactions
contemplated by this Agreement and the Consolidation Agreement.
(vi) No Plan or any trust created thereunder has incurred any
"accumulated funding deficiency", as such term is defined in Section 412 of
the Code (whether or not waived), during the past five plan years which
would result in a material liability.
(vii) Except as disclosed in Schedule 2(p), neither the execution and
delivery of this Agreement and the Consolidation Agreement nor the
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<PAGE>
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 Regional or any Regional
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 Regional and
--------------------
the Regional Subsidiaries supplied or to be supplied by Regional 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 Regional Common Stock pursuant to the provisions of the
Consolidation Agreement (the "Registration Statement"), (ii) the proxy statement
to be mailed to Regional's shareholders in connection with the meeting to be
called to consider the Consolidation (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 Consolidation 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 Regional and the Regional Subsidiaries are responsible for
filing with the SEC and any other regulatory authority in connection with the
Consolidation will comply as to form in all material respects with the
provisions of applicable law.
(r) Registration Obligations. Except as set forth on Schedule 2(r),
------------------------
neither Regional nor any Regional Subsidiary is under any obligation, contingent
or otherwise, by reason of any agreement to register any of its securities under
the Securities Act.
(s) Brokers and Finders. Except for Alex Sheshunoff Investment Banking,
-------------------
neither Regional nor any Regional 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
Regional or any Regional Subsidiary in connection with this Agreement and the
Consolidation Agreement or the transactions contemplated hereby and thereby.
(t) Fiduciary Activities. Neither Regional nor any Regional subsidiary
--------------------
has ever had any accounts for which it has acted as a fiduciary including but
not limited to accounts
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<PAGE>
for which it has served as trustee, agent, custodian, personal representative,
guardian, conservator or investment advisor.
(u) No Defaults. Neither Regional nor any Regional 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 Regional and the Regional Subsidiaries, taken as a
whole. To the knowledge of Regional, all parties with whom Regional or any
Regional Subsidiary has material leases, agreements or contracts or who owe to
Regional or any Regional Subsidiary material obligations other than with respect
to those arising in the ordinary course of the banking business of the Regional
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 Regional or any Regional 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 knowledge
of Regional, threatened against Regional or any Regional Subsidiary the result
of which has had or could reasonably be expected to have a material adverse
effect upon Regional and Regional's Subsidiaries taken as a whole; to the
knowledge of Regional there is no reasonable basis for any such proceeding,
claim or action; and to the knowledge of Regional neither Regional nor any
Regional 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. Regional 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.
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<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF NORWEST. Norwest represents and
warrants to Regional 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 Regional with true and correct copies of its certificate of
incorporation and bylaws, as amended.
(b) Norwest Subsidiaries. Schedule 3(b) sets forth a complete and correct
--------------------
list as of December 31, 1994, of Norwest's Significant Subsidiaries (as defined
in Regulation S-X promulgated by the SEC) (individually a "Norwest Subsidiary"
and collectively the "Norwest Subsidiaries"), all shares of the outstanding
capital stock of each of which, except as set forth in Schedule 3(b), are owned
directly or indirectly by Norwest. No equity security of any Norwest Subsidiary
is or may be required to be issued to any person or entity other than Norwest by
reason of any option, warrant, scrip, right to subscribe to, call or commitment
of any character whatsoever relating to, or security or right convertible into,
shares of any capital stock of such subsidiary, and there are no contracts,
commitments, understandings or arrangements by which any Norwest Subsidiary is
bound to issue additional shares of its capital stock, or options, warrants or
rights to purchase or acquire any additional shares of its capital stock.
Subject to 12 U.S.C. (S) 55 (1982), all of such shares so owned by Norwest are
fully paid and nonassessable and are owned by it free and clear of any lien,
claim, charge, option, encumbrance or agreement with respect thereto. Each
Norwest Subsidiary is a corporation or national banking association duly
organized, validly existing, duly qualified to do business and in good standing
under the laws of its jurisdiction of incorporation, and has corporate power and
authority to own or lease its properties and assets and to carry on its business
as it is now being conducted.
(c) Capitalization. The authorized capital stock of Norwest consists of
--------------
(i) 5,000,000 shares of Preferred Stock, without par value, of which as of the
close of business on September 30, 1995, 1,127,125 shares of 10.24% Cumulative
Preferred Stock at $100 stated value, 980,000 shares of Cumulative Tracking
Preferred Stock, 13,311 shares of ESOP Cumulative Convertible Preferred Stock,
at $1,000 stated value, and 33,732 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 September 30, 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 September 30, 1995, 337,931,133 shares were outstanding and
4,768,328 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.
A-12
<PAGE>
(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 Consolidation
Agreement and the consummation of the transactions contemplated hereby and
thereby. Subject to such approvals of government agencies and other governing
boards having regulatory authority over Norwest as may be required by statute or
regulation, this Agreement is a valid and binding obligation of Norwest
enforceable against Norwest in accordance with its terms.
Neither the execution, delivery and performance by Norwest of this
Agreement or the Consolidation Agreement, nor the consummation of the
transactions contemplated hereby and thereby, nor compliance by Norwest with any
of the provisions hereof or thereof, will (i) violate, conflict with, or result
in a breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the creation
of, any lien, security interest, charge or encumbrance upon any of the
properties or assets of Norwest or any Norwest Subsidiary under any of the
terms, conditions or provisions of (x) its certificate of incorporation or
by-laws or (y) any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Norwest or
any Norwest Subsidiary is a party or by which it may be bound, or to which
Norwest or any Norwest Subsidiary or any of the properties or assets of Norwest
or any Norwest Subsidiary may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in the next paragraph, to the best
knowledge of Norwest, violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to Norwest or any Norwest
Subsidiary or any of their respective properties or assets.
Other than in connection with or in compliance with the provisions of the
Securities Act, the Exchange Act, the securities or blue sky laws of the various
states or filings, consents, reviews, authorizations, approvals or exemptions
required under the BHC Act or the HSR Act, and filings required to effect the
Consolidation under the National Bank Act, 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 Consolidation Agreement.
(e) Norwest Financial Statements. The consolidated balance sheets of
----------------------------
Norwest and Norwest's subsidiaries as of December 31, 1994 and 1993 and related
consolidated statements of income, stockholders' equity and cash flows for the
three years ended December 31, 1994, 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
A-13
<PAGE>
December 31, 1994 (the "Norwest 10-K") as filed with the SEC, and the unaudited
consolidated balance sheets of Norwest and its subsidiaries as of September 30,
1995 and the related unaudited consolidated statements of income and cash flows
for the nine (9) months then ended included in Norwest's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1995, as filed with the SEC
(collectively, the "Norwest Financial Statements"), have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis and present fairly (subject, in the case of financial statements for
interim periods, to normal recurring adjustments) the consolidated financial
position of Norwest and its subsidiaries at the dates and the consolidated
results of operations, changes in financial position and cash flows of Norwest
and its subsidiaries for the periods stated therein.
(f) Reports. Since December 31, 1989, Norwest and each Norwest Subsidiary
-------
has filed all reports, registrations and statements, together with any required
amendments thereto, that it was required to file with (i) the SEC, including,
but not limited to, Forms 10-K, Forms 10-Q and proxy statements, (ii) the
Federal Reserve Board, (iii) the FDIC, (iv) the Comptroller and (v) any
applicable state securities or banking authorities. All such reports and
statements filed with any such regulatory body or authority are collectively
referred to herein as the "Norwest Reports". As of their respective dates, the
Norwest Reports complied in all material respects with all the rules and
regulations promulgated by the SEC, the Federal Reserve Board, the FDIC, the
Comptroller and any applicable state securities or banking authorities, as the
case may be, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(g) Properties and Leases. Except as may be reflected in the Norwest
---------------------
Financial Statements and except for any lien for current taxes not yet
delinquent, Norwest and each Norwest Subsidiary has good title free and clear of
any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Norwest's
consolidated balance sheet as of September 30, 1995 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
A-14
<PAGE>
to be filed by it, and paid or made adequate provision for the payment of all
taxes owed by it, including those with respect to income, withholding, social
security, unemployment, workers compensation, franchise, ad valorem, premium,
excise and sales taxes, and no taxes shown on such returns to be owed by it or
assessments received by it are delinquent. The federal income tax returns of
Norwest and the Norwest Subsidiaries for the fiscal year ended December 31,
1979, and for all fiscal years prior thereto, are for the purposes of routine
audit by the Internal Revenue Service closed because of the statute of
limitations, and no claims for additional taxes for such fiscal years are
pending. Except only as set forth on Schedule 3(h), (i) neither Norwest nor any
Norwest Subsidiary is a party to any pending action or proceeding, nor to
Norwest's knowledge is any such action or proceeding threatened by any
governmental authority, for the assessment or collection of taxes, interest,
penalties, assessments or deficiencies which could reasonably be expected to
have any material adverse effect on Norwest and its subsidiaries taken as a
whole, and (ii) no issue has been raised by any federal, state, local or foreign
taxing authority in connection with an audit or examination of the tax returns,
business or properties of Norwest or any Norwest Subsidiary which has not been
settled, resolved and fully satisfied, or adequately reserved for. Each of
Norwest and the Norwest Subsidiaries has paid all taxes owed or which it is
required to withhold from amounts owing to employees, creditors or other third
parties.
(i) Absence of Certain Changes. Since December 31, 1994, there has been
--------------------------
no change in the business, financial condition or results of operations of
Norwest or any Norwest Subsidiary which has had, or may reasonably be expected
to have, a material adverse effect on the business, financial condition or
results of operations of Norwest and its subsidiaries taken as a whole.
(j) Commitments and Contracts. Except as set forth on Schedule 3(j), as
-------------------------
of September 30, 1995 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
A-15
<PAGE>
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 for reasonable amounts with financially sound and reputable insurance
companies or self-insured, against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured and has maintained all insurance required by applicable law and
regulation.
(m) Compliance with Laws. Norwest and each Norwest Subsidiary has all
--------------------
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties or assets and to carry on its business as presently
conducted and that are material to the business of Norwest or such Subsidiary;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect, and to the best knowledge of Norwest, no suspension or
cancellation of any of them is threatened; and all such filings, applications
and registrations are current. The conduct by Norwest and each Norwest
Subsidiary of its business and the condition and use of its properties does not
violate or infringe, in any respect material to any such business, any
applicable domestic (federal, state or local) or foreign law, statute,
ordinance, license or regulation. Neither Norwest nor any Norwest Subsidiary is
in default under any order, license, regulation or demand of any federal, state,
municipal or other governmental agency or with respect to any order, writ,
injunction or decree of any court. Except for statutory or regulatory
restrictions of general application, no federal, state, municipal or other
governmental authority has placed any restrictions on the business or properties
of Norwest or any Norwest Subsidiary which reasonably could be expected to have
a material adverse effect on the business or properties of Norwest and its
subsidiaries taken as a whole.
(n) Labor. No work stoppage involving Norwest or any Norwest Subsidiary
-----
is pending or, to the best knowledge of Norwest, threatened. Neither Norwest
nor any Norwest Subsidiary is involved in, or threatened with or affected by,
any labor dispute, arbitration, lawsuit or administrative proceeding which could
materially and adversely affect the business of Norwest or such Norwest
Subsidiary. Except as set forth on Schedule 3(j), employees of Norwest and the
Norwest Subsidiaries are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees.
(o) Norwest Benefit Plans.
---------------------
(i) As of September 30, 1995, the only "employee benefit plans"
within the meaning of Section 3(3) of ERISA for which Norwest or any
Norwest Subsidiary
A-16
<PAGE>
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, 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 Consolidation 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
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<PAGE>
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
Consolidation 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 Consolidation Agreement
will, at the respective times such documents are filed with the SEC or any
regulatory authority and, in the case of the Registration Statement, when it
becomes effective and, with respect to the Proxy Statement, when mailed, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading
or, in the case of the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the meeting of shareholders referred to in paragraph
4(c), be false or misleading with respect to any material fact, or omit to state
any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for such meeting.
All documents which Norwest and the Norwest Subsidiaries are responsible for
filing with the SEC and any other regulatory authority in connection with the
Consolidation 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 Consolidation 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
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<PAGE>
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.
4. COVENANTS OF REGIONAL. Regional 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 Consolidation, Regional, and each
Regional 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 the day of receipt of the request by a representative designated
by Norwest in writing), 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 $350,000; 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 goodwill and the goodwill of its suppliers,
customers and others having business relationships with it; use its best efforts
to obtain any approvals or consents required to maintain existing leases and
other contracts in effect following the Consolidation; comply in all material
respects with all laws, regulations, ordinances, codes, orders, licenses and
permits applicable to the properties and operations of Regional and each
Regional Subsidiary the non-compliance with which reasonably could be expected
to have a material adverse effect on Regional and the Regional Subsidiaries
taken as a whole; and permit Norwest and its representatives (including KPMG
Peat Marwick LLP) to examine its and its subsidiaries
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books, records and properties and to interview officers, employees and agents at
all reasonable times when it is open for business. No such examination by
Norwest or its representatives either before or after the date of this Agreement
shall in any way affect, diminish or terminate any of the representations,
warranties or covenants of Regional herein expressed.
(b) Except as otherwise contemplated or required by this Agreement, from
the date hereof until the Effective Time of the Consolidation, Regional and each
Regional 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 $25,000 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 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 if the Effective Date of the Consolidation is after the record date for the
regular cash dividend, if any, declared on Norwest Common Stock for the second
quarter of 1996 ("Record Date"), Regional may declare and pay cash dividends on
Regional Common Stock in an amount not to exceed, in the aggregate, the amount
which would have been received by the holders of 355,000 shares of Norwest
Common Stock between such Record Date and the Effective Date of the
Consolidation; redeem, purchase or otherwise acquire, directly or indirectly,
any of the capital stock of Regional; increase the compensation of any officers,
directors or executive employees, except pursuant to existing compensation plans
and practices provided, however, that Regional may pay bonuses to its officers
in January 1996, based on earnings of Regional for the year 1995 (and accrued
for no later than December 31, 1995), in an aggregate amount not to exceed
$75,000; sell or otherwise dispose of any shares of the capital stock of any
Regional 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 Regional 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
Consolidation Agreement be submitted to a vote at such meeting. The Board of
Directors of Regional will (i) cause proper notice of such meeting to be given
to its shareholders in compliance with all applicable law and regulation, (ii)
subject to the exercise of its fiduciary duties established under applicable
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law, recommend by the affirmative vote of the Board of Directors a vote in favor
of approval of this Agreement and the Consolidation Agreement, and (iii) use its
best efforts to solicit from its shareholders proxies in favor thereof.
(d) Regional will furnish or cause to be furnished to Norwest all the
information concerning Regional and its subsidiaries required for inclusion in
the Registration Statement referred to in paragraph 5(c) hereof (including but
not limited to audited consolidated financial statements for Regional, which
Regional agrees to have prepared at its sole expense after the date hereof,
which comply as to form in all material respects with the applicable accounting
requirements of the Securities Act and the published rules and regulations
thereunder, and which otherwise are required or necessary to be filed or
included in the Registration Statement), or any statement or application made by
Norwest to any governmental body in connection with the transactions
contemplated by this Agreement. The financial statements for the 1995 fiscal
year provided under this paragraph must include the audit opinion and the
consent of GRA, Thompson, White & Co., P.A. to use such opinion in such
Registration Statement.
(e) Regional 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 Regional to carry out the transactions contemplated
by this Agreement and will cooperate with Norwest to obtain all such approvals
and consents required of Norwest.
(f) Regional will use its best efforts to deliver to the Closing all
opinions, certificates and other documents required to be delivered by it at the
Closing.
(g) Regional will hold in confidence all confidential or proprietary
documents and information concerning Norwest and its subsidiaries furnished to
Regional 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 Regional'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
Regional, in the public domain, or later acquired by Regional 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 Regional, nor any Regional 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
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security of Regional or any Regional 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 Regional or any
Regional Subsidiary except in the ordinary course of business, or (iv) to merge,
consolidate or otherwise combine with Regional or any Regional Subsidiary. If
any corporation, partnership, person or other entity or group makes an offer or
inquiry to Regional or any Regional Subsidiary concerning any of the foregoing,
Regional or such Regional Subsidiary will promptly disclose such offer or
inquiry, including the terms thereof, to Norwest.
(i) Regional 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) Regional and each Regional 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 Consolidation, (ii) to
amend the Plans to comply with the provisions of the the Tax Reform Act of 1986
and regulations thereunder and other applicable law, and (iii) to submit
application to the Internal Revenue Service for a favorable determination letter
for each of the Plans which is subject to the qualification requirements of
Section 401(a) of the Code prior to the Effective Date of the Consolidation.
(k) Neither Regional nor any Regional Subsidiary shall take any action
which with respect to Regional would disqualify the Consolidation as a "pooling
of interests" for accounting purposes.
(l) Regional shall use its best efforts to obtain and deliver at least 32
days prior to the Effective Date of the Consolidation signed representations
substantially in the form attached hereto as Exhibit B to Norwest by each
executive officer, director or shareholder of Regional who may reasonably be
deemed an "affiliate" of Regional within the meaning of such term as used in
Rule 145 under the Securities Act.
(m) Regional shall establish such additional accruals and reserves as may
be necessary to conform Regional's accounting and credit loss reserve practices
and methods to those of Norwest and Norwest's plans with respect to the conduct
of Regional's business following the Consolidation.
(n) Regional shall obtain, at its sole expense, Phase I environmental
assessments for each bank facility and each non-residential OREO property. Oral
reports of such environmental assessments shall be delivered to Norwest no later
than eight (8) weeks and written reports shall be delivered to Norwest no later
than sixteen (16) weeks from the date of this Agreement. Regional 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. Regional shall obtain a survey and assessment of all potential
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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 eight weeks of execution of the definitive agreement.
(o) Regional shall obtain, at its sole expense, commitments for title
insurance and boundary surveys for each bank facility which shall be delivered
to Norwest no later than four (4) weeks from the date of this Agreement.
5. COVENANTS OF NORWEST. Norwest covenants and agrees with Regional as
follows:
(a) From the date hereof until the Effective Time of the Consolidation,
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 Regional all the information concerning
Norwest required for inclusion in a proxy statement or statements to be sent to
the shareholders of Regional, or in any statement or application made by
Regional to any governmental body in connection with the transactions
contemplated by this Agreement.
(c) As promptly as practicable after the execution of this Agreement and
the receipt by Norwest of the audited financial statements required by paragraph
4(d) hereof, Norwest will prepare and 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 Regional pursuant to the Consolidation
Agreement, and will use its best efforts to cause the Registration Statement to
become effective following receipt of approval of the transaction from the
Federal Reserve Board or on such earlier date as may be agreed to by the
parties. 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
Regional shareholders, at the time of the Regional shareholders' meeting
referred to in paragraph 4(c) hereof and at the Effective Time of the
Consolidation 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
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to make the statements therein not false or misleading; provided, however, that
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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 Regional or any Regional
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 Consolidation 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 Regional pursuant to this Agreement and the Consolidation
Agreement will, upon such issuance and delivery to said shareholders pursuant to
the Consolidation Agreement, be duly authorized, validly issued, fully paid and
nonassessable. The shares of Norwest Common Stock to be delivered to the
shareholders of Regional pursuant to the Consolidation 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 Consolidation, 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 the Consolidation
Agreement and will cooperate with Regional to obtain all such approvals and
consents required by Regional.
(h) Norwest will hold in confidence all documents and information
concerning Regional and Regional'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 Regional (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 Regional.
(i) Norwest will file any documents or agreements required to be filed in
connection with the Consolidation under the National Bank Act.
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<PAGE>
(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 Regional 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 Regional written notice of receipt of the
regulatory approvals referred to in paragraph 7(e).
(m) For a period not exceeding fifteen days prior to the Closing Date,
Norwest will permit Regional 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
Regional or its representatives shall in any way affect, diminish or terminate
any of the representations, warranties or covenants of Norwest herein expressed.
(n) 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 Consolidation, a director or officer of Regional or
any Regional Subsidiary, (an "Indemnified Party" and, collectively, the
"Indemnified Parties") in Regional's Articles of Association or By-laws or
similar governing documents of any Regional 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 Consolidation, 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 Consolidation, survive
the Consolidation and shall continue in full force and effect. Nothing
contained in this paragraph 5(n)(i) shall be deemed to preclude the
liquidation, consolidation or merger of Regional or any Regional
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 Regional, Norwest shall guarantee, to
the extent of the net asset value of Regional or any Regional Subsidiary as
of the Effective Date of the Consolidation, the indemnification obligations
of Regional or any Regional Subsidiary to the extent of indemnification
obligations of Regional and the Regional Subsidiaries described above.
Notwithstanding anything to the contrary contained in this paragraph
5(n)(i), nothing contained herein shall require Norwest to indemnify any
person who was a director or officer of Regional or any Regional
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Subsidiary to a greater extent than Regional or any Regional 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(n)(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 Consolidation), (A) Norwest shall have the right to assume the
defense thereof and Norwest shall not be liable to any Indemnified Party
for any legal expenses of other counsel or any other expenses subsequently
incurred by such Indemnified Party in connection with the defense thereof,
except that if Norwest elects not to assume such defense or counsel for the
Indemnified Party advises that there are issues which raise conflicts of
interest between Norwest and the Indemnified Party, the Indemnified Party
may retain counsel satisfactory to them, and Norwest shall pay the
reasonable fees and expenses of such counsel for the Indemnified Party
promptly as statements therefor are received; provided, however, that
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Norwest shall be obligated pursuant to this subparagraph (ii) to pay for
only one firm of counsel for all Indemnified Parties in any jurisdiction
unless the use of one counsel for such Indemnified Parties would present
such counsel with a conflict of interest and (B) such Indemnified Party
shall cooperate in the defense of any such matter.
(iii) for a period of three years after the Effective Time of the
Consolidation, Norwest shall use its best efforts to cause to be maintained
in effect the current policies of directors' and officers' liability
insurance maintained by Regional (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 Consolidation; 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(n)(iii), any amount per annum in
excess of 125% of the amount of the annual premiums paid as of the date
hereof by Regional for such insurance (the "Maximum Amount") and provided
further that, prior to the Effective Time of the Consolidation, Regional
shall notify the appropriate directors' and officers' liability insurers of
the Consolidation 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.
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(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 Consolidation 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(n).
(v) the provisions of this paragraph 5(n) 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 REGIONAL. The obligation of
Regional to effect the Consolidation shall be subject to the satisfaction at or
before the Effective Date of the Consolidation of the following further
conditions, which may be waived in writing by Regional:
(a) Except as they may be affected by transactions contemplated hereby and
except to the extent such representations and warranties are by their express
provisions made as of a specified date and except for activities or transactions
after the date of this Agreement made in the ordinary course of business and not
expressly prohibited by this Agreement, the representations and warranties
contained in paragraph 3 hereof shall be true and correct in all respects
material to Norwest and its subsidiaries taken as a whole as if made at the
Effective Date of the Consolidation.
(b) Norwest shall have, or shall have caused to be, performed and observed
in all material respects all covenants, agreements and conditions hereof to be
performed or observed by it at or before the Effective Date of the
Consolidation.
(c) Regional shall have received a favorable certificate, dated as of the
Effective Date of the Consolidation, 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 Consolidation Agreement shall have been
approved by the affirmative vote of the holders of the percentage of the
outstanding shares of Regional required for approval of a plan of consolidation
in accordance with the provisions of Regional's Articles of Association and the
National Bank 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 Consolidation Agreement and
all waiting and appeal periods prescribed by applicable law or regulation shall
have expired.
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(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 Regional pursuant to this Agreement and the Consolidation Agreement shall
have been authorized for listing on the New York Stock Exchange and the Chicago
Stock Exchange.
(h) Regional shall have received an opinion, dated the Closing Date, of
counsel to Regional, substantially to the effect that, for federal income tax
purposes: (i) the Consolidation 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 Regional 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
Regional will be the same as the basis of Regional Common Stock exchanged
therefor; and (iv) the holding period of the shares of Norwest Common Stock
received by the shareholders of Regional will include the holding period of the
Regional Common Stock, provided such shares of Regional Common Stock were held
as a capital asset as of the Effective Time of the Consolidation.
(i) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order, and no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened and be unresolved. Norwest shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
(j) Prior to the mailing of the Proxy Statement referred to in paragraph
4(c), Regional and the Board of Directors of Regional shall have received an
opinion of Alex Sheshunoff Investment Banking addressed to Regional and the
Board of Directors of Regional, and for their exclusive benefit, for inclusion
in said Proxy Statement and dated effective as of the date of mailing of such
Proxy Statement, based on such matters as Alex Sheshunoff Investment Banking
deems appropriate or necessary, to the effect that the consideration to be
received by stockholders of Regional pursuant to the Consolidation is fair from
a financial point of view. Regional shall have promptly provided a copy of such
opinion to Norwest upon receipt.
7. CONDITIONS PRECEDENT TO OBLIGATION OF NORWEST. The obligation of
Norwest to effect the Consolidation shall be subject to the satisfaction at or
before the Effective Date of the Consolidation 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
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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 Regional and the Regional Subsidiaries taken as a whole as
if made at the Effective Date of the Consolidation.
(b) Regional 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 Effective Date of the
Consolidation.
(c) This Agreement and the Consolidation Agreement shall have been
approved by the affirmative vote of the holders of the percentage of the
outstanding shares of Regional required for approval of a plan of consolidation
in accordance with the provisions of Regional's Articles of Association and the
National Bank Act.
(d) Norwest shall have received a favorable certificate dated as of the
Effective Date of the Consolidation signed by the Chairman or President and by
the Secretary or Assistant Secretary of Regional, 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 Consolidation 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 Regional or any Regional Subsidiary that, in the good
faith judgment of Norwest, is unreasonably burdensome to Norwest.
(f) Regional and each Regional Subsidiary shall have obtained any and all
material consents or waivers from other parties to loan agreements, leases or
other contracts material to Regional's or such subsidiary's business required
for the consummation of the Consolidation, and Regional and each Regional
Subsidiary shall have obtained any and all material permits, authorizations,
consents, waivers and approvals required for the lawful consummation by it of
the Consolidation.
(g) No court or governmental authority of competent jurisdiction shall
have issued an order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(h) The Consolidation shall qualify as a "pooling of interests" for
accounting purposes and Norwest shall have received from GRA, Thompson, White &
Co., P.A. an opinion to that effect.
(i) At any time since the date hereof the total number of shares of
Regional Common Stock outstanding and subject to issuance upon exercise
(assuming for this purpose that phantom shares and other share-equivalents
constitute Regional Common
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Stock) of all warrants, options, conversion rights, phantom shares or other
share-equivalents, other than any option held by Norwest, shall not have
exceeded 24,366.
(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 Regional 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 Regional 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 Regional;
(ii) the amounts reported in the interim quarterly financial
statements of Regional agree with the general ledger of Regional;
(iii) from the date of the most recent unaudited consolidated
financial statements of Regional and the Regional Subsidiaries as may be
included in the Registration Statement to a date 5 days prior to the
effective date of the Registration Statement or 5 days prior to the
Closing, there are no increases in long-term debt, changes in the capital
stock or decreases in stockholders' equity of Regional and the Regional
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 Regional
and the Regional 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;
(iv) they have reviewed certain amounts, percentages, numbers of
shares and financial information which are derived from the general
accounting records of Regional and the Regional Subsidiaries, which appear
in the Registration Statement under the certain captions to be specified by
Norwest, and have
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compared certain of such amounts, percentages, numbers and financial
information with the accounting records of Regional and the Regional
Subsidiaries and have found them to be in agreement with financial records
and analyses prepared by Regional included in the annual and quarterly
financial statements, except as disclosed in such letters.
(l) Regional and the Regional Subsidiaries considered as a whole shall not
have sustained since December 31, 1994 any material loss or interference with
their business from any civil disturbance or any fire, explosion, flood or other
calamity, whether or not covered by insurance.
(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
Regional or any Regional 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 Regional and its subsidiaries taken as a whole.
(n) Since September 30, 1995, no change shall have occurred and no
circumstances shall exist which has had or might reasonably be expected to have
a material adverse effect on the financial condition, results of operations,
business or prospects of Regional and the Regional 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 Regional or
any Regional Subsidiary as of the Effective Date of the Consolidation ("Regional
Employees") shall be eligible for participation in the employee welfare and
retirement plans of Norwest, as in effect from time to time, as follows:
(a) Employee Welfare Benefit Plans. Each Regional Employee shall be
-------------------------------
eligible for participation in the employee welfare benefit plans of Norwest
listed below subject to any eligibility requirements applicable to such plans
and shall enter each plan not later than the first day of the calendar quarter
which begins at least 32 days after the Effective Date of the Consolidation:
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
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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 Regional Employee's benefit for the year in
which the Consolidation occurs under the Norwest vacation program, vacation
taken by a Regional Employee in the year in which the Consolidation occurs will
be deducted from the total Norwest benefit.
(b) Employee Retirement Benefit Plans.
----------------------------------
Each Regional 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 Regional
and the Regional 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 Regional and the Regional
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
Consolidation.
Each Regional 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 Effective
Date of the Consolidation:
(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 Consolidation shall not have been consummated by
September 30, 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; or
(iii) by Regional 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 either Norwest or Regional upon written notice to the other
party if a Takeover Proposal constitutes a Superior Proposal; provided,
however, that
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Regional shall not be permitted to terminate this Agreement
pursuant to this paragraph 9(a)(iv) unless (A) it has not breached any
covenant contained in paragraph 4(h) and (B) it delivers to Norwest
simultaneously with such notice of termination the fee referred to in
paragraph 9(c). As used in this Agreement: "Takeover Proposal" means a bona
fide proposal or offer by a person to make a tender or exchange offer, or
to engage in a merger, consolidation or other business combination
involving Regional or to acquire in any manner a substantial equity
interest in, or all or substantially all of the assets of, Regional, and
"Superior Proposal" means a Takeover Proposal which the Board of Directors
of Regional shall determine in good faith, after taking into account the
written advice of its outside counsel, that failure to accept such proposal
or offer would or could reasonably be expected to violate its fiduciary
duties under applicable law. The term "person" for purposes of this
Agreement has the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3)
of the Exchange Act and the rules and regulations thereunder but shall not
include Norwest; or
(v) by Norwest if (A) the Board of Directors of Regional fails to
recommend, withdraws, or modifies in a manner materially adverse to
Norwest, its approval or recommendation of this Agreement, the
Consolidation Agreement or the transactions contemplated hereby or thereby,
(B) after an agreement to engage in or the occurrence of an Acquisition
Event (as defined below) or after a third party shall have made a proposal
to Regional or Regional's shareholders to engage in an Acquisition Event,
the transactions contemplated hereby are not approved at the meeting of
Regional shareholders contemplated by paragraph 4(c), or (C) the meeting of
Regional shareholders contemplated by paragraph 4(c) is not held prior to
September 30, 1996 and Regional has failed to comply with its obligations
under paragraph 4(c); or
(vi) by Regional, within five business days after the meeting of the
stockholders of Regional held to vote on this Agreement and the
Consolidation Agreement, if the Norwest Measurement Price is less than $25.
The "Norwest Measurement Price" is defined as the average of the closing
prices of a share of Norwest Common Stock as reported on the consolidated
tape of the New York Stock Exchange during the period of 20 trading days
ending on the day immediately preceding such meeting of stockholders. If a
Common Stock Adjustment occurs with respect to the shares of Norwest Common
Stock between the date of this Agreement and the Regional stockholder
meeting date, the closing prices for Norwest Common Stock shall be
appropriately and proportionately adjusted for the purposes of the
definitions above so as to be comparable to what the price would have been
if the record date of the Common Stock Adjustment had been immediately
following the Effective Time of the Consolidation.
(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
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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) If this Agreement is terminated pursuant to paragraphs 9(a)(iv) or
9(a)(v), and if terminated pursuant to paragraph 9(a)(v) and prior thereto or
within 12 months after such termination:
(i) Regional or any successor to Regional shall have entered into
an agreement to engage in an Acquisition Event (as defined below) or an
Acquisition Event shall have occurred; or
(ii) the Board of Directors of Regional shall have authorized or
approved an Acquisition Event or shall have publicly announced an intention
to authorize or approve or shall have recommended that the shareholders of
Regional approve or accept any Acquisition Event,
then Regional shall promptly, but in no event later than five business days
after the first of such events shall have occurred, pay Norwest a fee equal to
$250,000.
"Acquisition Event" means any of the following: (i) a merger, consolidation or
similar transaction involving Regional or any successor to Regional, (ii) a
purchase, lease or other acquisition in one or a series of related transactions
of assets of Regional or its Subsidiaries representing 25% or more of the
consolidated assets of Regional and the Regional Subsidiaries or (iii) a
purchase or other acquisition (including by way of merger, consolidation, share
exchange or any similar transaction) in one or a series of related transactions
of beneficial ownership of securities representing 25% or more of the voting
power of Regional or any Regional subsidiary in each case with or by a person or
entity other than Norwest or an affiliate of Norwest.
10. EXPENSES. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by Regional and Regional Subsidiaries shall be borne
by Regional, and all such expenses incurred by Norwest shall be borne by
Norwest; provided, however, that if the transactions contemplated by this
Agreement are not consummated (unless such failure of consummation shall be due
to the failure of Regional to perform or observe in all material respects the
covenants and agreements hereof to be performed or observed by it), Norwest
agrees to reimburse Regional for its expenses incurred in performing its
obligations under paragraphs 4(n) and 4(o) hereof.
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.
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12. THIRD PARTY BENEFICIARIES. Each party hereto intends that except as
otherwise expressly provided in paragraph 5(n) hereof, 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
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If to Regional:
Regional Bank of Colorado, N. A.
1542 Railroad Avenue
Rifle, CO 81650-0752
Attention: Gary Ward, Chairman
With a copy to:
Malizia, Spidi, Sloane & Fisch, P.C.
One Franklin Square, Suite 700 East
1301 K Street, NW
Washington, DC 20005
Attention: John J. Spidi, Esq.
or to such other address with respect to a party as such party shall notify the
other in writing as above provided.
14. COMPLETE AGREEMENT. This Agreement and the Consolidation Agreement
contain the complete agreement between the parties hereto with respect to the
Consolidation 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 Effective Date of the
Consolidation, 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 Regional 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 Consolidation 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 Consolidation Agreement shall survive
the
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Consolidation or except as set forth in paragraph 9(b), the termination of this
Agreement. Paragraph 10 shall survive the Consolidation.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NORWEST CORPORATION REGIONAL BANK OF COLORADO,
NATIONAL ASSOCIATION
By: /s/ Kenneth R. Murray By: /s/ Gary S. Ward
Its: Executive Vice President Its: President
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EXHIBIT A
AGREEMENT AND PLAN OF CONSOLIDATION
This Agreement and Plan of Consolidation (the "Consolidation Agreement") is
dated as of _______________________, 19__, between NORWEST INTERIM BANK
REGIONAL, NATIONAL ASSOCIATION ("Interim Bank") and REGIONAL BANK OF COLORADO,
NATIONAL ASSOCIATION, a national banking association ("Regional"). Interim Bank
and Regional are sometimes referred to herein as the "Consolidating Banks".
PREAMBLE
Interim Bank and Regional acknowledge and confirm the following:
(a) Interim Bank is a national banking association having its principal
office and place of business at 1542 Railroad Avenue, P. O. Box 752, Rifle,
Garfield County, Colorado 81650. As of __________, 1995, Interim Bank had
capital of $100,000, divided into 1,000 shares of common stock, par value $100
per share ("Interim Bank Common Stock"), and surplus of $20,000.
(b) Regional is a national banking association having its principal office
and place of business at 1542 Railroad Avenue, P. O. Box 752, Rifle, Garfield
County, Colorado 81650. As of __________, Regional had capital of $_________,
divided into ______ shares of common stock, par value $20.00 per share
("Regional Common Stock"), surplus of $______, and retained earnings of
$_______.
(c) Regional and Norwest Corporation ("Norwest") have entered into an
Agreement and Plan of Reorganization dated as of ___________ (the
"Reorganization Agreement"), which Reorganization Agreement contemplates the
transactions to be effected by this Consolidation Agreement.
(d) A majority of the Boards of Directors of Interim Bank and of Regional
have duly approved this Consolidation Agreement and authorized its execution.
(e) It is the intent of the parties hereto to effect a corporate
reorganization which qualifies as a tax-free reorganization pursuant to Sections
368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code.
AGREEMENTS
IN CONSIDERATION OF THE PREMISES, Interim Bank and Regional make this
Consolidation Agreement and fix the terms and conditions of the Consolidation of
Interim Bank and Regional (the "Consolidation") as follows:
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SECTION 1
1.1 Pursuant to the authority of and in accordance with the provisions of
12 U.S.C. 215, Interim Bank shall be consolidated with Regional, under the
charter of Regional (the "Consolidated Bank").
1.2 The name of the Consolidated Bank shall be "Regional Bank of Colorado,
National Association."
1.3 The Consolidation shall be effective as of 12:01 a.m. on the date
specified in the certificate of approval to be issued by the Comptroller of the
Currency of the United States, under the seal of his office, approving the
Consolidation (the "Effective Date").
1.4 The business of the Consolidated Bank shall be that of a national
banking association and shall be conducted at the main office of the
Consolidated Bank, which shall be located at 1542 Railroad Avenue, P. O. Box
752, Rifle, Garfield County, Colorado 81650, and at its legally established
branches.
SECTION 2
As of the Effective Date:
2.1 The corporate existences of the Consolidating Banks shall be
consolidated into the Consolidated Bank.
2.2 All rights, franchises, and interests of the Consolidating Banks in
and to every type of property (real, personal and mixed) and choses in action
shall be transferred to and vested in the Consolidated Bank by virtue of the
Consolidation without any deed or other transfer. The Consolidated Bank, upon
the Consolidation and without any order or other action on the part of any court
or otherwise, shall hold and enjoy all rights of property, franchises, and
interests, including appointments, designations, and nominations, and all other
rights and interests as trustee, executor, administrator, registrar of stocks
and bonds, guardian of estates, assignee, receiver, and in every other fiduciary
capacity, in the same manner and to the same extent as such rights, franchises,
and interests were held or enjoyed by either of the Consolidating Banks at the
time of Consolidation.
2.3 The Consolidated Bank shall be liable for all liabilities of every
kind and description, including liabilities arising out of the operation of a
trust department, of each of the Consolidating Banks existing as of the
Effective Date.
2.4 The amount of capital stock of the Consolidated Bank shall be
$________, divided into _____ shares of common stock, each of $____ par value,
and at the time the Consolidation shall become effective, the Consolidated Bank
shall have a surplus of $________ and retained earnings which, when combined
with the capital and surplus, will be equal to the combined capital structures
of the Consolidating Banks as stated in the preamble of this Consolidation
Agreement, adjusted, however, for the results of operations, the payment of
dividends, if any, between __________, and the Effective Date, and the payment
provided for in Section 3.2 hereof.
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SECTION 3
As of the Effective Date:
3.1 Each share of Regional Common Stock outstanding immediately prior to
the Effective Time of the Consolidation (other than shares as to which statutory
dissenters' appraisal rights have been exercised) will be converted into and
exchanged for for the number of shares of Norwest Common Stock determined by
dividing 355,000 by the number of shares of Regional Common Stock then
outstanding. As soon as practicable after the consolidation becomes effective,
each holder of a certificate for shares of Regional Common Stock outstanding
immediately prior to the time of consolidation shall be entitled, upon surrender
of such certificate for cancellation to Norwest Bank Minnesota, National
Association, as the designated agent of the Consolidated Bank (the "Agent"), to
receive the Norwest Common Stock to which such holder shall be entitled on the
basis above set forth. Until so surrendered each certificate which, immediately
prior to the time of consolidation, represented shares of Regional Common Stock
shall not be transferable on the books of the Consolidated Bank but shall be
deemed (except for the payment of dividends as provided below) to evidence
ownership of the number of whole shares of Norwest Common Stock into which such
shares of Regional Common Stock have been converted on the basis above set
forth; provided, however, that, until the holder of such certificate shall have
surrendered the same for exchange as above set forth, no dividend payable to
holders of record of Norwest Common Stock as of any date subsequent to the
effective date of consolidation shall be paid to such holder with respect to the
Norwest Common Stock represented by such certificate, but, upon surrender and
exchange thereof as herein provided, there shall be paid by the Agent to the
record holder of such certificate for Norwest Common Stock issued in exchange
therefor an amount with respect to such shares of Norwest Common Stock equal to
all dividends that shall have been paid or become payable to holders of record
of Norwest Common Stock between the effective date of the consolidation and the
date of such exchange.
3.2 The shares of Interim Bank outstanding immediately prior to the time
of Consolidation shall be converted into and exchanged for _______ shares of the
Consolidated Bank, plus cash in the amount of $120,000.
3.3 From and after the Effective Date, there shall be no transfers on the
stock transfer books of Consolidated Banks of the shares of Regional Common
Stock or Interim Bank Common Stock which were issued and outstanding immediately
prior to the Effective Date.
SECTION 4
4.1 As of the Effective Date, the Articles of Association of the
Consolidated Bank shall be the Articles of Association of Regional shall read in
their entirety as set forth in Appendix A attached hereto, and the Consolidated
Bank shall be authorized under such Articles of Association to issue _______
shares of common stock, par value $____ per share.
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4.2 The by-laws of Regional as they exist at the Effective Date shall
continue in full force as the by-laws of the Consolidated Bank until altered,
amended, or repealed as provided therein or as provided by law.
4.3 As of the Effective Date, the following named persons shall serve as
the Board of Directors of the Consolidated Bank until the next annual meeting of
the shareholders or until such time as their successors have been elected and
have qualified:
_________________
_________________
_________________
4.4 The officers of Regional holding office at the Effective Date shall
continue as the officers of the Consolidated Bank for the term prescribed in the
by-laws or until the Board of Directors otherwise shall determine.
SECTION 5
5.1 This Consolidation Agreement shall be submitted to the shareholders of
Regional and Interim Bank, respectively, for approval at meetings to be called
and held in accordance with the articles of association of Regional and the
articles of association of Interim Bank, and in accordance with applicable
provisions of law. Such approval by the shareholders shall require the
affirmative vote of the shareholders of each of the Consolidating Banks owning
at least two-thirds of its capital stock outstanding.
SECTION 6
6.1 The Consolidation shall be subject to and conditioned upon the
following:
(a) approval of this Consolidation Agreement by the shareholders of
Regional and Interim Bank as required by law;
(b) approval of the Consolidation by all appropriate banking and
regulatory authorities and the satisfaction of all other requirements
prescribed by law necessary for consummation of the Consolidation; and
(c) satisfaction of the conditions precedent set forth in paragraphs 6 and
7 of the Reorganization Agreement.
6.2 At any time before the Effective Date, if any of the following
circumstances obtain, this Consolidation Agreement may be terminated, at the
election of Regional or Interim Bank, by written notice from the party so
electing to the other, or the consummation of the Consolidation may be postponed
for such period, and subject to such further rights of Regional and Interim
Bank, or either of them, to terminate this Consolidation Agreement as Regional
and Interim Bank may agree in writing:
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(a) by mutual consent of the Boards of Directors of the Consolidating
Banks if consummation of the Consolidation would be inadvisable in the
opinion of said Boards; or
(b) by action of the Board of Directors of any party hereto if the
Reorganization Agreement is terminated.
SECTION 7
7.1 Regional and Interim Bank, by mutual consent of their respective
Boards of Directors, may amend this Consolidation Agreement before the Effective
Date; provided, however, that after this Consolidation Agreement has been
approved by the shareholders of Regional, no such amendment shall affect the
rights of such shareholders of Regional in a manner which is materially adverse
to such shareholders.
7.2 This Consolidation Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, Regional and Interim Bank have caused this
Consolidation Agreement to be executed by their respective duly authorized
officers and their corporate seals, if any, to be hereunto affixed as of the
date first above written, pursuant to a resolution of each Consolidating Bank's
Board of Directors, acting by a majority thereof, and witness the signatures
hereto of a majority of each of said Consolidating Bank's Board of Directors.
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(NO BANK SEAL) NORWEST INTERIM BANK REGIONAL,
NATIONAL ASSOCIATION
ATTEST:
By: __________________________________
___________________________ Its: __________________________________
Secretary
A majority of the Board of Directors of Norwest Interim Bank Regional,
National Association:
___________________________________ ___________________________________
___________________________________ ___________________________________
___________________________________ ___________________________________
___________________________________ ___________________________________
STATE OF_________________)
) ss
COUNTY OF________________)
On this _____ day of __________, 19__, before me, a Notary Public for the
State and County aforesaid, personally came _________________________, as
___________________, and ________________________, as ______________________, of
NORWEST INTERIM BANK REGIONAL, NATIONAL ASSOCIATION, and each in his or her said
capacity acknowledged the foregoing instrument to be the act and deed of said
bank; and came also:
___________________________________ ___________________________________
___________________________________ ___________________________________
___________________________________ ___________________________________
___________________________________ ___________________________________
being a majority of the Board of Directors of said bank, and each of them
acknowledged said instrument to be the act and deed of said bank and of himself
or herself as a director thereof.
WITNESS my official seal and signature this day and year aforesaid.
________________________________
(Seal of Notary) Notary Public, __________ County
My Commission Expires __________
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(BANK SEAL) REGIONAL BANK OF COLORADO,
NATIONAL ASSOCIATION
ATTEST:
By: _________________________________
_______________________ Its: _________________________________
Secretary
A majority of the Board of Directors of Regional Bank of Colorado, National
Association:
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
STATE OF COLORADO )
) ss
COUNTY OF________________)
On this _____ day of ______________, 19__, before me, a Notary Public for
the State and County aforesaid, personally came _______________________, as
_________________, and ____________________, as __________________, of REGIONAL
BANK OF COLORADO, NATIONAL ASSOCIATION, and each in his or her said capacity
acknowledged the foregoing instrument to be the act and deed of said bank and
the seal affixed thereto to be its seal; and came also:
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
being a majority of the Board of Directors of said bank, and each of them
acknowledged said instrument to be the act and deed of said bank and of himself
or herself as a director thereof.
WITNESS my official seal and signature this day and year aforesaid.
_________________________________________
(Seal of Notary) Notary Public, __________________ County
My Commission Expires ___________________
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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 REGIONAL
BANK OF COLORADO, NATIONAL ASSOCIATION, a national banking association
("Regional").
Pursuant to an Agreement and Plan of Reorganization, dated as of ________,
19__, (the "Reorganization Agreement"), between Regional and Norwest
Corporation, a Delaware corporation ("Norwest"), it is contemplated that a
wholly-owned subsidiary of Norwest will consolidate with Regional (the
"Consolidation") and as a result, I will receive in exchange for each share of
Common Stock, par value $20.00 per share, of Regional ("Regional Common Stock")
owned by me immediately prior to the Effective Time of the Consolidation (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 Regional Common Stock or Norwest Common Stock held by me during the 30
days prior to the Effective Time of the Consolidation.
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 Consolidation (the
"Stock") except (a) in compliance with the applicable provisions of Rule 145,
(b) in a transaction that is otherwise exempt from the registration requirements
of the Securities Act, or (c) in an offering registered under the Securities
Act.
I will not sell, transfer or otherwise dispose of the Stock or in any way
reduce my risk relative to any shares of the Stock issued to me pursuant to the
Consolidation until such time as financial results covering at least 30 days of
post-Consolidation combined operations of Regional and Norwest have been
published.
I consent to the endorsement of the Stock issued to me pursuant to the
Consolidation 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-Consolidation combined operations have
been published.
I have carefully read this letter agreement and the Reorganization
Agreement and have discussed their requirements and other applicable limitations
upon my ability to offer to sell, transfer or otherwise dispose of shares of the
Stock, to the extent I felt necessary, with my counsel or counsel for Regional.
Sincerely,
_________________________
A-46
<PAGE>
APPENDIX B
OPINION OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING
<PAGE>
ALEX SHESHUNOFF & CO. INVESTMENT BANKING
April 30, 1996
Board of Directors
Regional Bank of Colorado, N.A.
1542 Railroad Avenue
Rifle, Colorado 81650
Members of the Board:
You have requested our opinion, as an independent financial analyst to the
common shareholders of Regional Bank of Colorado, N.A., Rifle, Colorado
("Regional"), as to the fairness, from a financial point of view to the common
shareholders of Regional, of the terms of the proposed merger of Regional with
and into Norwest Corporation, Minneapolis, Minnesota ("Norwest"). Pursuant to
the terms of the Agreement and Plan of Reorganization dated December 20, 1995
between Regional and Norwest (the "Consolidation Agreement"), each share of
Regional Common Stock (as defined in the Consolidation Agreement) outstanding
immediately prior to the Effective Time of the Consolidation will be converted
into and exchanged for the number of shares of Norwest Common Stock (as defined
in the Consolidation Agreement) determined by dividing 355,000 by the number of
shares of Regional Common Stock then outstanding.
As part of its banking analysis business, Alex Sheshunoff & Co. Investment
Banking is continually engaged in the valuation of bank, bank holding company
and thrift securities in connection with mergers and acquisitions nationwide.
Prior to being retained for this assignment, Alex Sheshunoff & Co. Investment
Banking has provided professional services and products to Regional and Norwest.
The revenues derived from such services and products are insignificant when
compared to the firm's total gross revenues.
In connection with this assignment, we reviewed (i) the Consolidation Agreement;
(ii) the most recent external auditor's reports to the Board of Directors of
Regional, the audited December 31, 1995 balance sheet and income statement for
Norwest; (iv) the Rate Sensitivity Analysis report for Regional; (v) Regional's
most recent listing of marketable securities showing rate, maturity and market
value as compared to book value; (vi) Regional's internal loan classification
list; (vii) the budget and projected operating plan of Regional; (viii) a
listing of unfunded letters of credit and any other off-balance sheet risks for
Regional; (ix) the Minutes of the Board of Directors meetings of Regional; (x)
the most recent Board report for Regional; (xi) the listing and description of
significant real properties for Regional; (xii) material leases on real and
personal property for Regional; (xiii) the directors and officers liability and
blanket bond insurance policies for Regional; and (xiv) market conditions and
current trading levels of outstanding equity securities of both organizations.
B-1
<PAGE>
We have also had discussions with the management of Regional and Norwest
regarding their respective financial results and have analyzed the most current
financial data available on Regional and Norwest. We also considered such other
information, financial studies, analyses and investigations, and economic and
market criteria which we deemed relevant. We have met with the management of
Regional to discuss the foregoing information with them.
We have considered certain financial data of Regional and Norwest, and have
compared that data with similar data for other banks and bank holding companies
which have recently merged or been acquired; furthermore, we have considered the
financial terms of these business combinations involving said banks and bank
holding companies.
We have not independently verified any of the information reviewed by us and
have relied on its being complete and accurate in all material respects. In
addition, we have not made an independent evaluation of the assets of Regional
or Norwest.
In reaching our opinion we took into consideration the financial benefits of the
proposed transaction to all Regional shareholders. Based on all factors that we
deem relevant and assuming the accuracy and completeness of the information and
data provided to us by Regional and Norwest, it is our opinion, as of
April 30, 1996, that the proposed transaction is fair and equitable to all
Regional shareholders from a financial point of view.
Our opinion does not constitute an endorsement of the merger or a recommendation
to any stockholder of Regional as to how such stockholder should vote.
We hereby consent to the reference to our firm in the proxy statement or
prospectus related to the merger transaction and to the inclusion of our opinion
as an exhibit to the proxy statement or prospectus related to the merger
transaction.
Respectfully submitted,
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
AUSTIN, TEXAS
B-2
<PAGE>
APPENDIX C
UNITED STATES CODE TITLE 12, SECTION 215
<PAGE>
* * * *
(B) LIABILITY OF CONSOLIDATED ASSOCIATION; CAPITAL STOCK; DISSENTING
SHAREHOLDERS
The consolidated association shall be liable for all liabilities of the
respective consolidating banks or associations. The capital stock of such
consolidated association shall not be less than that required under existing law
for the organization of a national bank in the place in which it is located:
Provided, That if such consolidation shall be voted for at such meetings by the
- --------
necessary majorities of the shareholders of each association and State bank
proposing to consolidate, and thereafter the consolidation shall be approved by
the Comptroller, any shareholder of any of the associations or State banks so
consolidated who has voted against such consolidation at the meeting of the
association or bank of which he is a stockholder or who has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of consolidation, shall be entitled to receive the value of the
shares so held by him when such consolidation is approved by the Comptroller
upon written request made to the consolidated association at any time before
thirty days after the date of consummation of the consolidation, accompanied by
the surrender of his stock certificates.
(C) VALUATION OF SHARES
The value of the shares of any dissenting shareholder shall be ascertained,
as of the effective date of the consolidation, by an appraisal made by a
committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the consolidated banking
association; and (3) one selected by the two so selected. The valuation agreed
upon by any two of the three appraisers shall govern. If the value so fixed
shall not be satisfactory to any dissenting shareholder who has requested
payment, that shareholder may, within five days after being notified of the
appraised value of his shares, appeal to the Comptroller, who shall cause a
reappraisal to be made which shall be final and binding as to the value of the
shares of the appellant.
(D) APPRAISAL BY COMPTROLLER; EXPENSES OF CONSOLIDATED ASSOCIATION; SALE AND
RESALE OF SHARES; STATE APPRAISAL AND CONSOLIDATION LAW
If, within ninety days from the date of consummation of the consolidation,
for any reason one or more of the appraisers is not selected as herein provided,
or the appraisers fail to determine the value of such shares, the Comptroller
shall upon written request of any interested party cause an appraisal to be made
which shall be final and binding on all parties. The expenses of the
Comptroller in making the reappraisal or the appraisal, as the case may be,
shall be paid by the consolidated banking association. The value of the shares
ascertained shall be promptly paid to the dissenting shareholders by the
consolidated banking association. Within thirty days after payment has been
made to all dissenting shareholders as provided for in this section the shares
of stock of the consolidated banking association which would have been delivered
to such dissenting shreholders had they not requested payment shall be
C-1
<PAGE>
sold by the consolidated banking association at an advertised public auction,
unless some other method of sale is approved by the Comptroller, and the
consolidated banking association shall have the rights to purchase any of such
shares at such public auction, if it is the highest bidder therefor, for the
purpose of reselling such shares within thirty days thereafter to such person or
persons and at such price not less than par as its board of directors by
resolution may determine. If the shares are sold at public auction at a price
greater than the amount paid to the dissenting shareholder the excess in such
sale price shall be paid to such shareholders. The appraisal of such shares of
stock in any State bank shall be determined in the manner prescribed by the law
of the State in such cases, rather than as provided in this section, if such
provision is made in the State law; and no such consolidation shall be in
contravention of the law of the State under which such bank is incorporated.
C-2
<PAGE>
APPENDIX D
BANKING CIRCULAR 259
<PAGE>
BC-259
BANKING ISSUANCE
________________________________________________________________________________
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
________________________________________________________________________________
Type: Banking Circular Subject: Stock Appraisals
________________________________________________________________________________
TO: Chief Executive Officers of National Banks, Deputy
Comptrollers (District), Department and Division Heads, and
Examining Personnel
PURPOSE
- -------
This banking circular informs all national banks of the valuation methods used
by the Office of the Comptroller of the Currency (OCC) to estimate the value of
a bank's shares when requested to do so by a shareholder dissenting to the
conversion, merger, or consolidation of its bank. The results of appraisals
performed by the OCC between January 1, 1985 and September 30, 1991 are also
summarized.
References: 12 U.S.C. 214a, 215 and 215a; 12 CFR 11.590 (Item 2)
BACKGROUND
- ----------
Under 12 U.S.C. Sections 214a, a shareholder dissenting from a conversion,
consolidation, or merger involving a national bank is entitled to receive the
value of his or her shares from the resulting bank. A valuation of the shares
shall be made by a committee of three appraisers (a representative of the
dissenting shareholder, a representative of the resulting bank, and a third
appraiser selected by the other two). If the committee is formed and renders an
appraisal that is acceptable to the dissenting shareholder, the process is
complete and the appraised value of the shares is paid to the dissenting
shareholder by the resulting bank. If, for any reason, the committee is not
formed or if it renders an appraisal that is not acceptable to the dissenting
shareholder, an interested party may request an appraisal by the Office of the
Comptroller of the Currency (OCC). 12 U.S.C. Section 215 provides these
appraisal rights to any shareholder dissenting to a consolidation. Any
dissenting shareholder of a target bank in a merger is also entitled to these
appraisal rights pursuant to 12 U.S.C. Section 215a.
________________________________________________________________________________
Date: March 5, 1992
The above provides only a general overview of the appraisal process. The
specific requirements of the process are set forth in the statutes themselves.
D-1
<PAGE>
METHODS OF VALUATION USED
- -------------------------
Through its appraisal process, the OCC attempts to arrive at a fair estimate of
the value of a bank's shares. After reviewing the particular facts in each case
and the available information on a bank's shares, the OCC selects an appropriate
valuation method, or combination of methods, to determine a reasonable estimate
of the shares' value.
MARKET VALUE
- ------------
The OCC uses various methods to establish the market value of shares being
appraised. If sufficient trading in the shares exists and the prices are
available from direct quotes from the Wall Street Journal or a market-maker,
---- ------ -------
those quotes are considered in determining the market value. If no market value
is readily available, or if the market value is not well established, other
methods of estimating market value can be used, such as the investment value and
adjusted book value methods.
INVESTMENT VALUE
- ----------------
Investment value requires an assessment of the value to investors of a share in
the future earnings of the target bank. Investment value is estimated by
applying an average price/earnings ratio of banks with similar earnings
potential to the earnings capacity of the target bank.
The peer group selection is based on location, size, and earnings patterns. If
the state in which the subject bank is located provides a sufficient number of
comparable banks using location, size and earnings patterns as the criteria for
selection, the price/earnings ratios assigned to the banks are applied to the
earnings per share estimated for the subject bank. In order to select a
reasonable peer group when there are too few comparable independent banks in a
location that is comparable to that of the subject bank, the pool of banks from
which a peer group is selected is broadened by including one-bank holding
company banks in a comparable location, and/or by selecting banks in less
comparable locations, including adjacent states, that have earnings patterns
similar to the subject bank.
ADJUSTED BOOK VALUE
- -------------------
The OCC also uses an "adjusted book value" method for estimating value.
Historically, the OCC has not placed any weight on the bank's "unadjusted book
value", since the value is based on historical acquisition costs of the bank's
assets, and does not reflect investors' perceptions of the value of the bank as
an ongoing concern. Adjusted book value is calculated by multiplying the book
value of the target bank's assets per share times the average market price to
book value ratio of comparable banking organizations. The average market price
to book value ratio measures the premium or discount to book value which
investors attribute to shares of similarly situated banking organizations.
Both the investment value method and the adjusted book value method present
appraised values which are based on the target bank's value as a going concern.
These techniques provide estimates of the market value of the shares of the
subject bank.
D-2
<PAGE>
OVERALL VALUATION
- -----------------
The OCC may use more than one of the above-described methods in deriving the
value of shares of stock. If more than one method is used, varying weights may
be applied in reaching an overall valuation. The weight given to the value by a
particular valuation method is based on how accurately the given method is
believed to represent market value. For example, the OCC may give more weight
to a market value representing infrequent trading by shareholders than to the
value derived from the investment value method when the subject bank's earnings
trend is so irregular that it is considered to be a poor predictor of future
earnings.
PURCHASE PREMIUMS
- -----------------
For mergers and consolidations, the OCC recognizes that purchase premiums do
exist and may, in some instances, be paid in the purchase of small blocks of
shares. However, the payment of purchase premiums depends entirely on the
acquisition or control plans of the purchasers, and such payment are not regular
or predictable elements of market value. Consequently, the OCC's valuation
methods do not include consideration of purchase premiums in arriving at the
value of shares.
STATISTICAL DATA
- ----------------
The chart below lists the results of appraisals the OCC performed between
January 1, 1985 and September 30, 1991. The OCC provides statistical data on
book value and price/earnings ratios for comparative purposes, but does not
necessarily rely on such data in determining the value of the banks' shares.
Dissenting shareholders should not view these statistics as determinative for
future appraisals.
In connection with disclosures given to shareholders under 12 CFR 11.590 (Item
2), banks may provide shareholders a copy of this banking circular or disclose
the information contained herein, including the past results of OCC appraisals.
If the bank discloses the past results of the OCC appraisals, it should advise
shareholders that: (1) the OCC did not rely on all the information set forth in
the chart in performing each appraisal; and (2) the OCC's past appraisals are
not necessarily determinative of its future appraisals of a particular bank's
shares.
D-3
<PAGE>
APPRAISAL RESULTS
- -----------------
<TABLE>
<CAPTION>
OCC AVERAGE PRICE/
APPRAISAL APPRAISAL PRICE BOOK EARNINGS RATIO
DATE* VALUE OFFERED VALUE OF PEER GROUP
<S> <C> <C> <C> <C>
1/1/85 107.25 110.00 178.29 5.3
1/2/85 73.16 NA 66.35 6.8
1/15/85 53.41 60.00 83.95 4.8
1/31/85 22.72 20.00 38.49 5.4
2/1/85 30.63 24.00 34.08 5.7
2/25/85 27.74 27.55 41.62 5.9
4/30/85 25.98 35.00 42.21 4.5
7/30/85 3,153.10 2,640.00 6,063.66 NC
9/1/85 17.23 21.00 21.84 4.7
11/22/85 316.74 338.75 519.89 5.0
11/22/85 30.28 NA 34.42 5.9
12/16/85 66.29 77.00 89.64 5.6
12/27/85 60.85 57.00 119.36 5.3
12/31/85 61.77 NA 73.56 5.9
12/31/85 75.79 40.00 58.74 12.1
1/12/86 19.93 NA 26.37 7.0
3/14/86 59.02 200.00 132.20 3.1
4/21/86 40.44 35.00 43.54 6.4
5/2/86 15.50 16.50 23.69 5.0
7/3/86 405.74 NA 612.82 3.9
7/31/86 297.34 600.00 650.63 4.4
8/22/86 103.53 106.67 136.23 NC
12/26/86 16.66 NA 43.57 4.0
12/31/86 53.39 95.58 69.66 7.1
5/1/87 186.42 NA 360.05 5.1
6/11/87 50.46 70.00 92.35 4.5
6/11/87 38.53 55.00 77.75 4.5
7/31/87 13.10 NA 20.04 6.7
8/26/87 55.92 57.52 70.88 NC
8/31/87 19.55 23.75 30.64 5.0
8/31/87 10.98 NA 17.01 4.2
10/6/87 56.48 60.00 73.11 5.6
3/15/88 297.63 NA 414.95 6.1
6/2/88 27.26 NA 28.45 5.4
6/30/88 137.78 NA 215.36 6.0
8/30/88 768.62 677.00 1,090.55 10.7
3/31/89 773.62 NA 557.30 7.9
5/26/89 136.47 180.00 250.42 4.5
5/29/90 9.87 NA 11.04 9.9
</TABLE>
________________________________________________________________________________
* The "Appraisal Date" is the consummation date for the conversion,
consolidation, or merger.
NA - Not Available
NC - Not Computed
________________________________________________________________________________
D-4
<PAGE>
For more information regarding the OCC's stock appraisal process, contact the
Office of the Comptroller of the Currency, 490 L'Enfant Plaza East, S.W.,
Washington, D.C. 20219, Director for Corporate Activity, Bank Organization and
Structure.
/s/ Frank McGuire
- ------------------------------
Frank McGuire
Acting Corporate Policy and Economic Analysis
D-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
* * *
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
* * *
II-1
<PAGE>
8 -- Form of Opinion of GRA, Thompson, White & Co., P.C.
* * *
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Minneapolis, State of Minnesota, on April 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, this Amendment
No. 1 to Registration Statement has been signed on April 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 )
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-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Form of
Number Description Filing
------ ------------ ---------
<S> <C> <C>
* * *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Form of
Number Description Filing
------ ----------- ---------
<S> <C> <C>
8 Form of Opinion of GRA, Thompson, White & Co., P.C. Electronic
Transmission
* * *
</TABLE>
<PAGE>
Exhibit 8
Board of Directors
Regional Bank of Colorado, National Association
Rifle, Colorado
Members of the Board:
Re: Federal Income Tax Consequences of the Proposed Merger of Regional Bank
of Colorado, National Association, with Norwest Interim Bank Regional,
National Association, a Subsidiary of Norwest Corporation
You have requested the opinion of GRA, Thompson, White & Co., P.C. regarding
certain federal income tax consequences resulting from the merger of Regional
Bank of Colorado, National Association ("Regional") with Norwest Interim Bank
Regional, National Association ("Interim"), a subsidiary of Norwest Corporation
("Norwest"). Specifically, you have requested our opinion that the form and
substance of the merger (the "Merger") of Regional with Interim constitutes a
tax-free reorganization under Code Sections 368 (a)(1)(A) and 368 (a)(2)(E) of
the Internal Revenue Code of 1986, as amended (the "Code"), and that no gain or
loss will be recognized by the shareholders of Regional upon the receipt of
Norwest Common Stock in exchange for their Regional common stock upon
consummation of the Merger.
The proposed transaction is described in the section of this letter entitled
"STATEMENT OF FACTS," and the federal tax consequences of the proposed
transaction are set forth in the section of this letter entitled "OPINION."
STATEMENT OF FACTS
------------------
Norwest, a Delaware corporation, is a registered bank holding company which owns
100 percent of the outstanding common stock of Interim.
Norwest has authorized 509,000,000 shares of capital stock, consisting of
500,000,000 shares of Norwest Common Stock, 5,000,000 shares of preferred stock
without par value ("Norwest Preferred Stock") and 4,000,000 shares of preference
stock without par value ("Norwest Preference Stock"). As of December 31, 1995,
Norwest had issued (i) 358,332,153 shares of Norwest Common Stock, of which
352,760,457 shares were outstanding and 5,571,696 shares were held as treasury
shares, and (ii) 2,119,681 shares of Norwest Preferred Stock, consisting of
1,127,125 shares of 10.24% Cumulative Preferred Stock, 980,000 shares of
Cumulative Tracking Preferred Stock (of which 25,000 shares were held by a
subsidiary of Norwest), 12,984 shares of ESOP Cumulative Convertible Preferred
Stock and 24,572 shares of 1995 ESOP Cumulative
<PAGE>
Page 2
Convertible Preferred Stock. On January 2, 1996, all of the outstanding shares
of 10.24% Cumulative Preferred Stock and related depositary shares were redeemed
at the $100 stated value. On February 27, 1996, Norwest issued 59,000 shares of
its 1996 ESOP Cumulative Preferred Stock. All of these outstanding shares of
Norwest are validly issued, fully paid, and nonassessable.
Interim, a national banking association, has authorized 1,000 shares of voting
common stock, par value $100 per share, of which 1,000 shares are outstanding
and owned by Norwest.
Regional, a national banking association, has authorized 27,000 shares of voting
common stock, par value $20 per share, of which 24,366 shares are outstanding.
All of the outstanding shares of Regional are validly issued, fully paid, and
nonassessable.
For what has been represented to us to be valid business purposes, Norwest and
Regional want to reorganize their businesses. In order to reach that result,
the following transaction is proposed:
(1) Pursuant to the Agreement and Plan of Reorganization dated December 20,
1995, between Norwest and Regional, Regional will merge with and into Interim
with Regional surviving the Merger. Pursuant to the merger all assets and
liabilities of Regional and Interim will become assets and liabilities of
Regional and the separate corporate existence of Interim will cease.
(2) On the effective date of the merger, Regional shareholders will, in exchange
for the surrender and cancellation of their respective stock interests in
Regional, receive 14.569 shares of Norwest voting common stock, with cash paid
for fractional shares, for each share of Regional common stock held at that
time, provided, however, that Norwest shall have no obligation to issue more
than 355,000 shares of Norwest Common Stock to effect the exchange of 100
percent of the issued and outstanding Regional common stock.
3) A minimum of two-thirds of the Regional Common Stock has been voted by the
shareholders for approval of the Agreement and Plan of Reorganization and these
shareholders have agreed not to revoke such approval.
The following additional representations have been made in regard to the
proposed merger:
(a) There is no plan or intention by the Regional shareholders to sell or
otherwise dispose of any Norwest Common Stock received by them in the
transaction which would reduce their ownership of Norwest Common Stock to a
number of shares having, in the aggregate, a fair market value as of the
effective date of the transaction of less than 50 percent of the fair market
value of the formerly outstanding common stock of Regional as of the date of the
transaction. For purposes of this representation, any sale or other disposition
of the Regional common stock occurring prior or subsequent to the exchange which
is part of the Merger will be considered in determining whether there will be a
50 percent continuing interest through common stock ownership as of the
effective date of the Merger.
<PAGE>
Page 3
(b) Norwest has no plan or intention to redeem or otherwise reacquire any of
its Norwest Common Stock to be issued in the proposed Merger.
(c) Norwest has no plan or intention to sell or otherwise dispose of any of the
common stock or assets of Regional except in the ordinary course of business.
(d) The liabilities to which the transferred assets of Regional are subject
were incurred by Regional in the ordinary course of its business.
(e) Following the Merger, Norwest will continue the historic business of
Regional in a substantially unchanged manner.
(f) Norwest, Regional and the shareholders of Regional will each pay their own
fees and expenses in connection with the Merger.
(g) There is no intercorporate debt existing between Norwest and Regional that
was issued, acquired, settled or will be settled at a discount.
(h) No two parties to the Merger are investment companies within the meaning of
such terms as used in Code Section 368 (a)(2)(F)(iii) and (iv).
(i) Regional is not under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Code Section 368 (a)(3)(A).
(j) The fair market value and the adjusted tax basis of the assets of Regional
will exceed the sum of the liabilities assumed by Norwest on the effective
date of the Merger plus the liabilities, if any, to which the assets of
Regional are subject.
(k) The fair market value of the Norwest Common Stock plus the cash for
fractional shares to be received by each of the Regional shareholders in
the Merger is approximately equal to the fair market value of the Regional
common stock exchanged therefor.
(l) None of the Norwest Common Stock issued in the Merger to the Regional
shareholders will represent compensation for past or future services.
(m) On the date of the Merger, the aggregate fair market value of the Norwest
Common Stock to be received by the Regional shareholders will exceed any
cash to be paid.
(n) There have been no material changes in the share holdings of Regional
within the previous 2 years or in contemplation of the Merger described
herein.
<PAGE>
Page 4
DISCUSSION
----------
Classification as a Reorganization
- ----------------------------------
Code Section 368 (a)(1)(A) provides that a reorganization includes a statutory
merger. A statutory merger may be achieved only by strict compliance with the
applicable corporate laws of the United States, a state or territory of the
United States, or the District of Columbia.
Code Section 368(a)(2)(E) provides that a transaction otherwise qualifying under
Code Section 368(a)(1)(A) shall not be disqualified by reason of the fact that
stock of corporation (Norwest) which before the merger was in control of the
merged corporation (Interim) is used in the transaction if, after the
transaction, the corporation surviving the merger (Regional) holds substantially
all of its properties and of the properties of the merged corporation (Interim);
and, in the transaction, former shareholders of the surviving corporation
(Regional) exchanged, for an amount of voting stock of the controlling
corporation (Norwest), an amount of stock in the surviving corporation
(Regional) which constitutes control of such corporation.
The general requirements of a reorganization under Code Sections 368 (a)(1)(A)
and 368 (a)(2)(E) include (1) a valid corporate business purpose, (2) continuity
of business enterprise, and (3) continuity of interest.
Continuity of business enterprise requires that the transferee corporation
either continue the transferor corporation's historic business or use a
significant portion of the transferor's historic business assets, Treasury
Regulation Section 1.368-1(d)(2).
All facts and circumstances are evaluated in determining whether a particular
transaction meets this standard. If the policy objective of granting tax-free
reorganization treatment only for "readjustments of continuing interests in
property under modified corporate form" (Treasury Regulation Section 1.368-
1(d)(2)) is met, the Internal Revenue Service ("IRS") has ruled that the merger
qualifies as a reorganization. In this transaction, Norwest will acquire all of
the stock of Regional currently owned by Regional shareholders and Norwest will
continue the operations of Regional substantially unchanged. Therefore, this
requirement should be met.
The regulations under Code Section 368(a) do not establish the amount of
qualifying consideration to satisfy the continuity of interest requirement.
Treasury Regulation Section 1.368-1(b) states "Requisite to a reorganization
under the Code are a continuity of the business enterprise under the modified
corporate form...a continuity of interest on the part of those persons who,
directly or indirectly, were the owners of the enterprise prior to the
reorganization." The IRS, however, has promulgated a definite test as to the
amount of consideration necessary to satisfy the continuity of interest
requirement for purposes of obtaining a private letter ruling. Under Revenue
Procedure 77-37, 1977-2 C.B. 568, the continuity of interest requirement of
Treasury Regulation Section 1.368-1(b) is satisfied if:
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There is continuing interest through stock ownership in the acquiring or
transferee corporation...on the part of the former shareholders of the acquired
or transferor corporation which is equal in value, as of the effective date of
the reorganization, to at least 50 percent of the value of all the formerly
outstanding stock of the acquired or transferor corporation as of the same date.
It is not necessary that each shareholder of the acquired or transferor
corporation receive in the exchange, stock of the acquiring or transferee
corporation...which is equal in value to at least 50 percent of the value of his
former stock interest in the acquired or transferor corporation, so long as one
or more of the shareholders of the acquired or transferor corporation have a
continuing interest through stock ownership in the acquiring or transferee
corporation...which is, in the aggregate, equal in value to at least 50 percent
of the value of all of the formerly outstanding stock of the acquired or
transferor corporation.
It has been represented in this transaction that the Regional shareholders will
receive Norwest Common Stock having a fair market value of not less than 50
percent of the fair market value of the formerly outstanding common stock of
Regional. Thus, it has been represented that there will be a level of
continuity of interest which meets the IRS guidelines for ruling.
A bona fide corporate business purpose is also vital to a tax-free
reorganization. Treasury Regulation Section 1.368-1(c) states: "A scheme which
involves an abrupt departure from normal reorganization procedure in connection
with a transaction on which the imposition of tax is imminent, such as a mere
device that puts on a form of a corporate reorganization as a disguise for
concealing its real character, and the object and accomplishment of which is a
consummation of a preconceived plan having no business or corporate purpose, is
not a plan of reorganization." Evidence should be prevalent that the transaction
is logical and sound from a business standpoint and that tax considerations be
secondary. It has been represented that there are bona fide business reasons
for consummating the Merger of Regional and Interim and thus it has been assumed
that this requirement has been met.
Provided that (1) the merger of Regional with Interim is undertaken for a valid
business purpose, (2) after the transaction Norwest continues the historic
business of Regional and (3) Regional shareholders exchange for Norwest common
stock an amount of Regional common stock constituting a continuity of interest,
then the transaction should constitute a reorganization within the meaning of
Code Section 368 (a)(1)(A). Norwest and Regional will each be a "party to
reorganization" within the meaning of Code Section 368 (b).
Nonrecognition of Gain or Loss
- ------------------------------
Code Section 354 (a)(1) provides that stock or securities in one corporation
which is a party to a reorganization may be exchanged for stock or securities in
another corporation which is also a party to the reorganization without the
recognition of gain or loss. In order that an exchange of stock or securities
may qualify for nonrecognition of gain or loss, it is necessary that (a) there
be a reorganization, (b) the stock or securities exchanged be stock or
securities in a corporation a party to the reorganization, (c) the exchange be
affected in pursuance of a plan of reorganization,
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and (d) the exchange be made solely for stock or securities in another
corporation also a party to the reorganization.
Receipt of Consideration Other Than Stock
- -----------------------------------------
Code Section 356 (a)(1) provides that, if the nonrecognition rule of Code
Section 354 would apply to an exchange but for the fact that money or other
property is received in addition to stock, then gain, if any, to the recipient
shall be recognized to the extent of the sum of money and the fair market value
of other property received. However, no loss from such exchange shall be
recognized. Therefore, the Regional shareholders will recognize gain, if any,
on their receipt of Norwest Common Stock and cash for fractional shares in
exchange for their Regional common stock, but only to the extent of cash
received in the exchange.
Code Section 356 (a)(2) provides that if a receipt of cash by Regional
shareholders has the effect of the distribution of a dividend, then the gain
recognized by Regional shareholders may be taxed as a dividend rather than as a
capital gain. In order for Regional shareholders to determine if the receipt of
cash has the effect of a dividend, an analysis must be done for each Regional
shareholder receiving cash. This analysis should apply the principles announced
by the Supreme Court in Donald E. Clark, 489 U.S. 726 (1989), with reference to
Revenue Ruling 93-61 and Revenue Ruling 76-385. Each affected shareholder of
Regional should consult their own tax advisor on this matter.
Basis and Holding Period of Stock
- ---------------------------------
Code Section 358 provides that shareholders receiving solely qualifying stock or
securities in a reorganization retain the same tax basis for such stock as they
had in the stock or securities surrendered. Accordingly, the basis of Regional
shareholders in their newly received Norwest Common Stock will be the same as
their basis in the Regional common stock surrendered. Other than cash for
fractional shares, the Regional shareholders will receive solely Norwest Common
Stock. Consequently, the general rule of carryover basis will govern this
transaction for those receiving Norwest stock.
If the property received in an exchange has the same basis as the property given
up, then Code Section 1223 (1) applies to determine the holding period for the
property received. Code Section 1223 (1) provides that if the property
surrendered is a capital asset then the period during which the taxpayer held
the property surrendered in the exchange is added to the period he holds the
property received in the exchange in order to determine the holding period of
the property received.
The status of property as a capital asset is determined under Code Section 1221,
which defines a "capital asset" as any property of a taxpayer other than
property specifically excluded by the Code. Generally, the stock of a
corporation will be treated as a capital asset under this section.
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Therefore, provided that the Regional common stock is a capital asset, each
Regional shareholder will be able to include his respective ownership period of
the Regional common stock in determining the holding period of the Norwest
Common Stock received in the proposed Merger.
OPINION
-------
Based on the forgoing, it is the opinion of GRA, Thompson, White & Co., P.C.
that the Merger of Regional with Interim, in accordance with federal law will be
treated as a tax-free reorganization under Sections 368 (a)(1)(A) and 368
(a)(2)(E) of the Code.
Each Regional shareholder who receives both cash for fractional shares and
Norwest Common Stock will realize gain, if any, measured by the excess of the
fair market value of the Norwest Common Stock plus the cash received over the
adjusted tax basis of such shareholder's Regional common stock surrendered.
However, gain will only be recognized by each Regional shareholder to the extent
of any cash received. The characterization of the gain recognized as ordinary
income (i.e. dividend) or capital gain will be made on a shareholder by
shareholder basis.
The basis of the Norwest Common Stock received by Regional shareholders will be
the same as the basis of the Regional common stock surrendered in the exchange
decreased by the amount of cash received by such shareholder, increased by the
amount treated as a dividend, and increased by the amount of capital gain
recognized.
Provided the Regional common stock surrendered was held as a capital asset on
the date of the Merger, then the holding period of the Norwest Common Stock
received will include the holding period of the Regional common stock
surrendered in exchange therefor.
LIMITATIONS ON OPINION
----------------------
The opinions expressed in this letter are rendered only with respect to the
specific matters discussed herein, and we express no opinion with respect to any
other legal, federal, or state income tax aspect of this transaction. If any of
the above-stated facts, circumstances, or representations are not entirely
complete or accurate, it is imperative that we be informed in writing
immediately, as their inaccuracy could have a material effect on our
conclusions. We have not independently verified each of the above facts or
representations.
In rendering our opinion, we are relying upon the relevant provisions of the
Code, the regulations thereunder, and judicial and administrative
interpretations thereof, all as of the date of this letter, all of which are
subject to change or modification by subsequent legislative, regulatory,
administrative or judicial decision. Such change could also have an effect on
our conclusions. We undertake no obligation to update our opinion in the event
of any such change.
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This opinion letter represents merely our view of the transaction. No assurance
can be given that the courts, Treasury Department, or Internal Revenue Service
will agree with our views. Moreover, this opinion is solely for the use of
Regional in evaluating this proposed transaction. No other use of this opinion
is authorized.
GRA, Thompson, White & Co., P.C.
