<PAGE>
As filed with the Securities and Exchange Commission on May 2, 1996
Registration No. 333-02679
================================================================================
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)
Copy to:
Mary E. Schaffner
Norwest Corporation
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
612-667-2367
_____________________
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>
NORWEST CORPORATION
-------------------
Cross Reference Sheet
Pursuant to Regulation S-K, Item 501(b)
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<CAPTION>
Form S-4 Item Prospectus Heading
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<S> <C> <C>
1. Forepart of Registration Statement Outside Front Cover Page
and Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Available Information;
Pages of Prospectus Incorporation of Certain
Documents by Reference;
Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Summary Information
Charges, and Other Information
4. Terms of the Reorganization The Merger
5. Pro Forma Financial Information *
6. Material Contracts with the Company The Merger
Being Acquired
7. Additional Information Required for *
Reoffering by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Experts and Counsel Legal Opinion
9. Disclosure of Commission Position on *
Indemnification for Securities Act
Liabilities
10. Information with Respect to S-3 Summary Information--
Registrants Comparative Per Common
Share Data; Summary
Information--Selected Financial
Data; Certain Regulatory
Considerations
11. Incorporation of Certain Information Incorporation of Certain
by Reference Documents by Reference;
Management and Additional
Information
</TABLE>
<PAGE>
NORWEST CORPORATION
-------------------
Cross Reference Sheet
Pursuant to Regulation S-K, Item 501(b)
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<CAPTION>
Form S-4 Item Prospectus Heading
------------- ------------------
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12. Information with Respect to S-2 or *
S-3 Registrants
13. Incorporation of Certain Documents *
by Reference
14. Information with Respect to *
Registrants Other Than S-2 or S-3
Registrants
15. Information with Respect to S-3 *
Companies
16. Information with Respect to *
S-2 or S-3 Companies
17. Information with Respect to Companies Summary Information--
Other Than S-2 or S-3 Companies Comparative Per Common Share
Data; Information About AGI
18. Information If Proxies, Consents, Meeting Information; The Merger--
or Authorizations Are to Be Solicited Interests of Certain Persons
in the Merger; The Merger--
Appraisal Rights of Dissenting
Stockholders
19. Information If Proxies, Consents, or *
Authorizations Are Not to Be Solicited
In an Exchange Offer
</TABLE>
- --------------
*Item is omitted because answer is negative or item is inapplicable.
<PAGE>
AMERIGROUP, INCORPORATED
1809 PLYMOUTH ROAD SOUTH
SUITE 360
MINNETONKA, MINNESOTA 55305
May 3, 1996
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
AmeriGroup, Incorporated ("AGI") to be held at the offices of Waycrosse, Inc.,
15407 McGinty Road West, Wayzata, Minnesota, on Tuesday, June 4, 1996,
at 10:00 a.m., local time.
The purpose of the Special Meeting is to consider and vote upon (i) the
Agreement and Plan of Reorganization, dated as of December 8, 1995, between
AGI and Norwest Corporation ("Norwest") and the related Agreement and Plan of
Merger (together, the "Reorganization Agreement"), providing for the merger of
a wholly-owned subsidiary of Norwest into AGI (the "Merger"), and (ii) in
connection with the Merger, an amendment to Article X of AGI's Certificate of
Incorporation to exclude certain transactions, including the Merger, from the
definition of a "Purchase Event" contained therein.
If the Merger is consummated, each share of AGI Class A Voting Common Stock
and Class B Non-Voting Common Stock outstanding immediately prior to the time
the Merger becomes effective will be converted into a number of shares of
Norwest Common Stock determined in accordance with the provisions of the
Reorganization Agreement, which are described in the enclosed Proxy Statement-
Prospectus for the Special Meeting. The Proxy Statement-Prospectus contains a
more complete description of the terms of the Merger. You are urged to read
the Proxy Statement-Prospectus carefully.
The Board of Directors has carefully reviewed and considered the terms and
conditions of the proposed Merger.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED MERGER IS IN THE BEST
INTERESTS OF AGI AND ITS STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED THE
PROPOSED MERGER.
AGI and Norwest intend that the Merger will be a tax-free reorganization
under the Internal Revenue Code. You should consult your own tax advisor
concerning the federal income tax consequences and any applicable foreign,
state, local, or other tax consequences of the Merger.
Only holders of AGI Class A Voting Common Stock will be entitled to vote at
the Special Meeting upon the proposals to approve the Reorganization Agreement
and the amendment to AGI's Certificate of Incorporation. Holders of AGI Class
B Non-Voting Common Stock are entitled to receive notice of the Special
Meeting and the accompanying Proxy Statement-Prospectus, which contains, in
addition to information about the terms of the Merger and other matters,
information with respect to certain appraisal rights available under Delaware
law to a holder of AGI Class A Voting Common Stock or Class B Non-Voting
Common Stock who dissents from the Merger.
If you are a holder of AGI Class A Voting Common Stock, PLEASE MARK, DATE,
SIGN, AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE, in order to
ensure that your vote is represented at the Special Meeting. If you attend the
meeting, you may vote in person if you wish, even though you have previously
returned your proxy.
Very truly yours,
David D. MacMillan
President
<PAGE>
AMERIGROUP, INCORPORATED
1809 PLYMOUTH ROAD SOUTH
SUITE 360
MINNETONKA, MINNESOTA 55305
----------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 4, 1996
----------------------------
A special meeting of the stockholders (the "Special Meeting") of
AmeriGroup, Incorporated ("AGI"), a Delaware corporation, will be held at the
offices of Waycrosse, Inc., 15407 McGinty Road West, Wayzata, Minnesota, on
Tuesday, June 4, 1996, at 10:00 a.m., local time, for the following
purposes:
1. To consider and vote upon the Agreement and Plan of
Reorganization, dated as of December 8, 1995 (including the Agreement and
Plan of Merger attached thereto) (together, the "Reorganization
Agreement"), by and between AGI and Norwest Corporation ("Norwest"), a
Delaware corporation, a copy of which is included in the accompanying Proxy
Statement-Prospectus as Appendix A, under the terms of which a wholly-owned
subsidiary of Norwest would be merged with AGI (the "Merger"), with AGI as
the surviving corporation, and each outstanding share of Class A Voting
Common Stock and Class B Non-Voting Common Stock, par value $.01 per share,
of AGI (collectively, the "AGI Common Stock")would be converted into a
number of shares of common stock, par value $1-2/3 per share, of Norwest
determined in accordance with the Reorganization Agreement; and to
authorize such further action by the Board of Directors and proper officers
of AGI as may be necessary or appropriate to carry out the intent and
purposes of the Merger.
2. To consider and vote upon an amendment to Article X of the
Certificate of Incorporation of AGI to exclude certain transactions,
including the Merger, from the definition of "Purchase Event" contained
therein (the "Certificate Amendment").
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only holders of record of AGI Common Stock on the books of AGI at the close
of business on April 30, 1996, will be entitled to receive notice of the Special
Meeting. Only holders of AGI Class A Common Stock as of such date will be
entitled to vote at the Special Meeting or any adjournment thereof.
The affirmative vote of a majority of the outstanding shares of AGI Class A
Voting Common Stock is required to approve the Reorganization Agreement; and the
affirmative vote of the holders of 70% of the outstanding shares of AGI Class A
Voting Common Stock is required to approve the
<PAGE>
Certificate Amendment. 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.
Holders of each of AGI Class A Voting and Class B Non-Voting Common Stock
are entitled to assert dissenters' rights under Section 262 of the Delaware
General Corporation Law, a copy of which is attached as Appendix C to the
accompanying Proxy Statement-Prospectus. See "THE MERGER--Appraisal Rights of
Dissenting Stockholders" in the accompanying Proxy Statement-Prospectus for more
information.
By Order of the Board of Directors
Lynn A. Wilde
Secretary
May 3, 1996
HOLDERS OF AGI CLASS A VOTING COMMON STOCK ARE URGED TO COMPLETE, SIGN,
DATE, AND MAIL THE ENCLOSED PROXY PROMPTLY IN THE ACCOMPANYING ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE SPECIAL
MEETING, YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AND VOTE IN PERSON. THE PROXY
MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE IN THE MANNER DESCRIBED IN THE
PROXY STATEMENT-PROSPECTUS.
HOLDERS OF AGI COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES FOR SHARES OF
AGI COMMON STOCK TO NORWEST OR AGI AT THIS TIME.
2
<PAGE>
AMERIGROUP, INCORPORATED
PROXY STATEMENT
FOR A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 4, 1996
-------------------------------
NORWEST CORPORATION
PROSPECTUS
SHARES OF COMMON STOCK
-------------------------------
This Prospectus of Norwest Corporation ("Norwest") relates to the issuance
of up to 1,300,000 shares of the common stock, par value $1-2/3 per share, of
Norwest ("Norwest Common Stock") to the stockholders of AmeriGroup, Incorporated
("AGI") upon consummation of the proposed merger (the "Merger") of a wholly-
owned subsidiary of Norwest with AGI, with AGI as the surviving corporation,
pursuant to the terms of the Agreement and Plan of Reorganization, dated as of
December 8, 1995, by and between AGI and Norwest (together with the Agreement
and Plan of Merger attached thereto, the "Reorganization Agreement"). The
Reorganization Agreement is set forth in Appendix A to this Proxy Statement-
Prospectus and is incorporated by reference herein.
This Prospectus also serves as the Proxy Statement of AGI for a special
meeting of its stockholders to be held on June 4, 1996 (the "Special Meeting").
Upon consummation of the Merger, each outstanding share of the Class A
Voting Common Stock and the Class B Non-Voting Common Stock of AGI
(collectively, the "AGI Common Stock"), will be converted into the number of
shares of common stock, par value $1-2/3 per share, of Norwest ("Norwest Common
Stock"), determined by dividing the "Adjusted Norwest Shares" by the aggregate
number of shares of AGI Common Stock then outstanding. The "Adjusted Norwest
Shares" will be that number of shares of Norwest Common Stock calculated by
dividing $32,250,000, minus (i) $60,711 (the cost to AGI and its subsidiaries,
AmeriBank and American Community Bank Group Service Corporation (the "AGI
Subsidiaries"), to redeem minority interests in the outstanding shares of
AmeriBank common stock, (ii) $63,440 (the after-tax cost to AGI and the AGI
Subsidiaries of one-half the lump sum cash payment to be paid to Larry D.
Albert, the current President of AmeriBank pursuant to the Change-in-Control
Agreement relating to the proposed Merger, and (iii) $1,149 (the after-tax cost
to AGI and the AGI Subsidiaries of health insurance to be provided by AGI
pursuant to the Change-in-Control Agreement), by the Norwest Measurement Price.
The amount of the adjustments shown in clauses (ii) and (iii) for purposes of
computing the Adjusted Norwest Shares to be issued in the Merger have been
agreed to by Norwest and AGI. In addition, and as provided in the Reorganization
Agreement, because the anticipated "Effective Date of the Merger" (as defined in
the Reorganization Agreement) will occur after the record dates for Norwest's
regular quarterly Norwest Common Stock dividend paid on March 1 and to be paid
on June 1, 1996 (the dividends for the fiscal quarters ending on or after
January 1, 1996, and prior to the Effective Date of the Merger,) then the
Adjusted Norwest Shares will also be increased by the "Dividend Shares" (a
number of shares of Norwest Common Stock equal to an aggregate cash dividend of
$510,000 paid on 1,000,000 shares of Norwest Common Stock on March 1 and June 1,
1996), divided by the Norwest Measurement Price. The Norwest Measurement Price
will be equal to 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 second trading day immediately
preceding the Special Meeting.
<PAGE>
If the Special Meeting were held on May 1, 1996 (the most recent
practicable date for purposes of this assumption prior to the date of this Proxy
Statement-Prospectus), the Norwest Measurement Price would be $36.38 (based on
the average of the closing prices of Norwest Common Stock as reported on the
NYSE during the period of 20 trading days (April 1, 1996 to April 29, 1996)
ending on the second trading day (April 29) immediately preceding the assumed
Special Meeting date of May 1, 1996. The Adjusted Norwest Shares would equal
897,051 shares, including 14,019 Dividend Shares computed as follows:
$32,250,000, minus (i) $60,711, (ii) $63,440, and (iii) $1,149, which equals
(A) $32,124,700, divided by the Norwest Measurement Price ($36.38) (883,032
shares), plus (B) $510,000 (the aggregate amount of the dividend that paid on
March 1, 1996 and on June 1, 1996 to a holder of record of 1,000,000 shares of
Norwest Common Stock on February 2, 1996 and May 10, 1996, the record dates for
such dividends), divided by the Norwest Measurement Price (14,019 Dividend
Shares). Assuming that the Merger had been consummated on May 1, 1996, and
based on the foregoing assumed Norwest Measurement Price and a total of
1,007,671 shares of AGI Common Stock outstanding, each AGI stockholder would
have received for each share of AGI Common Stock held, .89022 shares of Norwest
Common Stock (including cash in lieu of fractional shares) (897,051 Adjusted
Norwest Shares divided by 1,007,671 shares of AGI Common Stock).
THE FOREGOING INFORMATION WITH RESPECT TO THE NORWEST MEASUREMENT PRICE AND
THE ASSUMED PER SHARE EXCHANGE RATIO IS BEING PROVIDED FOR PURPOSES OF
ILLUSTRATION ONLY. THE INFORMATION PRESENTED ABOVE IS NOT INTENDED AS AN
ESTIMATE OR PROJECTION OF ANY DATA THAT WILL BE USED TO DETERMINE THE NORWEST
MEASUREMENT PRICE OR THE NUMBER OF SHARES OF NORWEST COMMON STOCK THAT AN AGI
STOCKHOLDER MAY ULTIMATELY RECEIVE IN THE MERGER. THE ACTUAL NORWEST MEASUREMENT
PRICE USED TO COMPUTE THE ADJUSTED NORWEST SHARES MAY BE HIGHER OR LOWER THAN
THE ASSUMED NORWEST MEASUREMENT PRICE PRESENTED ABOVE.
For a more complete description of the Reorganization Agreement and the
terms of the Merger, see "THE MERGER."
This Proxy Statement-Prospectus and the form of proxy for the Special
Meeting are first being mailed to stockholders of AGI on or about May 6,
1996.
-----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------------
THE 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.
-----------------------------
The date of this Proxy Statement-Prospectus is May __, 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
AVAILABLE INFORMATION.............................................................. 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................................... 2
SUMMARY............................................................................ 3
Parties to the Merger.......................................................... 3
Terms of the Merger............................................................ 4
Special Meeting and Vote Required.............................................. 4
Reasons for the Merger......................................................... 5
Recommendation of the AGI Board of Directors................................... 5
Effective Date and Time of the Merger.......................................... 5
Conditions and Termination..................................................... 6
Accounting Treatment........................................................... 6
Regulatory Approvals........................................................... 6
Management and Operations After the Merger..................................... 6
Interests of Certain Persons in the Merger..................................... 6
Appraisal Rights of Dissenting Stockholders.................................... 7
Certain Federal Income Tax Considerations...................................... 7
Resale of Norwest Common Stock................................................. 7
Markets and Market Prices...................................................... 8
Certain Differences in Rights of Stockholders.................................. 8
Comparative Per Common Share Data.............................................. 8
Selected Financial Data........................................................ 10
MEETING INFORMATION................................................................ 13
General........................................................................ 13
Date, Place, and Time.......................................................... 13
Record Date; Vote Required for Special Meeting................................. 13
Principal Stockholders and Security Ownership of Management of AGI............. 14
Voting and Revocation of Proxies............................................... 17
Solicitation of Proxies........................................................ 18
THE MERGER......................................................................... 18
Background of the Merger....................................................... 18
AGI's Reasons for the Merger; Recommendation of the Board of Directors of AGI.. 19
Terms of the Merger............................................................ 20
Effective Date and Time of the Merger.......................................... 21
Surrender of Certificates...................................................... 22
Conditions to the Merger....................................................... 22
Regulatory Approvals........................................................... 23
Conduct of Business Pending the Merger......................................... 24
Certain Covenants.............................................................. 25
No Solicitation................................................................ 25
Waiver, Amendment, and Termination............................................. 26
Effect on Employee Benefit Plans............................................... 26
Management and Operations After the Merger..................................... 26
</TABLE>
i
<PAGE>
<TABLE>
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PAGE
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Interests of Certain Persons in the Merger..................................... 27
Appraisal Rights of Dissenting Stockholders.................................... 27
Certain Federal Income Tax Considerations...................................... 30
Resale of Norwest Common Stock................................................. 33
Accounting Treatment........................................................... 33
Expenses....................................................................... 33
AMENDMENT TO THE CERTIFICATE OF
INCORPORATION OF AGI........................................................... 34
INFORMATION ABOUT AGI.............................................................. 35
General........................................................................ 35
Market Area and Competition.................................................... 36
Loans and Investments.......................................................... 36
Deposits and Other Banking Services............................................ 37
Properties..................................................................... 37
Employees...................................................................... 37
Market Price of and Dividends on AGI Common Stock.............................. 37
Supervision and Regulation..................................................... 37
Legal Proceedings.............................................................. 38
Management's Discussion and Analysis of AGI's Financial Condition
and Results of Operations................................................... 39
NORWEST CAPITAL STOCK AND RIGHTS................................................... 52
General........................................................................ 52
Norwest Common Stock........................................................... 52
Norwest Preferred Stock; Norwest Preference Stock.............................. 53
Rights Plan.................................................................... 53
Dividend Reinvestment and Optional Cash Payment Plan........................... 55
Shares Registered under the Securities Act..................................... 55
CERTAIN DIFFERENCES IN RIGHTS OF STOCKHOLDERS...................................... 55
Description of Capital Stock and Certain Rights................................ 56
Preemptive Rights.............................................................. 56
Election and Removal of Directors.............................................. 56
Amendment to Certificate of Incorporation and By-Laws.......................... 57
Required Stockholder Vote for Authorization of Mergers and Asset Sales......... 58
Appraisal Rights............................................................... 58
Special Meetings............................................................... 59
Limitation of Director Liability and Indemnification........................... 59
Action Without a Meeting....................................................... 61
Dividends...................................................................... 61
Proposal of Business, Nomination of Directors.................................. 61
</TABLE>
ii
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PAGE
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CERTAIN REGULATORY CONSIDERATIONS.................................................... 62
General.......................................................................... 62
Dividend Restrictions............................................................ 62
Holding Company Structure........................................................ 63
Acquisitions..................................................................... 63
Capital Requirements............................................................. 64
Federal Deposit Insurance Corporation Improvement Act of 1991.................... 65
FDIC Insurance................................................................... 66
Depositor Preference............................................................. 67
EXPERTS.............................................................................. 67
LEGAL OPINION........................................................................ 68
MANAGEMENT AND ADDITIONAL INFORMATION................................................ 68
FINANCIAL STATEMENTS................................................................. F-1
APPENDIX A AGREEMENT AND PLAN OF REORGANIZATION AND
AGREEMENT AND PLAN OF MERGER
APPENDIX B DELAWARE GENERAL CORPORATION LAW, SECTION 262
--------------------------------------
</TABLE>
iii
<PAGE>
AVAILABLE INFORMATION
Norwest is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In accordance
therewith, Norwest files reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission").
Reports, proxy statements, and other information filed by Norwest can be
inspected and copied at the public reference facilities of the Commission,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located at Seven World Trade Center, Suite 1300, New
York, New York 10048, and at the 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 filed by Norwest also may be inspected at
the offices of the New York Stock Exchange at 20 Broad Street, New York, New
York 10005 and at the offices of the Chicago Stock Exchange at One Financial
Place, 440 South LaSalle Street, Chicago, Illinois 60605.
This Proxy Statement-Prospectus does not contain all of the information
set forth in the Registration Statement on Form S-4 and the exhibits thereto
(the "Registration Statement") covering the securities offered hereby that
Norwest has filed with the Commission. Certain portions of the Registration
Statement have been omitted pursuant to the rules and regulations of the
Commission. Reference is hereby made to such omitted portions for further
information with respect to Norwest and the securities offered hereby.
Statements contained herein concerning the provisions of 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 as an appendix hereto.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE NORWEST
COMMON STOCK OFFERED BY THIS PROXY STATEMENT-PROSPECTUS, OR THE SOLICITATION
OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF NORWEST OR AGI SINCE THE DATE OF THIS PROXY
STATEMENT-PROSPECTUS OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
1
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS RELATING TO
NORWEST, EXCLUDING EXHIBITS, UNLESS SPECIFICALLY INCORPORATED THEREIN, ARE
AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST TO LAUREL A. HOLSCHUH,
SECRETARY, NORWEST CORPORATION, NORWEST CENTER, SIXTH AND MARQUETTE,
MINNEAPOLIS, MINNESOTA 55479-1026, TELEPHONE 612/667-8655. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MAY 28, 1996.
The following documents filed with the Commission by Norwest (File No. 1-
2979) are incorporated by reference in, and made a part of, this Proxy
Statement-Prospectus: (i) Annual Report on Form 10-K for the year ended
December 31, 1995; and (ii) Current Reports on Form 8-K dated January 17,
1996, February 20, 1996, as amended pursuant to Form 8-K/A, February 26, 1996,
and April 17, 1996.
All documents filed by Norwest with the Commission pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Exchange Act subsequent to the date hereof
and prior to the Special Meeting shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of such filing. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein or in any other
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part hereof.
2
<PAGE>
SUMMARY
The following summary of certain information relating to the Merger is
not intended to be complete and is qualified in all respects by the more
detailed information included in this Proxy Statement-Prospectus, the
Appendices hereto, and the documents incorporated by reference herein. As
used in this Proxy Statement-Prospectus, the terms "Norwest" and "AGI" refer
to such entities, respectively, and where the context requires, such entities
and their respective subsidiaries. All information concerning Norwest
included in this Proxy Statement-Prospectus has been furnished by Norwest, and
all information concerning AGI included in this Proxy Statement-Prospectus has
been furnished by AGI to Norwest for incorporation herein.
PARTIES TO THE MERGER
NORWEST
-------
Norwest is a diversified financial services company which was organized
under the laws of Delaware in 1929 and is registered under the Bank Holding
Company Act of 1956 (the "BHC Act"), as amended. 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. 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 to be paid for, its pending acquisitions
in its annual and quarterly reports filed with the Commission. 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 herein by reference and elsewhere in this Proxy
Statement-Prospectus. See "AVAILABLE INFORMATION," "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE," "--Selected Financial Data," "NORWEST CAPITAL STOCK
AND RIGHTS," "CERTAIN DIFFERENCES IN RIGHTS OF STOCKHOLDERS," and "CERTAIN
REGULATORY CONSIDERATIONS PERTAINING TO NORWEST."
3
<PAGE>
AGI
---
AGI is a one bank holding company, registered under the Bank Holding
Company Act of 1956, organized as a Delaware corporation, and headquartered in
Minnetonka, Minnesota. AGI owns all of the outstanding capital stock of
AmeriBank, a bank chartered under the laws of Minnesota with four branches in
two Minnesota communities. AGI also owns all of the outstanding capital stock
of American Community Bank Group Service Corporation. AmeriBank and American
Community Bank Group Service Corporation are referred to in this Proxy
Statement-Prospectus collectively as the "AGI Subsidiaries." At December 31,
1995, AGI had consolidated total assets of $165.8 million and total
stockholders' equity of $25.0 million. Through AmeriBank, AGI offers a range
of traditional banking services, including commercial and retail lending,
credit cards, data processing, and other financial services. AGI's main
office is located at 1809 Plymouth Road South, Suite 360, Minnetonka,
Minnesota 55305, and its telephone number is 612/525-5660. See "INFORMATION
ABOUT AGI."
TERMS OF THE MERGER
The Reorganization Agreement provides for the merger of a wholly-owned
subsidiary of Norwest with AGI, with AGI as the surviving corporation. Upon
consummation of the Merger, the outstanding shares of AGI Common Stock (other
than shares as to which statutory dissenters' rights have been exercised and
not forfeited) will be converted into a number of shares of Norwest Common
Stock determined in accordance with the provisions of the Reorganization
Agreement. The exact number of shares of Norwest Common Stock into which each
outstanding share of AGI Common Stock will be converted will be determined by
(i) calculating the Adjusted Norwest Shares (based on a dollar amount computed
pursuant to a formula set forth in the Reorganization Agreement divided by the
"Norwest Measurement Price) and (ii) by dividing the Adjusted Norwest Shares
by the aggregate number of shares of AGI Common Stock then outstanding. The
Norwest Measurement Price will be equal to 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
second trading day immediately preceding the Special Meeting. As provided in
the Reorganization Agreement, if the "Effective Date of the Merger" (as
defined in the Reorganization Agreement) occurs after the record date for any
of Norwest's regular quarterly Norwest Common Stock dividends for each fiscal
quarter ending on or after January 1, 1996, then the Adjusted Norwest Shares
will also be increased by the Dividend Shares (a number of shares of Norwest
Common Stock equal to the aggregate cash dividend that would have been paid on
1,000,000 shares of Norwest Common Stock for each such quarter divided by the
Norwest Measurement Price).
The terms of the Reorganization Agreement with respect to the calculation
of the number of shares of Norwest Common Stock to be received by holders of
AGI Common Stock in the Merger, and an example of this calculation for
purposes of illustration only, are set forth in more detail on the front cover
of this Proxy-Statement-Prospectus and under the heading "THE MERGER--Terms of
the Merger."
SPECIAL MEETING AND VOTE REQUIRED
The Special Meeting of AGI stockholders to consider and vote on the
Merger and the amendment to the Certificate of Incorporation of AGI (the
"Certificate Amendment") will be held on Tuesday, June 4, 1996, at 10:00
a.m., local time, at the offices of Waycrosse, Inc., 15407 McGinty Road West,
Wayzata, Minnesota. Only holders of record of AGI Class A Voting Common Stock
at the close of business on April 30, 1996, will be entitled to vote at the
Special Meeting. At such date, there were 901,134 shares of AGI Class A Voting
Common Stock outstanding. Each share of AGI Class A Voting
4
<PAGE>
Common Stock is entitled to one vote. For additional information relating to
the Special Meeting, see "MEETING INFORMATION."
Approval of the Reorganization Agreement requires the affirmative vote of
the holders of not less than a majority of the outstanding shares of Class A
Voting Common Stock of AGI. Approval of the Certificate Amendment requires the
affirmative vote of the holders of at least 70% of the outstanding shares of
Class A Voting Common Stock of AGI. As of the record date for the Special
Meeting, directors and officers of AGI owned beneficially or controlled the
voting of 49.4% of the shares of AGI Class A Voting Common Stock outstanding
on that date. AGI's directors and officers have informed AGI that they intend
to vote all of their shares (other than those shares held in a fiduciary
capacity) in favor of the Reorganization Agreement and the Certificate
Amendment. At the record date, directors and executive officers of Norwest did
not own beneficially any shares of AGI Class A Voting Common Stock. See
"MEETING INFORMATION--Record Date; Vote Required for Special Meeting" and
"--Principal Stockholders and Security Ownership of Management of AGI."
REASONS FOR THE MERGER
After careful consideration and review, the Board of Directors of AGI has
concluded that the Merger and the related Certificate Amendment are in the
best interests of the holders of AGI Common Stock. The Board reached its
decision to merge with Norwest based on their analysis of several critical
factors. These factors included the fact that, with the rapidly changing
environment in the banking industry, AGI would benefit from the association
with a larger banking organization and its resources The Board also
considered, among other factors, the terms and conditions of the
Reorganization Agreement, an analysis of certain economic, financial, legal,
and market factors, the anticipated tax consequences to the AGI stockholders,
and the consideration to be received by the stockholders of AGI in the Merger.
See "THE MERGER--Background of the Merger" and "--AGI's Reasons for the
Merger; Recommendation of the Board of Directors of AGI."
RECOMMENDATION OF THE AGI BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF AGI UNANIMOUSLY RECOMMENDS THAT HOLDERS OF AGI
STOCK VOTE "FOR" THE MERGER AND "FOR" THE CERTIFICATE AMENDMENT. For
information concerning the interests of certain members of the AGI Board of
Directors and management in the Merger, see "THE MERGER--Interests of Certain
Persons in the Merger."
EFFECTIVE DATE AND TIME OF THE MERGER
Subject to the terms and conditions of the Reorganization Agreement, the
Merger will be effective on the date on which the appropriate filing is made
with the Secretary of State of the state of Delaware (the "Effective Date of
the Merger") at 11:59 p.m., Minneapolis, Minnesota time (the "Effective Time
of the Merger"). That filing will be made within ten business days following
the satisfaction or waiver of all conditions set forth in the Reorganization
Agreement or on such other date upon which the parties may agree. The closing
of the Merger will occur on the Effective Date of the Merger (the "Closing
Date"). The parties expect the Merger to become effective in the second
quarter of 1996. See "THE MERGER--Effective Date and Time of the Merger" and
"--Conditions to the Merger."
5
<PAGE>
CONDITIONS AND TERMINATION
The respective obligations of Norwest and AGI to consummate the Merger
are subject to certain conditions, including the receipt of regulatory
approvals without unduly burdensome conditions, approval of the Reorganization
Agreement by the stockholders of AGI, receipt by AGI of certain tax opinions,
the approval of the Certificate Amendment, and certain other conditions
customary in transactions of this nature. See "THE MERGER--Conditions to the
Merger" and "--Regulatory Approvals."
The Reorganization Agreement may be terminated at any time prior to the
Effective Date of the Merger, whether prior to or after approval by AGI's
stockholders, by either party under specified conditions, including if the
Merger shall not have been consummated by July 31, 1996, unless such failure
of consummation shall be due to the failure of the party seeking termination
to perform its respective covenants and agreements under the Reorganization
Agreement. See "THE MERGER--Waiver, Amendment, and Termination."
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a "purchase" by
Norwest under generally accepted accounting principles. See "THE MERGER--
Conditions to the Merger" and "--Accounting Treatment."
REGULATORY APPROVALS
The Merger is subject to the approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). Receipt of such
approvals is a condition to the consummation of the Merger. Norwest filed an
application for approval of the Merger with the Federal Reserve Board on
January 26, 1996. On April 29, the Federal Reserve Board approved the Merger.
See "THE MERGER--Regulatory Approvals."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Following the Merger, and subject to the approval of the Comptroller of
the Currency, AmeriBank will be consolidated with Norwest Bank Minnesota,
National Association ("Norwest Bank Minnesota"), under the name and charter of
Norwest Bank Minnesota. The current head office and two existing branches of
AmeriBank (which branches will also be consolidated with two existing branches
of Norwest Bank Minnesota) will be operated as branches of Norwest Bank
Minnesota following the consolidation. See "THE MERGER--Management and
Operations After the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Under the Reorganization Agreement, Norwest must maintain existing
policies of directors' and officers' liability insurance maintained by AGI for
a period of three years. Norwest must also insure that all rights to
indemnification and all limitations of liability existing in favor of any
director, officer, employee, fiduciary, or agent of AGI shall survive the
Merger for a period of three years. In addition, Larry D. Albert, the current
President of AmeriBank, who is also a director of AGI, has certain rights
under the Change-in-Control Agreement that will be triggered by the Merger.
See "THE MERGER--Interests of Certain Persons in the Merger."
6
<PAGE>
APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS
Section 262 of the Delaware General Corporation Law provides that a
stockholder of a Delaware corporation (such as AGI) is generally entitled to
receive payment of the appraised value of his or her stock if such stockholder
dissents from a merger or consolidation. Accordingly, holders of AGI Common
Stock will be entitled to receive the appraised value for shares of such stock
based on an appraisal conducted by the Delaware Court of Chancery, provided
the stockholder does not vote in favor of the Merger and complies with certain
statutory procedures within time periods specified in the appraisal provisions
of Delaware law. The value determined in such appraisal could be more than,
the same as, or less than the value of the consideration to be received under
the Reorganization Agreement by AGI stockholders who do not dissent from the
Merger. See "THE MERGER--Appraisal Rights of Dissenting Stockholders."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The obligation of AGI to consummate the Merger is conditioned on, among
other things, the receipt of an opinion of Dorsey & Whitney LLP, counsel to
AGI, based upon certain representations and assumptions set forth therein,
substantially to the effect that for federal income tax purposes the Merger
will qualify as a "reorganization" under Sections 368(a)(1)(A) and
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code").
On the basis of the foregoing opinion, it is expected that the following
material federal income tax consequences will result from the Merger: (i) no
gain or loss will be recognized by holders of AGI Common Stock upon their
receipt of Norwest Common Stock in exchange for their shares of AGI Common
Stock, except with respect to cash received in lieu of fractional shares; (ii)
the income tax basis of the Norwest Common Stock received generally will be
equal to the income tax basis of the AGI Common Stock surrendered; and (iii)
the holding period of the Norwest Common Stock received generally will include
the holding period of the AGI Common Stock surrendered. If the required tax
opinion is not received, the Merger will not be consummated unless the
condition requiring receipt of the opinion is waived and the approvals of the
AGI stockholders are resolicited by means of an updated Proxy Statement-
Prospectus. EACH HOLDER OF AGI COMMON STOCK IS URGED TO CONSULT HIS OR HER
OWN TAX AND FINANCIAL ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER, AS WELL AS ANY STATE, LOCAL, FOREIGN, OR OTHER TAX
CONSEQUENCES, BASED UPON SUCH HOLDER'S OWN PARTICULAR FACTS AND CIRCUMSTANCES.
See "THE MERGER--Certain Federal Income Tax Considerations" and "THE MERGER--
Conditions to the Merger."
RESALE OF NORWEST COMMON STOCK
The shares of Norwest Common Stock issuable to stockholders of AGI upon
consummation of the Merger have been registered under the Securities Act of
1933, as amended (the "Securities Act"). Norwest Common Stock received by
those stockholders of AGI who are deemed to be "affiliates" of AGI will be
subject to certain restrictions on resale as described below under "THE
MERGER--Resale of Norwest Common Stock." All stockholders of AGI are
currently considered to be affiliates of AGI. In addition, as described under
"THE MERGER--Certain Federal Income Tax Considerations," each stockholder of
AGI will be asked to sign an agreement pursuant to which such stockholder will
agree that for a period of up to two years after the Merger, such stockholder
will not sell or otherwise dispose of a number of shares of Norwest Common
Stock issued to such stockholder in the Merger that would reduce such
stockholder's ownership of such Norwest Common Stock to a number of shares
having a value of less than 50% (or a higher percentage) of the value of the
formerly outstanding shares of AGI Common Stock held by such stockholder. See
"THE MERGER--Certain Federal Income Tax Considerations."
7
<PAGE>
MARKETS AND MARKET PRICES
Norwest Common Stock is listed on the New York Stock Exchange (the
"NYSE") and the Chicago Stock Exchange (the "CHX"). On December 8, 1995, the
last trading day preceding public announcement of the proposed Merger, the
closing price per share of Norwest Common Stock was $34.00 and on May 1,
1996, the price was $36.125. There is no established trading market for AGI
Common Stock, excluding limited trading as a result of private negotiations
not involving any broker or dealer.
Stockholders of AGI are advised to obtain current market quotations for
Norwest Common Stock. The market price for Norwest Common Stock will
fluctuate between the date of this Proxy Statement-Prospectus and the Closing
Date, which will not occur until after the Special Meeting. As a result, the
market value of the Norwest Common Stock that stockholders of AGI ultimately
receive in the Merger could be more or less than its market value on the date
of this Proxy Statement-Prospectus. No assurances can be given concerning
the market price of Norwest Common Stock before or after the Closing.
CERTAIN DIFFERENCES IN RIGHTS OF STOCKHOLDERS
Upon consummation of the Merger, stockholders of AGI will become
stockholders of Norwest. As a result, such stockholders' rights will change
significantly. See "CERTAIN DIFFERENCES IN RIGHTS OF STOCKHOLDERS."
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
AGI Common Stock on a historical and a pro forma equivalent basis giving
effect to the Merger using the purchase method of accounting. See "THE
MERGER--Accounting Treatment." This information is derived from the
consolidated historical financial statements of Norwest, including the related
notes thereto, incorporated by reference into this Proxy Statement-Prospectus
and the consolidated historical financial statements of AGI, including the
notes thereto, appearing elsewhere in this Proxy Statement-Prospectus. This
information should be read in conjunction with such historical financial
statements and the related notes thereto. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "FINANCIAL STATEMENTS."
This data is not necessarily indicative of the results of the future
operations of the combined entity or the actual results that would have
occurred had the Merger been consummated prior to the periods indicated.
8
<PAGE>
COMPARATIVE PER COMMON SHARE DATA
<TABLE>
<CAPTION>
NORWEST COMMON STOCK AGI COMMON STOCK
--------------------- ----------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL EQUIVALENT
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
BOOK VALUE (1):
December 31, 1995 14.20 14.24 24.83 12.68
DIVIDENDS DECLARED (2):
Year Ended
December 31, 1995 0.900 0.900 0.500 0.801
NET INCOME (3):
Year Ended
December 31, 1995 2.73 2.73 2.37 2.43
</TABLE>
(1) The pro forma combined book value per share of Norwest Common Stock is
based upon the historical total combined common stockholders' equity for
Norwest and AGI divided by total pro forma common shares of the combined
entities assuming exchange of the outstanding AGI Common Stock at an assumed
ratio of .89022 shares of Norwest Common Stock for each share of AGI Common
Stock. The pro forma equivalent book value per share of AGI represents the pro
forma combined amount multiplied by this assumed ratio. See "THE MERGER--Terms
of the Merger," for a detailed discussion of the calculation of this assumed
ratio.
(2) Assumes no changes in cash dividends per share. The pro forma equivalent
dividends per share of AGI Common Stock represent cash dividends declared per
share of Norwest Common Stock multiplied by .89022
(3) The pro forma combined net income per share of Norwest Common Stock (based
on fully diluted net income and weighted average shares outstanding) is based
upon the combined historical net income for Norwest and AGI divided by the
average pro forma common shares of the combined entities. The pro forma
equivalent net income per share of AGI Common Stock represents the pro forma
combined net income per share multiplied by .89022
9
<PAGE>
SELECTED FINANCIAL DATA
The following tables set forth certain selected historical consolidated
financial information for Norwest. The income statement and balance sheet
data 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. This information
should be read in conjunction with the consolidated financial statements of
Norwest and the related notes thereto, included in documents incorporated
herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
10
<PAGE>
SELECTED FINANCIAL DATA
NORWEST CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS 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>
11
<PAGE>
(1) On January 14, 1994, First United Bank Group, Inc. ("First United"), a
$3.9 billion bank holding company headquartered in Albuquerque, New
Mexico, was acquired in a purchase 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 purchase 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.
12
<PAGE>
MEETING INFORMATION
GENERAL
This Proxy Statement-Prospectus is being furnished to holders of AGI
Common Stock in connection with the solicitation of proxies by the Board of
Directors of AGI from holders of outstanding shares of AGI Class A Voting
Common Stock, the only class of AGI Common Stock entitled to vote at the
Special Meeting, for use at the Special Meeting to be held on Tuesday, June 4,
1996, and any adjournments thereof, to consider and take action upon a
proposal to approve the Reorganization Agreement, and proposal to approve the
Certificate Amendment and such other business as may properly come before the
Special Meeting or any adjournments thereof. Each copy of this Proxy State
ment-Prospectus mailed to holders of AGI Common Stock is accompanied by a form
of proxy for use by holders of AGI Class A Voting Common Stock.
This Proxy Statement-Prospectus is also being furnished by Norwest to the
stockholders of AGI as a prospectus in connection with the issuance by Norwest
of shares of Norwest Common Stock upon consummation of the Merger.
This Proxy Statement-Prospectus, the attached Notice of Special Meeting,
and the form of proxy for holders of AGI Class A Voting Common Stock enclosed
herewith are first being mailed to stockholders of AGI on or about May 6,
1996.
DATE, PLACE, AND TIME
The Special Meeting will be held at the offices of Waycrosse, Inc., 15407
McGinty Road West, Wayzata, Minnesota, on Tuesday, June 4, 1996, at 10:00
a.m., local time.
RECORD DATE; VOTE REQUIRED FOR SPECIAL MEETING
The close of business on April 30, 1996, has been fixed as the record
date for the determination of stockholders of AGI entitled to receive notice
of and to vote at the Special Meeting. On the record date there were 901,134
shares of AGI Class A Voting Common Stock outstanding, the only class of
outstanding AGI Common Stock entitled to vote on the matters presented to
stockholders of AGI at the Special Meeting, held of record by 46 holders.
Approval of the Reorganization Agreement requires the affirmative vote of the
holders of not less than a majority of the outstanding shares of AGI Class A
Voting Common Stock. Approval of the Certificate Amendment requires the
affirmative vote of the holders of at least 70% of the outstanding shares of
the AGI Class A Voting Common Stock. The Merger cannot be consummated without
the approval of the Reorganization Agreement by the requisite percentage of
the holders of the AGI Class A Voting Common Stock. Approval of the
Certificate Amendment is also a condition precedent to consummation of the
Merger.
As of the record date for the Special Meeting, directors and officers of
AGI owned beneficially or controlled the voting of an aggregate of 49.4% of
the shares of AGI Common Stock outstanding on that date. AGI's directors and
officers have informed AGI that they intend to vote all of their shares (other
than those shares held in a fiduciary capacity) in favor of the Reorganization
Agreement and the Certificate Amendment. Information regarding the shares of
AGI Common Stock beneficially owned, directly or indirectly, by certain
stockholders, by each director and executive officer of AGI, and by all
directors and
13
<PAGE>
officers as a group is set forth in the table under the heading "--Principal
Stockholders and Security Ownership of Management of AGI" below.
At the record date, directors and executive officers of Norwest did not
own beneficially any shares of AGI Common Stock.
PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT OF AGI
PRINCIPAL STOCKHOLDERS
----------------------
Set forth below are the names and addresses of and the number of shares
held as of the Record Date for the Special Meeting by those persons or
entities who may be deemed to own beneficially, whether directly or
indirectly, five percent (5%) or more of the outstanding shares of AGI Class A
Voting Common Stock and AGI Class B Nonvoting Common Stock. Each stockholder
named below has sole voting and investment power over the shares shown in the
table, unless otherwise indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
CLASS (1) NAME AND ADDRESS OWNED (2) CLASS
--------- ---------------- ---------------- ----------
<S> <C> <C> <C>
A Trust for Margaret A. Cargill 130,182 14.5%
Under Last Will and Testament,
dated July 13, 1944, of
Austin S. Cargill, deceased,
Way Trust and Dwane E.
Billbe, Trustees
c/o Way Trust, Suite 306
141 North Main Avenue
Sioux Falls, SD 57102
A Marianne C. Liebmann Living 154,509(3) 17.1%
Trust, Marianne C. Liebmann and
Lynn A. Wilde, Trustees
c/o Waycrosse, Inc., Dept. 28
P.O. Box 9300
Minneapolis, MN 55440-9300
A Restated Trust Agreement of 97,272(4) 10.8%
James R. Cargill II, dated
June 7, 1995
James R. Cargill II and
Susan M. Cargill, Trustees
c/o Waycrosse, Inc., Dept. 28
P.O. Box 9300
Minneapolis, MN 55440-9300
A Gwendolyn S. Meyer u/a dated 72,260 8.0%
February 15, 1991 f/b/o
Gwendolyn S. Meyer
Gwendolyn S. Meyer, Trustee
c/o Waycrosse, Inc., Dept. 28
P.O. Box 9300
Minneapolis, MN 55440-9300
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
CLASS (1) NAME AND ADDRESS OWNED (2) CLASS
--------- ---------------- ---------------- ----------
<S> <C> <C> <C>
B Cargill, Incorporated 106,512(5) 99.9%
P.O. Box 9300
Minneapolis, MN 55440-9300
</TABLE>
- ---------------------------------------
(1) AGI has total issued and outstanding shares of common stock of 1,007,671,
which includes 901,134 shares of Class A Voting Common Stock and 106,537
shares of Class B Non-Voting Common Stock. Unless otherwise noted, all
entities or persons listed share voting power and dispositive power with
all other trustees noted.
(2) The shares shown in the table include all shares the named parties may be
deemed to own beneficially, including shares held by spouses, minor
children, relatives sharing the home of such party, entities controlled by
such party, or trusts of which such parties are trustees or beneficiaries.
(3) Includes 26,968 shares held by Steven P. Liebmann with Lynn A. Wilde as
Trustees of Steven P. Liebmann Living Trust.
(4) Includes 3,950 shares held by Susan M. Cargill and James R. Cargill, II as
Trustees of the Restated Trust Agreement of Susan M. Cargill, dated June
7, 1995, and 600 shares held by Nathaniel L. Forbes, Paul M. Richards, and
Dayre M. Williams as Trustees of Anne R. Cargill-Margaret Anne Cargill-
James R. Cargill II Long Term Trust dated November 26, 1995, and 1,000
shares held by Roger S. Wherry, John Hugh MacMillan III, and Phillip H.
Martin as Trustees of the Alexandra M. Ditch Long Term Trust under
agreement dated March 5, 1964.
(5) Cargill, Incorporated stock ownership consists solely of Class B Non-
Voting Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
--------------------------------
Set forth below is the number of shares of AGI Common Stock held by each
director and officer, and by all directors and officers as a group, of AGI as
of the record date for the Special Meeting.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
CLASS (1) NAME AND ADDRESS OWNED (2) CLASS
--------- ---------------- ---------------- ----------
<S> <C> <C> <C>
-- Larry D. Albert 0 *
Director
4200 Old Shakopee Road
Bloomington, MN 55437
A Martha M. Bennett 26,850(2) 3.0%
Director
c/o Waycrosse, Inc., Dept. 28
P.O. Box 9300
Minneapolis, MN 55440
A Warren G. Keinath, Jr. 55,284(3) 6.1%
Director
c/o Waycrosse, Inc., Dept. 28
P.O. Box 9300
Minneapolis, MN 55440
A Steven P. Liebmann 154,509(4) 17.1%
Director
c/o Waycrosse, Inc., Dept. 28
P.O. Box 9300
Minneapolis, MN 55440
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
CLASS (1) NAME AND ADDRESS OWNED (2) CLASS
--------- ---------------- ---------------- ----------
<S> <C> <C> <C>
A David D. MacMillan 33,331(5) 3.7%
President and Chief Executive
Officer, Director
c/o Waycrosse, Inc., Dept. 28
P.O. Box 9300
Minneapolis, MN 55440
A W. Duncan MacMillan 17,969(6) 2.0%
Chairman of the Board,
Director
c/o Waycrosse, Inc., Dept. 28
P.O. Box 9300
Minneapolis, MN 55440
B Harry F. Martin 25 *
Director
c/o Waycrosse, Inc., Dept. 28
P.O. Box 9300
Minneapolis, MN 55440-9300
A Lucy M. Stitzer 29,667(7) 3.3%
Director
c/o Waycrosse, Inc., Dept. 28
P.O. Box 9300
Minneapolis, MN 55440-9300
A Lynn A. Wilde 154,509(8) 17.1%
Secretary
c/o Waycrosse, Inc., Dept. 28
P.O. Box 9300
Minneapolis, MN 55440-9300
A Directors and officers as a group 445,151 49.4%
B Directors and officers as a group 25 *
- -----------------------------
</TABLE>
* Does not exceed 1%.
(1) See Footnotes 1 and 2 in the Principal Stockholder table set forth above.
(2) Includes 26,850 shares held as Trustee of the Martha MacMillan Bennett
1987 Trust U/A dated September 5, 1987, as amended.
16
<PAGE>
(3) Includes 18,409 shares held with David S. Keinath, Pauline M. Keinath, and
Robert J. Theiler as Trustees of the David Scott Keinath 1981 Trust dated
September 3, 1981, 18,409 shares held with Steven W. Keinath, Pauline M.
Keinath, and Robert J. Theiler as Trustees of the Steven Whitney Keinath
1981 Trust dated September 3, 1981, and 18,466 shares held with Warren C.
Keinath, Pauline M. Keinath, and Robert J. Theiler as Trustees of the
Warren Cargill Keinath 1981 Trust dated September 3, 1981.
(4) Includes 26,968 shares held with Lynn A. Wilde as Trustees of Steven P.
Liebmann Living Trust, and 127,541 shares held by Marianne C. Liebmann and
Lynn A. Wilde, as Trustees of the Marianne C. Liebmann Living Trust.
(5) Includes 6,200 shares held with Catherine L. van der Schans and John H.
MacMillan IV as Trustees of the Marion H. MacMillan Family Trust (1985),
469 shares held as Custodian for Alexander L. MacMillan, 1,400 shares held
with Peter Dorsey as Trustee of the William Duncan MacMillan 1969 Trust,
6,300 shares held with John MacMillan IV and William H. Lefkowitz as
Trustees of the John Hugh MacMillan III 1989 Descendants' Trust, 500
shares held with Steven A. Hornig, Philip H. Martin, and Way Trust as
Trustees of the Lucy MacMillan Stitzer Long Term Trust U/A dated March 5,
1964, 469 shares held as Custodian for Peter H. MacMillan, and 17,993
shares held as Trustee of the David D. MacMillan Living Trust.
(6) Includes 17,969 shares held as Trustee of W. Duncan MacMillan 1982 Trust
U/A dated December 14, 1982, as amended.
(7) Includes 28,967 shares held with Mark Stitzer as Trustee of the Lucy C. M.
Stitzer Living Trust and 700 shares held with Alan W. Breed and
Catherine L. van der Schans as Trustees of the Lucy MacMillan Stitzer 1981
Trust Two.
(8) Includes 127,541 shares held with Marianne C. Liebmann as Trustees of the
Marianne C. Liebmann Living Trust and 26,968 shares held with Steven P.
Liebmann as Trustees of the Steven P. Liebmann Living Trust.
VOTING AND REVOCATION OF PROXIES
Shares of AGI Class A Voting Common Stock, the only class of AGI Common
Stock entitled to vote at the Special Meeting, 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 AGI Class A Voting Common Stock represented
by such proxy will be voted "FOR" approval of the Reorganization Agreement and
"FOR" the Certificate Amendment. If any other matters are properly presented
at the Special Meeting for consideration, including, among other things,
consideration of a motion to postpone or adjourn the Special Meeting to
another time and place, the persons named in the proxy and acting thereunder
will have discretion to vote on such matters in accordance with their best
judgment. 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 AGI prior to or at the Special Meeting or by voting the shares
subject to the proxy in person at the Special Meeting. Attendance at the
Special Meeting will not in and of itself constitute a revocation of a proxy.
The Special Meeting may be postponed or adjourned from time to time
without notice other than such notice as may be given at the meeting or any
postponement or adjournment thereof, including, without limitation, if fewer
shares are likely to be voted in favor of approval of the Reorganization
Agreement and the Certificate Amendment than the number required for approval.
Any business for which notice has been given may be transacted at any such
postponed or adjourned meeting. If the Special Meeting is postponed or
adjourned for the purpose of obtaining additional proxies or votes or for any
other purpose, at any subsequent reconvening of the Special Meeting, all
proxies will be voted in the same manner as such proxies would have been voted
at the original convening of the Special Meeting (except for any proxies
17
<PAGE>
which have theretofore effectively been revoked or withdrawn), notwithstanding
that they may have been effectively voted on the same or any other matter at a
previous meeting.
A proxy may indicate that all or a portion of the shares represented
thereby are not being voted with respect to a specific proposal. This could
occur, for example, when a broker is not permitted to vote shares held in
street name on certain proposals in the absence of instructions from the
beneficial owner. Shares that are not voted with respect to a specific
proposal will be considered as not present for such proposal, even though such
shares will be considered present for purposes of determining a quorum and
voting on other proposals. Abstentions on a specific proposal will be
considered as present, but not as voting in favor of such proposal. Because
each of the AGI proposals requires the affirmative vote of a specified
percentage of outstanding shares, the non-voting of shares or abstentions with
regard to each such proposal will have the same effect as votes against the
proposal.
The Board of Directors of AGI is not aware of any business to be acted
upon at the Special Meeting other than the business described herein. If,
however, other matters are properly brought before the Special Meeting, or any
adjournments thereof, the persons appointed as proxies will have discretion to
vote or act on such matters according to their best judgment.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers, and employees
of AGI may solicit proxies from the stockholders of AGI, either personally or
by telephone, telegram, or other form of communication. None of the foregoing
persons who solicit proxies will be specifically compensated for such
services. Nominees, fiduciaries, and other custodians will be requested to
forward soliciting materials to beneficial owners and will be reimbursed for
their reasonable expenses incurred in sending proxy material to beneficial
owners. AGI will bear its own expenses in connection with any solicitation of
proxies for the Special Meeting. See "THE MERGER--Expenses."
HOLDERS OF AGI COMMON STOCK ARE REQUESTED TO COMPLETE, DATE, AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO AGI IN THE ENCLOSED POSTAGE-
PREPAID ENVELOPE.
THE MERGER
This section of the Proxy Statement-Prospectus describes certain aspects
of the Merger. The following description does not purport to be complete and
is qualified in its entirety by reference to the Reorganization Agreement,
which is attached as Appendix A, to this Proxy Statement-Prospectus and is
incorporated by reference herein. ALL STOCKHOLDERS ARE URGED TO READ THE
REORGANIZATION AGREEMENT IN ITS ENTIRETY.
BACKGROUND OF THE MERGER
In recent years, the Board of Directors of AGI has discussed different
acquisitions and strategic alternatives for maximizing stockholder value for
the stockholders of AGI, including business combinations with other bank
holding companies. The Board determined that, in light of the current
consolidation within the banking industry, the best way to maximize
stockholder value would be through a business combination with a larger bank
holding company. At a meeting of the Board of Directors of AGI held on June
15,
18
<PAGE>
1995, the Board of Directors of AGI directed management of AGI to solicit
indications of interest with respect to a potential business combination and
report back to the Board with respect to the results of such solicitation.
During the late summer and fall of 1995, management of AGI solicited
several regional bank holding companies for indications of interest with
respect to a potential business combination with AGI. The Board of Directors
of AGI engaged Michael J. Pint, a member of the Board of Directors of
AmeriBank, to assist AGI in soliciting such companies and evaluating any
indications of interest. AGI received preliminary indications of interest
from four regional bank holding companies and held preliminary discussions
with each such regional bank holding company. At a meeting held on September
7, 1995, management of AGI reviewed with the Board of Directors of AGI the
terms of each such indication of interest. The Board resolved to pursue
further negotiations with Norwest regarding the possible acquisition of AGI
through a merger and directed management of AGI and its financial and legal
advisers to conduct further discussions and analysis with Norwest.
Norwest and AGI executed a Letter of Intent on September 21, 1995. The
Letter of Intent outlined the general terms of a proposed acquisition of AGI
by Norwest, provided for a three-month period of time during which Norwest
would conduct its due diligence investigation of AGI, and that, thereafter, if
Norwest wished to proceed with a transaction, each party would then proceed to
negotiate a definitive acquisition agreement. The Letter of Intent also
prohibited AGI from soliciting proposals from other persons regarding an
acquisition of AGI during the due diligence review period. Norwest conducted
its due diligence review of AGI during September and October 1995. Norwest
provided AGI with an initial draft of the Reorganization Agreement in late
October 1995. Representatives of Norwest and AGI and their respective counsel
thereafter negotiated the form of the Reorganization Agreement, and on
December 6, 1995, the Board of Directors of AGI met to consider the terms of
the Reorganization Agreement. Based on a variety of factors, the AGI Board of
Directors approved the Reorganization Agreement at that meeting. The
Reorganization Agreement was executed by AGI and Norwest on December 8, 1995.
During this time, AGI also had existing relationships with Norwest,
including various correspondent-bank arrangements, including demand deposit
accounts, safekeeping arrangements, and secured and unsecured "Fed Funds"
credit lines.
AGI'S REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS OF AGI
REASONS OF AGI FOR THE MERGER. The Board of Directors of AGI, after
careful study and evaluation of economic, financial, legal, and market
factors, believes that the Reorganization Agreement and the Certificate
Amendment are in the best interests of AGI and AGI's stockholders. The Board
believes that the consideration in the Merger is favorable and that the
receipt of such consideration represents an opportunity for the holders of AGI
Common Stock to exchange their shares of AGI Common Stock for shares of common
stock of a larger regional bank holding company on a tax-free basis. Among
the factors considered by the Board of Directors of AGI in deciding to approve
and recommend the execution of the Reorganization Agreement were the terms and
conditions of the Reorganization Agreement; recent market prices for Norwest
Common Stock; the lack of a public trading market for AGI Common Stock; the
nature of the banking businesses of AGI and Norwest and their respective
operating philosophies and management; the competitive position and outlook of
AGI and Norwest in a changing banking and financial services industry that is
facing the advent of interstate banking, a trend toward bank consolidation and
increasing pressure to realize economies of scale; the anticipated income tax
consequences to the stockholders of AGI; and the consideration to be received
by the stockholders of AGI in the Merger. While the Board of Directors of AGI
did not give greater weight to any one of the factors listed above, it
considered the proposed exchange of AGI Common Stock for Norwest Common Stock
to be
19
<PAGE>
advantageous to its stockholders, both because the consideration to be
received in the Merger has a value substantially in excess of the book value
of AGI and because the AGI stockholders will receive, in part, a security
which, in the opinion of the Board of Directors of AGI, has a greater market
liquidity than the AGI Common Stock and which has historically paid dividends
and has the potential for increased long-term value.
RECOMMENDATION OF AGI BOARD OF DIRECTORS. The Board of Directors of AGI
recommends that the stockholders of AGI vote for approval of the Merger. The
Board believes that the terms of the Reorganization Agreement are fair and
that the Merger is in the best interests of AGI and its stockholders. The
directors and executive officers of AGI have unanimously indicated that they
intend to vote the AGI Common Stock that they hold (other than shares held by
them in a fiduciary capacity) in favor of the Reorganization Agreement. See
"MEETING INFORMATION--Record Date; Vote Required for Special Meeting," and "--
Principal Stockholders and Security Ownership of Management of AGI."
THE BOARD OF DIRECTORS OF AGI UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF
AGI VOTE "FOR" APPROVAL OF THE MERGER.
---
TERMS OF THE MERGER
At the Effective Time of the Merger, a wholly-owned subsidiary of Norwest
will merge into AGI, with AGI as the surviving corporation, and the
outstanding shares of AGI Common Stock (other than shares as to which
statutory dissenters' rights have been exercised and not forfeited) will be
converted into a number of shares of Norwest Common Stock determined in
accordance with the provisions of the Reorganization Agreement. Each
outstanding share of AGI Common Stock, including all shares of Class A Voting
Common Stock and Class B Non-Voting Common Stock, will be converted into that
number of shares of Norwest Common Stock, determined by dividing the Adjusted
Norwest Shares by the number of shares of AGI Common Stock then outstanding.
The Adjusted Norwest Shares will be that number of shares of Norwest Common
Stock calculated by dividing $32,250,000, minus (i) $60,711 (the cost to AGI
and the AGI Subsidiaries to redeem minority interests in the outstanding
shares of AmeriBank common stock), (ii) $63,440 (the after-tax cost to AGI
and the AGI Subsidiaries of one-half the lump sum cash payment to be paid to
Larry D. Albert, the current President of AmeriBank pursuant to the Change-in-
Control Agreement relating to the proposed Merger, and (iii) $1,149 (the
after-tax cost to AGI and the AGI Subsidiaries of health insurance to be
provided by AGI pursuant to the Change-in-Control Agreement), by the Norwest
Measurement Price. The amount of the adjustments shown in clauses (ii) and
(iii) for purposes of computing the Adjusted Norwest Shares to be issued in
the Merger have been agreed to by Norwest and AGI. In addition, and as
provided in the Reorganization Agreement, because the anticipated Effective
Date of the Merger will occur after the record dates for Norwest's regular
quarterly Norwest Common Stock dividend paid on March 1, 1996 and to be paid
on June 1, 1996 (the dividends for the fiscal quarters ending on or after
January 1, 1996 and prior to the Effective Date of the Merger), then the
Adjusted Norwest Shares will also be increased by the Dividend Shares (a
number of shares of Norwest Common Stock equal to an aggregate cash dividend
of $510,000 paid on 1,000,000 shares of Norwest Common Stock on March 1
and June 1, 1996), divided by the Norwest Measurement Price. The Norwest
Measurement Price will be equal to 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 second
trading day immediately preceding the Special Meeting.
If the Special Meeting were held on May 1, 1996 (the most recent
practicable date for purposes of this assumption prior to the date of this
Proxy Statement-Prospectus), the Norwest Measurement Price would be $36.38
(based on the average of the closing prices of Norwest Common Stock as
reported on the NYSE during the period of 20 trading days (April 1, 1996 to
April 29, 1996) ending on the second trading day (April 29) immediately
preceding the assumed Special Meeting date of May 1, 1996. The Adjusted
Norwest Shares would equal 897,051 shares, including 14,019 Dividend Shares
computed as follows: $32,250,000, minus (i) $60,711, (ii) $63,440, and
20
<PAGE>
(iii) $1,149, which equals (A) $32,124,700, divided by the Norwest Measurement
Price ($36.38) (883,032 shares), plus (B) $510,000 (the aggregate amount of
the dividend that paid on March 1, 1996 and on June 1, 1996 to a holder of
record of 1,000,000 shares of Norwest Common Stock on February 2, 1996 and May
10, 1996, the record dates for such dividends), divided by the Norwest
Measurement Price (14,019 Dividend Shares). Assuming that the Merger had been
consummated on May 1, 1996, and based on the foregoing assumed Norwest
Measurement Price and a total of 1,007,671 shares of AGI Common Stock
outstanding, each AGI stockholder would have received for each share of AGI
Common Stock held, .89022 shares of Norwest Common Stock (including cash in
lieu of fractional shares) (897,051 Adjusted Norwest Shares divided by
1,007,671 shares of AGI Common Stock).
THE FOREGOING INFORMATION WITH RESPECT TO THE NORWEST MEASUREMENT PRICE
AND THE ASSUMED PER SHARE EXCHANGE RATIO IS BEING PROVIDED FOR PURPOSES OF
ILLUSTRATION ONLY. THE INFORMATION PRESENTED ABOVE IS NOT INTENDED AS AN
ESTIMATE OR PROJECTION OF ANY DATA THAT WILL BE USED TO DETERMINE THE NORWEST
MEASUREMENT PRICE OR THE NUMBER OF SHARES OF NORWEST COMMON STOCK THAT AN AGI
STOCKHOLDER MAY ULTIMATELY RECEIVE IN THE MERGER. THE ACTUAL NORWEST
MEASUREMENT PRICE USED TO COMPUTE THE ADJUSTED NORWEST SHARES MAY BE HIGHER OR
LOWER THAN THE ASSUMED NORWEST MEASUREMENT PRICE PRESENTED ABOVE.
The market price of a share of Norwest Common Stock, on which the Norwest
Measurement Price and the number of shares of Norwest Common Stock issuable to
stockholders of AGI in the Merger will be computed, will fluctuate between
April 29, 1996 and the date of the Special Meeting, and will fluctuate between
the date of Special Meeting and the Effective Date of the Merger. As a
result, the actual number of shares of Norwest Common Stock each stockholder
of AGI will ultimately receive in the Merger for each share of AGI Common
Stock held could be more or less than as indicated in the above illustration.
See "SUMMARY--Markets and Market Prices."
No fractional shares of Norwest Common Stock will be issued in the
Merger. Instead, Norwest will pay to each holder of AGI Common Stock who
would otherwise be entitled to a fractional share an amount of cash equal to
the fraction of a share of Norwest Common Stock to which the stockholders of
AGI would otherwise be entitled multiplied by the Norwest Measurement Price.
Shares of Norwest Common Stock issued and outstanding immediately prior
to the Effective Time of the Merger will remain issued and outstanding.
EFFECTIVE DATE AND TIME OF THE MERGER
Subject to the terms and conditions of the Reorganization Agreement, the
Effective Date of the Merger will be the date on which Articles of Merger are
filed with the Secretary of State of the state of Delaware. That filing will
be made within ten business days following the satisfaction or waiver of all
conditions of the Reorganization Agreement or on such other date upon which
the parties agree, and the time at which such filing will be made is
hereinafter referred to as the "Time of Filing." The Effective Time of the
Merger will be 11:59 p.m., Minneapolis, Minnesota time, on the Effective Date
of the Merger. Norwest and AGI anticipate that the closing of the Merger
will occur in the second quarter of 1996. See "--Conditions to the Merger"
and "--Regulatory Approvals."
21
<PAGE>
SURRENDER OF CERTIFICATES
As described below under "THE MERGER--Certain Federal Income Tax
Considerations," each stockholder of AGI will be asked, prior to the Effective
Time of the Merger, to sign an agreement, together with a letter of
transmittal directed to the Exchange Agent identified below, pursuant to which
such stockholder will authorize Waycrosse, Inc., a corporation controlled by
certain stockholders of AGI and related parties ("Waycrosse") upon
consummation of the Merger, to surrender certificates representing shares of
AGI Common Stock owned by such AGI stockholder and held by Waycrosse to
Norwest Bank Minnesota, National Association, acting in the capacity of
exchange agent for Norwest (the "Exchange Agent") in exchange for a
certificate representing shares of Norwest Common Stock and a check in lieu of
any fractional shares of Norwest Common Stock, as determined pursuant to the
terms of the Reorganization Agreement. If such agreement is not executed, then
as soon as practicable after the Effective Time of the Merger, the Exchange
Agent will mail to each such former holder of record of shares of AGI Common
Stock a letter of transmittal, together with instructions for the exchange of
such holder's stock certificates for a certificate representing Norwest Common
Stock.
Upon surrender to the Exchange Agent of one or more certificates for AGI
Common Stock, together with a properly completed letter of transmittal, there
will be issued and mailed to Waycrosse or the holder a certificate
representing the number of whole shares of Norwest Common Stock to which such
holder is entitled and, where applicable, a check for the amount representing
any fractional share. A certificate for Norwest Common Stock may be issued in
a name other than the name in which the surrendered certificate is registered
only if (i) the certificate surrendered is properly endorsed and otherwise in
proper form for transfer, and (ii) the person requesting the issuance of such
certificate either pays to the Exchange Agent any transfer or other taxes
required by reason of the issuance of a certificate for such shares in a name
other than the registered holder of the certificate surrendered or establishes
to the satisfaction of the Exchange Agent that such tax has been paid or is
not applicable.
All Norwest Common Stock issued pursuant to the Merger will be deemed
issued as of the Effective Time of the Merger. No dividends with a record date
after the Effective Time of the Merger will be paid to stockholders of AGI
entitled to receive certificates for shares of Norwest Common Stock until such
stockholders surrender their certificates representing shares of AGI Common
Stock. Upon such surrender, there shall be paid to the holder in whose name
the certificates representing such shares of Norwest Common Stock are issued
any dividends the record and payment dates of which shall have been after the
Effective Time of the Merger and before the date of such surrender. After such
surrender, there shall be paid to the person in whose name the certificate
representing such shares of Norwest Common Stock is issued, on the appropriate
dividend payment date, any dividend on such shares of Norwest Common Stock
which shall have a record date after the Effective Time of the Merger and
prior to the date of surrender, but a payment date subsequent to the
surrender. In no event shall the persons entitled to receive such dividends be
entitled to receive interest on amounts payable as dividends.
CONDITIONS TO THE MERGER
The Merger will occur only if the Reorganization Agreement is approved by
the requisite vote of the stockholders of AGI. Consummation of the Merger is
subject to the satisfaction of certain other conditions, any of which may be
waived to the extent waiver is permitted by applicable law. Such conditions to
the obligations of both parties to consummate the Merger include, but are not
limited to, (i) the receipt of all necessary regulatory approvals, including
the approval of the Merger by the Federal Reserve Board and the expiration of
all applicable waiting and approval periods, (ii) the approval of the
Certificate Amendment, (iii) the continued effectiveness of the Registration
Statement of which this Proxy Statement-Prospectus is a part and receipt by
Norwest of all state securities law or blue sky authorizations
22
<PAGE>
necessary for the Merger, (iv) the absence of any order of a court or agency
of competent jurisdiction restraining, enjoining, or otherwise prohibiting
consummation of the Merger, (v) the continued accuracy of representations and
warranties by the other party, (vi) the performance by the other party of its
obligations under the Reorganization Agreement, and (vii) the receipt of
certain certificates from the other party.
AGI's obligation to consummate the Merger is also subject to (i)
authorization for listing on the NYSE and the CHX upon official notice of
issuance of the shares of Norwest Common Stock issuable pursuant to the
Merger, (ii) the receipt of an opinion of counsel to AGI to the effect that
for federal income tax purposes the Merger will be a tax-free Merger, and
(iii) the absence since September 30, 1995 of any change which might
reasonably be expected to have a material adverse effect on the financial
condition, results of operations, business, or prospects of Norwest and the
subsidiaries of Norwest 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.
Norwest's obligation to consummate the Merger is also subject to (i) the
receipt by AGI and each AGI Subsidiary of any and all material consents or
waivers from third parties to loan agreements, leases, or other material
contracts required for the consummation of the Merger, and the receipt by AGI
and its subsidiary of any and all material permits, authorizations, consents,
waivers, and approvals required for the consummation of the Merger; (ii) the
total number of shares of AGI Common Stock outstanding and subject to issuance
upon exercise of all warrants, options, conversion rights, phantom shares, or
other share equivalents not having exceeded 1,007,671; (iii) the receipt of a
certificate signed by AGI's Chief Executive Officer and the Controller of
AmeriBank concerning the accuracy and completeness of certain of AGI's
financial statements and related information as of a date subsequent to the
date of such financial statements; (iv) the absence of any reasonable basis
for the imposition on AGI or any of the AGI Subsidiaries of any liability
arising from the release of hazardous substances under any local, state, or
federal environmental statute, regulation, or ordinance which has had or could
reasonably be expected to have a material adverse effect upon AGI and the AGI
Subsidiaries taken as a whole; (v) the absence, since December 31, 1994, of
any change which might reasonably be expected to have a material adverse
effect on the financial condition, results of operations, business, or
prospects of AGI and the AGI 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;
and (vi) receipt by AGI of the consent of FDH Partnership to the assignment of
AGI's lease as a result of the Merger.
REGULATORY APPROVALS
Transactions such as the Merger are subject to prior approval by the
Federal Reserve Board under the BHC Act, which requires that the Federal
Reserve Board take into consideration the financial and managerial resources
and future prospects of the existing and proposed institutions and the
convenience and needs of the communities to be served.
Norwest filed an application for approval of the Merger with the Federal
Reserve Board on January 26, 1996. On April 29, 1996, the Federal Reserve
Board approved the Merger.
The approval of any application merely implies satisfaction of regulatory
criteria for approval, which do not include review of the Merger from the
standpoint of the adequacy of the consideration to be received by, or fairness
to, AGI stockholders. Regulatory approvals do not constitute an endorsement
or recommendation of the proposed Merger.
23
<PAGE>
Neither Norwest nor AGI is aware of any governmental approvals or
compliance with banking laws and regulations that are required for
consummation of the Merger other than those described above. Should any other
approval or action be required, it is presently contemplated that such
approval or action would be sought. There can be no assurance that any such
approval or action, if needed, could be obtained and, if such approvals or
actions are obtained, there can be no assurance as to the timing thereof. The
Merger cannot proceed in the absence of all requisite regulatory approvals.
See "--Conditions to the Merger," "--Effective Date and Time of the Merger,"
and "--Waiver, Amendment, and Termination."
CONDUCT OF BUSINESS PENDING THE MERGER
Under the Reorganization Agreement, AGI is generally obligated to
maintain its corporate existence in good standing; to maintain the general
character of its business and conduct its business in the ordinary and usual
manner; extend credit in accordance with existing lending policies; maintain
proper business and accounting records in accordance with generally accepted
accounting 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 Merger; comply in all material respects with
all laws, regulations, ordinances, codes, orders, licenses, and permits
applicable to the properties and operations of AGI and the AGI Subsidiaries,
the noncompliance with which reasonably could be expected to have a material
adverse effect on AGI and the AGI Subsidiaries taken as a whole; and permit
Norwest and its representatives to examine its and its subsidiaries' books,
records, and properties, and to interview officers, employees, and agents at
all reasonable times when it is open for business. The Reorganization
Agreement also provides that, prior to the Closing Date, neither AGI nor any
AGI Subsidiary may, without the prior written consent of Norwest, among other
things: (i) make any new loan or modify, restructure, or renew any existing
loan (except pursuant to commitments made prior to the date of the
Reorganization Agreement) to any borrower if the amount of the resulting loan,
when aggregated with all other loans or extensions of credit to such person,
would exceed $100,000; (ii) amend or otherwise change its articles of
incorporation or association or by-laws; (iii) issue or sell, or authorize for
issuance or sale, or grant any options or make other agreements with respect
to the issuance or sale, or conversion of, any shares of its capital stock,
phantom shares, or other share equivalents, or any other of its securities;
(iv) authorize or incur any long-term debt (other than deposit liabilities);
(v) mortgage, pledge, or subject to lien or other encumbrance any of its
properties, except in the ordinary course of business; (vi) enter into any
material agreement, contract, or commitment in excess of $25,000 except
banking transactions in the ordinary course of business and in accordance with
policies and procedures in effect on the date of the Reorganization Agreement;
(vii) make any investments except investments made by AmeriBank in the
ordinary course of business for terms of up to one year and in amounts of
$100,000 or less; (viii) amend or terminate any "employee benefit plan" within
the meaning of the Employee Retirement Income Security Act of 1974, as
amended, except as described below under the heading "Effect on Employee
Benefit Plans" or as required by law; (ix) make any contributions to any such
plan except as required by the terms of such plan in effect as of the date of
the Reorganization Agreement, subject to certain enumerated exceptions; (x)
declare, set aside, make, or pay any dividend or other distribution with
respect to its capital stock; (xi) redeem, purchase, or otherwise acquire,
directly or indirectly, any of the capital stock of AGI or any AGI Subsidiary,
other than as contemplated by the Reorganization Agreement with respect to the
minority interest in the outstanding capital stock of AmeriBank held by third
parties; (xii) increase the compensation of any officers, directors, or
executive employees, except pursuant to existing compensation plans and
practices; (xiii) sell or otherwise dispose of any shares of the capital stock
of any subsidiary; or (xiv) sell or otherwise dispose of any of its assets or
properties other than in the ordinary course of business.
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CERTAIN COVENANTS
The Reorganization Agreement provides that prior to the Effective Date of
the Merger, AGI will (i) establish such additional accruals and reserves as
may be necessary to conform AGI's accounting and credit loss reserve practices
to those of Norwest and Norwest's plans with respect to the conduct of AGI's
business following the Merger and to provide for costs and expenses related to
the consummation of the transactions contemplated by the Reorganization
Agreement; (ii) obtain certain environmental assessments with respect to
certain real property identified by Norwest (including bank-owned or leased
property and certain non-residential OREO properties, and without first
obtaining Norwest's prior approval, not enter into a final consent order with
the Wisconsin Department of Natural Resources (the "Wisconsin DNR") or enter
into, amend or terminate proposed or existing written agreements with the
Wisconsin DNR or certain third parties with respect to certain sites
identified in the Reorganization Agreement; (iii) provide title insurance
commitments and boundary surveys to Norwest for each owned bank facility; (iv)
cause AmeriBank to use reasonable efforts to implement the recommendations in
a compliance audit report regarding AmeriBank by North Central Banking
Services; (v) submit the Certificate Amendment to the stockholders of AGI for
approval, and file any necessary amendments to the AGI Certificate of
Incorporation with the Secretary of State for the State of Delaware promptly
following such approval, and (vi) cause AmeriBank to repurchase all
outstanding common stock of AmeriBank held by persons other than AGI.
Pursuant to Stock Redemption Agreements dated January 3, 1996, AmeriBank
redeemed such shares for an aggregate redemption price of $60,711.
The Reorganization Agreement also provides that, prior to the Effective
Date, Norwest will (i) give AGI notice of the receipt of all regulatory
approvals; (ii) permit AGI and its representatives to examine Norwest's books,
records, and properties, and to interview Norwest's officers, employees, and
agents, for a period of up to 15 days prior to the Effective Date of the
Merger; (iii) file all documents necessary to list the Norwest Common Stock to
be issued in the Merger on the NYSE and the CHX and use its best efforts to
effect such listings; and (iv) take all necessary corporate and other action
and use its best efforts to obtain all approvals of regulatory authorities,
consents, and other approvals to carry out the transactions contemplated by
the Reorganization Agreement. Norwest has also agreed to provide certain
directors' and officers' liability insurance to directors and officers of AGI
and certain indemnification rights to any director, officer, employee,
fiduciary or agent of AGI. A discussion of the terms of such insurance and
indemnification rights is set forth below under the heading "--Interests of
Certain Persons in the Merger."
NO SOLICITATION
Pursuant to the Reorganization Agreement, neither AGI nor any AGI
Subsidiary, nor any director, officer, or representative thereof, may,
directly or indirectly, solicit, authorize the solicitation of, or enter into
any discussions with any party or group (other than Norwest) concerning any
offer or possible offer (i) to purchase any shares of AGI Common Stock, any
option or warrant to purchase any shares of AGI Common Stock, any securities
convertible into any shares of AGI Common Stock, or any other equity security
of AGI or any AGI Subsidiary; (ii) to make a tender or exchange offer for any
shares of AGI Common Stock or other equity security; (iii) to purchase, lease,
or otherwise acquire the assets of AGI or any AGI Subsidiary, except in the
ordinary course of business; or (iv) to merge, consolidate, or otherwise
combine with AGI or any AGI Subsidiary. Any offer or inquiry to AGI or any
AGI Subsidiary concerning any of the foregoing must be promptly disclosed,
along with the terms thereof, to Norwest.
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WAIVER, AMENDMENT, AND TERMINATION
The parties may, by a signed writing, waive any inaccuracies in the
representations and warranties of the other party or compliance by the other
party with any of the covenants and conditions in the Reorganization
Agreement.
At any time before the Time of Filing the parties may amend the
Reorganization Agreement by action taken by their respective Boards of
Directors or pursuant to authority delegated by their respective Boards of
Directors; provided, however, that no such amendment occurring after approval
of the Merger by the AGI stockholders may adversely affect the consideration
to be received by the AGI stockholders.
The Reorganization Agreement provides that it may be terminated at any
time prior to the Time of Filing (i) by mutual written consent of the parties;
(ii) by either party by written notice to the other if the Merger shall not
have been consummated by July 31, 1996, unless such failure of consummation is
due to the failure of the party seeking termination to perform or observe in
all material respects the covenants and agreements to be performed or observed
by it under the Reorganization Agreement; or (iii) by either party by written
notice to the other if any court or governmental authority of competent
jurisdiction shall have issued a final order restraining, enjoining, or
otherwise prohibiting the consummation of the transactions contemplated by the
Reorganization Agreement.
EFFECT ON EMPLOYEE BENEFIT PLANS
The Reorganization Agreement provides that, subject to any eligibility
requirements applicable to such plans, employees of AGI and any AGI Subsidiary
shall be entitled to participate in those Norwest employee benefit and welfare
plans specified in the Reorganization Agreement. The eligible employees of
AGI shall enter each of such plans no later than the first day of the calendar
quarter which begins at least 32 days after the Effective Date.
Employees of AGI and any AGI Subsidiary will receive credit for past
service for the purpose of determining eligibility for, and vesting of certain
benefits under certain of Norwest's benefit plans.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
As of the Effective Time of the Merger, AGI will become a direct
subsidiary, and each of the AGI Subsidiaries will become indirect
subsidiaries, of Norwest. Subsequent to the Merger, and subject to the
approval of the Comptroller of the Currency, AmeriBank will be consolidated
with Norwest Bank Minnesota, National Association ("Norwest Bank Minnesota"),
under the charter and with the name of Norwest Bank Minnesota. The current
head office and two existing branch locations of AmeriBank (two of which will
also be consolidated with two existing branches of Norwest Bank Minnesota)
will be operated as branches of Norwest Bank Minnesota, following the
consolidation, providing products and services offered by Norwest affiliates.
The steps taken to complete the consolidation of AmeriBank with Norwest
Bank Minnesota will be consistent with Norwest's representations to Dorsey &
Whitney LLP relating to the satisfaction, with respect to the Merger, of the
"substantially all of the assets" test as defined in Section 3.01 of I.R.S.
Revenue Procedure 77-37, 1977-2 C.B. 568, which representations such firm will
rely upon for purposes of its tax opinion as described under "--Certain
Federal Income Tax Considerations."
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Board of Directors of AGI was aware of the transactions and interests
of certain persons in the Merger described below and considered them, among
other matters, in recommending approval of the Merger and the transactions
contemplated thereby.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE; INDEMNIFICATION BY NORWEST.
Under the Reorganization Agreement, Norwest, for a period of three years after
the Effective Time, must use all reasonable efforts to cause to be maintained
in effect the existing policies of directors' and officers' liability
insurance maintained by AGI with respect to claims arising from facts or
events which occurred before the Effective Time of the Merger; provided,
however, that in no event must Norwest expend, in order to maintain or provide
insurance coverage pursuant to the Reorganization Agreement, any amount in
excess of 125% of the amount of the annual premiums paid as of the date hereof
by AGI for such insurance (the "Maximum Amount"); and provided further that,
prior to the Effective Time of the Merger, AGI must notify the appropriate
existing directors' and officers' liability insurer of the Merger and of all
pending and threatened claims, actions, suits, proceedings, or investigations
asserted or claimed against any indemnified party, or circumstances likely to
give rise thereto, in accordance with the terms and conditions of the
provisions of the existing policies. If the amount of the annual premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, Norwest must use all reasonable efforts to maintain the most
advantageous policies of directors' and officers' insurance obtainable for an
annual premium equal to the Maximum Amount.
Norwest must also ensure that all rights to indemnification and all
limitations of liability existing in favor of any director, officer, employee,
fiduciary or agent of AGI or the AGI Subsidiaries in AGI's Certificate of
Incorporation and By-Laws or similar governing documents of any AGI
Subsidiary, as in effect on the date of the Reorganization Agreement, or
allowed under applicable law as in effect on such date, with respect to claims
arising from facts or events that occurred before the Effective Time, shall
survive the Merger and shall continue in full force and effect, without
amendment, for a period of not less than three years from the Effective Time.
CHANGE-IN-CONTROL AGREEMENT. Pursuant to a letter agreement dated
December 8, 1995, AGI has agreed to provide for the payment of certain
benefits to Larry D. Albert, President of AmeriBank and a director of
AmeriGroup, upon the consummation of the Merger. Upon consummation of the
Merger, AGI has agreed (i) to pay to Mr. Albert a lump sum cash payment in an
amount equal to twice the amount of his then current annual salary, and (ii)
that in the event Mr. Albert is terminated at any time during the two year
period following the Effective Date of the Merger, AGI will pay, for a period
of six months after such termination, any premiums he would otherwise have to
pay for any "COBRA" continuation coverage. If Mr. Albert resigns from AGI or
is terminated for any reason prior to the Effective Date of the Merger, no
such payments will be made to him.
APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS
GENERAL
-------
Under the Delaware General Corporation Law ("DGCL") any holder of AGI
Common Stock on the date of the Demand (as defined below) who holds such
shares continually through the Effective Time of the Merger and follows the
procedures set forth in Section 262 of the DGCL ("Section 262") will be
entitled to have his AGI Common Stock appraised by the Delaware Court of
Chancery and to receive
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payment in cash of the "fair value" of such AGI Common Stock, exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
as determined by such Court.
PROCEDURE
---------
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, must notify each of its stockholders who was such on the record date
for the meeting with respect to shares for which appraisal rights are
available under Section 262 that such appraisal rights are available and
include in such notice a copy of Section 262. This Proxy Statement-Prospectus
constitutes such notice to each holder of AGI Common Stock and Section 262 is
attached to this Proxy Statement-Prospectus as Appendix B.
A holder of AGI Common Stock wishing to exercise his appraisal rights
must deliver to AGI, before the vote of the holders of AGI Class A Voting
Common Stock entitled to vote at the Special Meeting on the Reorganization
Agreement, a written demand for appraisal (the "Demand") of his shares and
must not vote in favor of approving the Reorganization Agreement. Because a
proxy which does not contain voting instructions will, unless revoked, be
voted "FOR" adoption of the Reorganization Agreement, a holder of AGI Class A
Voting Common Stock who votes by proxy and who wishes to exercise his
appraisal rights must (i) vote AGAINST the adoption of the Reorganization
Agreement or (ii) ABSTAIN from voting on the adoption of the Reorganization
Agreement. A vote against approval of the Reorganization Agreement, in person
or by proxy, will not in and of itself constitute a written demand for
appraisal satisfying the requirements of Section 262.
Only a holder of record of AGI Common Stock is entitled to assert
appraisal rights for the AGI Common Stock registered in that holder's name. A
demand for appraisal should be executed by or on behalf of the holder of
record, fully and correctly, as such holder's name appears on his stock
certificates. If the shares of AGI Common Stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the Demand must be made by the fiduciary. If the shares of AGI Common Stock
are owned of record by more than one person, as in a joint tenancy or tenancy
in common the Demand must be executed by or on behalf of all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
a Demand on behalf of a holder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that in executing the
Demand, the agent is acting as agent for the record owner or owners . A
record holder, such as a broker, who holds AGI Common Stock as nominee for
several beneficial owners, may exercise appraisal rights with respect to which
the holder is a record holder. In such case, the Demand must set forth the
number of shares of AGI Common Stock as to which appraisal is sought. Where
no number of shares of AGI Common Stock is expressly mentioned, the Demand
will be presumed to cover all shares of AGI Common Stock held in the name of
the record owner. Beneficial owners who are not record owners and who intend
to exercise appraisal rights should instruct the record owner to comply
strictly with the statutory requirements with respect to the exercise of
appraisal rights.
A holder of shares of AGI Common Stock held in "street name" who desires
appraisal rights with respect to such shares must take such actions as may be
necessary to ensure that a timely and proper demand for appraisal is made by
the record owner of such shares. Any holder of AGI Common Stock desiring
appraisal rights with respect to such shares who held his or her shares
through a brokerage firm, bank or other financial institution is responsible
for ensuring that the demand for appraisal is made by their record holder
thereof. The holder should instruct such firm, bank or institution that the
demand for appraisal must be made by the record holder of the shares, which
might be the nominee of a central security depository if the shares have been
so deposited. As required by Section 262, a demand for appraisal must
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reasonably inform the corporation of the identity of the record holder (which
might be a nominee as described above) and of such holder's intention to seek
appraisal of such shares.
Holders who elect to exercise appraisal rights must mail or deliver their
written demands to: AmeriGroup, Inc., 1809 Plymouth Road South, Suite 360,
Minnetonka, Minnesota 55305, Attention: David D. MacMillan. The written
demand for appraisal should specify that the holder is thereby demanding
appraisal of his or her shares.
Within 10 days after the Effective Time of the Merger, Norwest, as the
surviving corporation in the Merger, must send a notice as to the
effectiveness of the Merger to each holder of AGI Common Stock who has
satisfied the foregoing provisions of Section 262, which notice shall also
include a copy of Section 262. Within 120 days after the Effective Time of
the Merger, but not thereafter, AGI or any former holder of AGI Common Stock
entitled to appraisal rights under Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the value of AGI
Common Stock. AGI will not file any such petition. Accordingly, the
dissenting holder of AGI Common Stock will need to initiate all necessary
action to perfect his appraisal rights within the time periods prescribed in
Section 262.
Within 120 days after the Effective Time of the Merger, any former holder
of AGI Common Stock who has complied with the requirements for exercise of
appraisal rights will be entitled, upon written request, to receive from
Norwest a statement setting forth the aggregate number of shares of AGI Common
Stock not voted in favor of the adoption of the Reorganization Agreement and
with respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. Such statement must be mailed
within 10 days after a written request therefor has been received by Norwest
or within 10 days after expiration of the period for delivery of demands,
whichever is later.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine which former holders
of AGI Common Stock are entitled to appraisal rights and will appraise the
"fair value" of the AGI Common Stock exclusive of any element of value arising
from the accomplishment or expectation of the Merger. Holders of AGI Common
Stock considering seeking appraisal should be aware that the fair value of
their shares as determined under Section 262 could be more than, the same as,
or less than the consideration they would receive pursuant to the
Reorganization Agreement if they did not seek appraisal of their shares. Any
judicial determination of the "fair value" of the AGI Common Stock could be
based on numerous considerations including, but not limited to, the market
value of AGI Common Stock prior to the Merger and the net asset value and
earnings of AGI. The Delaware Supreme Court has stated that "proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered in
the appraisal proceeding. The Court will also determine the amount of
interest, if any, to be paid upon the amounts to be received by persons whose
shares have been appraised. The costs of the proceeding may be determined by
the Court and taxed upon the parties as the Court deems equitable. The Court
may also order that all or a portion of the expenses incurred by any
stockholder in connection with an appraisal proceeding, be charged pro rata
against the value of all the shares entitled to appraisal.
Any holder of AGI Common Stock who has duly demanded an appraisal in
compliance with Section 262 will not, after the Effective Time, be entitled to
vote the shares of AGI Common Stock subject to such demand for any purpose or
be entitled to the payment of dividends or other distributions on those shares
of AGI Common Stock, except dividends or other distributions payable to
holders of AGI Common Stock of record as of a date prior to the Effective Time
of the Merger.
If any holder of AGI Common Stock who demands appraisal of his AGI Common
Stock under Section 262 fails to perfect, or effectively withdraws or loses
his right to appraisal, then the shares of AGI
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Common Stock of such holder will be converted into and become the right to
receive shares of Norwest Common Stock in accordance with the Reorganization
Agreement. A holder of AGI Common Stock will fail to perfect, or effectively
lose, his right of appraisal if no petition for appraisal is filed within 120
days after the Effective Time, or if the stockholder delivers to AGI a written
withdrawal of his demand for appraisal and acceptance of the Merger, except
that any such attempt to withdraw made more than 60 days after the Effective
Time will require the written approval of AGI.
Failure to follow the steps required by Section 262 for perfecting rights
may result in the loss of such rights.
Cash received pursuant to the exercise of dissenters' rights may be
subject to federal or state income tax. See "--Certain Federal Income Tax
Considerations."
The foregoing summary of the applicable provisions of Section 262 is not
intended to be a complete statement of such provisions and is qualified in its
entirety by reference to such Section, the full text of which is attached as
Appendix C to this Proxy Statement-Prospectus.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The obligation of AGI to consummate the Merger is conditioned on, among
other things, the receipt of an opinion of Dorsey & Whitney LLP, counsel to
AGI, which will be based upon facts and representations to be provided to such
firm, and subject to various assumptions and qualifications, substantially to
the effect that for federal income tax purposes the Merger will qualify as a
"reorganization" under Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
On the basis of the foregoing opinion, it is expected that the following
material federal income tax consequences will result from the Merger:
(i) The Merger will qualify as 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 AGI
Common Stock upon the exchange of AGI Common Stock solely for Norwest
Common Stock pursuant to the Merger (but see clause (v) below for the tax
consequences of payments in lieu of fractional shares);
(iii) The income tax basis of the Norwest Common Stock received by
a stockholder of AGI pursuant to the Merger, including any fractional
share interest deemed received as described in (v) below, will be the
same as the income tax basis of the AGI Common Stock surrendered in
exchange therefor;
(iv) The holding period of the Norwest Common Stock received by a
stockholder of AGI pursuant to the Merger will include the period during
which the AGI Common Stock surrendered therefor was held, provided that
such AGI Common Stock is a capital asset in the hands of the stockholder
of AGI on the day of the Merger; and
(v) A holder of AGI Common Stock receiving cash in lieu of a
fractional share of Norwest Common Stock will be treated as having
received the fractional share of Norwest Common Stock in the Merger and
then having received the payment in lieu of the fractional share as a
distribution in full payment in exchange for the fractional share as
provided in Section 302(a) of the Code.
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The Internal Revenue Service (the "IRS") has not been and will not be
asked to rule upon the tax consequences of the Merger. An opinion of counsel
is not binding on the IRS and there can be no assurance, and none is hereby
given, that the IRS will not take a position contrary to the opinion or that
the opinion will be upheld by the courts if challenged by the IRS. In
addition, the tax opinion will be based upon the Code, regulations currently
in effect thereunder, current administrative rulings and practice, and
judicial authority, all of which are subject to change.
The tax opinion also will be based upon the truth and accuracy of, among
other things, the representations and warranties set forth in the
Reorganization Agreement and certain representations made or to be made by
Norwest, AGI, and the stockholders of AGI.
Of particular importance to the tax opinion will be the representations
to be made by the stockholders of AGI relating to the Merger's satisfaction of
the "continuity of interest" requirement. In order for this requirement to be
satisfied, (i) the value of the Norwest Common Stock received by the
stockholders of AGI in the Merger must represent a substantial portion of the
aggregate value of all shares of the AGI Common Stock exchanged in the Merger,
including shares exchanged for cash in lieu of fractional shares of Norwest
Common Stock ("Cash Shares"), and all shares held by stockholders of AGI, if
any, exercising their dissenters' rights ("Dissenting Shares"), and (ii)
stockholders of AGI must not, pursuant to a plan or intention existing at or
prior to the Merger, dispose of so much of either (A) their shares of AGI
Common Stock in anticipation of the Merger, or (B) their shares of Norwest
Common Stock received in the Merger (collectively, the "Planned Dispositions")
such that the stockholders of AGI, as a group, would no longer have a
significant equity interest in the AGI business being conducted by Norwest
after the Merger. The continuity of interest requirement will generally be
considered to be satisfied if, taking into account the Cash Shares, any
Dissenting Shares, and any Planned Dispositions, the shares of Norwest Common
Stock received in the Merger, in the aggregate, represent at least 50% of the
entire consideration received by the stockholders of AGI in the Merger. If
the continuity of interest requirement is not satisfied, the Merger would not
be treated as a tax-free reorganization and adverse tax consequences may
result to some or all of the stockholders of AGI.
In connection with the continuity of interest requirement, each
stockholder of AGI will be asked to sign a representation that such
stockholder (i) has not sold or otherwise disposed of any shares of AGI Common
Stock in anticipation of the Merger, and (ii) has no plan or intention to sell
or otherwise dispose of a number of shares of Norwest Common Stock received in
the merger that would reduce such stockholder's ownership of Norwest Common
Stock received in the Merger to a number of shares having a value, as of the
date of the Merger, which is less than 50% of the value of all of the formerly
outstanding shares of AGI Common Stock which such stockholder held as of the
same date.
The Board of Directors of AGI has decided that it is also prudent to have
some mechanism, in addition to the representations from stockholders of AGI
relating to the continuity of interest requirement, for ensuring that for an
appropriate period of time after the merger, no more than 50% of the Norwest
Common Stock issued in the merger, in the aggregate, will be sold or otherwise
disposed of. To that end, each stockholder of AGI will be asked to enter into
an agreement with the remaining stockholders of AGI and Waycrosse. Pursuant to
the agreement, each stockholder will promise the other stockholders entering
into the agreement that until the date that is two years after the Merger, of
such earlier date as determined by Waycrosse after consultation with counsel,
such stockholder will not sell or otherwise dispose of a number of shares of
Norwest Common Stock issued to such stockholder in the Merger that would
reduce such stockholder's ownership of Norwest Common Stock received in the
Merger to a number of shares having a value, as of the date of the Merger, of
less than the greater of (a) 50% of the value of the formerly outstanding
shares of AGI Common Stock held by such stockholder, or (b) such higher
percentage as may
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be appropriate after taking account of the Cash Shares, any Dissenting Shares,
and any other factors that Waycrosse determines to be appropriate after
consultation with counsel, applying such factors on a pro rata basis to all of
the stockholders signing the agreement so that each such stockholder will be
subject to the same percentage. Pursuant to the agreement, each stockholder
that signs the agreement will authorize Waycrosse, upon consummation of the
Merger, to surrender certificates representing the shares of AGI Common Stock
owned by such AGI stockholder and held by Waycrosse in exchange for a
certificate representing shares of Norwest Common Stock and a check in lieu of
any fractional shares of Norwest Common Stock, as determined pursuant to the
terms of the Reorganization Agreement. Upon consummation of the Merger, such
certificate of Norwest Common Stock and such check for fractional shares shall
be delivered to Waycrosse for safekeeping on behalf of such stockholder and so
that Waycrosse may monitor compliance by such stockholder with the terms of
the agreement. Upon receiving the checks for fractional shares, Waycrosse
shall deliver the checks to the stockholders. All voting rights with respect
to the shares of Norwest Common Stock held by Waycrosse will be exercised by
the owner thereof. All dividends received with respect to such shares shall be
income for tax purposes to the stockholders and shall be distributed currently
by the transfer agent for Norwest Common Stock to the stockholders. Upon
termination of the agreement, Waycrosse will deliver to each stockholder of
AGI, the shares of Norwest Common Stock held by Waycrosse on behalf of such
stockholder hereunder. While any shares of Norwest Common Stock are held by
Waycrosse under the agreement, no stockholders will be allowed to sell or
otherwise dispose of their rights to any of such shares except in accordance
with the terms of the agreement.
Also of importance to the tax opinion to be delivered by Dorsey & Whitney
LLP will be the representations and assumptions that, after the Merger, AGI
will hold assets representing at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross assets held by
AGI immediately prior to the Merger (the "substantially all of the assets"
test as defined in Section 3.01 of I.R.S. Revenue Procedure 77-37, 1977-2 C.B.
568). Of particular importance are Norwest's representations regarding the
"substantially all of the assets" test. For purposes of such representations
and assumptions, amounts paid by AGI to any dissenting stockholders and
amounts paid for reorganization expenses of AGI will be considered as assets
held by AGI immediately prior to the Merger.
If the required tax opinion is not received, the Merger will not be
consummated unless the condition requiring receipt of the opinion is waived
and the approvals of the AGI stockholders are resolicited by means of an
updated Proxy Statement-Prospectus.
Any stockholders of AGI who receive cash upon the exercise of dissenters'
rights will be treated as receiving a distribution in redemption of their
shares of AGI Common Stock, subject to the provisions and limitations of
Section 302 of the Code.
The foregoing is only a general description of certain anticipated
federal income tax consequences of the Merger, without regard to the
particular facts and circumstances of the tax situation of each stockholder of
AGI. The summary set forth above does not purport to be a complete analysis
of all potential tax effects of the transactions contemplated by the
Reorganization Agreement or the Merger itself. No information is provided
herein with respect to the tax consequences, if any, of the Merger under
state, local, foreign or other tax laws. EACH STOCKHOLDER OF AGI IS URGED TO
CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISORS AS TO THE EFFECT OF SUCH
FEDERAL INCOME TAX CONSEQUENCES ON HIS OR HER OWN PARTICULAR FACTS AND
CIRCUMSTANCES AND ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER TAX
CONSEQUENCES ARISING OUT OF THE MERGER.
32
<PAGE>
RESALE OF NORWEST COMMON STOCK
The shares of Norwest Common Stock issuable to stockholders of AGI upon
consummation of the Merger have been registered under the Securities Act.
Such shares may be traded freely and without restriction by those stockholders
not deemed to be "affiliates" of AGI or Norwest as that term is defined in the
rules under the Securities Act. Norwest Common Stock received by those
stockholders of AGI who are deemed to be "affiliates" of AGI may be resold
without registration as provided for by Rule 145, or as otherwise permitted
under the Securities Act. All stockholders of AGI are currently considered
affiliates of AGI. In the Reorganization Agreement, AGI has agreed to
use its best efforts to cause each AGI stockholder who is an executive officer
or director of AGI or who may otherwise reasonably be deemed to be an
affiliate of AGI to enter into an agreement (an "Affiliate Agreement"), in the
form attached as Exhibit B to the Reorganization Agreement included as
Appendix A to this Proxy Statement-Prospectus, with Norwest providing that
such affiliate will not sell, transfer, or otherwise dispose of the shares of
Norwest Common Stock to be received by such person in the Merger except in
compliance with the applicable provisions of the Securities Act and the rules
and regulations promulgated thereunder. It is currently contemplated that
each stockholder of AGI will be required to execute an Affiliate
Agreement.
This Proxy Statement-Prospectus does not cover any resales of Norwest
Common Stock received by affiliates of AGI. EACH STOCKHOLDER WHO MAY BE
DEEMED TO BE AN AFFILIATE IS URGED TO CONSULT INDEPENDENT LEGAL COUNSEL
CONCERNING APPLICABLE RESTRICTIONS ON RESALE.
In addition, as described under "--Certain Federal Income Tax
Considerations," each stockholder of AGI will be asked to sign an agreement
pursuant to which such stockholder will agree that for a period of up to two
years after the Merger, such stockholder will not sell or otherwise dispose of
a number of shares of Norwest Common Stock issued to such stockholder in the
Merger that would reduce such stockholder's ownership of such Norwest Common
Stock to a number of shares having a value of less than 50% (or a higher
percentage) of the value of the formerly outstanding shares of AGI Common
Stock held by such stockholder. See "--Certain Federal Income Tax
Considerations."
The Reorganization Agreement provides for the filing by Norwest of
listing applications with the NYSE and the CHX covering the shares of Norwest
Common Stock issuable upon consummation of the Merger. It is a condition to
the consummation of the Merger that such shares of Norwest Common Stock shall
have been authorized for listing on the NYSE and the CHX effective upon
official notice of issuance.
ACCOUNTING TREATMENT
Any provision of the Reorganization Agreement notwithstanding, management
of Norwest anticipates that the Merger will be accounted for as a purchase
under generally accepted accounting principles.
The unaudited pro forma summary financial information contained in this
Proxy Statement-Prospectus has been prepared using the purchase accounting
method to account for the Merger. See "SUMMARY--Comparative Per Common Share
Data."
EXPENSES
Norwest and AGI will each pay their own expenses in connection with the
Merger, including fees and expenses of their respective accountants and
counsel.
33
<PAGE>
AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF AGI
The AGI Board of Directors has unanimously approved the amendment to
AGI's Certificate of Incorporation to explicitly exclude certain transactions
from the definition of a Purchase Event, which could trigger an exercisable
irrevocable right and option in AGI and each of its stockholders to purchase
shares of AGI's Common Stock held by another stockholder (hereinafter, the
"Certificate Amendment"). The AGI Board believes adoption of the Certificate
Amendment is in the best interests of all of the AGI stockholders and
recommends that AGI stockholders vote in favor of Proposal 2.
THE AGI BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING
RESOLUTIONS WHICH WILL BE PRESENTED AT THE AGI SPECIAL MEETING AS PROPOSAL 2:
RESOLVED, that Article X, Section 10.2(a) of the Certificate of
Incorporation of AGI be, and hereby is, replaced with the following:
"Except as otherwise provided below, such irrevocable right and option
shall be exercisable as hereinafter provided upon the occurrence of any
one or more of the following events, except that such events shall not
include a merger or other business combination between the Corporation
and a bank holding company where total consolidated assets and total
stockholders' equity of such bank holding company exceeds that of the
Corporation (hereinafter referred to as "Purchase Events");"
RESOLVED FURTHER, that the officers of AGI be, and they hereby are,
authorized and directed to execute such documents and certificates and
take such other action as may be necessary or appropriate to give effect
to the foregoing resolution.
Article X of AGI's Certificate of Incorporation currently provides AGI
and each of its stockholders an irrevocable right and option, in certain
circumstances, to purchase shares of AGI's Common Stock held by any other
holder of shares of AGI's Common Stock. The irrevocable right and option are
exercisable upon the occurrence of a "Purchase Event," which includes, among
other things, a stockholder's or that stockholder's legal representative's
desire to sell any of the shares of AGI Common Stock. Thus, if a stockholder
desires to sell his or her shares of AGI Common Stock, he or she must offer
the shares to AGI and to its stockholders pursuant to the terms set forth in
AGI's Certificate of Incorporation.
Article X of AGI's Certificate of Incorporation also defines a Purchase
Event to include a transfer or other disposition of any share or shares of AGI
Common Stock. Article X does not indicate whether the transactions
contemplated by the Reorganization Agreement would result in a Purchase Event.
If such transactions constitute a Purchase Event such that they constitute
either a stockholder's desire to sell stock or a transfer of stock by a
stockholder, then AGI's Certificate of Incorporation provides that the stock
to be exchanged and converted must be offered back to the corporation and to
its stockholders before it may be transferred to a third party. Thus, before
each holder of shares of AGI Common Stock can exchange their shares pursuant
to the Merger, they would have to offer the shares to the corporation and the
other stockholders. Although each stockholder could agree to refuse each
offer and allow the shares to be exchanged and converted, the entire process
could potentially delay the Merger.
The Amendment would not alter the current language of AGI's Certificate
of Incorporation. Rather, it would add a provision that excludes mergers and
related transactions from the definition of a
34
<PAGE>
Purchase Event. Accordingly, the transactions contemplated under the
Reorganization Agreement would not give AGI or the stockholders an exercisable
irrevocable right and option to purchase any other stockholder's shares of AGI
Common Stock. The Certificate Amendment would thus further the purposes of AGI
and its stockholders in pursuing the Merger.
The affirmative vote of at least 70% of the holders of a majority of
Class A Voting Common Stock of AGI entitled to vote at the meeting is
necessary to approve the Certificate Amendment. If not otherwise specified,
properly executed proxies will be voted in favor of the Certificate Amendment.
INFORMATION ABOUT AGI
GENERAL
AGI is a one bank holding company, registered under the Bank Holding
Company Act of 1956, and headquartered in Minnetonka, Minnesota. AGI was
incorporated as a Delaware corporation in 1988. AGI owns all of the
outstanding capital stock of AmeriBank, a bank chartered under the laws of
Minnesota with three branches in Bloomington, Minnesota and one branch in
Minnetonka, Minnesota. AGI also owns all of the outstanding capital stock of
American Community Bank Group Service Corporation, which provides the use of
certain data processing equipment to AmeriBank. At December 31, 1995, AGI had
consolidated total assets of $165.8 million and total stockholders' equity of
$25 million. See the Consolidated Financial Statements and Notes thereto of
AGI contained elsewhere herein.
AGI derives substantially all of its revenues from cash dividends paid to
it by AmeriBank, its subsidiary, and interest on short-term investments.
Dividend payments by AmeriBank are determined by considering its earnings,
deposit growth and capital requirements. Service fees paid by AmeriBank to
AGI represent payments for services provided to it by AGI personnel. It has
been AGI's practice to increase the capital of AmeriBank primarily through
retention of earnings.
AmeriBank was organized through the consolidation of Minnetonka National
Bank of Minnetonka, Minnesota and American State Bank of Bloomington,
Minnesota in 1992. AmeriBank accounts for approximately 97% of AGI's
consolidated assets. American Community Bank Group Service corporation
accounts for less than 1% of AGI's consolidated assets. AmeriBank and
American Community Bank Group Service Corporation operate exclusively in
Minnesota through four branches located in Bloomington and Minnetonka,
Minnesota. AmeriBank's customer base consists of the retail and commercial
customers primarily of the southwestern suburbs of Minneapolis, Minnesota.
AmeriBank serves a wide range of commercial and retail borrowing needs within
its market. It extends various types of loans, including short- and long-term
residential and commercial real estate mortgage loans to individuals and
businesses. In addition, AmeriBank provides various types of secured and
unsecured consumer loans, indirect installment loans and second mortgages and
equity lines of credit.
AmeriBank also provides a full range of deposit products, including
checking accounts, savings accounts, certificates of deposit and money market
instruments. It also offers other services, including individual retirement
accounts, credit card services and annuities.
While the managers of the individual branch banks and the officers of
AmeriBank are responsible for daily management, AGI monitors lending and
accounting policies, budgeting goals and long-range plans by means of
centralized accounting and control systems.
35
<PAGE>
MARKET AREA AND COMPETITION
AmeriBank competes exclusively in Minnesota and conducts business
primarily in the southwest suburbs of the Minneapolis and St. Paul
metropolitan areas (the "Twin Cities"). The southwestern section of the Twin
Cities is characterized by substantial retail activity, numerous office
complexes, housing service-oriented businesses, and a few middle market
manufacturers of high end biotech or computer-oriented products. AmeriBank
competes with other financial institutions in their respective market areas,
including commercial banks, savings banks, mortgage companies, insurance
companies, consumer finance companies, securities brokerage firms, credit
unions, and money market funds.
Generally, AmeriBank tries to offer a more personalized banking
relationship and thus appeals to the smaller commercial operation or retail
customer. AmeriBank thereby faces less competition from larger banks that
focus on large commercial lending activity. Recently, AmeriBank has expanded
into offering brokerage services.
LOANS AND INVESTMENTS
Substantially all of AmeriBank's loans have been originated from their
local markets. AmeriBank's policies emphasize quality local loan growth.
Total funds available for investment regularly exceed local loan demand.
These excess funds are allocated among other investments including U.S.
government and agency securities, obligations of state and local governments,
high-quality non-local loans and loan participations, and other earning
assets.
The following is a brief description of the types of lending activities
engaged in by AmeriBank. More extensive financial information regarding each
category of loans is set forth under "--Management's Discussion and Analysis
of AGI's Financial Condition and Results of Operations."
COMMERCIAL LOANS. AmeriBank provides secured and unsecured loans and
lines of credit for the operation and expansion needs of local businesses.
Loans in this category include loans to service, retail, wholesale, and
manufacturing businesses.
REAL ESTATE LOANS. AmeriBank's real estate lending activities primarily
include construction financing and real estate mortgage financing, both on
commercial and residential properties. The majority of single family real
estate loans consist of second mortgages on residential properties used by the
borrower for home improvement and similar purposes. AmeriBank also services
first mortgage real estate loans and originates owner-occupied medium-term
commercial mortgage real estate loans.
CONSUMER AND OTHER LOANS. Other lending activities of AmeriBank include
automobile, personal and home equity loans, the latter principally secured
through second mortgages, and checking/overdraft lines of credit. The
consumer loan portfolio also includes a large number of dealer-originated
automobile contracts. AmeriBank also provides Small Business Administration
loans.
INVESTMENTS. The investment activities of AmeriBank are designed to
provide an investment alternative for funds not presently required to meet
loan demand. The investment activities also aid AmeriBank in meeting
potential liquidity requirements, maximizing income consistent with quality
and liquidity requirements, providing a means of balancing market and credit
risks and providing consistent income and market value throughout changing
economic times.
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<PAGE>
AmeriBank's investment portfolio consists primarily of obligations of the
United States Government, U.S. Government agencies, and state and local
governments, as well as corporate securities, mortgage-backed securities, and
collateralized mortgage obligations. Management of AmeriBank is responsible
for the overall management of its investment portfolio, subject to the
oversight of the AGI Board of Directors.
DEPOSITS AND OTHER BANKING SERVICES
AmeriBank's core business consists of attracting deposits and originating
loans, although new competitors and changing banking laws have created an
intense market for deposits. AmeriBank offers a variety of deposit products
and services. AmeriBank has a core deposit base comprised primarily of
traditional deposit accounts such as demand deposit accounts, NOW accounts,
savings accounts, and certificates of deposit. AmeriBank also offers numerous
other traditional bank products and services such as traveler's checks, safe
deposit box rentals, wire transfers, collections, night depository, and direct
deposit. AmeriBank also offers discount brokerage services.
PROPERTIES
Real property owned or leased by AGI consists primarily of bank buildings
for AmeriBank branches. AmeriBank owns the Minnetonka Bank Building located
at 1809 Plymouth Road South, Minnetonka, Minnesota which it leases to 13
tenants, including AGI. AGI leases space in the Minnetonka Bank Building for
its executive offices. AmeriBank leases real property in three Bloomington,
Minnesota locations in which it provides banking services.
EMPLOYEES
As of March 31, 1996, AGI and the AGI Subsidiaries employed approximately
70 people on a full-time equivalent basis. Management considers its
relationship with its employees to be good.
MARKET PRICE OF AND DIVIDENDS ON AGI COMMON STOCK
There is no established trading market for AGI Common Stock. AGI is
aware of no transactions involving the sale of AGI Common Stock in the current
fiscal year to date. The prices for the AGI Common Stock in any past
transactions should not be considered indicative of prices that could be
obtained in an active market involving a substantial number of shares.
AGI declared a cash dividend of $.50 per share in 1995 and $1.00 per
share in 1994. See "SUMMARY--Comparative Per Common Share Data."
SUPERVISION AND REGULATION
To the extent the information below consists of summaries of certain
statutory provisions, it is qualified in its entirety by reference to the
statutory provisions so described.
37
<PAGE>
THE HOLDING COMPANY
-------------------
AGI is subject to the provisions of the BHCA, which requires a bank
holding company to register with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") and be subject to its supervision. The
BHCA requires prior approval by the Federal Reserve Board of the acquisition
by a bank holding company of more than 5% of the voting stock or substantially
all the assets of any bank, but does not require prior approval before
acquisition of additional shares in banks, the majority of the shares of which
are already controlled by such bank holding company. A bank holding company
is prohibited, with limited exceptions, from acquiring direct or indirect
ownership or control of more than 5% of the voting shares of any company that
is not a bank and from engaging in activities other than those of banking or
of managing or controlling banks and other authorized subsidiaries and
providing services to its subsidiaries. One of the exceptions to this
prohibition permits ownership of the shares of a company, the activities of
which the Federal Reserve Board determines to be so closely related to the
business of banking or of managing or controlling banks as to be a proper
incident thereto. The Federal Reserve Board has published regulations
regarding these matters, which, in the opinion of management of AGI, enable
AGI to engage in its present operations. In addition, bank holding companies
are subject to certain restrictions on their ability to own banks in more than
one state.
AGI is required to file periodic reports with the Federal Reserve Board
and such other information as may be required to keep the Federal Reserve
Board informed regarding AGI's compliance with the provisions of the BHCA and
the rules, regulations and orders issued thereunder, and the Federal Reserve
Board examines AGI and the AGI Subsidiary banks periodically.
AMERIBANK
---------
AmeriBank, as a state-chartered bank, is subject to the supervision and
regulation of, and is regularly examined by, the Minnesota Commissioner of
Commerce. AmeriBank is a member of the Federal Deposit Insurance Corporation
and subject to regulation and regularly examined by the Federal Deposit
Insurance Corporation.
Minnesota banking regulations generally permit a bank to pay dividends
equaling 50% of its current year's income without prior regulatory approval if
certain requirements are met. Two such requirements are that the bank
maintain total stockholders' equity, as defined, equal to 6% of total assets
and that assets classified by regulatory examiners be less than 50% of
stockholders' equity, as defined. Banking regulations also require the bank
to maintain certain minimum capital levels in relation to bank assets.
The Federal Reserve Board has broad powers to expand and contract the
supply of money and credit. The supply of money and credit is also affected
by the fiscal practices of the United States Government. These may directly
or indirectly affect the growth of loans and deposits and the interest rates
charged on loans and paid for deposits and may affect the operations of
AmeriBank.
LEGAL PROCEEDINGS
There are no material pending legal proceedings other than ordinary
routine litigation to which AGI or the AGI Subsidiaries are or may be
considered a party. There are no material pending legal proceedings to which
any director, officer, or affiliate of AGI is or may be a party adverse to AGI
or has or may have a material interest adverse to AGI or any of the AGI
Subsidiaries.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF AGI'S FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BASIS OF PRESENTATION
---------------------
The following is AGI management's discussion and analysis of the results
of operations and the historical financial condition of AGI and its
consolidated subsidiaries. This should be read in conjunction with AGI's
audited consolidated financial statements and accompanying footnotes presented
elsewhere herein.
The financial information discussed below reflects the operation of AGI
and the AGI Subsidiaries. AmeriBank is the principal subsidiary of AGI.
American Community Bank Group Service Corporation owns most of the data
processing equipment used by AmeriBank and provides the equipment, software
and maintenance to AmeriBank in return for a monthly fee. AmeriBank employees
operate such equipment. In November 1993, AGI sold a subsidiary bank, Pierce
County Bank and Trust headquartered in Ellsworth, Wisconsin, for cash. The
discussion of operations covers 1995 and 1994 results.
COMPARISON OF INCOME FOR YEARS ENDED DECEMBER 31, 1995 AND 1994
---------------------------------------------------------------
EARNINGS PERFORMANCE. AGI earned $2.4 million in 1995 and $1.5 million
in 1994. The increase in earnings in 1995 is primarily attributable to a
$367,000 increase in net interest income, a $721,000 decrease in non-interest
expense and a positive adjustment of accrued income tax of $700,000. These
factors offset a decline in non-interest income from $1.8 million in 1994 to
$1.3 million in 1995 due to the closure in February, 1995 of AmeriBank's
mortgage department which had operated at a loss in the fourth quarter of 1994
and January, 1995. The increase in net interest income was due to loan growth
of 10% and a slight increase in net interest margin. The decline in other
expense came from a reduction in salary and benefits expense at AGI and
AmeriBank, and a reduction in FDIC insurance premiums. The positive tax
adjustment was due to a reduction in accrued income taxes to more accurately
reflect the estimated current income tax liability. Income before taxes
increased $658,000 in 1995.
1994 earnings of $1.5 million exceeded 1993 earnings adjusted to exclude
the sale and 1993 operating results of Pierce County Bank and Trust by
$146,000. Income before taxes increased by $710,000 in 1994 from 1993. The
1994 increase in net income was lessened considerably by a $480,000 positive
tax adjustment in 1993 due to a change in the accounting treatment of deferred
income tax expense. The $710,000 increase in income before taxes was
primarily the result of increased net interest income.
The following is a condensed summary of the consolidated statement of the
operations of AGI (dollars in thousands) along with selected profitability
ratios:
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<PAGE>
AGI ANALYSIS OF NET INCOME
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Net Interest Income................. $6,827 $6,459
Provision for Possible Loan Losses.. 170 194
Non-Interest Income................. 1,332 1,786
Non-Interest Expenses............... 5,184 5,905
Net Income.......................... 2,391 1,488
Return on Average Assets............ 1.46% .94%
Return on Average Equity............ 10.31% 6.54%
Dividend Payout Ratio............... 21.09% 67.57%
Average Equity to Assets............ 14.14% 14.34%
</TABLE>
NET INTEREST INCOME. Net interest income is affected by changes in both
interest rates and the volume of average earning assets and interest bearing
liabilities. The following table presents AGI's average balance sheets,
interest earned or paid, and the related yields and rates on major categories
of earning assets and interest-bearing liabilities for 1995 and 1994.
AGI ANALYSIS OF AVERAGE RATES AND BALANCES
YEARS ENDED DECEMBER 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
1995 1994
-------------------------- ---------------------------
INTEREST INTEREST AVERAGE
AVERAGE INCOME/ YIELDS AVERAGE INCOME/ YIELDS/
BALANCE EXPENSE /RATES BALANCE EXPENSE RATES
--------- -------- ------- --------- -------- --------
(1) (1)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Loans $ 97,249 $ 8,543 8.78% $ 88,875 $ 7,117 8.01%
Investment Securities 47,340 3,017 6.37% 50,266 2,925 5.82%
Other Interest Earning Assets 5,916 383 6.47% 6,219 308 4.95%
-------- -------- ---- -------- -------- ----
Total Interest Earning Assets 150,505 $ 11,943 7.94% 145,360 $ 10,350 7.12%
Allowances for Loan Losses (1,553) (1,562)
Non-Interest Earning Assets 15,018 14,921
-------- --------
Total Assets $163,970 $158,719
======== ========
LIABILITIES
Savings/Interest Bearing Checking $ 40,703 $ 850 2.09% $ 44,452 $ 817 1.84%
Time Deposits 53,545 3,153 5.89% 42,411 2,047 4.83%
Short-Term Borrowings 17,353 1,113 6.41% 22,184 1,027 4.63%
Long-Term Borrowings 0 0 0.00% 0 0 0.00%
-------- -------- ---- -------- -------- ----
Total Interest Bearing Liabilities $111,601 $ 5,116 4.58% $109,047 $ 3,891 3.57%
-------- --------
Non-interest Bearing Liabilities 29,186 26,906
Common Stockholder's Equity 23,183 22,766
-------- --------
Total Liabilities and
Stockholders Equity $163,970 $158,719
======== ========
Net Interest Income $ 6,827 $ 6,459
======== ========
Net Interest Spread 3.36% 3.55%
Net Interest Margin 4.54% 4.44%
</TABLE>
(1) Yields on tax exempt obligations are not computed on a tax equivalent
basis.
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<PAGE>
The following table reflects changes in interest income and expense
attributable to changes in volume and interest rates of significant interest-
bearing assets and liabilities:
AGI ANALYSIS OF VOLUME & INTEREST RATES
YEARS ENDED DECEMBER 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
1995 COMPARED TO 1994 1994 COMPARED TO 1993
----------------------- --------------------------
ATTRIBUTABLE TO CHANGE ATTRIBUTABLE TO CHANGE
----------------------- --------------------------
TOTAL IN IN TOTAL IN IN
CHANGE VOLUME RATE CHANGE VOLUME RATE
------ ----- ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans $1,426 $ 706 $ 720 ($2,576) ($1,935) ($641)
Investment Securities 92 (175) 267 (3,110) (3,161) 51
Federal Funds Sold and Deposits
with Bank 75 (13) 88 202 142 60
------ ----- ------ ------- ------- -----
Total Interest Income $1,593 $ 518 $1,075 ($5,484) ($4,954) ($530)
====== ===== ====== ======= ======= =====
INTEREST EXPENSE
Savings/Interest-Bearing
Checking Deposits $ 33 ($73) $ 106 ($1,183) ($816) ($367)
Time Deposits 1,106 602 504 (1,707) (1,661) (46)
Short-Term Borrowings 86 (248) 334 475 217 258
Long-Term Borrowings 0 0 0 (381) (381) 0
------ ----- ------ ------- ------- -----
Total Interest Expense $1,225 $ 281 $ 944 ($2,796) ($2,641) ($155)
====== ===== ====== ======= ======= =====
Increase (Decrease) in Net Interest Income $ 368 $ 237 $ 131 ($2,688) ($2,313) ($375)
====== ===== ====== ======= ======= =====
</TABLE>
The change in interest income/expense attributable to volume reflects the
change in volume times the prior year's rate and the change in interest
income/expense attributable to rate reflects the changes in rates times last
year's volume.
Net interest income in 1995 increased mainly as a result of increased
loan volume although the net interest margin increased due to a slightly higher
proportionate increase in the yield on earning assets compared to interest
bearing liabilities and an increase in non-interest bearing deposits. Net
interest income in 1994 decreased due to the sale of Pierce County Bank and
Trust in 1993. Excluding the impact of such sale, net interest income would have
increased by $800,000 over 1993 results. Of this amount, $300,000 is due to
increased net interest income at AmeriBank from increased loan balances with the
remainder attributable to the payoff of long term debt and the reinvestment of
$5 million of excess cash from the proceeds of the sale of Pierce County Bank
and Trust.
PROVISION FOR LOAN LOSSES. AGI made provisions to its Loan Loss Reserve
of $170,000 and $194,000 in 1995 and 1994 respectively. The provisions recorded
were based upon management's assessment of an adequate reserve for possible loan
losses. 1994 provisions were equivalent to 1993 levels.
Management continually assesses the adequacy of the Loan Loss Reserve by
evaluating the collectability of loans. This process includes assigning risk
ratings to loans and reserving percentages of these balances according to
reserve allocation formulas. This evaluation process takes into consideration
41
<PAGE>
such factors as changes in the nature and volume of AGI's loan portfolio, prior
loan loss experience, overall loan portfolio quality, review of specific problem
loans and current and anticipated economic conditions that may affect a
borrower's ability to pay. Net charge-offs were $8,000 and $123,000 for 1995 and
1994, respectively.
NON-INTEREST INCOME. The following table presents a summary of non-
interest income (in thousands):
AGI ANALYSIS OF NON-INTEREST INCOME
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Service Charges on Deposit Accounts.. $ 807 $ 867
Loan Fees............................ 165 520
Other Service Charges................ 254 218
Other Operating Income............... 106 181
------ ------
TOTAL............................. $1,332 $1,786
====== ======
</TABLE>
Non-interest income continues to be a significant source of revenue for
AGI. The decline in loan fees in 1995 was due to the closing of the AmeriBank
mortgage department in February, 1995. The mortgage department had experienced
significant losses in the preceding quarter. The decline in service charges on
deposit accounts in 1995 was due to lower overdraft fees and the conversion of a
number of consumer checking accounts from a fee to free basis due to market
conditions. Other operating income declined due to the recording of a one time
gain booked in 1994 on the sale of the Pierce County Bank. The gain was the
result of the settlement of certain issues concerning the sale subsequent to
December 31, 1993. Excluding the 1993 results of Pierce County Bank and Trust,
1994 non-interest income decreased from 1993 by $63,000 due primarily to a
decline in loan origination fees.
NON-INTEREST EXPENSE. The following table presents a summary of non-
interest expense (in thousands):
AGI ANALYSIS OF NON-INTEREST EXPENSE
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Salaries and Benefits...... $2,667 $3,129
Premises and Fixed Assets.. 1,221 1,147
Other Expenses............. 1,296 1,629
------ ------
TOTAL................... $5,184 $5,905
====== ======
</TABLE>
The majority of the 1995 decline in non-interest expense was in the
salary and benefit category. Reductions came from the closure of the mortgage
department at AmeriBank and the elimination and consolidation of several
positions at AmeriBank and AGI. The decline in other expenses is attributable to
improved expense control in a number of categories and a reduction in FDIC
insurance premiums of $112,000 in 1995. 1994 non-interest expense increased
slightly over 1993 levels (restated to exclude Pierce County Bank and Trust)
with no material differences in any specific category.
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<PAGE>
Income Taxes. AGI's income tax provision in 1995 was $409,000 and
$655,000 in 1994. The effective tax rates for the years were 14.6% and 30.5%
respectively. The effective tax rate differs from the federal statutory rate
due to the adjustment of the provision to compensate for greater than required
provisions in 1993. The adjustment amounted to $700,000 in 1995 and $250,000
in 1994.
FINANCIAL CONDITION
-------------------
Overview. AGI's total consolidated assets were $165.8 million and $168.9
million for the years ending December 31, 1995 and 1994, respectively. The
slight reduction was due to reduced holdings in the investment securities
portfolio. Deposits increased $11.8 million in 1995 while short-term
borrowings decreased $17.7 million during the year. Total consolidated assets
at December 31, 1994 increased by $14.3 million from December 31, 1993. The
increase was the direct result of a $20.5 million increase in loans and was
principally funded by borrowings from the Federal Home Loan Bank as deposit
levels did not materially change during 1994.
Loans. The following table presents the balance of each major category
of loans at the dates indicated:
AGI ANALYSIS OF LOANS
YEARS ENDED DECEMBER 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
1995 1994
-------------------- ---------------------
AMOUNT % OF LOANS AMOUNT % OF LOANS
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
LOAN CATEGORY
Commercial $27,287 27.91% $26,873 27.53%
Real Estate
Construction 2,837 2.90% 916 .94%
Residential 18,827 19.26% 16,315 16.71%
Other 11,402 11.66% 13,808 14.14%
Consumer 37,409 38.27% 39,706 40.67%
------- ------ ------- ------
TOTAL LOANS 97,762 100.00% $97,628 100.00%
------- ====== ------- ======
Less Allowance for Loan Losses (1,632) (1,471)
------- -------
TOTAL NET LOANS $96,130 $96,157
======= =======
Average Loans for the Period $97,249 $88,875
</TABLE>
The principal component of AGI's earning assets is its loan portfolio.
On December 31, 1995, loans totaled $97.8 million, up slightly from year-end
1994 although the annual average balance increased by $8.4 million. During
1995, emphasis was placed on increasing yields rather than volume and
originating relationship-based lines of credit in the commercial area.
Relationship-based lines of credit result in the creation of low cost deposits
resulting in greater overall profitability. Loans increased by $20.5 million
in 1994 compared to 1993 with the biggest increases in the consumer and real
estate categories.
43
<PAGE>
At December 31, 1995, the loan portfolio was distributed in roughly equal
amounts between commercial, real estate and consumer. The particular
characteristics of each category are as follows:
Commercial Loans. Loans in this category principally include loans to
service, wholesale, retail and manufacturing businesses located in the Twin
Cities area. Typical purposes include working capital, equipment acquisition
and owner-occupied real estate. The loans are typically structured as
revolving lines of credit and monthly pay term loans.
Real Estate Loans. At December 31, 1995, 57% of the real estate
portfolio consists of first and second mortgage loans secured by personal
residences. During 1995, the AmeriBank mortgage department was closed. This
department originated first mortgage loans for sale to the secondary market as
well as portfolio loans, which had an outstanding balance as of December 31,
1995, of approximately $6.0 million. Because of relatively less profitability
and highly competitive markets, first mortgage loan originations were
discontinued during 1995 except for limited situations where a long standing
customer relationship is involved. Second mortgages for a variety of purposes
are originated through AmeriBank's branch offices and referrals from home
improvement dealers which are actively solicited. Commercial real estate
mortgages secured by income properties comprised 35% of the real estate
portfolio at December 31,1995. Credit decisions on this type of loan are
heavily influenced by the borrower's ability to repay from sources other than
the primary collateral. Construction loans are made in limited numbers to
customers who are extremely credit worthy and have long standing relationships
with AmeriBank. These types of loans are not actively sought.
Consumer Loans. $31 million of the consumer loan portfolio at December
31, 1995, consist of auto loans purchased from a number of Twin Cities auto
dealers. The loans are comprised of both new and used vehicles. The
remainder of the consumer portfolio consists of loans originated through
AmeriBank offices for a variety of personal purposes.
Non-Performing Assets. AGI follows regulatory guidelines at a minimum
when placing loans on a non-accrual status. When it is clear that a loan is
impaired, it is placed on non-accrual even though the regulatory guideline
time may have not been reached. When a loan is placed on non-accrual status,
all previously accrued and uncollected interest is reversed. Non-performing
assets of AGI are summarized in the table below:
AGI NON-ACCRUAL, RESTRUCTURED AND PAST DUE LOANS
YEARS ENDED DECEMBER 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Non-Accrual Loans............... $ 397 $ 218
Loans Past Due 90 Days or More.. 22 139
Restructured Loans.............. 0 0
</TABLE>
If interest on non-accrual loans had been accrued, such income would have
amounted to approximately $17,000 in 1995 and $25,000 in 1994. The amount of
income recorded on nonaccrual loans during 1995 and 1994 was not material.
44
<PAGE>
Allowance for Possible Loan Losses. AGI's Allowance for Possible Loan
Losses is available to absorb future loan losses. The current level of the
Allowance for Possible Loan Losses is a result of management's assessment of
the risks within the loan portfolio based on the information revealed in the
credit reporting processes. AGI utilizes a risk-rating system on loans and a
monthly credit review and reporting process which results in the calculation
of the guideline reserves based on the risk within the portfolio. This
assessment of risk rakes into account the composition of the loan portfolio,
previous loan experience, current economic conditions and other factors that,
in management's judgment, deserve recognition.
The following table sets forth changes in AGI's Allowance for Possible
Loan Losses as of the dates indicated (dollars in thousands):
AGI ANALYSIS OF ALLOWANCE FOR POSSIBLE LOAN LOSSES
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994
------ -------
<S> <C> <C>
Balance Beginning of Year......... $1,470 $1,399
Provision for Loan Losses......... 170 194
Charge-Offs:
Commercial........................ 41 62
Real Estate....................... 0 149
Consumer.......................... 95 83
------ ------
TOTAL LOAN LOSSES............. 135 294
Recoveries:
Commercial........................ 70 129
Real Estate....................... 0 0
Consumer.......................... 57 42
------ ------
TOTAL LOAN RECOVERIES......... 127 171
------ ------
Net Charge-Offs................... 8 123
------ ------
Balance End of Year............... $1,632 $1,470
====== ======
Allowance for Loan Losses to Total
Loans at Year-End................. 1.67% 1.51%
Net Charge-Offs to Average Loans.. .01% .14%
</TABLE>
The Allowance for Possible Loan Losses at December 31, 1995 was
$1,632,000 compared to $1,470,000 at December 31, 1994. The increase is
attributable to strong recoveries in 1995. The Allowance for Possible Loan
Losses as a percentage of total loans stood at 1.67% at year-end 1995 and
1.51% on December 31, 1994. This was generally in excess of peer bank
percentages.
The following table allocates the Allowance for Possible Loan Losses
based upon management's judgment of potential losses in the respective areas.
This judgment is arrived at through the use of a detailed risk-rating system
and further supported by an annual loan quality review performed by an
experienced outside consultant. While management has allocated reserves to
various portfolio segments for purposes of this table, the Allowance for
Possible Loan Losses is general in nature and is available to the portfolio in
its entirety:
45
<PAGE>
AGI ALLOCATION OF ALLOWANCE FOR POSSIBLE LOAN LOSSES
YEARS ENDED DECEMBER 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
COMMERCIAL REAL ESTATE CONSUMER UNALLOCATED TOTAL
----------- ------------ -------- ----------- ------
<S> <C> <C> <C> <C> <C>
1995
Allowance for Possible Loan Losses $ 576 $ 404 $ 408 $244 $1,632
Percent of Loans in Category 2.11% 1.22% 1.09% N/A 1.67%
1994
Allowance for Possible Loan Losses $ 315 $ 482 $ 552 $122 $1,470
Percent of Loans in Category 1.17% 1.55% 1.39% N/A 1.51%
</TABLE>
INVESTMENT PORTFOLIO. The investment activities of AGI are designed to
provide an investment alternative for funds not presently required to meet
loan demand; assist AmeriBank in meeting potential liquidity requirements;
assist in maximizing income consistent with quality and liquidity
requirements; supply collateral to secure public funds and retail repurchase
agreements; provide a means for balancing market and credit risks; and provide
consistent income and market value throughout changing economic times.
AGI's portfolio consists primarily of obligations of the U.S. Government,
U.S. Government agencies and state and local governments, as well as private
corporate and collateralized mortgage obligations securities. AGI's portfolio
does not contain concentrations of investments in any one issuer in excess of
10% of AGI's total investment portfolio. Exempt from this calculation are
securities of the U.S. Government and U.S. Government agencies.
The following table sets forth the composition of AGI's investment
portfolio at the dates indicated:
AGI INVESTMENT PORTFOLIO
YEARS ENDED DECEMBER 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
U.S. Treasury/Agency Securities.. $35,430 $39,657
Municipal Securities............. 3,763 3,622
Other Securities................. 4,997 6,535
------- -------
TOTAL......................... $44,190 $49,814
======= =======
</TABLE>
For the investment portfolio as of December 31, 1995, the following table
sets forth a summary of yield and maturities:
AGI ANALYSIS OF INVESTMENT YIELDS AND MATURITIES
DECEMBER 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
ONE YEAR OR LESS 1 YEAR - 5 YEARS 5 YEARS - 10 YRS OVER TEN YEARS TOTAL
WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------- ---------- -------- ---------- ------- ---------- ------ --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
US Treasury/Agency Securities $2,570 6.16% $19,850 6.96% $5,222 7.19% $7,788 5.64% $35,430 6.65%
Municipal Securities 0 0.00% 654 4.76% 2,261 5.77% 848 6.09% 3,763 5.65%
Other Securities 1,919 7.06% 3,078 6.76% 0 0.00% 0 0.00% 4,997 6.88%
------ ---- ------- ---- ------ ---- ------ ---- ------- ----
TOTAL $4,489 6.54% $23,582 6.87% $7,483 6.76% $8,636 5.68% $44,190 6.59%
====== ==== ======= ==== ====== ==== ====== ==== ======= ====
</TABLE>
46
<PAGE>
Note: All Securities were classified as Available-For-Sale as of 12/31/95 and
are shown at fair value. Municipal securities yield is not stated on a
taxable equivalent basis.
In May of 1993, the FASB issued Statement of Financial Accounting
Standards No. 115 (SFAS No. 115), Accounting for Certain Investments in Debt
and Equity Securities. This statement addresses the accounting and reporting
for investments that have readily determinable fair values. Those investments
are to be classified in three categories and accounted for as follows:
1. Debt Securities that the enterprise has the positive intent and
ability to hold to maturity are classified as held-to-maturity
securities and reported at amortized cost.
2. Debt and equity securities that are bought and held principally for
the purpose of selling them in the near term are classified as trading
securities and reported at fair value, with unrealized gains and
losses included in earnings.
3. Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and
losses excluded from earnings and reported in a separate component of
stockholders' equity.
The Statement does not apply to unsecuritized loans. However, after
mortgage loans are converted to mortgage-backed securities, they are subject
to its provisions. The Statement supersedes SFAS No. 12, Accounting for
Certain Marketable Securities, and amends SFAS No. 65, Accounting for Certain
Mortgage Banking Activities, to eliminate mortgage-backed securities from its
scope. SFAS No. 115 is effective for fiscal years beginning after December
15, 1993.
AGI implemented SFAS No. 115 on January 1, 1994, by properly classifying
all securities into either the held-to-maturity investment account or the
available-for-sale account. In December 1995, the FASB allowed banks to make
a one-time reclassification of securities between held-to-maturity and
available-for-sale. Because of federal regulatory rulings made subsequent to
the issuance of SFAS No. 115 concerning the treatment of unrealized gains or
losses, management reclassified all securities into the available-for-sale
category on December 31, 1995. As of December 31, 1995, the portfolio
carrying amount listed above contained net unrealized gains of $240,000.
DEPOSITS. The following tables set forth a summary of AGI's average
deposits and related rates as of the dates indicated and the maturity of time
deposits over $100,000:
AGI ANALYSIS OF DEPOSITS
YEARS ENDED DECEMBER 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
BALANCE RATE BALANCE RATE
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Non-Interest Bearing $ 26,122 0.00% $ 24,868 0.00%
Interest Bearing:
Demand/NOW $ 13,939 1.18% $ 13,602 1.13%
Savings 26,764 2.64% 30,850 2.15%
Time 53,545 5.89% 42,411 4.83%
-------- --------
TOTAL $120,370 $111,731
======== ========
</TABLE>
47
<PAGE>
AGI MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
YEAR ENDED DECEMBER 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Within 3 3 to 6 6 to 12 Over 12
Months Months Months Months Total
-------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Certificates of Deposit $2,899 $1,907 $3,474 $1,150 $9,430
</TABLE>
Average total deposits were $120.4 million for the year ending December
31, 1995. This represented an increase of $8.6 million for the year ending
December 31, 1995. AGI experienced a significant shift from saving accounts
to time deposits during the year due to the relatively higher interest rate
environment during 1995 as compared to 1994. The higher rates also attracted
new time deposits from sources outside of AmeriBank. The amount and
composition of deposits at December 31, 1994 did not materially change from
December 31, 1993.
AGI, in limited instances where amounts are very significant, offers
retail repurchase agreements as a funding source and an alternative to
deposits. During 1995, repurchase agreements averaged $9.0 million which was
a decrease of $1.6 million from 1994 levels. Two customer relationships
comprise the majority of the outstanding balances. Because of this
significant concentration, management maintains back-up short term borrowing
facilities from institutional funding sources.
CAPITAL. Bank regulatory agencies measure capital adequacy through
standardized risk-based capital guidelines which compare different levels of
capital (as defined by such guidelines) to risk-weighted assets and off-
balance sheet obligations. Under final rules effective December 31, 1992, all
financial institutions are required to maintain a level of core capital (known
as Tier 1 capital), which must be at least 4.0% of risk-weighted assets, and a
minimum level of total capital at least 8.0% of risk-weighted assets. The
Federal Reserve Board and the FDIC have adopted final regulations defining
what capital ratios were necessary to be "well capitalized."
The following tables present regulatory capital requirements and AGI's
risk-based capital levels as of December 31, 1995.
REGULATORY CAPITAL REQUIREMENTS
<TABLE>
<CAPTION>
TIER 1 CAPITAL TOTAL RISK-BASED CAPITAL LEVERAGE RATIO
--------------- ------------------------- ---------------
<S> <C> <C> <C>
Adequately Capitalized.. 4.0% 8.0% 4.0%
Well Capitalized........ 6.0% 10.0% 5.0%
</TABLE>
48
<PAGE>
AGI RISK BASED CAPITAL
YEAR ENDED DECEMBER 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
AMOUNT RATIO
------- ------
<S> <C> <C>
Capital Category:
Tier 1 Capital......... $21,193 19.01%
Tier 2 Capital......... 1,632 1.47%
------- ------
Total Risk Based Capital.. $22,825 20.48%
======= ======
Leverage Ratio............ 13.22%
</TABLE>
As of December 31, 1995, AGI exceeded each of the capital requirements
set forth by federal or state banking regulatory agencies.
LIQUIDITY AND FUNDS MANAGEMENT. Liquidity management requires an ability
to meet financial commitments when contractually due and to respond to other
requirements for funds. AmeriBank has an Asset/Liability Management Committee
(ALCO) responsible for managing balance sheet and off balance sheet
commitments to meet the needs of customers while achieving AGI's financial
objectives. AmeriBank's ALCO meets regularly to review funding capacities,
current and forecasted loan demand and investment opportunities.
Liquidity is provided by regular maturities of and payments on
installment loans, monthly payments from mortgage-backed securities and short
term investment securities. Bank-up liquidity arrangements through the use of
secured borrowing facilities from the Federal Home Loan Bank of Des Moines and
correspondent banks are also maintained and provide supplemental funding
capacity of $15 - $20 million. AGI has a stable core deposit base with a
relatively small proportion of volatile deposits. Certificates of deposits
over $100,000 were 7.8% of total deposits at December 31, 1995. Deposits
increased by 8% during 1995. The loan to deposit ratio at December 31, 1995
was 73.21% compared to 81.38% at year-end 1994. It is AGI's policy to
maintain the ratio of loans to deposits in a range of 65% to 80%.
INTEREST RATE SENSITIVITY. Significant changes in interest rates affect
the composition, yield and cost of balance sheet components. The rate
sensitivity of these assets and liabilities is monitored and matched to
control the risk associated with movements in rates. The ALCO for AmeriBank
meets regularly to monitor and formulate strategies and policies to provide
sufficient levels of net interest income while maintaining acceptable levels
of interest rate sensitivity, risk and liquidity. The primary objective of
rate sensitivity management is to insure earnings stability by minimizing the
sensitivity of net interest income to fluctuations in interest rates.
AmeriBank uses gap and other systems to measure, monitor and adopt to changing
interest rates environments.
49
<PAGE>
The following table sets forth AGI's interest rate sensitivity analysis by
contractual repricing or maturity at December 31, 1995:
AGI INTEREST RATE SENSITIVITY
YEAR ENDED DECEMBER 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
REPRICING OR MATURING IN:
1 YEAR OVER 1 OVER 5
OR LESS TO 5 YEARS YEARS TOTAL
---------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Rate Sensitive Assets:
Loans $ 43,719 $44,501 $ 9,542 $ 97,762
Investment Securities 23,056 5,907 15,227 44,190
Other Interest-Bearing Assets 7,243 0 0 7,243
--------- ------- ------- --------
Total Rate Sensitive Assets $ 74,018 $50,408 $24,769 $149,195
========= ======= ======= ========
Rate Sensitive Liabilities:
Savings/Interest-Bearing Checking $ 46,195 $ 0 $ 0 $ 46,195
Time Deposits 40,818 14,513 266 55,597
Short Term Borrowings 9,147 0 0 9,147
--------- ------- ------- --------
Total Rate Sensitive Liabilities $ 96,160 $14,513 $ 266 $110,939
========= ======= ======= ========
Rate Sensitive Gap ($22,142) $35,895 $24,503 $ 38,256
Cumulative Rate Sensitive Gap ($22,142) $13,753 $38,256 $ 38,256
Rate Sensitive Gap Percentage 76.97% 347.33% NM 134.48%
Cumulative Rate Sensitive Gap Percentage 76.97% 112.43% 134.48% 134.48%
</TABLE>
The following table sets forth AGI's interest rate sensitivity analysis
at December 31, 1995, with respect to individual categories of loans, and
provides separate analysis with respect to fixed interest rate loans and
floating interest rate loans:
AGI LOANS REPRICING OR MATURING
YEAR ENDED DECEMBER 31, 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
REPRICING OR MATURING IN:
1 Year Over 1 Over 5
or Less to 5 Years Years Total
------- ---------- ------ -------
<S> <C> <C> <C> <C>
Loan Category:
Commercial $18,606 $ 8,579 $ 102 $27,287
Real Estate 22,535 3,506 7,025 33,066
Consumer and Other 2,578 32,416 2,415 37,409
------- ------- ------ -------
Total Loans $43,719 $44,501 $9,542 $97,762
======= ======= ====== =======
Fixed Interest Rate Loans $ 4,944 $39,961 $9,542 $54,447
Floating Interest Rate Loans 38,775 4,540 0 43,315
------- ------- ------ -------
TOTAL LOANS $43,719 $44,501 $9,542 $97,762
======= ======= ====== =======
</TABLE>
50
<PAGE>
SHORT-TERM BORROWINGS. The following table presents a summary of short-
term borrowings.
AGI ANALYSIS OF SHORT-TERM BORROWINGS
YEARS ENDED DECEMBER 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
WEIGHTED MAXIMUM AVERAGE WEIGHTED
OUTSTANDING AVERAGE RATE OUTSTANDING AT MONTH OF OUTSTANDING AVERAGE RATE
AT YEAR END AT YEAR-END ANY MONTH-END MAXIMUM DURING YEAR DURING YEAR
----------- ----------- ------------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1995
Federal Funds Purchased 0 N/A $ 7,400 Jan. $ 2,315 6.20%
Federal Home Loan Bank 0 N/A 12,000 Jan. 6,079 6.19%
Retail Purchase Agreements $ 9,147 6.25% 9,147 Dec. 8,959 6.62%
------- ---- ------- ----
TOTAL $ 9,147 6.25% $17,353 6.41%
======= ==== ======= ====
1994
Federal Funds Purchased $ 4,200 5.75% $13,000 March $ 3,221 4.46%
Federal Home Loan Bank 12,000 6.13% 15,000 July-Dec. 8,378 4.92%
Retail Repurchase Agreements 10,616 5.36% 14,519 May 10,585 4.19%
------- ---- ------- ----
TOTAL $26,816 5.76% $22,184 4.51%
======= ==== ======= ====
</TABLE>
General Terms:
. Federal funds purchased are overnight borrowings from correspondent
banks governed by agreements with various terms and stipulations. A
$10 million facility is maintained with Norwest Bank Minnesota which
provides that the first $5 million in borrowings are unsecured with
amounts in excess of $5 million secured by investment grade securities.
Additionally, an unsecured $5 million facility is available through
First Bank Minneapolis.
. Federal Home Loan Bank borrowings are obtained through the Federal Home
Loan Bank of Des Moines. The borrowings are in the form of repurchase
agreements secured by eligible government or agency securities with
terms of thirty to ninety days in minimum amounts of $1 million with
maximum amounts dependent upon available collateral.
. Retail repurchase agreements are borrowings from private individuals
secured by government or agency securities. Terms generally range from
thirty days to one year.
51
<PAGE>
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
Norwest's Restated Certificate of Incorporation, as amended from time to time,
and other documents incorporated by reference. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" AND "CERTAIN DIFFERENCES IN RIGHTS OF STOCKHOLDERS."
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 (the "10.24% Preferred Stock"), 980,000 shares of Cumulative
Tracking Preferred Stock (the "Tracking Preferred Stock") (of which 25,000
shares are held by a subsidiary of Norwest), 12,984 shares of ESOP Cumulative
Convertible Preferred Stock (the "ESOP Preferred Stock") and 24,572 shares of
1995 ESOP Cumulative Convertible Preferred Stock (the "1995 ESOP 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 1996
ESOP Cumulative Convertible Preferred Stock (the "1996 ESOP Preferred Stock").
Norwest had not issued any shares of Norwest Preference Stock as of the date
of this 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 "Junior Preferred Shares") and reserved the Junior
Preferred Shares for issuance pursuant to a rights agreement dated November
22, 1988 between Norwest and Citibank, N.A., as the rights agent (the "Rights
Agreement"). See "--Rights Plan" below. Norwest had not issued any Junior
Preferred Shares as of the date of this 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." 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 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
52
<PAGE>
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 Merger will include, a right to purchase one four-
hundredth of a 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 rights of holders of outstanding Norwest Preferred Stock or
Norwest Preference Stock may limit the rights of holders of Norwest Common
Stock. To designate a series of Norwest Preferred Stock or Norwest Preference
Stock for issuance, Norwest files a Certificate of Designations with the
Delaware Secretary of State which sets forth the rights, preferences,
privileges, and restrictions of the series. Norwest generally files a copy of
each such certificate as part of an annual, quarterly, or current report filed
with the Commission pursuant to the Exchange Act.
Copies of the Certificates of Designations filed with the Delaware
Secretary of State setting forth the rights, preferences, privileges, and
restrictions of, respectively, the Tracking Preferred Stock, the ESOP
Preferred Stock, the 1995 ESOP Preferred Stock, and the 1996 ESOP Preferred
Stock are included as exhibits to the Registration Statement on Form S-4 (the
"Registration Statement") of which this Proxy Statement-Prospectus forms a
part, by means of incorporation by reference to copies of each such
Certificate of Designation filed as exhibits to those annual, quarterly, or
current reports indicated in the Registration Statement.
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 Norwest's
Restated Certificate of Incorporation or By-Laws 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 Merger, have attached to it one Norwest
Preferred Stock purchase right (a "Right") entitling the holder thereof to
purchase one one-hundredth of a Junior Preferred Share at a price of $175.00,
subject to customary antidilution adjustments. The Rights are not separable
from, and trade automatically with, the shares of
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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 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 acquirer,
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
acquirer 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
minimum preferential quarterly dividend payment of $1.00 per share and will be
entitled to an aggregate dividend of 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 minimum preferential
liquidation payment of $400 per share and will be entitled to an aggregate
payment of 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.
The foregoing discussion of the Rights Plan is qualified in its entirety
by reference to the Rights Agreement, a copy of which has been filed with the
SEC and is incorporated herein by reference. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
DIVIDEND REINVESTMENT AND OPTIONAL CASH PAYMENT PLAN
Norwest has in effect an automatic 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 Common
Stock 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 stockholders of AGI who receive shares of Norwest Common Stock in the
Merger) 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 March 31, 1995, Norwest had
available for issuance Shelf Securities having an aggregate initial public
offering price of up to $1.35 billion. On March 15, 1996, Norwest filed a
registration statement for an additional $5 billion of Shelf Securities.
Approval by the Commission of this shelf registration statement is pending as
of the date of this Proxy Statement-Prospectus. 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.
CERTAIN DIFFERENCES IN RIGHTS OF STOCKHOLDERS
If the holders of AGI Common Stock approve the Reorganization Agreement
and the Merger is subsequently consummated, stockholders of AGI will become
stockholders of Norwest. AGI and Norwest are each a corporation organized and
governed by the Delaware General Corporation Law (the "DGCL"). The following
summary describes certain differences between the rights of holders of AGI
Common Stock and Norwest Common Stock to the extent such differences arise
because of differences between Norwest's Restated Certificate of Incorporation
(the "Norwest Certificate"), Norwest By-Laws, and Norwest's Rights Plans (as
defined below) and AGI's Certificate of Incorporation (the "AGI Certificate")
and AGI By-Laws.
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This summary is qualified in its entirety by reference to the DGCL, the
Norwest Certificate and Norwest By-Laws, and the AGI Certificate and AGI By-
Laws.
DESCRIPTION OF CAPITAL STOCK AND CERTAIN RIGHTS
AGI
---
IN GENERAL. The AGI Certificate authorizes the issuance of 1,000,000
shares of Class A Voting Common Stock, $.01 par value per share, and 200,000
shares of Class B Non-Voting Common Stock, par value $0.01 per share. At
December 31, 1995, 901,134 shares of AGI Class A Common Stock were issued, and
106,537 shares of AGI Class B Non-Voting Common Stock were issued.
Holders of common stock are entitled to receive such dividends as are
declared by the AGI Board out of funds legally available for that purpose.
All voting rights are vested in the holders of Class A Voting Common Stock,
each share being entitled to one vote. Holders of Class B Non-Voting Common
Stock are not entitled to vote. In the event of liquidation, dissolution, or
winding up of AGI, holders of shares of common stock are entitled to receive
pro rata any assets distributable to stockholders in respect of shares held by
them. Holders of shares of common stock do not have any preemptive right to
subscribe for any additional securities which may be issued by AGI. The
outstanding shares of AGI Common Stock are fully paid and nonassessable.
RIGHTS PLAN. Unlike Norwest, AGI has not adopted any stockholder rights
plan or issued any similar rights to the holders of AGI Common Stock. One
Norwest Right will be attached to each share of Norwest Common Stock issued in
the Merger to AGI stockholders. See "NORWEST CAPITAL STOCK AND RIGHTS--Rights
Plan" above.
NORWEST
-------
Information with respect to certain aspects of Norwest capital stock,
including a stockholder rights plan, is set forth above under the heading
"NORWEST CAPITAL STOCK AND RIGHTS."
PREEMPTIVE RIGHTS
NORWEST AND AGI
---------------
Under Section 102 of the DGCL, stockholders have no statutory preemptive
rights to subscribe for or purchase shares of a corporation's capital stock,
unless such corporation's certificate of incorporation specifies otherwise.
Neither the Norwest Certificate nor the AGI Certificate provides for any such
preemptive rights.
ELECTION AND REMOVAL OF DIRECTORS
The DGCL provides that directors are elected by a plurality of the votes
of the shares entitled to vote on such election present in person or by proxy
at the meeting at which directors are elected. In addition, stockholders of a
Delaware corporation, unless the corporation's Certificate of Incorporation
otherwise provides, are entitled to one vote for each share of capital stock
held, and are also entitled to exercise cumulative voting rights for
directors, if the corporation's Certificate of Incorporation permits such
cumulative voting. The DGCL also permits removal of any director or all
directors of a Delaware corporation by the holders of a majority of the shares
entitled to vote for directors and permits vacancies on the board of directors
to be filled by a majority of the directors then in office.
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AGI
---
AGI currently has eight directors who serve for one-year terms. The AGI
Certificate does not permit cumulative voting in the election of directors to
the AGI Board, and each holder of Class A Voting Common Stock of AGI may cast
one vote in the election of directors for each share held of record by such
stockholder. Under the AGI By-Laws, any or all directors may be removed
either with or without cause at any special meeting of the stockholders.
Vacancies on the AGI Board may be filled for the unexpired term by a majority
vote of the directors present at a meeting at which a quorum is present.
NORWEST
-------
Norwest currently has 14 directors, who serve for one-year terms. Under
the DGCL, cumulative voting in the election of directors is permitted if the
corporation's certificate of incorporation so provides. Norwest's Certificate
does not so provide. Under Norwest's By-Laws, any or all directors may be
removed, with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors. Vacancies on the Norwest
Board may be filled by a majority vote of the directors then in office.
AMENDMENT TO CERTIFICATE OF INCORPORATION AND BY-LAWS
AGI
---
Under the DGCL, the vote of a majority of the outstanding shares of the
capital stock of a Delaware corporation entitled to vote thereon generally is
required to approve an amendment to the corporation's certificate of
incorporation, unless such certificate requires the vote of a greater
percentage of the corporation's outstanding capital stock entitled to vote on
such matters. Except as noted below, an amendment to the AGI Certificate
generally requires the vote of a majority of the outstanding shares of the AGI
Class A Voting Common Stock, the only class of stock entitled to vote on such
amendments. However, an amendment to provisions of the AGI Certificate
relating to certain stock purchase rights of AGI stockholders in connection
with specified dispositions of shares of AGI Common Stock requires the
affirmative vote of 70% of the holders of Class A Voting Common Stock.
Holders of AGI Class A Voting Common Stock are being requested to approve an
amendment to the AGI Certificate to clarify that such provisions will not
apply to a disposition of AGI Common Stock in connection with the Merger. See
"AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF AGI."
The AGI By-Laws may be amended or altered by a majority vote of the Board
of Directors. However, the Board of Director's power is subject to that of
the stockholders to change or repeal the by-laws by a majority vote of
stockholders at a meeting called for such purpose. Also, the Board of
Directors cannot alter or amend the by-laws to (i) fix a quorum for meetings
of stockholders to (ii) fix a quorum for meetings of stockholders, (iii)
prescribe procedures for removing directors and to fill vacancies in the Board
of Directors, or (iv) fix the number of directors or their classifications,
qualifications, or terms of office, except that the Board of Directors may
adopt or amend any by-law to increase their number.
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 By-
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Laws may be amended by the affirmative vote of a majority of the Norwest Board
or of the holders of a majority of the outstanding Norwest 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--
Norwest Preferred Stock and Norwest Preference Stock."
REQUIRED STOCKHOLDER VOTE FOR AUTHORIZATION OF MERGERS AND ASSETS SALES
AGI AND NORWEST
---------------
Under the DGCL, the vote of a majority of the outstanding shares of the
capital stock of a Delaware corporation entitled to vote thereon generally is
required to approve mergers or consolidations (except in certain limited
circumstances described below), or the sale, lease, or exchange of all or
substantially all of the corporation's assets, unless such certificate
requires the vote of a greater percentage of the corporation's outstanding
capital stock entitled to vote on such matters. With respect to a merger, no
vote of the stockholders of a Delaware corporation is required if such
corporation is the surviving corporation in the merger, and (1) the related
agreement of merger does not amend the corporation's certificate of
incorporation, (2) each share of capital stock outstanding immediately before
the merger is to be an identical outstanding or treasury share of the
corporation after the merger, and (3) the number of shares of capital stock to
be issued in the merger (or to be issuable upon conversion of any convertible
instruments to be issued in the merger) does not exceed 20% of the shares of
such corporation's capital stock outstanding immediately before the merger.
Neither the AGI Certificate nor the Norwest Certificate requires a vote of a
greater percentage of stockholders to approve a merger, consolidation, or
sale, lease, or exchange of all or substantially all of, respectively, the
assets of AGI or Norwest than the majority vote mandated by the DGCL.
APPRAISAL RIGHTS
Pursuant to Section 262 of the DGCL, a holder of capital stock of a
Delaware corporation is generally entitled to receive payment of the appraised
value of his or her shares if such stockholder dissents from a merger or
consolidation and complies with the procedures set forth in Section 262 of the
DGCL for exercising such rights. However, appraisal rights are not available
in merger or consolidation transactions to holders of (a) shares either listed
on a national stock exchange or designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 persons, or (b)
shares of the corporation surviving a merger unless, in either case, holders
of such stock are required by the terms of the merger or consolidation to
accept anything other than (i) shares of the surviving or resulting
corporation; (ii) shares of stock of another corporation so listed or held of
record by not fewer than 2,000 persons; and/or (iii) cash in lieu of
fractional shares of such corporations. Appraisal rights are not available
for a sale of assets or an amendment to the certificate. See APPENDIX C to
this Proxy Statement-Prospectus for a copy of the complete text of Section
262.
AGI
---
AGI Common Stock is not publicly-traded, therefore, holders of AGI Common
Stock may be, subject to such express exceptions, entitled to appraisal
rights. For a more complete discussion of the appraisal rights available to
AGI stockholders who vote against the Merger, see "THE MERGER--Appraisal
Rights of Dissenting Stockholders."
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NORWEST
-------
Because shares of Norwest Common Stock are listed on the NYSE and the CHX
and because Norwest currently has more than 2,000 stockholders of record,
holders of Norwest Common Stock are not, subject to the express exceptions
noted above, entitled to any rights of appraisal in connection with proposed
mergers or consolidations involving Norwest.
SPECIAL MEETINGS
The DGCL provides that special meetings of stockholders may be called by
the board of directors of the corporation, or by the person or persons
authorized by the corporation's certificate of incorporation or by-laws.
AGI
---
The AGI By-Laws provide that a special meeting of stockholders may be
called only by the Secretary at the written request of a majority of the Board
of Directors, the Chairman of the Board, the President, or by the stockholders
owning a majority of the shares outstanding and entitled to vote.
Accordingly, holders of AGI Class B Non-Voting Common Stock do not have the
right to call a special meeting.
NORWEST
-------
The By-Laws of Norwest provide that a special meeting of stockholders may
be called only by the Chairman of the Board, a Vice Chairman, the President,
or a majority of the Norwest Board. Accordingly, holders of Norwest Common
Stock do not have the right to call a special meeting.
LIMITATION OF DIRECTOR LIABILITY AND INDEMNIFICATION
----------------------------------------------------
The DGCL provides that directors, officers and other employees and
individuals may be indemnified against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement in connection with specified
actions, suits, or proceedings, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the corporation, a
"derivative action") if they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, regarding any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification
extends only to expenses (including attorneys' fees) incurred in connection
with the defense or settlement of such actions. In the case of derivative
actions, the DGCL requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. To the extent that a person otherwise eligible to be
indemnified is successful on the merits of any claim or defense described
above, indemnification for expenses (including attorneys' fees) actually and
reasonably incurred is mandated by the DGCL. Both AGI and Norwest have
provisions in their respective Certificates of Incorporation limiting the
liability of directors for monetary damages for breach of their fiduciary duty
and providing for indemnification of such director in certain circumstances.
Descriptions of these provisions in the AGI Certificate and the Norwest
Certificate are set forth below.
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AGI
---
The AGI Certificate provides that a director (including an officer who is
also a director) of AGI shall not be liable personally to AGI or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability arising out of (a) any breach of the director's duty of
loyalty to AGI or its stockholders, (b) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c)
payment of a dividend or approval of a stock repurchase in violation of
Section 174 of the DGCL, or (d) any transaction from which the director
derived an improper personal benefit. This provision protects AGI directors
against personal liability for monetary damages from breaches of their duty of
care. However, it does not eliminate the director's duty of care. For
example, this provision in the AGI Certificate has no effect on the
availability of equitable remedies, such as an injunction or rescission, based
upon a director's breach of his duty of care.
NORWEST
-------
The Norwest Certificate provides that a director (including an officer
who is also a director) of Norwest shall not be liable personally to Norwest
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability arising out of (a) any breach of the director's
duty of loyalty to Norwest or its stockholders, (b) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (c) payment of a dividend or approval of a stock repurchase in violation
of Section 174 of the DGCL, or (d) any transaction from which the director
derived an improper personal benefit. This provision protects Norwest
directors against personal liability for monetary damages from breaches of
their duty of care. However, it does not eliminate the director's duty of
care. For example, this provision in the Norwest Certificate has no effect on
the availability of equitable remedies, such as an injunction or rescission,
based upon a director's breach of his duty of care.
The Norwest Certificate further provides that Norwest must indemnify, to
the fullest extent authorized by the DGCL, each person who was or is made a
party to, is threatened to be made a party to, or is involved in, any action,
suit, or proceeding because he is or was a director or officer of Norwest (or
was serving at the request of Norwest as a director, trustee, officer,
employee, or agent of another entity) while serving in such capacity against
all expenses, liabilities, or loss incurred by such person in connection
therewith, provided that indemnification in connection with a proceeding
brought by such person will be permitted only if the proceeding was authorized
by the Norwest Board. The Norwest Certificate also provides that Norwest must
pay expenses incurred in defending the proceedings specified above in advance
of their final disposition, provided that if so required by the DGCL, such
advance payments for expenses incurred by a director or officer may be made
only if he undertakes to repay all amounts so advanced if it is ultimately
determined that the person receiving such payments is not entitled to be
indemnified.
The Norwest Certificate authorizes Norwest to provide similar
indemnification to employees or agents of Norwest.
Pursuant to the Norwest Certificate, Norwest may maintain insurance, at
its expense, to protect itself and any directors, officers, employees, or
agents of Norwest or another entity against any expense, liability, or loss,
regardless of whether Norwest has the power or obligation to indemnify that
person against such expense, liability, or loss under the DGCL.
The right to indemnification is not exclusive of any other right which
any person may have or acquire under any statute, provision of the Norwest
Certificate or By-Laws, agreement, vote of stockholders, or disinterested
directors, or otherwise.
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The AGI By-Laws provide that AGI must indemnify such persons for such
liabilities in such a manner under such circumstances and to the fullest
extent authorized by the DGCL.
Pursuant to the AGI By-Laws, AGI may purchase and maintain insurance for
the purpose of indemnification as provided under the DGCL.
ACTION WITHOUT A MEETING
AGI AND NORWEST
---------------
Section 228 of the DGCL permits any action required or permitted to be
taken at a stockholders' meeting to be taken by written consent signed by the
holders of the number of shares that would have been required to effect the
action at an actual meeting of the stockholders. The DGCL also provides that
a corporation's certificate of incorporation may restrict or even prohibit
stockholders' action without a meeting. The AGI By-Laws parallel the DGCL,
however, prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent must be given to stockholders who have
not consented in writing. The Norwest Certificate neither restricts nor
prohibits stockholders' action without a meeting.
DIVIDENDS
AGI AND NORWEST
---------------
Delaware corporations may pay dividends out of surplus or, if there is no
surplus, out of net profits for the fiscal year in which declared and/for the
preceding fiscal year. Section 170 of the DGCL also provides that dividends
may not be paid out of net profits if, after the payment of the dividend,
capital is less than the capital represented by the outstanding stock of all
classes having a preference upon the distribution of assets.
Norwest and AGI are subject to the same Federal Reserve Board policies
regarding payment of dividends, which generally limit dividends to operating
earnings. See "INFORMATION ABOUT AGI" and "CERTAIN REGULATORY CONSIDERATIONS
PERTAINING TO NORWEST."
PROPOSAL OF BUSINESS, NOMINATION OF DIRECTORS
AGI AND NORWEST
---------------
The Norwest By-Laws contain detailed advance notice and informational
procedures which must be complied with in order for a stockholder to nominate
a person to serve as a director. The Norwest By-Laws generally require a
stockholder to give notice of a proposed nominee in advance of a stockholder's
meeting at which directors will be elected. In addition, the Norwest By-Laws
contain detailed advance notice and informational procedures which must be
followed in order for a Norwest stockholder to propose an item of business for
consideration at a meeting of Norwest stockholders. There are no similar
provisions in the AGI By-Laws.
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CERTAIN REGULATORY CONSIDERATIONS
GENERAL
As a bank holding company, Norwest is subject to supervision and
examination by the Federal Reserve Board. Under the Bank Holding Company Act,
a bank holding company generally may not directly or indirectly acquire the
ownership or control of more than 5% of the voting securities or all or
substantially of the assets of any company, including a bank, without the
prior approval of the Federal Reserve Board. In addition, a bank holding
company is generally prohibited under the Bank Holding Company Act from
engaging in nonbanking activities, subject to certain exceptions. Various
proposals are pending before Congress that would allow affiliations between a
bank holding company and nonbank entities that are prohibited or restricted
under current law. Whether Congress will adopt any of these proposals, and if
so in what form, is not known at this time.
Norwest's banking and savings association subsidiaries are subject to
supervision and examination by applicable federal and state banking agencies.
The deposits of Norwest's banking subsidiaries are primarily insured by the
Bank Insurance Fund; deposits attributable to certain of Norwest's savings
associations are insured by the Savings Association Insurance Fund (the
"SAIF"). For that reason, such banking subsidiaries are subject to regulation
by the FDIC. In addition to the impact of regulation, commercial banks are
affected significantly by the actions of the Federal Reserve Board as it
attempts to control the money supply and credit availability in order to
influence the economy.
DIVIDEND RESTRICTIONS
Various federal and state statutes and regulations limit the amount of
dividends the subsidiary banks can pay to Norwest without regulatory approval.
The approval of the OCC is required for any dividend by a national bank if the
total of all dividends declared by the bank in any calendar year would exceed
the total of its net profits, as defined by regulation, for that year combined
with its retained net profits for the preceding two years less any required
transfers to surplus or a fund for the retirement of any preferred stock. In
addition, a national bank may not pay a dividend in an amount greater than its
net profits then on hand after deducting its losses and bad debts. For this
purpose, bad debts are defined to include, generally, loans which have matured
and are in arrears with respect to interest by six months or more, other than
such loans that are well secured and in the process of collection. Under
these provisions Norwest's national bank subsidiaries could have declared, as
of 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 statements which
provide that FDIC-insured banks and bank holding companies should generally
pay dividends only out of current operating earnings.
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HOLDING COMPANY STRUCTURE
Norwest is a legal entity separate and distinct from its banking and
nonbanking subsidiaries. For that reason, the right of Norwest, and thus the
rights of Norwest's creditors, to participate in any distribution of the
assets or earnings of any subsidiary is necessarily subject to the prior
claims of creditors of such subsidiary, except to the extent that claims of
Norwest in its capacity as a creditor may be recognized. The principal
sources of Norwest's revenues are dividends and fees from its subsidiaries.
Norwest's banking subsidiaries are subject to restrictions under federal
law which limit the transfer of funds by the subsidiary banks to Norwest and
its nonbank subsidiaries, whether in the form of loans, extensions of credit,
investments or asset purchases. Such transfers by any subsidiary bank to
Norwest or any nonbank subsidiary are limited in amount to 10% of the bank's
capital and surplus and, with respect to Norwest and all such nonbank
subsidiaries, to an aggregate of 20% of such bank's capital and surplus.
Furthermore, such loans and extensions of credit are required to be secured in
specified amounts.
The Federal Reserve Board has a policy to the effect that a bank holding
company is expected to act as a source of financial and managerial strength to
each of its subsidiary banks and to commit resources to support each such
subsidiary bank. This support may be required at times when Norwest may not
have the resources to provide it. Any capital loans by Norwest to any of the
subsidiary banks are subordinate in right of payment to deposits and to
certain other indebtedness of such subsidiary bank. In addition, the Crime
Control Act of 1990 provides that in the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
A depository institution insured by the FDIC can be held liable for any
loss incurred by, or reasonably expected to be incurred by, the FDIC after
August 9, 1989 in connection with (i) the default of a commonly controlled
FDIC-insured depository institution or (ii) any assistance provided by the
FDIC to a commonly controlled FDIC-insured depository institution in danger of
default. "Default" is defined generally as the appointment of a conservator
or receiver and "in danger of default" is defined generally as the existence
of certain conditions indicating that a "default" is likely to occur in the
absence of regulatory assistance.
Federal law (12 U.S.C. (S)55) permits the OCC to order the pro rata
assessment of stockholders of a national bank whose capital stock has become
impaired, by losses or otherwise, to relieve a deficiency in such national
bank's capital stock. This statute also provides for the enforcement of any
such pro rata assessment of stockholders of such national bank to cover such
impairment of capital stock by sale, to the extent necessary, of the capital
stock of any assessed stockholder failing to pay the assessment. Similarly,
the laws of certain states provide for such assessment and sale with respect
to banks chartered by such states. Norwest, as the sole stockholder of most
of its subsidiary banks, is subject to such provisions.
ACQUISITIONS
Effective September 29, 1995, under the provisions of the Reigle-Neal
Interstate Banking and Branching Act of 1994 (the "Reigle-Neal Act"),
Norwest's banking subsidiaries are permitted to acquire banks located in any
state in which the acquiring subsidiary bank is located (an intrastate
merger). Effective June 1, 1997, Norwest's banking subsidiaries will be
permitted to acquire a bank located in a state other than the state in which
the acquiring subsidiary bank is located (an interstate merger) through
merger, consolidation or purchase of assets and assumption of liabilities,
unless the state in which either of the banks is located has opted out of the
interstate banking provisions of the Reigle-Neal Act. An interstate
63
<PAGE>
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, unless it is
Norwest's initial entry into the state.
CAPITAL REQUIREMENTS
Under the Federal Reserve Board's risk-based capital guidelines for bank
holding companies, the minimum ratio of total capital to risk-adjusted assets
(including certain off-balance sheet items, such as stand-by letters of
credit) is 8%. At least half of the total capital is to be comprised of
common stockholders' equity, minority interests and noncumulative perpetual
preferred stock ("Tier 1 capital"). The remainder ("Tier 2 capital") may
consist of hybrid capital instruments, perpetual debt, mandatory convertible
debt securities, a limited amount of subordinated debt, other preferred stock,
and a limited amount of the allowance for credit losses. The risk-based
guidelines also specify that all intangibles, including core deposit
intangibles, as well as mortgage servicing rights ("MSRs") and purchased
credit card relationships ("PCCRs"), be deducted from Tier 1 capital. The
guidelines, however, grandfather identifiable assets (other than MSRs and
PCCRs) acquired on or before February 19, 1992 and permit the inclusion of
readily marketable MSRs and PCCRs in Tier 1 capital to the extent that (i)
MSRs and PCCRs do not collectively exceed 50% of Tier 1 capital, and (ii)
PCCRs do not exceed 25% of Tier 1 capital. For such purposes, MSRs and PCCRs
each are included in Tier 1 capital only up to the lesser of (i) 90% of their
fair market value (which must be determined quarterly), and (ii) 100% of the
remaining unamortized book value of such assets. The OCC has adopted
substantially similar regulations.
In addition, the Federal Reserve Board's minimum "leverage ratio" (the
ratio of Tier 1 capital to quarterly average total assets) guidelines for bank
holding companies provide for a minimum leverage ratio of 3% for bank holding
companies that meet certain specified criteria, including that they have the
highest regulatory rating. All other bank holding companies are required to
maintain a leverage ratio of 3% plus an additional cushion of 1% to 2%. The
guidelines also provide that banking organizations experiencing internal
growth or making acquisitions are expected to maintain strong capital
positions substantially above the minimum supervisory levels, without
significant reliance on intangible assets. Furthermore, the guidelines
indicate that the Federal Reserve Board will continue to consider a "tangible
Tier 1 leverage ratio" in evaluating proposals for expansion or new
activities. The tangible Tier 1 leverage ratio is the ratio of a banking
organization's Tier 1 capital, less all intangibles, to total assets, less all
intangibles. Each of Norwest's banking subsidiaries is also subject to
capital requirements adopted by applicable regulatory agencies that are
substantially similar to the foregoing. At 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
64
<PAGE>
comment a joint policy statement that describes the process to be used to
measure and assess the exposure of a bank's net economic value to changes in
interest rates. These agencies have indicated that in the second step of this
regulation process they intend to issue a proposed rule that would propose to
establish an explicit minimum capital charge for interest rate risk based on
the level of a bank's measured interest rate exposure. The agencies intend to
implement the second step after the agencies and the banking industry have had
more experience with the proposed supervisory and measurement process. None
of Norwest, AGI, or AmeriBank believes that these recent proposals and
revisions to the capital guidelines will materially impact its operations.
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
In December 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), which substantially revised
the bank regulatory and funding provisions of the Federal Deposit Insurance
Act and makes revisions to several other federal banking statutes. Among
other things, FDICIA requires the federal banking regulators to take "prompt
corrective action" in respect of depository institutions insured by the
Federal Deposit Insurance Corporation (the "FDIC") that do not meet minimum
capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." Under applicable
regulations, an FDIC-insured depository institution is defined to be well
capitalized if it maintains a leverage ratio of at least 5%, a risk-adjusted
Tier 1 capital ratio of at least 6% and a risk-adjusted total capital ratio of
at least 10% and is not subject to a directive, order or written agreement to
meet and maintain specific capital levels. An insured depository institution
is defined to be adequately capitalized if its meets all of its minimum
capital requirements as described above. An insured depository institution
will be considered undercapitalized if it fails to meet any minimum required
measure, significantly undercapitalized if it has a risk-adjusted total
capital ratio of less than 6%, risk-adjusted Tier 1 capital ratio of less than
3% or a leverage ratio of less than 3% and critically undercapitalized if it
fails to maintain a level of tangible equity equal to at least 2% of total
assets. An insured depository institution may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized depository institutions are
subject to a wide range of limitations on operations and activities, including
growth limitations, and are required to submit a capital restoration plan.
The federal banking agencies may not accept a capital plan without
determining, among other things, that the plan is based on realistic
assumptions and is likely to succeed in restoring the depository institution's
capital. In addition, for a capital restoration plan to be acceptable, the
depository institution's parent holding company must guarantee that the
institution will comply with such capital restoration plan. The aggregate
liability of the parent holding company is limited to the lesser of (i) an
amount equal to 5% of the depository institution's total assets at the time it
became undercapitalized, and (ii) the amount which is necessary (or would have
been necessary) to bring the institution into compliance with all capital
standards applicable with respect to such institution as of the time it fails
to comply with the plan. If a depository institution fails to submit an
acceptable plan, it is treated as if it were significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to
a number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator.
65
<PAGE>
FDICIA, as amended by the Reigle Community Development and Regulatory
Improvement Act of 1994 enacted on August 22, 1994, directs that each federal
banking agency prescribe standards, by regulation or guideline, for depository
institutions relating to internal controls, information systems, internal
audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, compensation, asset quality, earnings, stock
valuation, and such other operational and managerial standards as the agency
deems appropriate. The FDIC, in consultation with the other federal banking
agencies, has adopted a final rule and guidelines with respect to internal and
external audit procedures and internal controls in order to implement those
provisions of FDICIA intended to facilitate the early identification of
problems in financial management of depository institutions. On July 10,
1995, the federal banking agencies published the final rules implementing
three of the safety and soundness standards required by FDICIA, including
operational and managerial standards, asset quality and earnings standards,
and compensation standards. The impact of such standards on Norwest has not
yet been fully determined, but management does not believe it will be
material.
FDICIA also contains a variety of other provisions that may affect the
operations of Norwest, including new reporting requirements, revised
regulatory standards for real estate lending, "truth in savings" provisions,
and the requirement that a depository institution give 90 days' notice to
customers and regulatory authorities before closing any branch.
Under other regulations promulgated under FDICIA a bank cannot accept
brokered deposits (that is, deposits obtained through a person engaged in the
business of placing deposits with insured depository institutions or with
interest rates significantly higher than prevailing market rates) unless (i)
it is well capitalized, or (ii) it is adequately capitalized and receives a
waiver from the FDIC. A bank that cannot receive brokered deposits also
cannot offer "pass-through" insurance on certain employee benefit accounts,
unless it provides certain notices to affected depositors. In addition, a
bank that is adequately capitalized and that has not received a waiver from
the FDIC may not pay an interest rate on any deposits in excess of 75 basis
points over certain prevailing market rates. There are no such restrictions
on a bank that is well capitalized. 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
66
<PAGE>
institution's financial condition is unsafe or unsound or that the institution
has engaged in unsafe or unsound practices or has violated any applicable
rule, regulation, order or condition enacted or imposed by the institution's
regulatory agency. The termination of deposit insurance with respect to one
or more of the Corporation'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.
DEPOSITOR PREFERENCE
Under the FDIA, claims of holders of domestic deposits and certain claims
of administrative expenses and employee compensation against an FDIC-insured
depository institution have priority over other general unsecured claims
against the institution in the "liquidation or other resolution" of the
institution by a receiver.
EXPERTS
The audited consolidated financial statements of Norwest and subsidiaries
as of December 31, 1995 and 1994, and for each of the years in the three-year
period ended December 31, 1995, incorporated by reference herein, have been
incorporated herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of AGI as of December 31, 1995 and
1994, and for each of the years in the three-year period ended December 31,
1995, included in this Proxy Statement-Prospectus and made a part of this
Registration Statement, have been audited by Larson Allen Weishair & Co., LLP,
independent auditors, as set forth in their report thereon included therein.
Such consolidated financial statements are included herein in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
67
<PAGE>
LEGAL OPINION
A legal opinion to the effect that the shares of Norwest Common Stock
offered hereby, when issued in accordance with the Reorganization Agreement,
will be validly issued and fully paid and nonassessable, has been rendered by
Stanley S. Stroup, Executive Vice President and General Counsel of Norwest
Corporation. At December 31, 1995, Mr. Stroup was the owner of 108,607 shares
and held options to acquire 179,931 additional shares of Norwest Common Stock.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the executive compensation, voting
securities and the principal holders thereof, certain relationships and
related transactions, and other related matters concerning Norwest is included
or incorporated by reference in its Annual Report on Form 10-K for the year
ended December 31, 1995, which are incorporated in this Proxy Statement-
Prospectus by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE." Stockholders of AGI desiring copies of such documents may contact
Norwest at its address or phone number indicated under "AVAILABLE INFORMATION"
above.
68
<PAGE>
AMERIGROUP, INCORPORATED
AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
CONTENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1995 AND 1994
<S> <C>
Independent Auditor's Report
December 31, 1995 and 1994...................... F-2
Consolidated Balance Sheets
For the Years Ended December 31, 1995 and 1994.. F-3
Consolidated Statements of Income
For the Years Ended December 31, 1995 and 1994.. F-5
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1995 and 1994.. F-6
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1995 and 1994.. F-7
Notes to Consolidated Financial Statements........ F-8
DECEMBER 31, 1994 AND 1993
Independent Auditor's Report
December 31, 1994 and 1993...................... F-21
Consolidated Balance Sheets
For the Years Ended December 31, 1994 and 1993.. F-22
Consolidated Statements of Income
For the Years Ended December 31, 1994 and 1993.. F-24
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1994 and 1993.. F-25
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1994 and 1993.. F-26
Notes to Consolidated Financial Statements........ F-27
</TABLE>
F-1
<PAGE>
[LOGO OF LARSON ALLEN WEISHAIR & CO., LLP]
INDEPENDENT AUDITOR'S REPORT
Board of Directors
AmeriGroup, Inc. and Subsidiaries
Minnetonka, Minnesota
We have audited the accompanying consolidated balance sheets of AmeriGroup, Inc.
and Subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AmeriGroup, Inc. and
Subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for certain investments in debt and equity
securities in 1994.
/s/ LARSON, ALLEN, WEISHAIR & CO., LLP
LARSON, ALLEN, WEISHAIR & CO., LLP
Minneapolis, Minnesota
February 16, 1996
F-2
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
CASH, CASH EQUIVALENTS AND DUE FROM BANKS $ 9,617,635 $ 12,555,583
------------ ------------
INVESTMENT SECURITIES
Available-for-Sale Securities $ 44,189,986 $ 19,345,646
Held-to-Maturity Securities -- 30,468,283
------------ ------------
Total Investment Securities $ 44,189,986 $ 49,813,929
------------ ------------
FEDERAL FUNDS SOLD $ 6,400,000 $ --
------------ ------------
LOANS (Less Allowance for Loan Losses of
$1,632,317 in 1995 and $1,470,405 in 1994) $ 96,129,842 $ 96,157,312
------------ ------------
PREMISES AND EQUIPMENT (at Cost) $ 5,789,582 $ 5,721,417
Less: Accumulated Depreciation 3,093,169 2,606,478
------------ ------------
Net Premises and Equipment $ 2,696,413 $ 3,114,939
------------ ------------
OTHER ASSETS
Accrued Interest Receivable $ 911,675 $ 852,833
Prepaid Expenses and Other Assets 1,389,858 1,776,460
Escrow for Environmental Matters 842,645 933,137
------------ ------------
Total Other Assets $ 3,144,178 $ 3,562,430
------------ ------------
COST IN EXCESS OF NET ASSETS OF SUBSIDIARY
(Less Accumulated Amortization of $747,749
in 1995 and $638,473 in 1994) $ 3,625,729 $ 3,734,994
------------ ------------
Total Assets $165,803,783 $168,939,187
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 32,428,412 $ 28,143,651
Money market and NOW Accounts 24,051,156 23,328,090
Savings 16,944,109 17,057,572
Time, $100,000 and Over 9,430,000 7,350,000
Other Time 46,166,926 41,303,598
------------ ------------
Total Deposits $129,020,603 $117,182,911
Other Borrowings:
Federal Funds Purchased -- 4,200,000
Securities Sold Under Repurchase Agreements 9,147,389 10,615,909
Federal Home Loan Bank Advances -- 12,000,000
Accrued Interest and Other Liabilities 2,577,846 2,458,053
------------ ------------
Total Liabilities $140,745,838 $146,456,873
------------ ------------
MINORITY INTEREST IN SUBSIDIARY $ 33,413 $ 27,517
------------ ------------
STOCKHOLDERS' EQUITY
Common Stock:
Class A - Voting; Par Value $.01 Per Share;
Authorized 1,000,000 Shares; Issued and
Outstanding 901,134 Shares for 1995 and 1994 $ 9,011 $ 9,011
Class B - Non-Voting; Par Value $.01 Per Share;
Authorized 200,000 Shares; Issued and
Outstanding 106,537 Shares for 1995 and 1994 1,065 1,065
Additional Paid-In Capital 20,652,195 20,655,799
Retained Earnings 4,122,744 2,235,366
Net Unrealized Gain (Loss) on Securities Available-for-Sale,
Net of Taxes of $163,120 and $304,050 at December 31,
1995 and 1994, Respectively 239,517 (446,444)
------------ ------------
Total Stockholders' Equity $ 25,024,532 $ 22,454,797
------------ ------------
Total Liabilities and Stockholders' Equity $165,803,783 $168,939,187
============ ============
</TABLE>
F-4
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $ 8,542,589 $ 7,117,153
Interest on Investment Securities 3,017,358 2,925,215
Interest on Federal Funds Sold 34,204 17,875
Interest on Deposits with Bank 349,156 289,978
----------- -----------
Total Interest Income $11,943,307 $10,350,221
----------- -----------
INTEREST EXPENSE
Deposits $ 4,003,523 $ 2,863,853
Other Borrowings 1,113,202 1,026,866
----------- -----------
Total Interest Expense $ 5,116,725 $ 3,890,719
----------- -----------
NET INTEREST INCOME $ 6,826,582 $ 6,459,502
PROVISION FOR POSSIBLE LOAN LOSSES 170,000 194,000
----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES $ 6,656,582 $ 6,265,502
----------- -----------
NON-INTEREST INCOME
Service Charges on Deposit Accounts $ 806,870 $ 866,571
Gain on Sale of Pierce County Bank & Trust -- 128,393
Other Service Charges and Fees 419,240 737,773
Other Operating Income 106,403 53,190
----------- -----------
Total Non-Interest Income $ 1,332,513 $ 1,785,927
----------- -----------
NON-INTEREST EXPENSES
Salaries $ 2,294,113 $ 2,715,545
Employee Benefits 373,190 413,250
Occupancy Expense 474,929 447,948
Equipment Rentals, Depreciation and Maintenance 745,815 699,068
Other Operating Expenses 1,296,457 1,601,745
Net Realized Losses on Available-for-Sale Securities -- 27,478
----------- -----------
Total Non-Interest Expenses $ 5,184,504 $ 5,905,034
----------- -----------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST $ 2,804,591 $ 2,146,395
PROVISION FOR INCOME TAXES 408,977 654,858
----------- -----------
INCOME BEFORE MINORITY INTEREST $ 2,395,614 $ 1,491,537
MINORITY INTEREST IN INCOME OF CONSOLIDATED
SUBSIDIARIES 4,400 3,269
----------- -----------
NET INCOME $ 2,391,214 $ 1,488,268
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
CLASS A CLASS B RETAINED
---------------- ---------------- PAID-IN EARNINGS UNREALIZED
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) LOSS TOTAL
------- ------ ------- ------ ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 901,134 $9,011 106,537 $1,065 $20,655,799 $ 1,754,769 $ -- $22,420,644
Dividends Paid -- -- -- -- -- (1,007,671) -- (1,007,671)
Net Change in Unrealized Loss
on Available-for-Sale Securities,
Net of Taxes of $304,050 -- -- -- -- -- -- (446,444) (446,444)
Net Income -- -- -- -- -- 1,488,268 -- 1,488,268
------- ------ ------- ------ ----------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1994 901,134 $9,011 106,537 $1,065 $20,655,799 $ 2,235,366 $(446,444) $22,454,797
Dividends Paid -- -- -- -- -- (503,836) -- (503,836)
Contingency Payments-Pierce
County Bank -- -- -- -- (3,604) -- -- (3,604)
Net Change in Unrealized Loss
on Available-for-Sale Securities,
Net of Taxes of $467,171 -- -- -- -- -- -- 685,961 685,961
Net Income -- -- -- -- -- 2,391,214 -- 2,391,214
------- ------ ------- ------ ----------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1995 901,134 $9,011 106,537 $1,065 $20,652,195 $ 4,122,744 $ 239,517 $25,024,532
======= ====== ======= ====== =========== =========== ========= ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 2,391,214 $ 1,488,268
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Possible Loan Losses 170,000 194,000
Depreciation 516,538 467,849
Realized Losses on Available-for-Sale Securities (Net) -- 27,478
Gain on Sale of Pierce County Bank -- (128,393)
Gain on Disposal of Premises and Equipment -- (4,185)
Loss on Sale and Write-Down of Other Real Estate -- 10,073
Amortization of Organization Costs, and Cost in
Excess of Net Assets of Subsidiaries 124,553 135,214
(Increase) Decrease in Other Assets 96,312 (209,809)
Decrease in Accrued Interest Payable
and Other Liabilities (41,527) (1,143,484)
Increase in Minority Interest of Subsidiaries 4,400 3,269
------------ ------------
Net Cash Provided by Operating Activities $ 3,261,490 $ 840,280
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) Decrease in Federal Funds Sold $ (6,400,000) $ 1,800,000
Purchase of Available-for-Sale Securities (1,777,256) (14,655,861)
Proceeds from the Sales, Maturities and Paydown of
Available-for-Sale Securities 3,608,842 8,426,652
Purchase of Held-to-Maturity Securities -- (10,051,107)
Proceeds from the Maturity and Paydown of
Held-to-Maturity Securities 4,947,785 9,410,125
Increase in Loans (Net) (142,530) (16,278,222)
Purchases of Premises and Equipment (105,472) (407,344)
Proceeds from Sale of Premises and Equipment 7,460 12,623
Proceeds from Sale of Other Real Estate -- 149,927
Proceeds from Sale of Pierce County Bank
(Net of Selling Expenses) -- 128,393
------------ ------------
Net Cash Provided (Used) by Investing Activities $ 138,829 $(21,464,814)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Demand, Money Market, Savings
and Time Deposits $ 11,837,693 $ 1,002,640
Increase (Decrease) in Other Borrowings (17,668,520) 14,430,308
Contingency Payments-Sale of Pierce County Bank (3,604) --
Dividends Paid (503,836) (1,007,671)
------------ ------------
Net Cash Provided (Used) by Financing Activities $ (6,338,267) $ 14,425,277
------------ ------------
NET DECREASE IN CASH, CASH EQUIVALENTS
AND DUE FROM BANKS $ (2,937,948) $ (6,199,257)
Cash, Cash Equivalents and Due from Banks - Beginning 12,555,583 18,754,840
------------ ------------
CASH, CASH EQUIVALENTS AND DUE FROM BANKS - ENDING $ 9,617,635 $ 12,555,583
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-7
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
------------------
AmeriGroup, Inc. and Subsidiaries is a one-bank holding company
providing bank and bank-related services through its subsidiary,
AmeriBank. The majority of the subsidiary bank's business activity is
with customers located within the immediate area. The Company also
owns 100% of the stock of American Community Bank Group Service
Corporation which provides the data processing services to its
subsidiary bank. The accounts and operations of the service
corporation are included in the consolidated financial statements.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions. These estimates may 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 vary from the estimates that were used.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of its
wholly-owned subsidiaries, AmeriBank (99.78% owned) and American
Community Bank Group Service Corporation (100% owned). All significant
intercompany accounts and transactions have been eliminated in
preparing the consolidated financial statements.
A summary of the Company's significant accounting and reporting
policies consistently applied in the preparation of the accompanying
consolidated financial statements follows:
Amortization
------------
Amortization of costs in excess of net assets is computed using the
straight-line method over 40 years. The amount of amortization expense
for 1995 and 1994 was $109,265 and $112,489, respectively.
Cash Flows
----------
For purposes of reporting cash flows, cash, cash equivalents and due
from banks includes cash on hand and amounts due from banks (including
cash items in process of clearing). At December 31, 1994, an
investment in a short-term investment fund was included in this
classification. The assets in the fund consisted of investments in
commercial paper and other corporate bonds. The market value of this
investment approximates its carrying value. Cash flows for loans
originated by the Company, deposits and other borrowings are reported
net.
F-8
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash paid (received) during the years ended December 31, 1995 and 1994
included the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Interest Paid to Depositors $3,539,783 $3,679,183
========== ==========
Interest Paid on Note Payable $ 0 $ 27,538
========== ==========
Income Taxes Paid $1,080,000 $1,440,000
========== ==========
</TABLE>
Investment Securities
---------------------
The Bank's investments in securities are classified in three
categories and accounted for as follows:
Available-for-Sale Securities
-----------------------------
Available-for-sale securities consist of bonds, notes, debentures
and equity securities not classified as held-to-maturity
securities. Unrealized holding gains and losses, net of tax, on
available-for-sale securities are reported as a net amount in a
separate component of stockholders' equity until realized. Gains
and losses on the sale of available-for-sale securities are
determined using the specific-identification method. Premiums and
discounts are recognized in interest income using the interest
method over the period to maturity.
Held-to-Maturity Securities
---------------------------
Held-to-maturity securities consist of bonds, notes and
debentures for which the subsidiary banks have the positive
intent and ability to hold to maturity. Held-to-maturity
securities are reported at cost, adjusted for premiums and
discounts that are recognized in interest income using the
interest method over the period to maturity.
Trading Account Securities
--------------------------
Debt and equity securities that are bought and held principally
for the purpose of selling them in the near term are classified
as trading account securities and are reported at fair value.
Gains or losses on sales of trading account securities,
adjustments to fair values, and other noninterest income are
included in trading account profits and commissions. As of
December 31, 1995 and 1994, the Company had no investments
classified as trading account securities.
F-9
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
-----
Loans are stated at the amount of unpaid principal, reduced by
unearned income, deferred fees and an allowance for possible loan
losses.
The allowance for possible loan losses is maintained at a level
considered adequate to provide for losses that can be reasonably
anticipated. The allowance is increased by provisions charged to
operating expense and reduced by net charge-offs. The banks make
continuous credit reviews of the loan portfolios and consider current
economic conditions, historical loan loss experience, review of
specific problem loans and other factors in determining the adequacy
of the allowance balance.
Unearned income on discounted loans is amortized to income over the
life of the loans, using the interest method. For all other loans,
interest is accrued daily on the outstanding balances. Accrual of
interest is discontinued on a loan when management believes, after
considering collection efforts and other factors, that the borrower's
financial condition is such that collection of interest is doubtful.
Interest on these loans is recognized only when actually paid by the
borrower if collection of the principal is likely to occur.
Concentration of Credit Risks
-----------------------------
Substantially all of the Company's loans, commitments to extend credit
and standby letters of credit have been granted to customers in its
market area. Investments in securities issued by State and political
subdivisions (see Note 2) involve diverse governmental entities. The
concentration of credit by type of loan is set forth in Note 3.
Standby letters of credit were granted primarily to commercial
customers.
Income Taxes
------------
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standard (SFAS) No. 109. In accordance with SFAS
No. 109, the asset and liability approach is used to determine
deferred income taxes. The asset and liability approach requires
recognition of deferred tax liabilities and assets for the expected
future consequences of temporary differences between the financial
reporting basis and tax basis of assets and liabilities. A valuation
allowance is provided when it is more likely than not that a deferred
tax asset will not be realized.
The Company and its subsidiaries file consolidated federal and unitary
state income tax returns. The provision for income taxes is allocated
on a separate entity basis.
Premises and Equipment
----------------------
Depreciation of premises and equipment is computed principally on the
straight-line method with useful lives ranging from 3 to 31 1/2 years.
F-10
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments (see Note 15)
-------------------------------------------------
Financial Accounting Standards Statement No. 107, Disclosure about
Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in
the balance sheet, for which it is practicable to estimate that value.
In cases where quoted market prices are not available, fair values are
based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. In
that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be
realized in immediate settlement of the instrument. Statement No. 107
excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:
Cash, Cash Equivalents and Due from Banks
-----------------------------------------
The carrying amounts reported in the balance sheet for cash, cash
equivalents and due from banks approximates their fair value.
Investment Securities (Including Mortgage-Backed Securities)
------------------------------------------------------------
Fair values for investment securities are based on quoted market
prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of
comparable instruments.
Loans
-----
Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type such as
commercial, agricultural, real estate, consumer, and other.
For variable rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on
carrying values. The fair values for fixed rate term loans are
determined using estimated future cash flows, discounted at the
interest rates currently being offered for loans with similar
terms to borrowers with similar credit quality. The carrying
amount of accrued interest receivable approximates its fair
value.
Off Balance Sheet Instruments
-----------------------------
Fair values for the Company's off balance sheet instruments
(lending commitments and standby letters of credit) are based on
fees currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements and the
counterparties' credit standing.
F-11
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments (see Note 15) (Continued)
-------------------------------------------------------------
Deposit Liabilities
-------------------
The fair values of demand, NOW, money market and savings deposits
equal their carrying amounts which represents the amount payable
on demand. The carrying amounts for variable rate certificates of
deposit approximate their fair values at the reporting date. Fair
values for fixed rate certificates of deposit are estimated using
a discounted cash flow calculation that applies interest rates
currently being offered on certificates to a schedule of
aggregated expected monthly maturities on time deposits.
Short-Term Borrowings
---------------------
The carrying amounts of borrowings approximate their fair values.
Reclassifications
-----------------
Certain reclassifications have been made to the 1994 financial
statements in order to conform to the 1995 presentation. These
reclassifications had no effect on net income or total stockholders'
equity as originally presented.
NOTE 2 INVESTMENT SECURITIES
Debt and equity securities have been classified in the consolidated
statements of financial condition according to management's intent.
The carrying amount of securities and their approximate fair values at
December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
December 31, 1995
- -----------------
Available-for-Sale Securities:
FHLB Stock $ 1,065,600 $ 0 $ 0 $ 1,065,600
U.S. Government and
Agency Securities 4,472,015 2,454 3,051 4,471,418
State and Municipal Securities 3,620,349 151,023 8,276 3,763,096
Mortgage-Backed Securities 34,632,523 338,090 80,741 34,889,872
----------- ----------- ----------- -----------
Total $43,790,487 $ 491,567 $ 92,068 $44,189,986
=========== =========== =========== ===========
December 31, 1994
- -----------------
Available-for-Sale Securities:
FHLB Stock $ 750,000 $ 0 $ 0 $ 750,000
U.S. Government and
Agency Securities 4,465,486 0 166,111 4,299,375
State and Municipal Securities 3,639,757 13,324 30,750 3,622,331
Mortgage-Backed Securities 11,241,885 0 567,945 10,673,940
----------- ----------- ----------- -----------
Total $20,097,128 $ 13,324 $ 764,806 $19,345,646
=========== =========== =========== ===========
Held-to-Maturity Securities:
Mortgage-Backed Securities $30,468,283 $ 58,870 $ 1,396,244 $29,130,909
=========== =========== =========== ===========
</TABLE>
F-12
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 2 INVESTMENT SECURITIES (CONTINUED)
The amortized cost and approximate market value of the investment
securities as of December 31, 1995, by contractual maturity, are shown
below. Expected maturities may differ from contractual maturities on
mortgage-backed securities because the mortgages underlying the
securities may be called or prepaid without any penalties, therefore,
these securities are not included in the maturity categories on the
summary.
<TABLE>
<CAPTION>
Available-for-Sale Securities
-----------------------------
Amortized Cost Fair Value
-------------- -----------
<S> <C> <C>
Due in One Year or Less $ 1,488,642 $ 1,491,097
Due from One to Five Years 3,353,371 3,353,844
Due from Five to Ten Years 2,453,746 2,541,280
Due After Ten Years 796,605 848,293
-------------- -----------
$ 8,092,364 $ 8,234,514
Mortgage-Backed Securities 34,632,523 34,889,872
Equity Securities 1,065,600 1,065,600
-------------- -----------
Total $ 43,790,487 $44,189,986
============== ===========
</TABLE>
At December 31, 1995 and 1994, the Bank's investment portfolio
includes approximately $9,843,000 and $12,630,000, respectively, of
collateralized mortgage obligations which are defined as derivatives.
These investments are more difficult to price and may be thinly
traded. Accordingly, these investments are typically subject to
greater market risk than non-derivative financial instruments.
Proceeds from sales and maturities of investment securities were
$8,567,000 during 1995 and $17,837,000 during 1994. Gross gains of
$-0- during 1995 and 1994, and gross losses of $-0- during 1995 and
$27,478 during 1994 were realized on those sales.
Investment securities with a market value of $34,464,000 and
$38,938,000 at December 31, 1995 and 1994, respectively, were pledged
as collateral on public deposits, repurchase agreements and for other
purposes as required or permitted by law.
Under FASB No. 115, Accounting for Certain Investments in Debt and
Equity Securities, an enterprise may reassess the appropriateness of
the classifications of all securities held at that time and account
for any relating reclassifications at fair value. The reclassification
must take place before December 31, 1995. During 1995, the Bank
transferred, at fair value, $25,520,498 of held-to-maturity securities
to available-for-sale at fair value. There was no realized gain or
loss related to this transfer. This reclassification resulted in an
increase of approximately $211,000 to the unrealized gain at
December 31, 1995.
F-13
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 3 LOANS
The major classifications of loans at December 31, 1995 and 1994 are
as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Commercial $41,185,275 $41,911,748
Consumer 6,446,544 7,143,241
Indirect 31,288,107 32,283,893
Real Estate 18,844,606 16,301,138
----------- -----------
Total $97,764,532 $97,640,020
Less: Allowance for Possible Loan Losses (1,632,317) (1,470,405)
Unearned Discount (2,373) (12,303)
----------- -----------
$96,129,842 $96,157,312
=========== ===========
</TABLE>
Non-accruing loans totaled approximately $397,000 and $218,000 at
December 31, 1995 and 1994, respectively, which had the effect of
reducing net income approximately $13,000 and $22,000 for 1995 and
1994, respectively.
Loans to principal officers, directors, employees and other related
parties of the banks and entities to which they are affiliated,
aggregated approximately $3,157,000 and $3,187,000 at December 31,
1995 and 1994, respectively. In the opinion of management, all such
loans are made at normal interest rates and terms.
NOTE 4 ALLOWANCE FOR POSSIBLE LOAN LOSSES
Changes in the allowance for possible loan losses are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Balance, Beginning of Year $1,470,405 $1,399,063
Provision Charged to Operating Expenses 170,000 194,000
Loans Charged Off (135,090) (293,483)
Recoveries of Amounts Charged Off 127,002 170,825
---------- ----------
Balance, End of Year $1,632,317 $1,470,405
========== ==========
</TABLE>
The impairment of loans having carrying values of $363,495 in 1995
have been recognized in conformity with FASB Statement No. 114,
Accounting by Creditors for Impairment of a Loan. The total allowance
for credit losses related to these loans was $237,729 in 1995. For
impairment recognized in conformity with FASB Statement No. 114, the
entire change in present value of expected cash flows is reported as
bad debt expense in the same manner in which impairment initially was
recognized or as a reduction in the amount of bad debt expense that
otherwise would be reported.
F-14
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 5 PREPAID EXPENSES AND OTHER ASSETS
The major classification of prepaid expenses and other assets at
December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Dealer Reserve $ 863,547 $ 946,500
Deferred Tax 306,112 610,150
Prepaid Expenses 153,374 174,868
Other 66,825 44,942
----------- -----------
$ 1,389,858 $ 1,776,460
=========== ===========
NOTE 6 PREMISES AND EQUIPMENT
The major classes of premises and equipment and the total accumulated
depreciation are as follows:
1995 1994
----------- -----------
<S> <C> <C>
Land $ 225,000 $ 225,000
Building and Improvements 1,250,000 1,250,000
Property and Fixtures 4,314,582 4,246,417
----------- -----------
Total $ 5,789,582 $ 5,721,417
Less: Accumulated Depreciation 3,093,169 2,606,478
----------- -----------
Total (Net) $ 2,696,413 $ 3,114,939
=========== ===========
</TABLE>
NOTE 7 PROVISION FOR INCOME TAXES
The provision (benefit) for income taxes for the years ended December
31, 1995 and 1994 consisted of the following components:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Current $ 1,098,291 $ 768,682
Deferred Taxes (689,314) (113,824)
----------- -----------
Provision for Income Taxes $ 408,977 $ 654,858
=========== ===========
</TABLE>
Deferred taxes result from temporary differences in the recognition of
revenue and expense for financial reporting and income tax purposes.
The principal sources of these differences are the provision for loan
losses for tax purposes which differs from the provision for financial
reporting purposes and from using accelerated methods of depreciation
for tax purposes only.
F-15
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 7 PROVISION FOR INCOME TAXES (CONTINUED)
Income tax expense differs from income tax expense computed by
applying the statutory federal income tax rate. The reasons for these
differences are as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Income Tax Expense at Statutory Rate $ 953,561 $ 729,775
State Taxes, Net of Federal Tax Benefit 185,248 138,829
Exempt Interest from Investments (62,121) (70,710)
Reduction in Valuation Reserve (700,000) 0
Other 32,289 (143,036)
----------- -----------
Income Tax Expense $ 408,977 $ 654,858
=========== ===========
</TABLE>
NOTE 8 PENSION PLAN
The Bank and affiliates participate in a defined benefit pension plan
for salaried employees. The plan covers all of the Bank's salaried
employees who have satisfied the plan's eligibility requirements.
The Bank accounts for pension expense based on Statement of Financial
Accounting Standards (SFAS) No. 87, Employers' Accounting for
Pensions. Pension expenses, included in employee benefits expense,
were $40,895 and $15,202 for 1995 and 1994, respectively.
The Bank's funding policy is to make annual contributions as required
by applicable regulations.
The detail of the consolidated funded status is as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Actuarial Present Value of Vested
Benefit Obligation $ 1,156,239 $ 982,432
=========== ===========
Accumulated Benefit Obligation $ 1,247,602 $ 1,058,076
=========== ===========
Projected Benefit Obligation $ 1,336,109 $ 1,127,400
Plan Assets at Fair Value 1,221,605 1,092,484
----------- -----------
Plan Assets Less than Projected
Benefit Obligation $ (114,504) $ (34,916)
Unrecognized Net Gain (268,966) (324,105)
Unrecognized Net Transition Assets (24,900) (29,200)
Unrecognized Prior Service Cost 63,142 83,888
----------- -----------
Accrued Pension Liability $ (345,228) $ (304,333)
=========== ===========
</TABLE>
F-16
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 8 PENSION PLAN (CONTINUED)
The periodic net pension cost of the consolidated defined benefit
plan includes the following components:
<TABLE>
<CAPTION>
1995 1994
-------- ----------
<S> <C> <C>
Service Cost $ 46,148 $ 45,068
Interest Cost 97,074 91,752
Actual Return on Plan Assets 245,082 (24,520)
Net Amortization of Deferral 142,755 (146,138)
-------- ----------
Total Pension Cost $ 40,895 $ 15,202
======== ==========
</TABLE>
Assumptions used in the computations:
<TABLE>
<CAPTION>
1995 1994
-------- ----------
<S> <C> <C>
Assumed Discount Rate 8 % 9 %
Rate of Increase in Future Compensation Levels 4.5 % 4.5 %
Expected Long-Term Rate of Return on Plan Assets 8 % 8 %
</TABLE>
NOTE 9 STOCK APPRECIATION RIGHTS PLAN
On April 21, 1994 the Board of Directors approved a stock appreciation
rights plan for all key employees of AmeriGroup, Incorporated and
Subsidiaries. There were no contributions made to the plan during
1995 and 1994.
NOTE 10 LEASE OBLIGATION
AmeriBank leases its main bank premises and other branch locations
under lease agreements requiring monthly rental payments through
September 2008. The bank also pays pro rata portion of real estate
taxes, insurance and operating expenses. The following is a schedule
of future minimum lease payments on these noncancelable leases:
<TABLE>
<CAPTION>
Year Amount
---------- ----------
<S> <C>
1996 $ 284,792
1997 284,792
1998 290,844
1999 308,025
2000 308,025
Thereafter 1,300,616
----------
Total $2,777,094
==========
</TABLE>
F-17
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 10 LEASE OBLIGATION (CONTINUED)
Rent expense, included in occupancy expense, was $296,000 and $301,000
for the years ended December 31, 1995 and 1994, respectively. The
Company's subsidiary bank leases office and storage space under
operating leases which expire at various dates. Occupancy expense has
been reduced by the amount of rental income recorded which totaled
$361,000 and $372,000 in 1995 and 1994, respectively.
NOTE 11 OTHER BORROWINGS
Federal funds purchased and securities sold under repurchase
agreements generally mature from one to 366 days from the transaction
date. Securities sold under repurchase agreements were
collateralized by securities with a market value of $10,330,000 and
$12,280,000 at December 31, 1995 and 1994, respectively.
The Bank had outstanding advances of $10,000,000 and $2,000,000 from
the Federal Home Loan Bank at December 31, 1994. These advances
matured every thirty days. As of December 31, 1994, the interest
rates are 6.11% and 6.21%, respectively. Specific investments market
values of approximately $13,338,000 and $15,987,000 at December 31,
1995 and 1994, respectively, were pledged to the Federal Home Loan
Bank as collateral in the event the Bank requests further advances.
At December 31, 1995 the Bank had no outstanding advances from the
Federal Home Loan Bank.
NOTE 12 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company's subsidiary Bank is party to financial instruments with
off-balance sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments
include commitments to extend credit and standby letters of credit.
The instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amounts recognized in the balance
sheets. The contract or notional amounts of these instruments
reflect the extent of involvement the Bank has in particular classes
of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the
contractual notional amount of these instruments. The Bank uses the
same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.
The contract or notional amount of financial instruments whose
contract amounts represent credit risk were approximately $13,631,000
and $13,746,000 for commitments to extend credit and $386,000 and
$963,000 standby letters of credit at December 31, 1995 and 1994,
respectively.
F-18
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 12 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (CONTINUED)
Commitments to extend credit are agreements 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 and may require payment of a fee. Since many of
the commitments are expected to expire without being 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. Collateral held varies but may
include accounts receivable, inventory, property, plant and equipment,
and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the
bank to guarantee the performance of a customer to a third party. The
credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers. The
Bank holds appropriate collateral supporting those commitments for
which collateral is deemed necessary.
NOTE 13 RETAINED EARNINGS
Minnesota banking regulations generally permit a bank to pay dividends
equaling 50% of current year's income without prior regulatory
approval if certain requirements are met. Two such requirements are
that the bank maintain total stockholders' equity, as defined, equal
to 6% of total assets and that assets classified by regulatory
examiners be less than 50% of stockholder's equity, as defined. At
December 31, 1995, the Bank could pay dividends of approximately
$1,000,500 without prior regulatory approval.
Banking regulations also require the subsidiary bank to maintain
certain minimum capital levels in relation to bank assets. The Bank's
capital levels were in compliance with these regulations as of
December 31, 1995 and 1994.
NOTE 14 COMMITMENTS AND CONTINGENCIES
Included in other assets is cash held in escrow of $842,645 in 1995
and $933,137 in 1994 which was the amount withheld from the proceeds
of the sale of the Pierce County State Bank & Trust Company. The
funds were withheld from the proceeds to provide for various
environmental clean-up costs related to property owned or leased by
the Pierce County Bank & Trust Company. The Company believes that the
actual cost will be substantially less than the amount held in escrow
and has recorded a liability in the financial statements of $374,850
at December 31, 1995 and $458,746 at December 31, 1994.
F-19
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 14 COMMITMENTS AND CONTINGENCIES (CONTINUED)
In 1993, under a redemption agreement which expired on January 24,
1994, 61,606 shares were purchased by the Company for $26.63 per
share. Under the redemption agreement, the Company may also be
required to pay each tendering stockholder an additional or contingent
payment. This contingent payment will be determined after the cost
related to the environmental clean-up related to the sale of Pierce
County State Bank & Trust Company have been determined. Contingent
payments of $3,604 were paid to these shareholders during 1995.
NOTE 15 CARRYING AMOUNT AND FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
1995 1994
---------------------------- ----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial Assets:
Investment Securities $ 44,189,987 $ 44,189,987 $ 49,813,929 $ 48,477,000
============ ============ ============ ============
Federal Funds Sold $ 6,400,000 $ 6,400,000 $ 0 $ 0
============ ============ ============ ============
Loans $ 97,762,159 $ 97,627,717
Less: Allowance for Loan Losses 1,632,317 1,470,405
------------ ------------
Net Loans $ 96,129,842 $ 96,834,000 $ 96,157,312 $ 95,516,000
============ ============ ============ ============
Financial Liabilities:
Deposits $129,020,603 $129,975,000 $117,182,910 $116,406,000
============ ============ ============ ============
Other Borrowings $ 9,147,389 $ 9,147,000 $ 26,815,909 $ 26,815,909
============ ============ ============ ============
</TABLE>
NOTE 16 MERGER OF COMPANY
On December 8, 1995, the Company entered into a definitive merger
agreement with Norwest Corporation as a result of which the Company
will become a wholly-owned subsidiary of Norwest through a reverse
subsidiary merger. The merger has received Board approval and will be
completed upon regulatory and shareholder approval.
F-20
<PAGE>
[LOGO OF LARSON ALLEN WEISHAIR & CO.]
INDEPENDENT AUDITOR'S REPORT
Board of Directors
AmeriGroup, Inc. and Subsidiaries
Minnetonka, Minnesota
We have audited the accompanying consolidated balance sheets of AmeriGroup, Inc.
and Subsidiaries (formerly American Community Bank Group, Inc.) as of December
31, 1994 and 1993, and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AmeriGroup, Inc. and
Subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for certain investments in debt securities
in 1994 and income taxes in 1993.
/s/ LARSON, ALLEN, WEISHAIR & CO., LLP
LARSON, ALLEN, WEISHAIR & CO., LLP
Minneapolis, Minnesota
February 13, 1995
F-21
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
CASH, CASH EQUIVALENTS AND DUE FROM BANKS $ 12,555,583 $ 18,754,840
------------ ------------
INVESTMENT SECURITIES
Available-for-Sale Securities $ 19,345,646 $ --
Held-to-Maturity Securities 30,468,283 43,744,574
------------ ------------
Total Investment Securities $ 49,813,929 $ 43,744,574
------------ ------------
FEDERAL FUNDS SOLD $ -- $ 1,800,000
------------ ------------
LOANS HELD FOR SALE $ -- $ 4,415,016
------------ ------------
LOANS (Less Allowance for Loan Losses of
$1,470,405 in 1994 and $1,399,063 in 1993) $ 96,157,312 $ 75,658,074
------------ ------------
PREMISES AND EQUIPMENT (at Cost) $ 5,721,417 $ 5,345,411
Less: Accumulated Depreciation 2,606,478 2,161,530
------------ ------------
Net Premises and Equipment $ 3,114,939 $ 3,183,881
------------ ------------
OTHER ASSETS
Accrued Interest Receivable $ 852,833 $ 705,237
Prepaid Expenses and Other Assets 1,776,460 1,342,378
Other Real Estate -- 160,000
Escrow for Environmental Matters 933,137 1,001,812
------------ ------------
Total Other Assets $ 3,562,430 $ 3,209,427
------------ ------------
COST IN EXCESS OF NET ASSETS OF SUBSIDIARY
(Less Accumulated Amortization of $638,473
in 1994 and $525,984 in 1993) $ 3,734,994 $ 3,847,483
------------ ------------
Total Assets $168,939,187 $154,613,295
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-22
<PAGE>
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand $ 28,143,651 $ 30,499,441
Money market and NOW Accounts 23,328,090 28,732,184
Savings 17,057,572 18,031,314
Time, $100,000 and Over 7,350,000 6,956,000
Other Time 41,303,598 31,961,331
------------ ------------
Total Deposits $117,182,911 $116,180,270
Other Borrowings:
Federal Funds Purchased 4,200,000 --
Securities Sold Under Repurchase Agreements 10,615,909 8,150,601
Federal Home Loan Bank Advances 12,000,000 --
Note Payable-Bank -- 4,235,000
Accrued Interest and Other Liabilities 2,458,053 3,601,537
------------ ------------
Total Liabilities $146,456,873 $132,167,408
------------ ------------
MINORITY INTEREST IN SUBSIDIARY $ 27,517 $ 25,243
------------ ------------
STOCKHOLDERS' EQUITY
Common Stock:
Class A - Voting; Par Value $.01 Per Share;
Authorized 1,000,000 Shares; Issued and
Outstanding 901,134 Shares for 1994 and 1993 $ 9,011 $ 9,011
Class B - Non-Voting; Par Value $.01 Per Share;
Authorized 200,000 Shares; Issued and
Outstanding 106,537 Shares for 1994 and 1993 1,065 1,065
Additional Paid-In Capital 20,655,799 20,655,799
Retained Earnings 2,235,366 1,754,769
Net Unrealized Loss on Securities Available-for-Sale,
Net of Taxes (446,444) --
------------ ------------
Total Stockholders' Equity $ 22,454,797 $ 22,420,644
------------ ------------
Total Liabilities and Stockholders' Equity $168,939,187 $154,613,295
============ ============
</TABLE>
F-23
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $ 7,117,153 $ 9,692,806
Interest on Investment Securities 2,925,215 6,035,160
Interest on Federal Funds Sold 17,875 37,464
Interest on Deposits with Bank 289,978 68,976
----------- -----------
Total Interest Income $10,350,221 $15,834,406
----------- -----------
INTEREST EXPENSE
Deposits $ 2,863,853 $ 5,754,234
Other Borrowings 1,026,866 932,769
----------- -----------
Total Interest Expense $ 3,890,719 $ 6,687,003
----------- -----------
NET INTEREST INCOME $ 6,459,502 $ 9,147,403
PROVISION FOR POSSIBLE LOAN LOSSES 194,000 180,000
----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR POSSIBLE LOAN LOSSES $ 6,265,502 $ 8,967,403
----------- -----------
NON-INTEREST INCOME
Service Charges on Deposit Accounts $ 866,571 $ 1,224,276
Gain on Sale of Pierce County Bank & Trust 128,393 2,669,006
Other Service Charges and Fees 737,773 856,965
Other Operating Income 53,190 335,984
----------- -----------
Total Non-Interest Income $ 1,785,927 $ 5,086,231
----------- -----------
NON-INTEREST EXPENSES
Salaries $ 2,715,545 $ 3,561,206
Employee Benefits 413,250 494,744
Occupancy Expense 447,948 620,159
Equipment Rentals, Depreciation and Maintenance 699,068 870,153
Other Operating Expenses 1,601,745 2,887,210
Net Realized Losses on Available-for-Sale Securities 27,478 --
----------- -----------
Total Non-Interest Expenses $ 5,905,034 $ 8,433,472
----------- -----------
INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $ 2,146,395 $ 5,620,162
PROVISION FOR INCOME TAXES 654,858 2,230,841
----------- -----------
INCOME BEFORE MINORITY INTEREST AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $ 1,491,537 $ 3,389,321
MINORITY INTEREST IN INCOME OF CONSOLIDATED
SUBSIDIARIES 3,269 14,407
----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE $ 1,488,268 $ 3,374,914
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE -- 480,000
----------- -----------
NET INCOME $ 1,488,268 $ 3,854,914
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-24
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
CLASS A CLASS B RETAINED
---------------- ---------------- PAID-IN EARNINGS UNREALIZED
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) LOSS TOTAL
------- ------ ------- ------ ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 962,738 $9,627 106,537 $1,065 $22,295,697 $(2,100,145) $ -- $20,206,244
Purchase of Common Stock (61,604) (616) -- -- (1,639,898) -- -- (1,640,514)
Net Income -- -- -- -- -- 3,854,914 -- 3,854,914
------- ------ ------- ------ ----------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1993 901,134 $9,011 106,537 $1,065 $20,655,799 $ 1,754,769 $ -- $22,420,644
Dividends Paid -- -- -- -- -- (1,007,671) -- (1,007,671)
Net Change in Unrealized Loss
on Available-for-Sale Securities
(Net of Taxes) -- -- -- -- -- -- (446,444) (446,444)
Net Income -- -- -- -- -- 1,488,268 -- 1,488,268
------- ------ ------- ------ ----------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1994 901,134 $9,011 106,537 $1,065 $20,655,799 $ 2,235,366 $(446,444) $22,454,797
======= ====== ======= ====== =========== =========== ========= ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-25
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,488,268 $ 3,854,914
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Possible Loan Losses 194,000 180,000
Depreciation 467,849 598,338
Realized Losses on Available-for-Sale Securities (Net) 27,478 --
Gain on Sale of Pierce County Bank (128,393) (2,669,006)
Cumulative Effect of Change in Accounting Principle -- (480,000)
(Gain) Loss on Disposal of Premises and Equipment (4,185) 90,549
(Gain) Loss on Sale and Write-Down of Other Real Estate 10,073 (130,181)
Amortization of Organization Costs, and Cost in
Excess of Net Assets of Subsidiaries 135,214 126,346
Accretion of Net Assets of Subsidiary in Excess of Cost -- (19,037)
Increase in Other Assets (209,809) (1,394,745)
Increase (Decrease) in Accrued Interest Payable
and Other Liabilities (1,143,484) 2,409,761
Increase in Minority Interest of Subsidiaries 3,269 14,407
------------ ------------
Net Cash Provided by Operating Activities $ 840,280 $ 2,581,346
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in Federal Funds Sold $ 1,800,000 $ 4,825,000
Purchase of Available-for-Sale Securities (14,655,861) --
Proceeds from the Sales, Maturities and Paydown of
Available-for-Sale Securities 8,426,652 --
Purchase of Held-to-Maturity Securities (10,051,107) (28,314,176)
Proceeds from the Maturity and Paydown of
Held-to-Maturity Securities 9,410,125 57,893,953
Increase in Loans (Net) (16,278,222) (16,387,248)
Purchases of Premises and Equipment (407,344) (353,039)
Proceeds from Sale of Premises and Equipment 12,623 36,525
Proceeds from Sale of Other Real Estate 149,927 394,048
Proceeds from Sale of Pierce County Bank
(Net of Selling Expenses) 128,393 11,831,065
------------ ------------
Net Cash Provided (Used) by Investing Activities $(21,464,814) $ 29,926,128
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) Increase in Demand, Money Market, Savings
and Time Deposits $ 1,002,640 $(14,918,531)
Redemption of Common Stock -- (1,640,514)
Increase (Decrease) in Other Borrowings 14,430,308 (10,867,674)
Payment of Minority Interest -- (204,076)
Dividends Paid (1,007,671) --
Dividends Paid to Minority Shareholders -- (1,326)
------------ ------------
Net Cash Provided (Used) by Financing Activities $ 14,425,277 $(27,632,121)
------------ ------------
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS
AND DUE FROM BANKS $ (6,199,257) $ 4,875,353
Cash, Cash Equivalents, and Due from Banks - Beginning 18,754,840 13,879,487
------------ ------------
CASH, CASH EQUIVALENTS, AND DUE FROM BANKS - ENDING $ 12,555,583 $ 18,754,840
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-26
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE 1 NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
------------------
AmeriGroup, Inc. and Subsidiaries (formerly American Community Bank
Group, Inc.) is a one-bank holding company providing bank and bank-
related services through its subsidiary, AmeriBank. The majority of
the subsidiary bank's business activity is with customers located
within the immediate area. The Company also owns 100% of the stock of
American Community Service Corporation which provides the data
processing services to its subsidiary bank. The accounts and
operations of the service corporation are included in the consolidated
financial statements.
In October 1993, AmeriGroup sold its investment in Pierce County Bank
& Trust.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of its
wholly-owned subsidiaries. AmeriBank (99.78% owned) and American
Community Service Corporation (100% owned). On October 31, 1993, the
Company sold its investment in Pierce County Bank & Trust Company and
recorded a gain of $2,669,006. The operating results for Pierce County
Bank & Trust Company for the period of January 1 through October 31,
1993 are included in the consolidated financial statements. All
significant intercompany accounts and transactions have been
eliminated in preparing the consolidated financial statements.
A summary of the Company's significant accounting and reporting
policies consistently applied in the preparation of the accompanying
consolidated financial statements follows:
Amortization
------------
Amortization of costs in excess of net assets is computed using the
straight-line method over 40 years. The amount of amortization expense
for 1994 and 1993 was $112,489 and $117,074, respectively.
Cash Flows
----------
For purposes of reporting cash flows, cash, cash equivalents and due
from banks includes cash on hand, amounts due from banks (including
cash items in process of clearing), and investments in a short-term
investment fund. The assets in the fund consists of investments in
commercial paper and other corporate bonds. The market value of this
investment approximates its carrying value. Cash flows for loans
originated by the Company, deposits and other borrowings are reported
net.
Cash paid (received) during the years ended December 31, 1994 and 1993
included the following:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Interest Paid to Depositors $3,679,183 $5,854,090
========== ==========
Interest Paid on Note Payable $ 27,538 $ 380,650
========== ==========
Income Taxes Paid $1,440,000 $ 56,501
========== ==========
</TABLE>
F-27
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE 1 NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash Flows (Continued)
----------------------
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Noncash Investing Activity
--------------------------
Change in Unrealized Loss on Available-for-Sale
Securities Related to the Adoption of SFAS
No. 115 (Net of Taxes of $304,050) $446,444 $ 0
======== ========
</TABLE>
Investment Securities
---------------------
Effective January 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 115. Accounting
for Certain Investments in Debt and Equity Securities. In accordance
with SFAS No. 115, the December 31, 1993 financial statements have not
been restated to reflect this change in accounting principle. At
January 1, 1994, approximately $19,085,000 of investment securities,
were classified as available for sale which increased shareholders
equity by $260,000 net of income taxes. Generally, SFAS No. 115
requires that investments in debt securities and equity securities
with readily determinable fair values be classified into the following
three categories which then establishes the accounting requirements:
Available-for-Sale Securities
-----------------------------
Available-for-sale securities consist of bonds, notes and
debentures not classified as held-to-maturity securities.
Unrealized holding gains and losses, net of tax, on available-
for-sale securities are reported as a net amount in a separate
component of stockholders' equity until realized. Gains and
losses on the sale of available-for-sale securities are
determined using the specific-identification method. Premiums and
discounts are recognized in interest income using the interest
method over the period to maturity.
Held-to-Maturity Securities
---------------------------
Held-to-maturity securities consist of bonds, notes and
debentures for which the subsidiary banks have the positive
intent and ability to hold to maturity. Held-to-maturity
securities are reported at cost, adjusted for premiums and
discounts that are recognized in interest income using the
interest method over the period to maturity.
Trading Account Securities
--------------------------
Debt and equity securities that are bought and held principally
for the purpose of selling them in the near term are classified
as trading account securities and are reported at fair value.
Gains or losses on sales of trading account securities,
adjustments to fair values, and other noninterest income are
included in trading account profits and commissions. As of
December 31, 1994, the Company had no investments classified as
trading account securities.
F-28
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE 1 NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans
-----
Loans are stated at the amount of unpaid principal, reduced by
unearned income, deferred fees and an allowance for possible loan
losses.
The allowance for possible loan losses is maintained at a level
considered adequate to provide for losses that can be reasonably
anticipated. The allowance is increased by provisions charged to
operating expense and reduced by net charge-offs. The banks make
continuous credit reviews of the loan portfolios and consider current
economic conditions, historical loan loss experience, review of
specific problem loans and other factors in determining the adequacy
of the allowance balance.
Unearned income on discounted loans is amortized to income over the
life of the loans, using the interest method. For all other loans,
interest is accrued daily on the outstanding balances. Accrual of
interest is discontinued on a loan when management believes, after
considering collection efforts and other factors, that the borrower's
financial condition is such that collection of interest is doubtful.
Loans Held for Sale
-------------------
Mortgage loans originated and intended for sale in the secondary
market are carried at the lower of cost or estimated market value.
There were no loans held for sale at December 31, 1994.
Concentration of Credit Risks
-----------------------------
Substantially all of the Company's loans, commitments to extend credit
and standby letters of credit have been granted to customers in its
market area. Investments in securities issued by State and political
subdivisions (see Note 2) involve diverse governmental entities. The
concentration of credit by type of loan is set forth in Note 3.
Standby letters of credit were granted primarily to commercial
customers.
Income Taxes
------------
Beginning in 1993, the Company provides for income taxes in accordance
with Statement of Financial Accounting Standard (SFAS) No. 109. In
accordance with SFAS No. 109, the asset and liability approach is used
to determine deferred income taxes. The asset and liability approach
requires recognition of deferred tax liabilities and assets for the
expected future consequences of temporary differences between the
financial reporting basis and tax basis of assets and liabilities. A
valuation allowance is provided when it is more likely than not that a
deferred tax asset will not be realized. The effect of the adjustment
as of January 1, 1993 to adopt SFAS No. 109 has been reflected in the
income statement as a cumulative effect of an accounting change and
increased 1993 net earnings by $480,000.
The Company and its subsidiaries file consolidated federal and unitary
state income tax returns. The provision for income taxes is allocated
on a separate entity basis.
F-29
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE 1 NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Premises and Equipment
----------------------
Depreciation of premises and equipment is computed principally on the
straight-line method with useful lives ranging from 3 to 40 years.
Fair Value of Financial Instruments (see Note 16)
-------------------------------------------------
Financial Accounting Standards Statement No. 107, Disclosure about
Fair Value of Financial Instruments, requires disclosure of fair value
information about financial instruments, whether or not recognized in
the balance sheet, for which it is practicable to estimate that value.
In cases where quoted market prices are not available, fair values are
based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. In
that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be
realized in immediate settlement of the instrument. Statement No. 107
excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:
Cash, Cash Equivalents and Due from Banks
-----------------------------------------
The carrying amounts reported in the balance sheet for cash, cash
equivalents and due from banks approximates their fair value.
Investment Securities (including Mortgaged-Backed Securities)
-------------------------------------------------------------
Fair values for investment securities are based on quoted market
prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of
comparable instruments.
Loans
-----
Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type such as
commercial, agricultural, real estate, consumer, and other.
For variable rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on
carrying values. The fair values for fixed rate term loans are
determined using estimated future cash flows, discounted at the
interest rates currently being offered for loans with similar
terms to borrowers with similar credit quality. The carrying
amount of accrued interest receivable approximates its fair
value.
F-30
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE 1 NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Off Balance Sheet Instruments
-----------------------------
Fair values for the Company's off balance sheet instruments (lending
commitments and standby letters of credit) are based on fees currently
charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the counterparties' credit
standing.
Deposit Liabilities
-------------------
The fair values of demand, NOW, money market and savings deposits
equal their carrying amounts which represents the amount payable on
demand. The carrying amounts for variable rate certificates of deposit
approximate their fair values at the reporting date. Fair values for
fixed rate certificates of deposit are estimated using a discounted
cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected monthly
maturities on time deposits.
Short-Term Borrowings
---------------------
The carrying amounts of borrowings approximate their fair values.
Reclassifications
-----------------
Certain reclassifications have been made to the 1993 financial
statements in order to conform to the 1994 presentation. These
reclassifications had no effect on net income or total stockholders'
equity as originally presented.
NOTE 2 INVESTMENT SECURITIES
Debt and equity securities have been classified in the consolidated
statements of financial condition according to management's intent.
The carrying amount of securities and their approximate fair values at
December 31, 1994 and 1993 were as follows.
<TABLE>
<CAPTION>
December 31, 1994
-------------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Available-for-Sale Securities:
FHLB Stock $ 750,000 $ 0 $ 0 $ 750,000
U.S. Government and
Agency Securities 4,465,486 0 (166,111) 4,299,375
State and Municipal Securities 3,639,757 13,324 (30,750) 3,622,331
Mortgage-Backed Securities 11,241,885 0 (567,945) 10,673,940
----------- ------- ----------- -----------
Total $20,097,128 $13,324 $ (764,806) $19,345,646
=========== ======= =========== ===========
Held-to-Maturity Securities:
Mortgage-Backed Securities $30,468,283 $58,870 $(1,396,244) $29,130,909
=========== ======= =========== ===========
</TABLE>
F-31
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE 2 INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
December 31, 1993
------------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Held-to-Maturity Securities:
FHLB Stock $ 750,000 $ 0 $ 0 $ 750,000
U.S. Government and
Agency Securities 4,511,297 27,609 0 4,538,906
State and Municipal Securities 3,658,061 233,010 (9,678) 3,881,393
Mortgage-Backed Securities 34,825,216 664,113 (79,889) 35,409,440
----------- -------- -------- -----------
Total $43,744,574 $924,732 $(89,567) $44,579,739
=========== ======== ======== ===========
</TABLE>
The amortized cost and approximate market value of the investment
securities as of December 31, 1994, by contractual maturity, are shown
below. Expected maturities may differ from contractual maturities on
mortgage-backed securities because the mortgages underlying the
securities may be called or prepaid without any penalties, therefore,
these securities are not included in the maturity categories on the
summary.
At December 31, 1994, the Bank's investment portfolio includes
approximately $12,630,000 of collateralized mortgage obligations which
are defined as derivatives. These investments are more difficult to
price and may be thinly traded. Accordingly, these investments are
typically subject to greater market risk than non-derivative financial
instruments.
<TABLE>
<CAPTION>
Available-for-Sale Securities Held-to-Maturity Securities
----------------------------- ---------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Due in One Year or Less $ 1,496,136 $ 1,471,876 $ 0 $ 0
Due from One to Five Years 3,624,350 3,468,065 0 0
Due from Five to Ten Years 2,181,761 2,175,520 0 0
Due After Ten Years 802,996 806,245 0 0
----------- ----------- ----------- -----------
$ 8,105,243 $ 7,921,706 $ 0 $ 0
Mortgage-Backed Securities 11,241,885 10,673,940 30,468,283 29,130,909
Equity Securities 750,000 750,000 0 0
----------- ----------- ----------- -----------
Total $20,097,128 $19,345,646 $30,468,283 $29,130,909
============ =========== =========== ===========
</TABLE>
Proceeds from sales and maturities of investment securities were
$17,837,000 during 1994 and $32,632,000 during 1993. Gross gains of
$-0- during 1994 and $-0- during 1993, and gross losses of $27,478
during 1994 and $-0- during 1993 were realized on those sales.
Investment securities with a market value of $38,938,000 and
$43,782,000 at December 31, 1994 and 1993, respectively, were pledged
as collateral on public deposits, repurchase agreements and for other
purposes as required or permitted by law.
F-32
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE 3 LOANS
The major classifications of loans at December 31, 1994 and 1993 are
as follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Commercial $41,911,748 $39,859,444
Consumer 7,143,241 5,299,292
Indirect 32,283,893 23,320,633
Real Estate 16,301,138 8,632,034
----------- -----------
Total $97,640,020 $77,111,403
Less: Allowance for Possible Loan Losses (1,470,405) (1,399,063)
Unearned Discount (12,303) (54,266)
----------- -----------
$96,157,312 $75,658,074
=========== ===========
</TABLE>
Nonaccruing loans totaled approximately $218,000 and $467,000 at
December 31, 1994 and 1993, respectively, which had the effect of
reducing net income approximately $22,000 and $56,000 for 1994 and
1993, respectively.
Other nonperforming assets, consisting of other real estate acquired
through foreclosure or loan workout situations, amounted to $-0- and
$160,000 at December 31, 1994 and 1993, respectively.
Loans to principal officers, directors, employees and other related
parties of the banks and entities to which they are affiliated,
aggregated approximately $3,187,000 and $3,729,000 at December 31,
1994 and 1993, respectively. In the opinion of management, all such
loans are made at normal interest rates and terms.
NOTE 4 ALLOWANCE FOR POSSIBLE LOAN LOSSES
Changes in the allowance for possible loan losses are as follows:
<TABLE>
<CAPTION>
1994 1993
---------- -----------
<S> <C> <C>
Balance, Beginning of Year $1,399,063 $ 2,409,154
Allowance for Possible Loans Losses
of Subsidiary Bank at Date of Sale 0 (1,059,503)
Provision Charged to Operating Expenses 194,000 180,000
Loans Charged Off (293,483) (533,924)
Recoveries of Amounts Charged Off 170,825 403,336
---------- -----------
Balance, End of Year $1,470,405 $ 1,399,063
========== ===========
</TABLE>
F-33
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE 5 PREPAID EXPENSES AND OTHER ASSETS
The major classification of prepaid expenses and other assets at
December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Dealer Reserve $ 946,500 $ 773,585
Deferred Tax 610,150 306,100
Prepaid Expenses 174,868 118,420
Other 44,942 145,273
---------- ----------
$1,776,460 $1,342,378
========== ==========
</TABLE>
NOTE 6 PREMISES AND EQUIPMENT
The major classes of premises and equipment and the total accumulated
depreciation are as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Land $ 225,000 $ 225,000
Building and improvements 1,250,000 1,250,000
Property and Fixtures 4,246,417 3,870,411
---------- ----------
Total $5,721,417 $5,345,411
Less: Accumulated Depreciation 2,606,478 2,161,530
---------- ----------
Total (Net) $3,114,939 $3,183,881
========== ==========
</TABLE>
NOTE 7 NOTE PAYABLE - BANK
The note payable was due in annual principal installments, with a
maturity date of February 28, 2001 and interest payable quarterly. The
note was secured by shares of common stock of AmeriBank. This note
payable was subject to loan covenants, including minimum net worth,
classified loans, and return on assets of each bank subsidiary; and
consolidated tangible net worth and consolidated primary capital of
the Company. The note was paid in full in January 1994.
F-34
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE 8 PROVISION FOR INCOME TAXES
The provision (benefit) for income taxes for the years ended December
31, 1994 and 1993 consisted of the following components:
<TABLE>
<CAPTION>
1994 1993
--------- ----------
<S> <C> <C>
Current $ 768,682 $ 859,000
Deferred Taxes (113,824) 1,371,841
--------- ----------
Provision for Income Taxes $ 654,858 $2,230,841
========= ==========
</TABLE>
Deferred taxes result from temporary differences in the recognition of
revenue and expense for financial reporting and income tax purposes.
The principal sources of these differences are the provision for loan
losses for tax purposes which differs from the provision for financial
reporting purposes and from using accelerated methods of depreciation
for tax purposes only.
Income tax expense differs from income tax expense computed by
applying the statutory federal income tax rate. The reasons for these
differences are as follows:
<TABLE>
<CAPTION>
1994 1993
--------- ----------
<S> <C> <C>
Income Tax Expense at Statutory rate $ 729,775 $1,911,000
State Taxes, Net of Federal Tax Benefit 138,829 367,000
Exempt interest from investments (70,710) (65,000)
Other (143,036) 17,841
--------- ----------
Income Tax Expense $ 654,858 $2,230,841
========= ==========
</TABLE>
NOTE 9 PENSION PLAN
On January 1, 1993, the Company, AmeriBank, and Pierce County Bank &
Trust Company consolidated the three individual plans into one defined
benefit pension plan. The detail of the consolidated funded status is
as follows:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Actuarial Present Value of Vested
Benefit Obligation $ 982,432 $1,236,320
========== ==========
Accumulated Benefit Obligation $1,058,076 $1,345,069
========== ==========
Projected Benefit Obligation $1,127,400 $1,424,958
Plan Assets at Fair Value 1,092,484 1,142,993
---------- ----------
Plan Assets Less than Projected Benefit Obligation $ (34,916) $ (281,965)
Unrecognized Net Gain (324,105) (184,446)
Unrecognized Net Transition Assets (29,200) (33,500)
Unrecognized Prior Service Cost 83,888 104,834
---------- ----------
Accrued Pension Liability $ (304,333) $ (395,277)
========== ==========
</TABLE>
F-35
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE 9 PENSION PLAN (CONTINUED)
The periodic net pension cost of the consolidated defined benefit plan
includes the following components:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Service Cost $ 45,068 $ 67,584
Interest Cost 91,752 109,547
Actual Return on Plan Assets (24,520) (163,339)
Net Amortization of Deferral (146,138) 64,107
--------- ---------
Total Pension Cost $ 15,202 $ 77,899
========= =========
</TABLE>
Assumptions used in the computations:
<TABLE>
<CAPTION>
1994 1993
----- ----
<S> <C> <C>
Assumed Discount Rate 9% 8%
Rate of Increase in Future Compensation Levels 4.5% 4.5%
Expected Long-Term Rate of Return on Plan Assets 8% 8%
</TABLE>
NOTE 10 STOCK APPRECIATION RIGHTS PLAN
On April 21, 1994 the Board of Directors approved a stock appreciation
rights plan for all key employees of AmeriGroup, Incorporated and
Subsidiaries. There were no contributions made to the plan during
1994.
NOTE 11 LEASE OBLIGATION
AmeriBank leases its main bank premises and other branch locations
under lease agreements requiring monthly rental payments through
September 2008. The bank also pays pro rata portion of real estate
taxes, insurance and operating expenses. The following is a schedule
of future minimum lease payments on these noncancelable leases:
<TABLE>
<CAPTION>
Year Amount
---- ----------
<S> <C>
1995 $ 229,536
1996 231,227
1997 231,227
1998 236,450
1999 251,201
Thereafter 1,487,186
----------
Total $2,666,827
==========
</TABLE>
Rent expense, included in occupancy expense, was $301,000 and $267,000
for the years ended December 31, 1994 and 1993, respectively. The
Company's subsidiary bank leases office and storage space under
operating leases which expire at various dates. Occupancy expense has
been reduced by the amount of rental income recorded which totaled
$372,000 and $363,000 in 1994 and 1993, respectively.
F-36
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE 12 OTHER BORROWINGS
Federal funds purchased and securities sold under repurchase
agreements generally mature from one to eighty-one days from the
transaction date. As of December 31, 1994, the weighted average
interest paid on the securities sold under repurchase agreements is
5.36%. Securities sold under repurchase agreements were collateralized
by securities with a market value of $12,280,000 and $9,154,000 at
December 31, 1994 and December 31, 1993, respectively.
The Bank had outstanding advances of $10,000,000 and $2,000,000 from
the Federal Home Loan Bank at December 31, 1994. These advances mature
every thirty days. As of December 31, 1994, the interest rates are
6.11% and 6.21%, respectively. Specific investments with a market
value of approximately $15,987,000 at December 31, 1994 were pledged
to the Federal Home Loan Bank as collateral in the event the Bank
requests further advances.
NOTE 13 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company's subsidiary Bank is party to financial instruments with
off-balance sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments include
commitments to extend credit and standby letters of credit. The
instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amounts recognized in the balance
sheets. The contract or notional amounts of these instruments reflect
the extent of involvement the Bank has in particular classes of
financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
notional amount of these instruments. The Bank uses the same credit
policies in making commitments and conditional obligations as it does
for on-balance sheet instruments.
The contract or notional amount of financial instruments whose
contract amounts represent credit risk were approximately $13,746,000
and $11,945,000 for commitments to extend credit and $963,000 and
$523,000 for standby letters of credit at December 31, 1994 and 1993,
respectively.
Commitments to extend credit are agreements 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 and may require payment of a fee. Since many of
the commitments are expected to expire without being 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. Collateral held varies but may include
accounts receivable, inventory, property, plant and equipment, and
income-producing commercial properties.
F-37
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE 13 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (CONTINUED)
Standby letters of credit are conditional commitments issued by the
bank to guarantee the performance of a customer to a third party. The
credit risk involved in issuing letters of credit is essentially the
same as that involved in extending loan facilities to customers. The
Bank holds appropriate collateral supporting those commitments for
which collateral is deemed necessary.
NOTE 14 RETAINED EARNINGS
Minnesota banking regulations generally permit a bank to pay dividends
equaling 50% of current year's income without prior regulatory
approval if certain requirements are met. Two such requirements are
that the bank maintain total stockholders' equity, as defined, equal
to 6% of total assets and that assets classified by regulatory
examiners be less than 50% of stockholder's equity, as defined. At
December 31, 1994, the Bank could pay dividends of approximately
$735,200 without prior regulatory approval.
Banking regulations also require the subsidiary bank to maintain
certain minimum capital levels in relation to bank assets. The Bank's
capital levels were in compliance with these regulations as of
December 31, 1994 and 1993.
NOTE 15 COMMITMENTS AND CONTINGENCIES
Included in other assets is cash held in escrow of $933,137 in 1994
and $1,001,812 in 1993 which was the amount withheld from the proceeds
of the sale of the Pierce County State Bank & Trust Company. The funds
were withheld from the proceeds to provide for various environmental
clean-up costs related to property owned or leased by the Pierce
County Bank & Trust Company. The Company believes that the actual cost
will be substantially less than the amount held in escrow and has
recorded a liability in the financial statements of $458,746 at
December 31, 1994 and $550,000 at December 31, 1993.
In 1993, under a redemption agreement which expired on January 24,
1994, 61,606 shares were purchased by the Company for $26.63 per
share. Under the redemption agreement, the Company may also be
required to pay each tendering stockholder an additional or contingent
payment. This contingent payment will be determined after the cost
related to the environmental clean-up related to the sale of Pierce
County State Bank & Trust Company have been determined.
F-38
<PAGE>
AMERIGROUP, INC. AND SUBSIDIARIES
(formerly American Community Bank Group, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE 16 CARRYING AMOUNT AND FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
1994 1993
---------------------------- ----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial Assets:
Investment Securities $ 49,813,929 $ 48,477,000 $ 43,744,574 $ 44,580,000
============ ============ ============ ============
Loans $ 97,627,717 $ 81,472,153
Less: Allowance for
Loan Losses 1,470,405 1,399,083
------------ ------------
Net Loans $ 96,157,312 $ 95,516,000 $ 80,073,090 $ 80,798,000
============ ============ ============ ============
Financial Liabilities:
Deposits $117,182,910 $116,406,000 $116,180,270 $116,921,000
============ ============ ============ ============
Other Borrowings $ 26,815,909 $ 26,816,000 $ 8,150,601 $ 8,151,000
============ ============ ============ ============
Note Payable $ 0 $ 0 $ 4,235,000 $ 4,235,000
============ ============ ============ ============
</TABLE>
F-39
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
AND
AGREEMENT AND PLAN OF MERGER
<PAGE>
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as of
the 8th day of December, 1995, by and between AMERIGROUP, INCORPORATED ("AGI"),
a Delaware corporation, and NORWEST CORPORATION ("Norwest"), a Delaware
corporation.
WHEREAS, the parties hereto desire to effect a reorganization whereby a
wholly-owned subsidiary of Norwest will merge with and into AGI (the "Merger")
pursuant to an agreement and plan of merger (the "Merger Agreement") in
substantially the form attached hereto as Exhibit A, which provides, among other
things, for the conversion and exchange of the shares of common stock of AGI of
the par value of $.01 per share ("AGI Common Stock") outstanding immediately
prior to the time the Merger becomes effective in accordance with the provisions
of the Merger Agreement into shares of voting common stock of Norwest of the par
value of $1-2/3 per share ("Norwest Common Stock"),
WHEREAS, the parties hereto intend that such reorganization will constitute
a reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, to effect such reorganization and in consideration of the
premises and the mutual covenants and agreements contained herein, the parties
hereto do hereby represent, warrant, covenant and agree as follows:
1. BASIC PLAN OF REORGANIZATION
(a) Merger. Subject to the terms and conditions contained herein, a
wholly-owned subsidiary of Norwest incorporated in Delaware ("Merger Co.") will
be merged by statutory merger with and into AGI pursuant to the Merger
Agreement, with AGI as the surviving corporation, in which merger each share of
AGI Common Stock outstanding immediately prior to the Effective Time of the
Merger (as defined in paragraph 1(d)) (other than shares as to which statutory
dissenters' appraisal rights have been exercised) will be converted into and
exchanged for the number of shares of Norwest Common Stock determined by
dividing the Adjusted Norwest Shares (as defined below) by the aggregate number
of shares of AGI Common Stock then outstanding. The "Adjusted Norwest Shares"
shall be a number equal to (i) $32,250,000, minus the cost to AGI and the AGI
Subsidiaries (as defined in paragraph 2(b)) of the amount to be paid pursuant to
paragraph 4(r), minus the after-tax cost to
A-1
<PAGE>
AGI and the AGI Subsidiaries of one half of the lump sum cash payment to be made
pursuant to the contract between AGI and Larry Albert, dated December 8, 1995,
and minus the estimated after-tax cost to AGI and the AGI Subsidiaries of health
insurance (such estimate to be provided by Norwest and consented to by AGI (such
consent not to be unreasonably withheld)) to be provided pursuant to such
contract, divided by (ii) the Norwest Measurement Price; provided that if the
Effective Date of the Merger (as defined in paragraph 1(d) below) is after the
record date for any of Norwest's regular quarterly Norwest Common Stock
dividends for any fiscal quarter ending on or after January 1, 1996, then the
Adjusted Norwest Shares shall be increased by a number of shares of Norwest
Common Stock equal to the aggregate cash dividend that would have been paid on
1,000,000 shares of Norwest Common Stock for each such quarter divided by the
Norwest Measurement Price. 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 second trading day immediately preceding the meeting
of shareholders required by paragraph 4(c) of this Agreement.
(b) Norwest Common Stock Adjustments. If, between the date hereof and the
Effective Time of the Merger, shares of Norwest Common Stock shall be changed
into a different number of shares or a different class of shares by reason of
any reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or if a stock dividend thereon shall be declared with a
record date within such period (a "Common Stock Adjustment"), then the number of
shares of Norwest Common Stock into which a share of AGI 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 AGI Common Stock shall be converted will equal the
number of shares of Norwest Common Stock which holders of shares of AGI Common
Stock would have received pursuant to such Common Stock Adjustment had the
record date therefor been immediately following the Effective Time of the
Merger.
(c) Fractional Shares. No fractional shares of Norwest Common Stock and no
certificates or scrip certificates therefor shall be issued to represent any
such fractional interest, and any holder thereof shall be paid an amount of cash
equal to the product obtained by multiplying the fractional share interest to
which such holder is entitled by the average of the closing prices of a share of
Norwest Common Stock as reported by the consolidated tape of the New York Stock
Exchange for each of the five (5) trading days ending on the second trading day
immediately preceding the meeting of shareholders required by paragraph 4(c) of
this Agreement.
(d) Mechanics of Closing Merger. Subject to the terms and conditions set
forth herein, the Merger Agreement shall be executed and a Certificate of Merger
shall be filed with the Secretary of State of the State of Delaware within ten
(10) business days following the satisfaction or waiver of all conditions
precedent set forth in Sections 6 and 7 of this Agreement or on such other date
as may be agreed to by the parties (the
A-2
<PAGE>
"Closing Date"). Each of the parties agrees to use its best efforts to cause the
Merger to be completed as soon as practicable after the receipt of final
regulatory approval of the Merger and the expiration of all required waiting
periods. The time that the filing referred to in the first sentence of this
paragraph is made is herein referred to as the "Time of Filing". The day on
which such filing is made and accepted is herein referred to as the "Effective
Date of the Merger". The "Effective Time of the Merger" shall be 11:59 p.m.
Minneapolis, Minnesota time on the Effective Date of the Merger. At the
Effective Time of the Merger, the separate existence of Merger Co. shall cease
and Merger Co. will be merged with and into AGI pursuant to the Merger
Agreement.
The closing of the transactions contemplated by this Agreement and the
Merger Agreement (the "Closing") shall take place on the Closing Date at the
offices of Norwest, Norwest Center, Sixth and Marquette, Minneapolis, Minnesota.
2. REPRESENTATIONS AND WARRANTIES OF AGI. AGI represents and warrants to
Norwest as of the date of this Agreement (except as expressly provided
otherwise) as follows:
(a) Organization and Authority. AGI is a corporation duly incorporated,
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 AGI and the AGI Subsidiaries (as defined in paragraph
2(b)) 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.
AGI is registered as a bank holding company with the Federal Reserve Board under
the Bank Holding Company Act of 1956, as amended (the "BHC Act"). AGI has
furnished Norwest true and correct copies of its and the AGI Subsidiaries'
articles of incorporation and by-laws, as amended.
(b) AGI's Subsidiaries. Schedule 2(b) sets forth a complete and correct
list of all of AGI's subsidiaries as of the date hereof (individually a "AGI
Subsidiary" and collectively the "AGI 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 AGI. No equity security of any AGI
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 AGI 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
M.S.A. (S)49.02, all of such shares so owned by AGI 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 AGI Subsidiary is a
Minnesota corporation or Minnesota banking corporation duly incorporated,
validly existing, duly qualified to do
A-3
<PAGE>
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), AGI 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 AGI consists of
1,000,000 shares of Class A Voting Common Stock, $.01 par value, of which, as of
the close of business on October 31, 1995, 901,134 shares were outstanding and
no shares were held in the treasury and 200,000 shares of Class B Nonvoting
Common Stock, $.01 par value, of which, as of the close of business on October
31, 1995, 106,537 were outstanding and no shares were held in the treasury. The
maximum number of shares of AGI Common Stock (assuming for this purpose that
phantom shares, stock appreciation rights and other share-equivalents constitute
AGI Common Stock) that would be outstanding as of the Effective Date of the
Merger if all options, warrants, conversion rights and other rights with respect
thereto were exercised is 1,007,671. The authorized capital stock of AmeriBank
(the "Bank") consists of 21,281 shares of capital stock, $100 par value, of
which, as of the close of business on October 31,1995, 21,281 were outstanding
and no shares were held in the treasury. All of the outstanding shares of
capital stock of AGI have been duly and validly authorized and issued and are
fully paid and nonassessable. Except as set forth in Schedule 2(c), there are
no outstanding subscriptions, contracts, conversion privileges, options,
warrants, calls, preemptive rights or other rights obligating AGI or any AGI
Subsidiary to issue, sell or otherwise dispose of, or to purchase, redeem or
otherwise acquire, any shares of capital stock of AGI or any AGI Subsidiary.
Since December 31, 1994, no shares of AGI capital stock have been purchased,
redeemed or otherwise acquired, directly or indirectly, by AGI or any AGI
Subsidiary and, except for the $.50 per share dividend paid to shareholders of
AGI on February 28, 1995, no dividends or other distributions have been
declared, set aside, made or paid to the shareholders of AGI or the Bank.
(d) Authorization. AGI has the corporate power and authority to enter into
this Agreement and the Merger Agreement and, subject to any required approvals
of its shareholders, to carry out its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the Merger Agreement
by AGI and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by the Board of Directors of AGI. Subject to such
approvals of shareholders and of government agencies and other governing boards
having regulatory authority over AGI as may be required by statute or
regulation, this Agreement and the Merger Agreement are valid and binding
obligations of AGI enforceable against AGI in accordance with their respective
terms.
Except as set forth on Schedule 2(d), neither the execution, delivery and
performance by AGI of this Agreement or the Merger Agreement, nor the
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consummation of the transactions contemplated hereby and thereby, nor compliance
by AGI 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 AGI or any AGI Subsidiary under any of the terms,
conditions or provisions of (x) its articles of incorporation or by-laws or (y)
except to the extent such violation, conflict, breach, default, termination,
acceleration or lien could not reasonably be expected to have a material adverse
effect on the business, financial condition or results of operation of AGI and
the AGI Subsidiaries taken as a whole, any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
AGI or any AGI Subsidiary is a party or by which it may be bound, or to which
AGI or any AGI Subsidiary or any of the properties or assets of AGI or any AGI
Subsidiary may be subject, or (ii) subject to compliance with the statutes and
regulations referred to in the next paragraph, violate any statute, rule or
regulation or, to the best knowledge of AGI, violate any judgment, ruling,
order, writ, injunction or decree applicable to AGI or any AGI 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 Chapter 46 of Minnesota Statutes, the BHC Act or the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 ("HSR Act"), and filings required to
effect the Merger under Delaware law and pursuant to the provisions of 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 AGI of the transactions contemplated by this Agreement
and the Merger Agreement.
(e) AGI Financial Statements. The consolidated balance sheets of AGI and
AGI's Subsidiaries as of December 31, 1994 and 1993 and related consolidated
statements of income, stockholders' equity and cash flows for the two years
ended December 31, 1994, together with the notes thereto, and the opinion of
Larson, Allen, Weishair & Co., LLP relating thereto, and the unaudited
consolidated balance sheets of AGI and AGI's Subsidiaries as of September 30,
1995 and the related unaudited consolidated statements of income, stockholders'
equity and cash flows for the nine months then ended (collectively, the "AGI
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 and without notes thereto) the consolidated financial position of
AGI and AGI's Subsidiaries at the dates and the consolidated results of
operations and cash flows of AGI and AGI's Subsidiaries for the periods stated
therein.
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(f) Reports. Since December 31, 1989, AGI and each AGI 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 Federal Deposit Insurance Corporation (the
"FDIC"), (iv) the Office of the Comptroller of the Currency (the "Comptroller")
(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 "AGI Reports". As of their respective dates, the AGI
Reports complied in all material respects with all the rules and regulations
promulgated by the SEC, the Federal Reserve Board, the FDIC, the Comptroller and
applicable state securities or banking authorities, as the case may be, and did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Copies of all the AGI Reports have been made available to Norwest
by AGI.
(g) Properties and Leases. Except as may be reflected in the AGI Financial
Statements and except for any lien for current taxes not yet delinquent, AGI and
each AGI 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 AGI's consolidated balance sheet as of
December 31, 1994 included in AGI's Financial Statements for the period then
ended, and all real and personal property acquired since such date, except such
real and personal property as has been disposed of in the ordinary course of
business. All leases of real property and all other leases material to AGI or
any AGI Subsidiary pursuant to which AGI or such AGI 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 AGI or such AGI Subsidiary or any event which, with notice
or lapse of time or both, would constitute such a material default.
Substantially all AGI's and each AGI 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 AGI and the AGI Subsidiaries has filed all federal,
state, county, local and foreign tax returns, including information returns,
required to be filed by it, and paid all taxes owed by it, including those with
respect to income, withholding, social security, unemployment, workers
compensation, franchise, ad valorem, premium, excise and sales taxes, and no
taxes shown on such returns to be owed by it or assessments received by it are
delinquent. The federal income tax returns of AGI and the AGI 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 as set forth on Schedule 2(h), (i)
neither AGI nor any AGI Subsidiary is a party to any pending action or
proceeding,
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nor, to the best knowledge of AGI, is any such action or proceeding
threatened by any governmental authority, for the assessment or collection of
taxes or related interest, penalties, assessments or deficiencies and (ii) to
the best knowledge of AGI, 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 AGI or any AGI Subsidiary which has not
been settled, resolved and fully satisfied. Each of AGI and the AGI
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 December 31, 1994, referred to in paragraph 2(e) hereof,
includes adequate provision for all accrued but unpaid federal, state, county,
local and foreign taxes or related interest, penalties, assessments or
deficiencies of AGI and the AGI 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 AGI or
any AGI 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 AGI and the AGI Subsidiaries taken as a whole (other than changes
in banking laws or regulations, changes in generally accepted accounting
principles or interpretations thereof that affect the banking industry
generally, or changes in general economic conditions that uniformly affect the
banking industry on a nationwide basis, including changes in the general level
of interest rates).
(j) Commitments and Contracts. Except as set forth on Schedule 2(j),
neither AGI nor any AGI Subsidiary is a party or subject to any of the following
(whether written or oral, express or implied):
(i) any contract or understanding relating to the employment of
(including any understandings or obligations with respect to severance or
termination pay, liabilities or fringe benefits) any present or former
officer, director, employee or consultant (other than those that are
terminable at will by AGI or such AGI Subsidiary);
(ii) any plan, contract or understanding providing for any bonus,
pension, option, deferred compensation, retirement payment, profit sharing
or similar arrangement with respect to any present or former officer,
director, employee or consultant;
(iii) any labor contract or agreement with any labor union;
(iv) any contract containing covenants that limit the ability of AGI
or any AGI Subsidiary to compete in any line of business or with any person
or that involve any restriction of the geographical area in which, or
method by which, AGI or any AGI Subsidiary may carry on its business (other
than as may be required by law or applicable regulatory authorities);
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(v) any other contract or agreement not made in the ordinary course
of business; or
(vi) any lease with annual rental payments aggregating $10,000 or
more; or
(vii) any agreement or commitment with respect to the Community
Reinvestment Act with any state or federal bank regulatory authority or any
other party; or
(viii) any current or past agreement, contract or understanding with
any current or former director, officer, employee, consultant, financial
adviser, broker, dealer, or agent providing for any rights of
indemnification in favor of such person or entity.
(k) Litigation and Other Proceedings. AGI has furnished Norwest copies of
(i) all attorney responses to the request of the independent auditors for AGI
with respect to loss contingencies as of December 31, 1994 in connection with
the AGI Financial Statements, and (ii) a written list of legal and regulatory
proceedings filed against AGI or any AGI Subsidiary since said date. There is
no pending or, to the best knowledge of AGI, threatened, claim, action, suit,
investigation or proceeding against AGI or any AGI Subsidiary, nor is AGI or any
AGI Subsidiary subject to any order, judgment or decree, except for matters
which, in the aggregate, will not have, or cannot reasonably be expected to
have, a material adverse effect on the business, financial condition or results
of operations of AGI and the AGI Subsidiaries taken as a whole.
(l) Insurance. Each of AGI and the AGI Subsidiaries is presently insured,
and during each of the past five calendar years (or during such lesser period of
time as AGI has owned such AGI 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. Each of AGI and the AGI Subsidiaries has all
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties and assets and to carry on its business as presently
conducted and that are material to the business of AGI and the AGI Subsidiaries
taken as a whole; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect and, to the best knowledge of AGI, no
suspension or cancellation of any of them is threatened; and all such filings,
applications and registrations are current. The conduct by AGI and each AGI
Subsidiary of its business and the condition and use of its
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properties does not violate or infringe any applicable domestic (federal, state
or local) or foreign law, statute, ordinance, license or regulation, except
where such violation or infringement could not reasonably be expected to have a
material adverse effect on the business, financial condition or results of
operations of AGI and the AGI Subsidiaries taken as a whole; provided, however,
that the representations and warranties included in this sentence shall be
limited to matters not relating to environmental laws and regulations, as to
which AGI makes only the representations and warranties set forth in paragraph
2(v). Neither AGI nor any AGI 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 AGI or any AGI Subsidiary which reasonably could be expected to have a
material adverse effect on the business or properties of AGI and the AGI
Subsidiaries taken as a whole.
(n) Labor. No work stoppage involving AGI or any AGI Subsidiary is pending
or, to the best knowledge of AGI, threatened. Neither AGI nor any AGI Subsidiary
is involved in, or threatened with or affected by, any labor dispute,
arbitration, lawsuit or administrative proceeding that could reasonably be
expected to have a material adverse affect on the business of AGI and the AGI
Subsidiaries taken as a whole. Employees of AGI and the AGI Subsidiaries are not
represented by any labor union nor are any collective bargaining agreements
otherwise in effect with respect to such employees.
(o) Material Interests of Certain Persons. Except as set forth on Schedule
2(o), to the best knowledge of AGI, no officer or director of AGI or any AGI
Subsidiary, or any "associate" (as defined below) 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 AGI
or any AGI Subsidiary. "Associate" shall mean (1) any corporation or
organization (other than AGI or an AGI Subsidiary) of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10
percent or more of any class of equity securities, (2) any trust or other estate
in which such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity, and (3) any
relative or spouse of such person, or any relative of such spouse, who has the
same home as such person or who is a director or officer of the registrant or
any of its parents or subsidiaries.
Schedule 2(o) sets forth a correct and complete list of any loan from AGI
or any AGI Subsidiary to any present officer, director, employee or any
associate or related interest of any such person and any loan to such person
which was required under Regulation O of the Federal Reserve Board to be
approved by or reported to an AGI Subsidiary's Board of Directors.
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(p) AGI 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 AGI or any AGI 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 AGI or any AGI
Subsidiary are those set forth on Schedule 2(p)(i) (the "Plans"). No Plan
is a "multi-employer plan" within the meaning of Section 3(37) of ERISA.
Any plans subject to ERISA in which employees of AGI or the AGI
Subsidiaries participate have not resulted in and will not result in any
financial liability for AGI that will survive the termination of
participation in such plans by AGI Employees.
(ii) Each Plan is and has been in all material respects operated and
administered in accordance with its provisions and applicable law. Except
as set forth on Schedule 2(p)(ii), AGI or the AGI 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 Code apply. AGI does not know of any reason that
any Plan that 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 that 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) To the best knowledge of AGI, 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, that could subject, to the best
knowledge of AGI, 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 that would result in material liability to AGI and the AGI 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
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than those events that may result from the transactions
contemplated by this Agreement and the Merger Agreement.
(vi) No Plan or any trust created thereunder has incurred any
"accumulated funding deficiency", as such term is defined in Section 412 of
the Code (whether or not waived), since the effective date of ERISA.
(vii) Except as disclosed in Schedule 2(p)(vii), neither the
execution and delivery of this Agreement and the Merger Agreement nor the
consummation of the transactions contemplated hereby and thereby will (i)
result in any material payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to
any director or employee or former employee of AGI or any AGI 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 AGI and the
AGI Subsidiaries supplied or to be supplied by AGI for inclusion in (i) a
Registration Statement on Form S-4 and the prospectus included therein to be
filed with the SEC by Norwest for the purpose of registering the shares of
Norwest Common Stock to be exchanged for shares of AGI Common Stock pursuant to
the provisions of the Merger Agreement (the "Registration Statement"), (ii) the
proxy statement included in the Registration Statement to be mailed to AGI's
shareholders in connection with the meetings to be called to consider the Merger
(the "Proxy Statement") and (iii) any other documents to be filed with the SEC
or any regulatory authority in connection with the transactions contemplated
hereby or by the Merger Agreement will, at the respective times such
Registration Statement, Proxy Statement and other documents are filed with the
SEC or any regulatory authority and, in the case of the Registration Statement,
when it becomes effective and, with respect to the Proxy Statement, when mailed,
and, in the case of the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the meeting of shareholders referred to in paragraph
4(c), and at the Effective Time of the Merger contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. All documents which
AGI and the AGI Subsidiaries are responsible for filing with the SEC and any
other regulatory authority in connection with the Merger will comply as to form
in all material respects with the provisions of applicable law.
(r) Registration Obligations. Except as set forth on Schedule 2(r), neither
AGI nor any AGI Subsidiary is under any obligation, contingent or otherwise, to
register any of its securities under the Securities Act.
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(s) Brokers and Finders. Except as set forth on Schedule 2(s), neither AGI
nor any AGI 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 AGI or any AGI Subsidiary,
in connection with this Agreement and the Merger Agreement or the transactions
contemplated hereby and thereby.
(t) Fiduciary Activities. AGI and each AGI Subsidiary has properly
administered in all respects material, and which could reasonably be expected to
be material, to the financial condition of AGI and the AGI Subsidiaries taken as
a whole all accounts for which it acts as a fiduciary, including but not limited
to accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents and applicable state and federal law and
regulation and common law. Neither AGI, any AGI Subsidiary, nor any director,
officer or employee of AGI or any AGI Subsidiary has committed any breach of
trust with respect to any such fiduciary account which is material to, or could
reasonably be expected to be material to, the financial condition of AGI and the
AGI Subsidiaries taken as a whole, and the accountings for each such fiduciary
account are true and correct in all material respects and accurately reflect the
assets of such fiduciary account.
(u) No Defaults. Neither AGI nor any AGI Subsidiary is in default, nor has
any event occurred that, 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 AGI and the AGI Subsidiaries, taken as a whole. To the best knowledge of
AGI, all parties with whom AGI or any AGI Subsidiary has material leases,
agreements or contracts or who owe to AGI or any AGI Subsidiary material
obligations, other than those arising in the ordinary course of the banking
business of the AGI 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 AGI or any AGI Subsidiary, any liability
relating to the release of hazardous substances as defined under any local,
state or federal environmental statute, regulation or ordinance including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, pending or to the best knowledge of AGI,
threatened against AGI or any AGI Subsidiary the result of which has had or
could reasonably be expected to have a material adverse effect upon AGI and
AGI's Subsidiaries taken as a whole; to the best knowledge of AGI, there is no
reasonable basis for any such proceeding, claim or action; and to the best
knowledge of AGI, neither AGI nor any AGI 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. AGI
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has provided Norwest with copies of all environmental assessments, reports,
studies and other related information in its possession with respect to each
owned bank facility and each non-residential OREO property.
3. REPRESENTATIONS AND WARRANTIES OF NORWEST. Norwest represents and
warrants to AGI as of the date of this Agreement (except as expressly provided
otherwise) as follows:
(a) Organization and Authority. Norwest is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware,
is duly qualified to do business and is in good standing in all jurisdictions
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and failure to be so qualified would have a
material adverse effect on Norwest and its subsidiaries taken as a whole and has
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted. Norwest is registered as a bank
holding company with the Federal Reserve Board under the BHC Act.
(b) Norwest Subsidiaries. Schedule 3(b) sets forth a complete and correct
list as of September 30, 1995, of Norwest's Significant Subsidiaries (as defined
in Regulation S-X promulgated by the SEC) (individually a "Norwest Subsidiary"
and collectively the "Norwest Subsidiaries"), all shares of the outstanding
capital stock of each of which, except as set forth in Schedule 3(b), are owned
directly or indirectly by Norwest. No equity security of any Norwest Subsidiary
is or may be required to be issued to any person or entity other than Norwest by
reason of any option, warrant, scrip, preemptive right, right to subscribe to,
call or commitment of any character whatsoever relating to, or security or right
convertible into, shares of any capital stock of such subsidiary, and there are
no contracts, commitments, understandings or arrangements by which any Norwest
Subsidiary is bound to issue additional shares of its capital stock, or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock. Subject to 12 U.S.C. (S) 55 (1982), all of such shares so owned by
Norwest are fully paid and nonassessable and are owned by it free and clear of
any lien, claim, charge, option, encumbrance or agreement with respect thereto.
Each Norwest Subsidiary is a corporation or national banking association duly
organized, validly existing, duly qualified to do business and in good standing
under the laws of its jurisdiction of incorporation, and has corporate power and
authority to own or lease its properties and assets and to carry on its business
as it is now being conducted.
(c) Norwest Capitalization. The authorized capital stock of Norwest
consists of (i) 5,000,000 shares of Preferred Stock, without par value, of which
as of the close of business on 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 at $200 stated value, 13,311 shares of ESOP Cumulative
Convertible Preferred
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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.
(d) Authorization. Norwest has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance of this Agreement by Norwest and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of Norwest. No approval or consent by the stockholders of Norwest is
necessary for the execution and delivery of this Agreement and the Merger
Agreement and the consummation of the transactions contemplated hereby and
thereby. Subject to such approvals of government agencies and other governing
boards having regulatory authority over Norwest as may be required by statute or
regulation, this Agreement is a valid and binding obligation of Norwest
enforceable against Norwest in accordance with its terms.
Neither the execution, delivery and performance by Norwest of this
Agreement or the Merger Agreement, nor the consummation of the transactions
contemplated hereby and thereby, nor compliance by Norwest with any of the
provisions hereof or thereof, will (i) violate, conflict with, or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration of, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Norwest or any Norwest Subsidiary under any of the terms, conditions or
provisions of (x) its certificate of incorporation or by-laws or (y) except to
the extent such violation, conflict, breach, default, termination, acceleration
or lien could not reasonably be expected to have a material adverse effect on
the business, financial condition or results of operation of AGI and the AGI
Subsidiaries taken as a whole, any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which
Norwest or any Norwest Subsidiary is a party or by which it may be bound, or to
which Norwest or any Norwest Subsidiary or any of the properties or assets of
Norwest or any Norwest Subsidiary may be subject, or (ii) subject to compliance
with the statutes and regulations referred to in the next paragraph, violate any
statute, rule or regulation or, to the best knowledge of Norwest, violate any
judgment, ruling, order, writ, injunction or decree applicable to Norwest or any
Norwest Subsidiary or any of their respective properties or assets.
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 Chapter 46 of Minnesota Statutes, the BHC Act or the HSR Act, and
filings required to effect the Merger under Delaware law and pursuant to the
provisions of the National
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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 Merger 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, and the
opinion of KMPG Peat Marwick LLP relating thereto and included in Norwest's
Annual Report on Form 10-K for the fiscal year ended 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 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 that has been disposed of in the ordinary course of business. All
leases of real property and all other leases material to Norwest or any Norwest
Subsidiary pursuant to
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which Norwest or such Norwest Subsidiary, as lessee, leases real or personal
property, are valid and effective in accordance with their respective terms, and
there is not, under any such lease, any material existing default by Norwest or
such Norwest Subsidiary or any event which, with notice or lapse of time or
both, would constitute such a material default. Substantially all Norwest's and
each Norwest Subsidiary's buildings and equipment in regular use have been well
maintained and are in good and serviceable condition, reasonable wear and tear
excepted.
(h) Taxes. Each of Norwest and the Norwest Subsidiaries has filed all
material federal, state, county, local and foreign tax returns, including
information returns, required to be filed by it, and paid or made adequate
provision for the payment of all taxes owed by it, including those with respect
to income, withholding, social security, unemployment, workers compensation,
franchise, ad valorem, premium, excise and sales taxes, and no taxes shown on
such returns to be owed by it or assessments received by it are delinquent. The
federal income tax returns of Norwest and the Norwest Subsidiaries for the
fiscal year ended December 31, 1979, and for all fiscal years prior thereto, are
for the purposes of routine audit by the Internal Revenue Service closed because
of the statute of limitations, and no claims for additional taxes for such
fiscal years are pending. Except only as set forth on Schedule 3(h), (i)
neither Norwest nor any Norwest Subsidiary is a party to any pending action or
proceeding, nor to Norwest's knowledge is any such action or proceeding
threatened by any governmental authority, for the assessment or collection of
taxes, interest, penalties, assessments or deficiencies that 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 that
has not been settled, resolved and fully satisfied, or adequately reserved for.
Each of Norwest and the Norwest Subsidiaries has paid all taxes owed or which it
is required to withhold from amounts owing to employees, creditors or other
third parties.
(i) Absence of Certain Changes. Since September 30, 1995, there has been no
change in the business, financial condition or results of operations of Norwest
or any Norwest Subsidiary which has had, or may reasonably be expected to have,
a material adverse effect on the business, financial condition or results of
operations of Norwest and its subsidiaries taken as a whole (other than changes
in banking laws or regulations, changes in generally accepted accounting
principles or interpretations thereof that affect the banking industry
generally, or changes in general economic conditions that uniformly affect the
banking industry on a nationwide basis, including changes in the general level
of interest rates).
(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):
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(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
that 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. There is no pending or, to the best
knowledge of Norwest, threatened, claim, action, suit, investigation or
proceeding against Norwest or any Norwest Subsidiary, nor is Norwest or any
Norwest Subsidiary subject to any order, judgment or decree, except for matters
which, in the aggregate, will not have, or cannot reasonably be expected 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. Each of Norwest and the Norwest Subsidiaries is presently
insured or self insured, and during each of the past five calendar years (or
during such lesser period of time as Norwest has owned such Norwest Subsidiary)
has been insured or self-insured, for reasonable amounts with financially sound
and reputable insurance companies against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured and has maintained all insurance required by applicable law and
regulation.
(m) Compliance with Laws. Each of Norwest and the Norwest Subsidiaries 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 and the Norwest
Subsidiaries taken as a whole; 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 any applicable
domestic (federal, state or local) or foreign law, statute, ordinance, license
or regulation, except where such violation or infringement could not reasonably
be expected to have a material adverse effect on the business, financial
condition or results of operations of Norwest and the Norwest Subsidiaries taken
as a whole; provided, however, that the representations and warranties included
in this sentence shall be limited to matters not relating to environmental laws
and regulations, as to which Norwest makes only the
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representations and warranties set forth in paragraph 3(s). 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 that could
reasonably be expected to have a material adverse effect on the business of
Norwest and the Norwest Subsidiaries taken as a whole. 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 acts as plan sponsor as defined in ERISA Section
3(16)(B) with respect to which any liability under ERISA or otherwise
exists or may be incurred by Norwest or any Norwest Subsidiary are those
set forth on Schedule 3(o)(i) (the "Norwest Plans"). No Norwest Plan is a
"multi-employer plan" within the meaning of Section 3(37) of ERISA.
(ii) Each Norwest Plan is and has been in all material respects
operated and administered in accordance with its provisions and applicable
law. Except as set forth on Schedule 3(o)(ii), Norwest or the Norwest
Subsidiaries have received favorable determination letters from the
Internal Revenue Service under the provisions of TEFRA, 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 that is subject to Title IV of ERISA did
not, in each case, as determined for purposes of reporting on Schedule B to
the Annual Report on Form 5500 of each such Norwest Plan as of the end of
the most recent Norwest Plan year, exceed the value of the assets of the
Norwest Plans allocable to such vested or accrued benefits.
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(iv) Except as set forth on Schedule 3(o)(iv), and to the best
knowledge of Norwest, no Norwest Plan or any trust created thereunder, nor
any trustee, fiduciary or administrator thereof, has engaged in a
"prohibited transaction", as such term is defined in Section 4975 of the
Code or Section 406 of ERISA or violated fiduciary standards under Part 4
of Title I of ERISA, which could subject, to the best knowledge of Norwest,
such Norwest Plan or trust, or any trustee, fiduciary or administrator
thereof, or any party dealing with any such Norwest Plan or trust, to the
tax or penalty on prohibited transactions imposed by said Section 4975 or
would result in material liability to Norwest and its subsidiaries taken as
a whole.
(v) Except as set forth on Schedule 3(o)(v), no Norwest Plan which is
subject to Title IV of ERISA or any trust created thereunder has been
terminated, nor have there been any "reportable events" as that term is
defined in Section 4043 of ERISA with respect to any Norwest Plan, other
than those events which may result from the transactions contemplated by
this Agreement and the Merger Agreement.
(vi) No Norwest Plan or any trust created thereunder has incurred any
"accumulated funding deficiency", as such term is defined in Section 412 of
the Code (whether or not waived), during the last five Norwest Plan years
that would result in a material liability.
(vii) Neither the execution and delivery of this Agreement and the
Merger Agreement nor the consummation of the transactions contemplated
hereby and thereby will (i) result in any material payment (including,
without limitation, severance, unemployment compensation, golden parachute
or otherwise) becoming due to any director or employee or former employee
of Norwest under any Norwest Plan or otherwise, (ii) materially increase
any benefits otherwise payable under any Norwest Plan or (iii) result in
the acceleration of the time of payment or vesting of any such benefits to
any material extent.
(p) Registration Statement, etc. None of the information regarding Norwest
and its subsidiaries supplied or to be supplied by Norwest for inclusion in (i)
the Registration Statement, (ii) the Proxy Statement, or (iii) any other
documents to be filed with the SEC or any regulatory authority in connection
with the transactions contemplated hereby or by the Merger Agreement will, at
the respective times such Registration Statement, Proxy Statement and other
documents are filed with the SEC or any regulatory authority and, in the case of
the Registration Statement, when it becomes effective and, with respect to the
Proxy Statement, when mailed, and in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the meeting of
shareholders referred to in paragraph 4(c), and at the Effective Time of the
Merger contain any untrue statement of a material fact or omit to state a
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material fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading. All documents which Norwest and the Norwest Subsidiaries are
responsible for filing with the SEC and any other regulatory authority in
connection with the Merger will comply as to form in all material respects with
the provisions of applicable law.
(q) Brokers and Finders. Neither Norwest nor any Norwest Subsidiary nor any
of their respective officers, directors or employees has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted directly
or indirectly for Norwest or any Norwest Subsidiary in connection with this
Agreement and the Merger Agreement or the transactions contemplated hereby and
thereby.
(r) No Defaults. Neither Norwest nor any Norwest Subsidiary is in default,
nor has any event occurred that, with the passage of time or the giving of
notice or both, would constitute a default under any material agreement,
indenture, loan agreement or other instrument to which it is a party or by which
it or any of its assets is bound or to which any of its assets is subject, the
result of which has had or could reasonably be expected to have a material
adverse effect upon Norwest and its subsidiaries taken as a whole. To the best
of Norwest's knowledge, all parties with whom Norwest or any Norwest Subsidiary
has material leases, agreements or contracts or who owe to Norwest or any
Norwest Subsidiary material obligations, other than those arising in the
ordinary course of the banking business of the Norwest Subsidiaries, are in
compliance therewith in all material respects.
(s) Environmental Liability. There is no legal, administrative, or other
proceeding, claim, or action of any nature seeking to impose, or that could
result in the imposition, on Norwest or any Norwest Subsidiary of any liability
relating to the release of hazardous substances as defined under any local,
state or federal environmental statute, regulation or ordinance including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, pending or to the best of Norwest's
knowledge, threatened against Norwest or any Norwest Subsidiary, the result of
which has had or could reasonably be expected to have a material adverse effect
upon Norwest and its subsidiaries taken as a whole; to the best of Norwest's
knowledge, there is no reasonable basis for any such proceeding, claim or
action; and to the best of Norwest's knowledge, neither Norwest nor any Norwest
Subsidiary is subject to any agreement, order, judgment, or decree by or with
any court, governmental authority or third party imposing any such environmental
liability.
(t) Merger Co. As of the Closing Date, Merger Co. will be a corporation
duly incorporated, validly existing, duly qualified to do business and in good
standing under the laws of its jurisdiction of incorporation, and will have
corporate power and authority to own or lease its properties and assets and to
carry on its business.
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4. COVENANTS OF AGI. AGI covenants and agrees with Norwest as follows:
(a) Maintain Corporate Existence; Conduct Business in Ordinary Course;
Limitations on Loans; Compliance With Laws; Examination of Books and Records
Etc. Except as otherwise permitted or required by this Agreement, from the date
hereof until the Effective Time of the Merger, AGI and each AGI 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 prior written notice to Norwest not less than two days
prior to the date that AGI or the Bank proposes to take the following actions
and provided that Norwest does not object to such action within such two day
period, make any new loan or modify, restructure or renew any existing loan
(except pursuant to commitments made prior to the date of this Agreement) to any
borrower if the amount of the resulting loan, when aggregated with all other
loans or extensions of credit to such person, would be in excess of $100,000;
maintain proper business and accounting records in accordance with reasonable
business practices; maintain its properties in good repair and condition,
ordinary wear and tear excepted; maintain in all material respects presently
existing insurance coverage; use its best efforts to preserve its business
organization intact, to keep the services of its present principal employees and
to preserve its good will and the good will of its suppliers, customers and
others having business relationships with it; use its best efforts to obtain any
approvals or consents required to maintain existing leases and other contracts
in effect following the Merger; comply in all material respects with all laws,
regulations, ordinances, codes, orders, licenses and permits applicable to the
properties and operations of AGI and each AGI Subsidiary the non-compliance with
which reasonably could be expected to have a material adverse effect on AGI and
the AGI Subsidiaries taken as a whole; and permit Norwest and its
representatives (including KMPG Peat Marwick LLP) to examine its and its
subsidiaries books, records and properties and to interview officers, employees
and agents at all reasonable times when it is open for business. No such
examination by Norwest or its representatives either before or after the date of
this Agreement shall in any way affect, diminish or terminate any of the
representations, warranties or covenants of AGI herein expressed.
(b) No Amendment of Articles or Bylaws; No Stock or Debt Issuance;
Limitations on Liens, Contracts, Investments, Plan Amendments and Investments,
Dividends, Redemptions and Compensation; No Sale of Stock; Limitation on Sales
of Assets. Except as otherwise contemplated or required by this Agreement, from
the date hereof until the Effective Time of the Merger, AGI and each AGI
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
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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 the Bank in the ordinary course of business for terms
of up to one year and in amounts of $100,000 or less; amend or terminate any
Plan except as required by law or by paragraph 4(j) hereof; 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; redeem, purchase or otherwise
acquire, directly or indirectly, any of the capital stock of AGI or any AGI
Subsidiary; increase the compensation of any officers, directors or executive
employees, except pursuant to existing compensation plans and practices; sell or
otherwise dispose of any shares of the capital stock of any AGI Subsidiary; or
sell or otherwise dispose of any of its assets or properties other than in the
ordinary course of business.
(c) Shareholder Meeting. The Board of Directors of AGI will duly call, and
will cause to be held not later than twenty-five (25) business days following
the effective date of the Registration Statement, a meeting of its shareholders
and will direct that this Agreement and the Merger Agreement be submitted to a
vote at such meeting. The Board of Directors of AGI will (i) cause proper notice
of such meeting to be given to its shareholders in compliance with the Delaware
General Corporation Law and other applicable law and regulation, (ii) recommend
by the affirmative vote of the Board of Directors a vote in favor of approval of
this Agreement and the Merger Agreement, and (iii) use its best efforts to
solicit from its shareholders proxies in favor thereof.
(d) Registration Statement Information. AGI will furnish or cause to be
furnished to Norwest all the information concerning AGI and the AGI Subsidiaries
required for inclusion in the Registration Statement, or any statement or
application made by Norwest to any governmental body in connection with the
transactions contemplated by this Agreement. Any financial statement for any
fiscal year provided under this paragraph must include the audit opinion and the
consent of Larson, Allen, Weishair & Co., LLP to use such opinion in such
Registration Statement.
(e) Approvals and Consents. AGI will take, and will cause the Bank to 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
AGI and the Bank 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) Closing Certificates. AGI will use its best efforts to deliver to the
Closing all opinions, certificates and other documents required to be delivered
by it at the Closing.
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(g) Confidentiality. AGI and the AGI Subsidiaries each will hold in
confidence all documents and information written or oral concerning Norwest and
its subsidiaries furnished to AGI, the AGI Subsidiaries and their
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 AGI's and the AGI Subsidiaries' 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 AGI or
the AGI Subsidiaries, in the public domain, or later acquired by AGI or the AGI
Subsidiaries from other legitimate sources) and, upon request, all such
documents, any copies thereof and extracts therefrom shall immediately
thereafter be returned to Norwest or destroyed.
(h) Non-Solicitation. Neither AGI, nor any AGI Subsidiary, nor any
director, officer, representative or agent thereof, will, directly or
indirectly, solicit, authorize the solicitation of or enter into any discussions
with any corporation, partnership, person or other entity or group (other than
Norwest) concerning any offer or possible offer (i) to purchase any shares of
common stock, any option or warrant to purchase any shares of common stock, any
securities convertible into any shares of such common stock, or any other equity
security of AGI or any AGI 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 AGI or any AGI Subsidiary except in the
ordinary course of business, or (iv) to merge, consolidate or otherwise combine
with AGI or any AGI Subsidiary. If any corporation, partnership, person or other
entity or group makes an offer or inquiry to AGI or any AGI Subsidiary
concerning any of the foregoing, AGI or such AGI Subsidiary will promptly
disclose such offer or inquiry, including the terms thereof, to Norwest.
(i) Press Releases. AGI 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) Benefit Plans. AGI and each AGI Subsidiary will take all action
necessary or required to terminate or amend, if requested by Norwest, all
qualified retirement and welfare benefit plans and all non-qualified benefit
plans and compensation arrangements as of the Effective Date of the Merger.
(k) Pooling of Interests. Except for any action taken pursuant to a
specific requirement of this Agreement or at the request of Norwest, neither AGI
nor any AGI Subsidiary shall take any action which with respect to AGI would
disqualify the Merger as a "pooling of interests" for accounting purposes.
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(l) Affiliate Letters. AGI shall use its best efforts to obtain and deliver
at least 32 days prior to the Effective Date of the Merger signed
representations substantially in the form attached hereto as Exhibit B to
Norwest by each executive officer, director or shareholder of AGI who may
reasonably be deemed an "affiliate" of AGI within the meaning of such term as
used in Rule 145 under the Securities Act.
(m) Accruals and Reserves. AGI shall establish or shall cause the AGI
Subsidiaries to establish such additional accruals and reserves as may be
necessary to (i) conform AGI's and the AGI Subsidiaries accounting and credit
loss reserve practices and methods to those of Norwest and Norwest's plans with
respect to the conduct of the business of AGI and the AGI Subsidiaries following
the Merger and (ii) to provide for the costs and expenses relating to the
consummation by AGI of the Merger and the other transactions contemplated by
this Agreement.
(n) Environmental Assessments. AGI has delivered to Norwest Phase I
environmental assessments for each owned bank facility and each non-residential
OREO property. AGI 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. AGI shall obtain a survey and
assessment of all potential asbestos containing material in owned or leased real
properties (other than OREO property) and a written report of the results shall
be delivered to Norwest within six weeks of execution of this Agreement. AGI
shall provide to Norwest, for its prior review and approval, any proposed final
consent order with the Wisconsin Department of Natural Resources for the sites
identified on Schedule 4(n). Without the prior review and approval of Norwest,
not to be unreasonably withheld or delayed, AGI shall not enter into, amend, or
terminate (i) any other written agreements with third parties that materially
increase AGI's or Norwest's liability with respect to the sites identified on
Schedule 4(n), (ii) the Escrow Agreement between Valley Bancorporation, AGI and
Firstar Trust Company, dated November 5, 1995, (iii) the agreement dated
December ___, 1994 between AGI and Dale Raasch or (iv) the proposed agreement
between AGI and the Wisconsin Department of Natural Resources. AGI will not
materially deviate from the existing remedial action workplans, which have been
approved by the Wisconsin DNR for the sites identified on Schedule 4(n), without
the prior review and approval of Norwest, not to be unreasonably withheld or
delayed.
(o) Title Commitments and Boundary Surveys. AGI shall obtain, at its sole
expense, commitments for title insurance and boundary surveys for each owned
bank facility which shall be delivered to Norwest no later than six weeks from
the date of this Agreement.
(p) Compliance Audit. AGI shall cause Bank to use reasonable efforts to
implement in all material respects the recommendations made in the compliance
audit dated October 16, 1995 by North Central Banking Services, Inc.
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(q) Right of First Refusal. AGI shall take all corporate action necessary
to submit to shareholders and recommend the approval of an amendment to Article
X of its Articles of Incorporation to exclude the Merger from the definition of
a "Purchase Event" thereunder. Such amendment shall be filed with the Secretary
of State of the State of Delaware promptly following such shareholder approval.
(r) Bank Stock Repurchase. AGI shall cause the Bank to purchase, between
the date hereof and February 1, 1996, all of the common stock of the Bank that
is not owned by AGI for fair market value as determined by AGI and consented to
by Norwest (such consent not to be unreasonably withheld).
(s) Colbert Pension. AGI shall use its best efforts to obtain an annuity,
satisfactory to Norwest, to replace the AGI pension obligation to Patrick W.
Colbert identified on Schedule 2(j)(i) hereto.
5. COVENANTS OF NORWEST. Norwest covenants and agrees with AGI as
follows:
(a) Maintain Corporate Existence; Conduct Business in Compliance With Laws.
From the date hereof until the Effective Time of the Merger, Norwest will
maintain its corporate existence in good standing; conduct, and cause the
Norwest Subsidiaries to conduct, their respective businesses in compliance with
all material obligations and duties imposed on them by all laws, governmental
regulations, rules and ordinances, and judicial orders, judgments and decrees
applicable to Norwest or the Norwest Subsidiaries, their businesses or their
properties; maintain all books and records of it and the Norwest Subsidiaries,
including all financial statements, in accordance with the accounting principles
and practices consistent with those used for the Norwest Financial Statements,
except for changes in such principles and practices required under generally
accepted accounting principles.
(b) Proxy Statement Information. Norwest will furnish to AGI all the
information concerning Norwest required for inclusion in, and will cooperate in
the preparation of, the Proxy Statement to be sent to the shareholders of AGI,
or in any statement or application made by AGI to any governmental body in
connection with the transactions contemplated by this Agreement.
(c) Registration Statement. Unless otherwise agreed by the parties hereto,
as promptly as practicable after receipt of approval (but not including the
expiration of any waiting or appeal periods with respect thereto) from the
Federal Reserve Board of the transactions contemplated by this Agreement and the
Merger Agreement, Norwest will file with the SEC the Registration Statement and
any other applicable documents, relating to the shares of Norwest Common Stock
to be delivered to the shareholders of AGI pursuant to the Merger Agreement, and
will use its best efforts to cause the Registration Statement to become
effective. At the time the Registration Statement becomes effective, the
Registration Statement will comply in all material respects with
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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 AGI shareholders, at the time of the AGI shareholders' meeting referred
to in paragraph 4(c) hereof and at the Effective Time of the Merger the
prospectus included as part of the Registration Statement, as amended or
supplemented by any amendment or supplement filed by Norwest (hereinafter the
"Prospectus"), will not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not false or
misleading; provided, however, that none of the provisions of this subparagraph
shall apply to statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information furnished by
AGI or any AGI Subsidiary for use in the Registration Statement or the
Prospectus.
(d) Stock Exchange Listings. Norwest will file all documents required to be
filed to list the Norwest Common Stock to be issued pursuant to the Merger
Agreement on the New York Stock Exchange and the Chicago Stock Exchange and use
its best efforts to effect said listings.
(e) Due Authorization, etc. of Stock Issued in Merger. The shares of
Norwest Common Stock to be issued by Norwest to the shareholders of AGI pursuant
to this Agreement and the Merger Agreement will, upon such issuance and delivery
to said shareholders pursuant to the Merger Agreement, be duly authorized,
validly issued, fully paid and nonassessable. The shares of Norwest Common Stock
to be delivered to the shareholders of AGI pursuant to the Merger Agreement are
and will be free of any preemptive rights of the stockholders of Norwest.
(f) Blue Sky Approvals. Norwest will file all documents required to obtain,
prior to the Effective Time of the Merger, all necessary Blue Sky permits and
approvals, if any, required to carry out the transactions contemplated by this
Agreement, will pay all expenses incident thereto and will use its best efforts
to obtain such permits and approvals.
(g) Approvals and Consents. Norwest will take all necessary corporate and
other action and file all documents required to obtain and will use its best
efforts to obtain all approvals of regulatory authorities, consents and
approvals required of it to carry out the transactions contemplated by this
Agreement and will cooperate with AGI to obtain all such approvals and consents
required by AGI.
(h) Confidentiality. Norwest will hold in confidence all documents and
information written or oral concerning AGI and AGI'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
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transactions contemplated by this Agreement shall not be consummated, such
confidence shall be maintained and such information shall not be used in
competition with AGI or the Bank (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 AGI or destroyed.
(i) Merger Documents. Norwest will file any documents or agreements
required to be filed in connection with the Merger under the Delaware General
Corporation Law.
(j) Closing Certificates. 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) Press Releases. Norwest shall consult with AGI 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) Notice of Receipt of Regulatory Approvals. Norwest shall give AGI
notice of receipt of the regulatory approvals referred to in paragraph 7(e).
(m) Pooling of Interests. Neither Norwest nor any Norwest Subsidiary shall
take any action which with respect to Norwest would disqualify the Merger as a
"pooling of interests" for accounting purposes.
(n) Examination of Books and Records. For a period not exceeding fifteen
days prior to the Closing Date, Norwest will permit AGI and their
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 AGI or its representatives shall in
any way affect, diminish or terminate any of the representations, warranties or
covenants of Norwest herein expressed.
(o) D&O Insurance; Indemnification. For a period of three years after the
Effective Time of the Merger, Norwest shall use all reasonable efforts to cause
to be maintained in effect the existing policies of directors' and officers'
liability insurance maintained by AGI (provided that Norwest may substitute
therefor policies of at least the same coverage and amount containing terms and
conditions which are substantially no less advantageous) with respect to claims
arising from facts or events which occurred before the Effective Time of the
Merger; provided, however, that in no event shall Norwest be obligated to
expend, in order to maintain or provide insurance coverage pursuant to this
paragraph 5(p), any amount per annum in excess of 125% of the amount of the
annual premiums paid as of the date hereof by AGI for such insurance (the
"Maximum Amount"); and provided further that, prior to the Effective Time of the
Merger, AGI shall notify the appropriate existing directors' and officers'
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liability insurer of the Merger and of all pending or threatened claims,
actions, suits, proceedings or investigations asserted or claimed against any
indemnified party, or circumstances likely to give rise thereto, in accordance
with the terms and conditions of the provisions of the existing 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.
Norwest shall insure that all rights to indemnification and limitations of
liability existing pursuant to AGI's Certificate of Incorporation and Bylaws or
similar governing documents of any AGI Subsidiary, as in effect of the date
hereof, in favor of any person who is now, or has been at any time prior to the
date hereof, or who becomes prior to the Effective Time of the Merger, a
director, officer, employee, fiduciary or agent of AGI or any AGI Subsidiary
(the "Indemnified Parties") shall, with respect to claims arising from facts or
events that occurred before the Effective Time of the Merger, survive the Merger
and shall continue in full force and effect, without any amendment, for a period
of not less than three years from the Effective Time of the Merger, provided,
however, that all rights to indemnification in respect of any claim asserted or
made within such period shall continue until the final disposition of such
claim. Nothing contained in this paragraph 5(p) shall be deemed to preclude the
liquidation, consolidation, merger or amendment of the articles of
incorporation, bylaws or similar documents of AGI or any AGI Subsidiary , in
which case all of such rights to indemnification and limitations on liability
shall be deemed to survive and continue notwithstanding any such liquidation,
consolidation, merger or amendment; provided, however, that in the event of a
liquidation or sale of substantially all of the assets of AGI, Norwest shall
guarantee the indemnification obligations of AGI to the extent of the net asset
value of AGI as of the Effective Date of the Merger. Notwithstanding anything
to the contrary contained in this paragraph 5(p), nothing contained herein shall
require Norwest to indemnify any person who was a director, officer, employee,
fiduciary or agent of a corporation, banking institution or other entity
acquired by AGI or any AGI Subsidiary with respect to claims based on, or
arising out of, or pertaining to, a matter which occurred prior to the
consummation of any such acquisition to a greater extent than AGI or any AGI
Subsidiary is, as of the date of this Agreement, required to indemnify any such
person. This paragraph 5(p) is intended for the benefit of and shall be
enforceable by each Indemnified Party and each Indemnified Party's heirs and
representatives.
(p) Accruals or Reserves. Norwest agrees to assist AGI in the preparation
of the accruals and reserves described in paragraph 4(m).
6. CONDITIONS PRECEDENT TO OBLIGATION OF AGI. The obligation of AGI to
effect the Merger shall be subject to the satisfaction at or before the Time of
Filing of the following further conditions, which may be waived in writing by
AGI:
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(a) Representations and Warranties True and Correct. Except as they may be
affected by transactions contemplated hereby and except to the extent such
representations and warranties are by their express provisions made as of a
specified date and except for activities or transactions after the date of this
Agreement made in the ordinary course of business and not expressly prohibited
by this Agreement, the representations and warranties contained in paragraph 3
hereof shall be true and correct in all respects material to Norwest and its
subsidiaries taken as a whole as if made at the Time of Filing.
(b) Covenants Performed. Norwest shall have, or shall have caused to be,
performed and observed in all material respects all covenants, agreements and
conditions hereof to be performed or observed by it and Merger Co. at or before
the Time of Filing.
(c) Officers' Certificate. AGI shall have received a favorable certificate,
dated as of the Effective Date of the Merger, signed by the Chairman, the
President or any Executive Vice President or Senior Vice President and by the
Secretary or Assistant Secretary of Norwest, as to the matters set forth in
subparagraphs (a) and (b) of this paragraph 6.
(d) Shareholder Approvals. Promptly following the shareholder vote thereon,
the Certificate of Incorporation of AGI shall have been amended to exclude the
Merger from the definition of a "Purchase Event" in Article X thereof effective
immediately. This Agreement and the Merger Agreement shall have been approved by
the affirmative vote of the holders of the percentage of the outstanding shares
of AGI required for approval of a plan of merger in accordance with the
provisions of AGI's Articles of Incorporation, the Delaware General Corporation
Law and all other applicable law.
(e) Governmental Approvals. Norwest shall have received approval by the
Federal Reserve Board and such other governmental agencies as may be required by
law of the transactions contemplated by this Agreement and the Merger Agreement
and all waiting and appeal periods prescribed by applicable law or regulation
shall have expired.
(f) No Restraining Order, Etc. 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) Shares Authorized for Listing. The shares of Norwest Common Stock to be
delivered to the stockholders of AGI pursuant to this Agreement and the Merger
Agreement shall have been authorized for listing on the New York Stock Exchange
and the Chicago Stock Exchange.
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(h) Tax Opinion. AGI shall have received an opinion, dated the Closing
Date, of counsel to AGI, substantially to the effect that, for federal income
tax purposes: (i) the Merger will constitute a reorganization within the meaning
of Sections 368(a)(1)(A) and 368 (a)(2)(E) of the Code; (ii) no gain or loss
will be recognized by the holders of AGI 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 AGI will be
the same as the basis of AGI Common Stock exchanged therefor; and (iv) the
holding period of the shares of Norwest Common Stock received by the
shareholders of AGI will include the holding period of the AGI Common Stock
provided such shares of AGI Common Stock were held as a capital asset as of the
Effective Time of the Merger.
(i) Registration Statement Effective; No Stop Order, Etc.; Blue Sky
Authorizations Received. 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) No Material Adverse Change. 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 Norwest and the Norwest
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).
7. CONDITIONS PRECEDENT TO OBLIGATION OF NORWEST. The obligation of Norwest
to effect the Merger shall be subject to the satisfaction at or before the Time
of Filing of the following conditions, which may be waived in writing by
Norwest:
(a) Representations and Warranties True and Correct. Except as they may be
affected by transactions contemplated hereby and except to the extent such
representations and warranties are by their express provisions made as of a
specified date and except for activities or transactions or events occurring
after the date of this Agreement made in the ordinary course of business and not
expressly prohibited by this Agreement, the representations and warranties
contained in paragraph 2 hereof shall be true and correct in all respects
material to AGI and the AGI Subsidiaries taken as a whole as if made at the Time
of Filing.
(b) Covenants Performed. AGI each shall have, or shall have caused to be,
performed and observed in all material respects all covenants, agreements and
conditions hereof to be performed or observed by it at or before the Time of
Filing.
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(c) Shareholder Approvals. Promptly following the shareholder vote thereon,
the Certificate of Incorporation of AGI shall have been amended to exclude the
Merger from the definition of a "Purchase Event" in Article X thereof effective
immediately. This Agreement and the Merger Agreement shall have been approved by
the affirmative vote of the holders of the percentage of the outstanding shares
of AGI required for approval of a plan of merger in accordance with the
provisions of AGI's Articles of Incorporation and the Delaware Business
Corporation Act and all other applicable law.
(d) Officers' Certificate. Norwest shall have received a favorable
certificate dated as of the Closing Date signed by the Chairman or President and
by the Secretary or Assistant Secretary of AGI, as to the matters set forth in
subparagraphs (a) through (c) of this paragraph 7.
(e) Governmental Approvals. Norwest shall have received approval by all
governmental agencies as may be required by law of the transactions contemplated
by this Agreement and the Merger Agreement and all waiting and appeal periods
prescribed by applicable law or regulation shall have expired. No approvals,
licenses or consents granted by any regulatory authority shall contain any
condition or requirement relating to AGI or any AGI Subsidiary that, in the good
faith judgment of Norwest, is unreasonably burdensome to Norwest.
(f) Consents, Authorizations, etc. Obtained. AGI and each AGI Subsidiary
shall have obtained any and all material consents or waivers from other parties
to loan agreements, leases or other contracts material to AGI's or such AGI
Subsidiary's business required for the consummation of the Merger, and AGI and
each AGI Subsidiary shall have obtained any and all material permits,
authorizations, consents, waivers and approvals required for the lawful
consummation by it of the Merger.
(g) No Restraining Order, etc. 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) Pooling of Interests Opinions. The Merger shall qualify as a "pooling
of interests" for accounting purposes and Norwest shall have received from
Larson, Allen, Weishair & Co., LLP an opinion to that effect based upon certain
representations of the management of AGI, but only with respect to the actions
of AGI and the AGI Subsidiaries that may affect the ability of Norwest to
account for the Merger as a pooling of interests.
(i) Number of Outstanding Shares. At any time since the date hereof, the
total number of shares of AGI Common Stock outstanding and subject to issuance
upon exercise (assuming for this purpose that phantom shares, stock appreciation
rights and other share-equivalents constitute AGI Common Stock) of all warrants,
options,
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conversion rights, phantom shares or other share-equivalents shall not
have exceeded 1,007,671.
(j) Registration Statement Effective; No Stop Order, etc.; Blue Sky
Authorizations Received. 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) AGI Comfort Certificate. Norwest shall have received from the Chief
Executive Officer of AGI and the Controller of the Bank a letter, dated as of
the effective date of the Registration Statement and updated through the Closing
Date, in form and substance satisfactory to Norwest, to the effect that:
(i) the interim quarterly consolidated financial statements of AGI
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 consolidated financial
statements of AGI;
(ii) the amounts reported in the interim quarterly consolidated
financial statements of AGI agree with the general ledger of AGI;
(iii) the annual and quarterly consolidated financial statements of
AGI and the AGI Subsidiaries included in, or incorporated by reference in,
the Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the Securities Act and the
published rules and regulations thereunder;
(iv) from the date of the most recent unaudited consolidated
financial statements of AGI and the AGI Subsidiaries as may be included in
the Registration Statement to a date 5 days prior to the effective date of
the Registration Statement and to a date 5 days prior to the Closing, there
are no increases in long-term debt, changes in the capital stock or
decreases in stockholders' equity of AGI and the AGI 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 consolidated net income per share amounts of
AGI and the AGI 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
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changes, increases or decreases which the Registration Statement discloses have
occurred or may occur or which are described in such letters;
(v) they have reviewed certain amounts, percentages, numbers of shares
and financial information which are derived from the general accounting
records of AGI and the AGI Subsidiaries, which appear in the Registration
Statement under the certain captions to be specified by Norwest, and have
compared certain of such amounts, percentages, numbers and financial
information with the accounting records of AGI and the AGI Subsidiaries and
have found them to be in agreement with financial records and analyses
prepared by AGI included in the annual and quarterly financial statements,
except as disclosed in such letters.
(l) No Casualty Losses, etc. AGI and the AGI 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) No Environmental Liability. 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 AGI or any AGI 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 AGI and the AGI Subsidiaries taken as a whole.
(n) No Material Adverse Change. Since December 31, 1994, no change shall
have occurred and no circumstances shall exist which has had or might reasonably
be expected to have a material adverse effect on the financial condition,
results of operations, business or prospects of AGI and the AGI Subsidiaries
taken as a whole (other than changes in banking laws or regulations, or
interpretations thereof, that affect the banking industry generally or changes
in the general level of interest rates).
(o) Consent to Assignment of Lease. AGI shall have obtained the prior
written consent of FDH Partnership to the assignment (resulting from the Merger)
of its lease with AGI.
8. EMPLOYEE BENEFIT PLANS. Each person who is an employee of AGI or any
AGI Subsidiary as of the Effective Date of the Merger ("AGI Employees") shall be
eligible for participation in the employee welfare and retirement plans of
Norwest, as in effect from time to time, as follows:
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(a) Employee Welfare Benefit Plans. Each AGI Employee shall be eligible
for participation in the employee welfare benefit plans of Norwest listed below
subject to any eligibility requirements (with full credit for years of past
service to AGI or any AGI Subsidiary, or to any predecessor of AGI or any AGI
Subsidiary to the extent such service is presently given credit under the plans
of AGI or any AGI Subsidiary described in paragraph 2(p) hereof, for the purpose
of satisfying any eligibility and vesting periods) applicable to such plans (but
not subject to any pre-existing conditions exclusions, except in the case of the
Long Term Care Plan) and shall enter each plan not later than the first day of
the calendar quarter which begins at least 32 days after the Effective Date of
the Merger:
Medical Plan
Dental Plan
Vision Plan
Short Term Disability Plan
Long Term Disability Plan
Long Term Care Plan
Flexible Benefits Plan
Basic Group Life Insurance Plan
Group Universal Life Insurance Plan
Dependent Group Life Insurance Plan
Business Travel Accident Insurance Plan
Accidental Death and Dismemberment Plan
Severance Pay Plan
Vacation Program
For the purpose of determining each AGI Employee's benefit for the year in which
the Merger occurs under the Norwest vacation program, vacation taken by an AGI
Employee in the year in which the Merger occurs will be deducted from the total
Norwest benefit.
(b) Employee Retirement Benefit Plans.
Each AGI 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 AGI and the AGI
Subsidiaries, or to any predecessor-in-interest of AGI or the AGI Subsidiaries
to the extent such service is currently given credit under the existing AGI
401(k) plan, for the purpose of satisfying any eligibility and vesting periods
applicable to the SIP), and shall enter the SIP not later than the first day of
the calendar quarter which begins at least 32 days after the Effective Date of
the Merger.
Each AGI Employee shall be eligible for participation in the Norwest Pension
Plan under the terms thereof with full credit for years of past service to AGI
and the AGI Subsidiaries to the extent such service was credited in the AGI
Pension Plan for the
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purpose of satisfying any eligibility and vesting periods applicable to the
Norwest Pension Plan (but not for benefit purposes).
9. TERMINATION OF AGREEMENT.
(a) This Agreement may be terminated at any time prior to the Effective
Time of the Merger:
(i) by mutual written consent of the parties hereto;
(ii) by any of the parties hereto upon written notice to the other
party if the Merger shall not have been consummated by July 31, 1996 unless
such failure of consummation shall be due to the failure of the party
seeking to terminate to perform or observe in all material respects the
covenants and agreements hereof to be performed or observed by such party;
or
(iii) by AGI or Norwest upon written notice to the other party if any
court or governmental authority of competent jurisdiction shall have issued
a final order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(b) Termination of this Agreement under this paragraph 9 shall not release,
or be construed as so releasing, any party hereto from any liability or damage
to any other party hereto arising out of the breaching party's wilful and
material breach of the warranties and representations made by it, or wilful and
material failure in performance of any of its covenants, agreements, duties or
obligations arising hereunder, and the obligations under paragraphs 4(g), 5(h)
and 10 shall survive such termination.
10. EXPENSES. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by AGI and AGI Subsidiaries shall be borne by AGI, and
all such expenses incurred by Norwest shall be borne by Norwest, including,
without limitation, all registration fees relating to the registration with the
SEC of the shares of Norwest Common Stock to be delivered to the shareholders of
AGI pursuant to this Agreement and all printing costs relating to the joint
Proxy Statement and Prospectus.
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 any party hereto without the prior
written consent of the other parties hereto.
12. THIRD PARTY BENEFICIARIES. Except as otherwise stated herein, each
party hereto intends that this Agreement shall not benefit or create any right
or cause of action in or on behalf of any person other than the parties hereto.
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13. NOTICES. Any notice or other communication provided for herein or given
hereunder to a party hereto shall be in writing and shall be delivered in person
or shall be mailed by first class registered or certified mail, postage prepaid,
addressed as follows:
If to Norwest:
Norwest Corporation
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Attention: Secretary
If to AGI:
AmeriGroup, Incorporated
809 Plymouth Road South, Suite 360
Minnetonka, MN 55305
Attention: David D. MacMillan
With a copy to:
Dorsey & Whitney P.L.L.P.
220 South Sixth Street
Minneapolis, MN 55402
Attention: Mary J. Streitz, Esq.
or to such other address with respect to a party as such party shall notify the
others in writing as above provided.
14. COMPLETE AGREEMENT. This Agreement and the Merger Agreement contain the
complete agreement between the parties hereto with respect to the Merger and
other transactions contemplated hereby and supersede all prior agreements and
understandings between the parties hereto with respect thereto.
15. CAPTIONS. The captions contained in this Agreement are for convenience
of reference only and do not form a part of this Agreement.
16. WAIVER AND OTHER ACTION. Either party hereto may, by a signed writing,
give any consent, take any action pursuant to paragraph 9 hereof or otherwise,
or waive any inaccuracies in the representations and warranties by the other
party and compliance by the other party with any of the covenants and conditions
herein.
17. AMENDMENT. At any time before the Time of Filing, the parties hereto,
by action taken by their respective Boards of Directors or pursuant to authority
delegated by their respective Boards of Directors, may amend this Agreement;
provided,
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however, that no amendment after approval by the shareholders of AGI
shall be made which changes in a manner adverse to such shareholders the
consideration to be provided to said shareholders pursuant to this Agreement and
the Merger Agreement.
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota without regard to the
conflict of laws provisions thereof.
19. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No representation or
warranty contained in the Agreement or the Merger Agreement shall survive the
Merger or, except as set forth in paragraph 9(b), the termination of this
Agreement.
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 AMERIGROUP, INCORPORATED
By: /s/ James R. Campbell By: /s/ David D. MacMillan
------------------------ ------------------------------
Name: James R. Campbell Name: David D. MacMillan
Title: Executive Vice President Title: Chief Executive Officer
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EXHIBIT A
TO AGREEMENT AND PLAN
OF REORGANIZATION
AGREEMENT AND PLAN OF MERGER
BETWEEN
AMERIGROUP, INCORPORATED
a Delaware corporation
(the surviving corporation)
AND
_________________
a Delaware corporation
(the merged corporation)
This Agreement and Plan of Merger dated as of __________, 199__, between
AMERIGROUP, INCORPORATED, a Delaware corporation (hereinafter sometimes called
"AGI" and sometimes called the "surviving corporation") and ____________, a
Delaware corporation ("Merger Co.")(said corporations being hereinafter
sometimes referred to as the "constituent corporations"),
WHEREAS, Merger Co., a wholly-owned subsidiary of Norwest Corporation, was
incorporated by Articles of Incorporation filed in the office of the Secretary
of State of the State of Delaware on _______, 19__, and said corporation is now
a corporation subject to and governed by the provisions of the Delaware General
Corporation Law. Merger Co. has authorized capital stock of 1,000,000 shares of
common stock having a par value of $.01 per share ("Merger Co. Common Stock"),
of which 100,000 shares were outstanding as of the date hereof; and
WHEREAS, AGI was incorporated by Articles of Incorporation filed in the
office of the Secretary of State of the State of Delaware on April 21, 1988 and
said corporation is now a corporation subject to and governed by the provisions
of the Delaware General Corporation Law. AGI has authorized capital stock of
1,000,000 shares of Class A Voting Common Stock, par value $.01 per share, of
which _______ shares were outstanding and ______shares were held in the treasury
as of the date hereof and 200,000 shares of Class B Nonvoting Common Stock, par
value $.01 per share, of which _______ shares were outstanding and ______shares
were held in the treasury as of the date hereof (together the "AGI Common
Stock"); and
WHEREAS, Norwest Corporation and AGI are parties to an Agreement and Plan
of Reorganization, dated as of December 8, 1995 (the "Reorganization
Agreement"), setting forth certain representations, warranties and covenants in
connection with the merger provided for herein; and
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WHEREAS, the directors, or a majority of them, of each of the constituent
corporations respectively deem it advisable for the welfare and advantage of
said corporations and for the best interests of the respective shareholders of
said corporations that said corporations merge and that Merger Co. be merged
with and into AGI, with AGI continuing as the surviving corporation, on the
terms and conditions hereinafter set forth in accordance with the provisions of
the Delaware General Corporation Law, which statute permits such merger; and
WHEREAS, it is the intent of the parties to effect a merger which qualifies
as a tax-free reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(E)
of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, the parties hereto, subject to the approval of the
shareholders of AGI and Merger Co., in consideration of the premises and of the
mutual covenants and agreements contained herein and of the benefits to accrue
to the parties hereto, have agreed and do hereby agree that Merger Co. shall be
merged with and into AGI pursuant to the laws of the State of Delaware, and do
hereby agree upon, prescribe and set forth the terms and conditions of the
merger of Merger Co. with and into AGI, the mode of carrying said merger into
effect, the manner and basis of converting the shares of AGI Common Stock into
shares of common stock of Norwest Corporation of the par value of $1-2/3 per
share ("Norwest Common Stock"), and such other provisions with respect to said
merger as are deemed necessary or desirable, as follows:
FIRST: At the time of merger, Merger Co. shall be merged with and into
AGI, one of the constituent corporations, which shall be the surviving
corporation, and the separate existence of Merger Co. shall cease and the name
of the surviving corporation shall be AmeriGroup, Incorporated.
SECOND: The Articles of Incorporation of AGI at the time of merger shall
be and remain the Articles of Incorporation of the surviving corporation until
further amended according to law.
THIRD: The By-Laws of AGI at the time of merger shall be and remain the
By-Laws of the surviving corporation until amended according to the provisions
of the Articles of Incorporation of the surviving corporation or of said By-
Laws.
FOURTH: The number of directors of the surviving corporation shall be
three and the persons named below shall become the directors of the surviving
corporation and shall hold office from the time of merger until their respective
successors are elected and qualify:
Stanley S. Stroup
William H. Queenan
John T. Thornton
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FIFTH: The persons named below shall become the officers of the surviving
corporation and shall hold office from the time of merger until their respective
successors are elected or appointed and qualify:
John T. Thornton - President
Charles D. White - Vice President and Treasurer
J. Daniel Vandermark - Vice President
Robert J. Murphy - Vice President
Margaret M. Weber - Secretary
Rachelle M. Graham - Assistant Secretary
SIXTH: The manner and basis of converting the shares of AGI Common Stock
into cash or shares of shares of Norwest Common Stock shall be as follows:
1. Each of the shares of AGI Common Stock outstanding immediately prior to
the time of merger (other than shares as to which statutory dissenters'
rights have been exercised) shall, at the time of merger, by virtue of the
merger and without any action on the part of the holder or holders thereof,
be converted into and exchanged for the number of shares of Norwest Common
Stock determined by dividing the Adjusted Norwest Shares (as defined in the
Reorganization Agreement) by the aggregate number of shares of AGI Common
Stock then outstanding.
2. As soon as practicable after the merger becomes effective, each holder
of a certificate for shares of AGI Common Stock outstanding immediately
prior to the time of merger shall be entitled, upon surrender of such
certificate for cancellation to the surviving corporation or to Norwest
Bank Minnesota, National Association, as the designated agent of the
surviving corporation (the "Agent"), to receive a new certificate for the
number of whole shares of Norwest Common Stock to which such holder shall
be entitled on the basis set forth in paragraph 1 above. Until so
surrendered each certificate which, immediately prior to the time of
merger, represented shares of AGI Common Stock shall not be transferable on
the books of the surviving corporation but shall be deemed to evidence
(except for the payment of dividends as provided below) ownership of the
number of whole shares of Norwest Common Stock into which such shares of
AGI Common Stock have been converted on the basis above set forth;
provided, however, until the holder of such certificate for AGI Common
Stock shall have surrendered the same for exchange as above set forth, no
dividend payable to holders of record of Norwest Common Stock as of any
date subsequent to the effective date of merger shall be paid to such
holder with respect to the Norwest Common Stock, if any, represented by
such certificate, but, upon surrender and exchange thereof as herein
provided, there shall be paid by the surviving corporation or the Agent to
the record holder of such certificate for Norwest Common Stock issued in
exchange therefor an amount with respect
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to such shares of Norwest Common Stock equal to all dividends that shall
have been paid or become payable to holders of record of Norwest Common
Stock between the effective date of merger and the date of such exchange.
3. If, between the date of the Reorganization Agreement and the time of
merger, shares of Norwest Common Stock shall be changed into a different
number of shares or a different class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or if a stock dividend thereon shall be declared
with a record date within such period, then the number of shares of Norwest
Common Stock, if any, into which a share of AGI Common Stock shall be
converted on the basis above set forth, will be appropriately and
proportionately adjusted so that the number of such shares of Norwest
Common Stock into which a share of AGI Common Stock shall be converted will
equal the number of shares of Norwest Common Stock which the holders of
shares of AGI Common Stock would have received pursuant to such
reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or stock dividend had the record date therefor been
immediately following the time of merger.
4. No fractional shares of Norwest Common Stock and no certificates or
scrip certificates therefor shall be issued to represent any such
fractional interest, and any holder of a fractional interest shall be paid
an amount of cash equal to the product obtained by multiplying the
fractional share interest to which such holder is entitled by the average
of the closing prices of a share of Norwest Common Stock as reported by the
consolidated tape of the New York Stock Exchange for each of the five (5)
trading days ending on the second trading day immediately preceding the
meeting of the shareholders of AGI held to vote on the merger.
5. Each share of Merger Co. Common Stock issued and outstanding at the
time of merger shall be converted into and exchanged for one share of the
surviving corporation after the time of merger.
SEVENTH: The merger provided for by this Agreement shall be effective as
follows:
1. The effective date of merger shall be the date on which a Certificate
of Merger (as described in subparagraph 1(b) of this Article Seventh) shall
be delivered to and filed by the Secretary of State of the State of
Delaware; provided, however, that all of the following actions shall have
been taken in the following order:
a. This Agreement shall be approved, adopted, certified, executed and
acknowledged by Merger Co. and AGI in accordance with the Delaware
General Corporation Law; and
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b. A Certificate of Merger with respect to the merger, setting forth
the information required by the Delaware General Corporation Law,
shall be executed by the President or a Vice President of Merger Co.
and shall be filed in the office of the Secretary of State of the
State of Delaware in accordance with the Delaware General Corporation
Law.
2. The merger shall become effective as of 11:59 p.m. Minneapolis,
Minnesota time (the "time of merger") on the effective date of merger.
EIGHTH: At the time of merger:
1. The separate existence of Merger Co. shall cease, and the corporate
existence and identity of AGI shall continue as the surviving corporation.
2. The merger shall have the other effects prescribed by Section 259 of
the Delaware General Corporation Law.
NINTH: The following provisions shall apply with respect to the merger
provided for by this Agreement:
1. The registered office of the surviving corporation in the State of
Delaware shall be The Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware, 19801, and the name of the registered agent of the
surviving corporation at such address is The Corporation Trust Company.
2. If at any time the surviving corporation shall consider or be advised
that any further assignment or assurance in law or other action is
necessary or desirable to vest, perfect or confirm in the surviving
corporation the title to any property or rights of Merger Co. acquired or
to be acquired as a result of the merger provided for herein, the proper
officers and directors of AGI and Merger Co. may execute and deliver such
deeds, assignments and assurances in law and take such other action as may
be necessary or proper to vest, perfect or confirm title to such property
or right in the surviving corporation and otherwise carry out the purposes
of this Agreement.
3. For the convenience of the parties and to facilitate the filing of this
Agreement, any number of counterparts hereof may be executed and each such
counterpart shall be deemed to be an original instrument.
4. This Agreement and the legal relations between the parties hereto shall
be governed by and construed in accordance with the laws of the State of
Minnesota without regard to the conflicts of laws provisions thereof.
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5. This Agreement cannot be altered or amended except pursuant to an
instrument in writing signed by both of the parties hereto.
6. At any time prior to the effective time of the merger, subject to the
provisions of the Reorganization Agreement, this Agreement may be
terminated upon approval by the Boards of Directors of either of the
constituent corporations notwithstanding the approval of the shareholders
of either constituent corporation.
(The remainder of this page has intentionally been left blank.)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be signed in their respective corporate names by the undersigned
officers pursuant to authority duly given by their respective Boards of
Directors, all as of the day and year first above written.
AMERIGROUP, INCORPORATED
By: _________________________________
Name: ________________________
Title: ________________________
The undersigned is the Secretary of AmeriGroup, Incorporated and hereby
certifies, in accordance with Section 251(c) of the Delaware General Corporation
Law, that a majority of the outstanding stock of AmeriGroup, Incorporated
entitled to vote on the foregoing Agreement and Plan of Merger has been voted
for adoption of such agreement.
By: ______________________________
Name: _____________________
[MERGER CO.]
By: ________________________________
Name: _______________________
Title: _______________________
The undersigned is the Secretary of _________________ and hereby certifies, in
accordance with Section 251(c) of the Delaware General Corporation Law, that a
majority of the outstanding stock of _______________________ entitled to vote on
the foregoing Agreement and Plan of Merger has been voted for adoption of such
agreement.
By: ______________________________
Name: _____________________
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EXHIBIT B
TO AGREEMENT AND
PLAN OF REORGANIZATION
Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-1026
Attn: Secretary
Ladies and 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
AmeriGroup, Incorporated, a Delaware corporation ("AGI").
Pursuant to an Agreement and Plan of Reorganization, dated as of December
__, 1995 (the "Reorganization Agreement"), between AGI and Norwest Corporation,
a Delaware corporation ("Norwest"), it is contemplated that a wholly-owned
subsidiary of Norwest will merge with and into AGI (the "Merger") and, as a
result, I will receive, in exchange for each share of common stock, par value
$.01 per share, of AGI ("AGI Common Stock") owned by me immediately prior to the
Effective Time of the Merger (as defined in the Reorganization Agreement), a
number of shares of common stock, par value $1 2/3 per share, of Norwest
("Norwest Common Stock"), as more specifically set forth in the Reorganization
Agreement.
I hereby agree as follows:
I will not offer to sell, transfer or otherwise dispose of any of the
shares of AGI Common Stock or Norwest Common Stock held by me during the 30 days
prior to the Effective Time of the Merger.
I will not offer to sell, transfer or otherwise dispose of any of the
shares of Norwest Common Stock issued to me pursuant to the Merger (the "Stock")
except (a) in compliance with the applicable provisions of Rule 145, (b) in a
transaction that is otherwise exempt from the registration requirements of the
Securities Act, or (c) in an offering registered under the Securities Act.
I will not sell, transfer or otherwise dispose of the Stock or in any way
reduce my risk relative to any shares of the Stock until such time as financial
results covering at least 30 days of post-Merger combined operations of AGI and
Norwest have been published.
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I consent to the endorsement of the Stock issued to me pursuant to the
Merger with a restrictive legend which will read substantially as follows:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act of 1933,
as amended (the "Act"), applies, and may be sold or otherwise transferred
only in compliance with the limitations of such Rule 145, or upon receipt
by Norwest Corporation of an opinion of counsel reasonably satisfactory to
it that some other exemption from registration under the Act is available,
or pursuant to a registration statement under the Act."
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) any such shares of Stock are
sold at a time when I am not at the time an affiliate of Norwest and have been
the beneficial owner of the Stock for at least two years (or such other period
as may be prescribed thereunder) and Norwest has filed with the Commission all
of the reports it is required to file under the Securities Exchange Act of 1934,
as amended, during the preceding twelve months, or (iv) I am not and have not
been for at least three months an affiliate of Norwest and have been the
beneficial owner of the Stock for at least three years (or such other period as
may be prescribed by the Securities Act, and the rules and regulations
promulgated thereunder), or (v) Norwest shall have received an opinion of
counsel acceptable to Norwest to the effect that the stock transfer restrictions
and the legend are not required, and (b) financial results covering at least 30
days of post-Merger combined operations of AGI and Norwest 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 AGI.
Sincerely,
By:_________________________
Name:_______________________
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APPENDIX B
DELAWARE GENERAL CORPORATION
LAW SECTION 262
<PAGE>
262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to (S)228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to (S)251 (other than a merger effected pursuant to subsection
(g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders 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 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to (SS)251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a
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national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
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(2) If the merger or consolidation was approved pursuant to (S)228 or 253
of this title, the surviving or resulting corporation, either before the
effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal rights of the
effective date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent corporation, and shall
include in such notice a copy of this section. The notice shall be sent by
certified or registered mail, return receipt requested, addressed to the
stockholder at his address as it appears on the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing the notice, demand in writing from the surviving or resulting
corporation the appraisal of his shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and that
the stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington,
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Delaware or such publication as the Court deems advisable. The forms of the
notices by mail and by publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation,
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reasonable attorney's fees and the fees and expenses of experts, to be charged
pro rata against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes indemnification
of directors and officers of a Delaware corporation under certain circumstances
against expenses, judgments, and the like in connection with an action, suit, or
proceeding. Article Fourteenth of Norwest's Certificate of Incorporation
provides for broad indemnification of directors and officers.
Item 21. Exhibits and Financial Statement Schedules
Exhibits: Parenthetical references to exhibits in the description of Exhibits
3.1, 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5, 3.1.6, 3.2, 4.2, 4.3, and 4.4
below are incorporated by reference from such exhibits to the
indicated reports of Norwest filed with the Securities and Exchange
Commission under File No. 1-2979.
2.1 - Agreement and Plan of Reorganization, dated as of December 8, 1995,
between AmeriGroup, Incorporated and Norwest Corporation (included in
Proxy Statement-Prospectus as Appendix A).
2.2 - Form of Agreement and Plan of Merger between AmeriGroup, Incorporated
and Merger Co. (included in Proxy Statement-Prospectus as part of
Appendix A).
3.1 - Restated Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 3(b) to Norwest's Current Report on Form 8-K
dated June 28, 1993 and Exhibit 3 to Norwest's Current Report on Form
8-K dated July 3, 1995).
3.1.1- Certificate of Designations of Powers, Preferences, and Rights of
Norwest ESOP Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 4 to Norwest's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994).
3.1.2- Certificate of Designations of Powers, Preferences, and Rights of
Norwest Cumulative Tracking Preferred Stock (incorporated by
reference to Exhibit 3 to Norwest's Current Report on Form 8-K dated
January 9, 1995).
3.1.3- Certificate of Designations of Powers, Preferences, and Rights of
Norwest 1995 ESOP Cumulative Convertible Preferred Stock
(incorporated by reference to Exhibit 4 to Norwest's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1995).
3.1.4- Certificate eliminating the Certificate of Designations with respect
to the Cumulative Convertible Preferred Stock, Series B (incorporated
by reference to Exhibit 3(a) to Norwest's Current Report on Form 8-K
dated November 1, 1995).
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<PAGE>
3.1.5- Certificate eliminating the Certificate of Designations with respect
to the 10.24% Cumulative Preferred Stock (incorporated by reference
to Exhibit 3 to Norwest's Current Report on Form 8-K dated February
20, 1996, as amended pursuant to Form 8-K/A dated February 21, 1996.
3.1.6- Certificate of Designations with respect to Norwest's 1996 ESOP
Cumulative Convertible Preferred Stock (incorporated by reference to
Exhibit 3 to Norwest's Current Report on Form 8-K dated February 26,
1996).
3.2 - By-Laws, as amended (incorporated by reference to Exhibit 4(c) to
Norwest's Quarterly Report on Form 10-Q for the quarter ended March
31, 1991).
4.1 See 3.1 through 3.2 above
4.2 - Rights Agreement, dated as of November 22, 1988, between Norwest
Corporation and Citibank, N.A. (incorporated by reference to Exhibit
1 to Norwest's Form 8-A dated December 6, 1988).
4.3 - Certificate of Adjustment, dated July 21, 1989, to Rights Agreement
(incorporated by reference to Exhibit 3 to Norwest's Form 8 dated
July 21, 1989).
4.4 - Certificate of Adjustment, dated June 28, 1993, to Rights Agreement
(incorporated by reference to Exhibit 4 to Norwest's Form 8-A/A dated
June 29, 1993).
5 - Opinion of Stanley S. Stroup, counsel to Norwest.
8 - Opinion of Dorsey & Whitney P.L.L.P.
23.1 - Consent of Stanley S. Stroup (included as part of Exhibit 5 filed
herewith).
23.2 - Consent of Dorsey & Whitney P.L.L.P. (included as part of Exhibit 8
filed herewith).
23.3 - Consent of KPMG Peat Marwick LLP.
23.4 - Consent of Larson, Allen, Weishair & Co., LLP.
24 - Powers of Attorney.
99 - Form of proxy for Special Meeting of Shareholders of AmeriGroup,
Incorporated.
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<PAGE>
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
posteffective amendment to this registration statement (i) to include
any prospectus required by section 10(a)(3) of the Securities Act of
1933, (ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent posteffective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement, and (iii) to include any material
information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such posteffective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a posteffective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
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<PAGE>
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
posteffective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Minneapolis, State of Minnesota, on the 2nd day of May, 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 to
the Registration Statement has been signed on the 2nd day of May, 1996, by the
following persons in the capacities indicated:
/s/ Richard M. Kovacevich President and Chief Executive Officer
- ---------------------------- (Principal Executive Officer)
Richard M. Kovacevich
/s/ John T. Thornton Executive Vice President and Chief
- ---------------------------- Financial Officer
John T. Thornton (Principal Financial Officer)
/s/ Michael A. Graf Senior Vice President and Controller
- ---------------------------- (Principal Accounting Officer)
Michael A. Graf
DAVID A. CHRISTENSEN )
GERALD J. FORD )
PIERSON M. GRIEVE )
CHARLES M. HARPER )
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 )
STEPHEN E. WATSON )
MICHAEL W. WRIGHT )
- --------------------
*Richard M. Kovacevich, by signing his name hereto, does hereby sign this
document on behalf of each of the directors named above pursuant to powers of
attorney duly executed by such persons.
/s/ Richard M. Kovacevich
----------------------------
Richard M. Kovacevich
Attorney-in-Fact
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