<PAGE>
As filed with the Securities and Exchange Commission on April , 1997
Registration No. 333- xxxxxx
----------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------------------
NORWEST CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 6711 41-0449260
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-1000
612-667-1234
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------
Stanley S. Stroup
Executive Vice President and General Counsel
Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
612-667-8858
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Robert J. Kaukol John R. Brantley
Norwest Corporation Bracewell & Patterson, L.L.P.
Norwest Center 711 Louisiana Street, Suite 2900
Sixth and Marquette Houston, Texas 77002
Minneapolis, Minnesota 55479-1026
------------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of the Registration
Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------- ----------------- -------------------- ------------------- -------------
Title of Securities Amount Proposed Maximum Proposed Maximum Amount of
to Be to Be Offering Price Aggregate Registration
Registered Registered Per Share Offering Price Fee
- ---------------------------- ----------------- -------------------- ------------------- -------------
<S> <C> <C> <C> <C>
Common Stock
(par value $1-2/3 per
share) (1) 375,000 N/A $ 8,995,622 (2) $ 2,726.00
- ---------------------------- ----------------- -------------------- ------------------- -------------
</TABLE>
(1) Each share of the registrant's common stock includes one preferred stock
purchase right.
(2) Estimated solely for the purpose of computing the registration fee, in
accordance with Rule 457(f), based upon the book value as of December 31,
1996 of all shares of common to be acquired by the registrant in the
transaction described herein.
-------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
-------------------------
<PAGE>
[FNB LETTERHEAD]
May 9, 1997
Dear Shareholder:
A special meeting of shareholders of The First National Bankshares, Inc.
("FNB") will be held on June 11, 1997 to approve the Agreement and Plan of
Reorganization dated January 17, 1997 (the "Reorganization Agreement") between
FNB and Norwest Corporation ("Norwest") and the related Agreement and Plan of
Merger dated April 28, 1997 (the "Plan of Merger"). The Reorganization Agreement
and Plan of Merger provide for the merger of a wholly-owned subsidiary of
Norwest with and into FNB (the "Merger"). FNB, as the surviving corporation in
the Merger, will become a wholly-owned subsidiary of Norwest.
If the Reorganization Agreement and Plan of Merger are approved and the
Merger becomes effective, you will be entitled to receive shares of Norwest
common stock in exchange for shares of FNB common stock owned by you immediately
prior to the Merger. The number of shares of Norwest common stock you will be
entitled to receive (the "exchange ratio") will be determined in accordance with
the formula set forth in the Reorganization Agreement. The formula is based on
the average closing prices of a share of Norwest common stock, as reported on
the New York Stock Exchange during the 20 trading day period ending on the last
trading day before the special meeting.
Enclosed with this letter are a notice of special meeting, which sets forth
the time and location of the special meeting, and a Proxy Statement-Prospectus,
which describes in more detail the terms and conditions of the Merger. Please
carefully review and consider the information in the Proxy Statement-Prospectus.
Copies of the Reorganization Agreement and the Plan of Merger are included in
the Proxy Statement-Prospectus as Appendix A and Appendix B, respectively.
Additional information concerning Norwest, including its most recent annual
report on Form 10-K, may be obtained from Norwest as indicated in the Proxy
Statement-Prospectus under the section entitled "Incorporation of Certain
Documents by Reference."
FNB's board of directors has approved the Reorganization Agreement and the
Plan of Merger as being advisable and in your best interests as a shareholder of
FNB and RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE REORGANIZATION AGREEMENT
AND PLAN OF MERGER.
YOUR VOTE IS IMPORTANT. Please mark, date, sign and return the enclosed
proxy in the enclosed postage prepaid envelope as soon as possible, regardless
of whether you plan to attend the special meeting. A failure to vote, either by
not returning the enclosed proxy or by checking the "Abstain" box thereon, will
have the same effect as a vote against approval of the Reorganization Agreement
and the Plan of Merger. If you attend the meeting, you may vote in person if you
wish, even though you have previously returned your proxy.
H. Barton Jones
Chairman
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
302 SOUTH FIRST STREET
TUCUMCARI, NEW MEXICO 88401
(505) 461-3602
---------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 11, 1997
---------------------------
A special meeting (the "Special Meeting") of shareholders of The First
National Bankshares, Inc., a New Mexico corporation ("FNB"), will be held at 302
South First Street, Tucumcari, New Mexico, on June 11, 1997, at 10:00 a.m.,
local time, to consider and vote upon the following:
1. A proposal to approve the Agreement and Plan of Reorganization
dated January 17, 1997 (the "Reorganization Agreement") between FNB and
Norwest Corporation ("Norwest"), a copy of which is attached as Appendix
A to the accompanying Proxy Statement-Prospectus, and the related
Agreement and Plan of Merger dated April 28, 1997 (the "Plan of
Merger"), a copy of which is attached as Appendix B to the accompanying
Proxy Statement-Prospectus. Pursuant to the Reorganization Agreement and
the Plan of Merger, a wholly-owned subsidiary of Norwest will merge with
and into FNB and FNB will become a wholly-owned subsidiary of Norwest,
all upon the terms and subject to the conditions set forth in the
Reorganization Agreement and the Plan of Merger.
2. To transact such other business as may properly come
before the Special Meeting or any adjournments or postponements thereof.
Only shareholders of record on the books of FNB at the close of business
on May __, 1997 will be entitled to vote at the Special Meeting or any
adjournments or postponements thereof.
Your attention is directed to the Proxy Statement-Prospectus
accompanying this notice for a more complete statement regarding the matters to
be acted upon at the Special Meeting.
By Order of the Board of Directors
E. Bruce Thomas
Secretary
May 9, 1997
- --------------------------------------------------------------------------------
PLEASE COMPLETE, SIGN AND DATE YOUR PROXY AND PROMPTLY MAIL IT IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. YOU MAY
REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE PROXY STATEMENT-
PROSPECTUS AT ANY TIME BEFORE IT IS EXERCISED.
PLEASE DO NOT SEND IN ANY SHARE CERTIFICATES AT THIS TIME.
- --------------------------------------------------------------------------------
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
PROXY STATEMENT
FOR A SPECIAL MEETING OF SHAREHOLDERS
------------------------
NORWEST CORPORATION
PROSPECTUS
SHARES OF COMMON STOCK
------------------------
This Proxy Statement-Prospectus is being provided to you in connection
with the solicitation of your proxy by the board of directors of The First
National Bankshares, Inc. ("FNB") for use at a special meeting of FNB's
shareholders to be held on June 11, 1997 (the "Special Meeting"). FNB's board of
directors has called the Special Meeting to approve the Agreement and Plan of
Reorganization dated January 17, 1997 (the "Reorganization Agreement") between
FNB and Norwest Corporation ("Norwest") and the related Agreement and Plan of
Merger dated April 28, 1997 (the "Plan of Merger").
The Reorganization Agreement and Plan of Merger provide for the merger of a
wholly-owned subsidiary of Norwest with and into FNB (the "Merger"). FNB, as the
surviving corporation in the Merger, will become a wholly-owned subsidiary of
Norwest. If the Reorganization Agreement and Plan of Merger are approved and the
Merger becomes effective, you will be entitled to receive shares of Norwest
common stock, par value $1-2/3 per share ("Norwest Common Stock"), in exchange
for your shares of FNB common stock, par value $1.00 per share ("FNB Common
Stock").
The number of shares of Norwest Common Stock you will be entitled to receive
in the Merger in exchange for your shares of FNB Common Stock (the "exchange
ratio") will be determined in accordance with the formula set forth in the
Reorganization Agreement. The exchange ratio formula is based on the average of
the closing prices of a share of Norwest Common Stock, as reported on the New
York Stock Exchange during the 20 trading day period ending on the last trading
day before the Special Meeting. (This average is referred to as the "Norwest
Measurement Price.") The full exchange ratio formula is described in
"SUMMARY--The Merger--Exchange Ratio" and "THE MERGER--Merger Consideration."
The formula operates in the following manner:
(1) If the Norwest Measurement Price is equal to or greater than $40.25,
then the exchange ratio will be 10.165--that is, you will be entitled to
receive 10.165 shares of Norwest Common Stock for each share of FNB
Common Stock owned by you.
(2) If the Norwest Measurement Price is equal to or less than $36.25, then
the exchange ratio will be 11.287--that is, you will be entitled to
receive 11.287 shares of Norwest Common Stock for each share of FNB
Common Stock owned by you.
(3) If the Norwest Measurement Price is less than $40.25 and more than
$36.25, then the exchange ratio will equal the number obtained by
dividing 409.14 by the Norwest Measurement Price. For example, if the
Norwest Measurement Price is $38, then the exchange ratio would equal
409.14 divided by $38, or 10.767. In this example, you would receive
10.767 shares of Norwest Common Stock for each share of FNB Common Stock
owned by you.
The closing price of a share of Norwest Common Stock on the effective date of
the Merger may be higher or lower than the Norwest Measurement Price.
Copies of the Reorganization Agreement and Plan of Merger are included
in this Proxy Statement-Prospectus as Appendix A and Appendix B, respectively,
and are incorporated herein by reference. For purposes of the remainder of this
document, unless otherwise indicated or the context otherwise requires,
references to the Reorganization Agreement will be deemed to include the Plan of
Merger.
Norwest Common Stock trades on the NYSE and the Chicago Stock Exchange
("CHX") under the symbol NOB. The closing price of Norwest Common Stock as
reported on the NYSE Composite Tape on May __, 1997 was $______ per share. There
is no established market for FNB Common Stock.
In addition to serving as the proxy statement of FNB in connection with
the Special Meeting, this document constitutes the prospectus of Norwest
covering the shares of Norwest Common Stock to be issued in the Merger.
NORWEST, ITS BANKING SUBSIDIARIES AND MANY OF ITS NONBANKING
SUBSIDIARIES ARE SUBJECT TO EXTENSIVE REGULATION BY A NUMBER OF FEDERAL AND
STATE AGENCIES. THIS REGULATION MAY AFFECT, AMONG OTHER THINGS, NORWEST'S
EARNINGS AND/OR RESTRICT ITS ABILITY TO PAY DIVIDENDS ON NORWEST COMMON STOCK.
SEE "CERTAIN REGULATORY AND OTHER CONSIDERATIONS PERTAINING TO NORWEST."
THE SHARES OF NORWEST COMMON STOCK OFFERED BY THIS PROXY
STATEMENT-PROSPECTUS ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF
ANY BANK OR NONBANK SUBSIDIARY OF NORWEST AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
All information concerning Norwest contained in this Proxy
Statement-Prospectus has been provided by Norwest, and all information
concerning FNB contained in this Proxy Statement-Prospectus has been provided by
FNB.
This Proxy Statement-Prospectus is dated as of May 9, 1997 and, together
with the accompanying form of proxy, is first being mailed to shareholders of
FNB on or about May 9, 1997.
<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 5
SUMMARY 6
Parties to the Merger 6
Special Meeting and Vote Required 7
The Merger 7
Market Information 10
Comparison of Rights of Holders of FNB Common Stock and
Norwest Common Stock 10
Comparative Per Common Share Data 10
Selected Consolidated Financial Data 11
Share Prices and Dividends for Norwest Common Stock 15
MEETING INFORMATION 16
General 16
Record Date; Voting Rights; Vote Required 17
Voting and Revocation of Proxies 17
Solicitation of Proxies 17
THE MERGER 18
General 18
Merger Consideration 18
Background of and Reasons for the Merger 19
Dissenters' Rights 21
Surrender of Certificates 22
Conditions to the Merger 23
Regulatory Approvals 24
Conduct of Business Pending the Merger 25
Competing Transactions 25
Certain Additional Agreements 26
Termination of Reorganization Agreement 26
Amendment of Reorganization Agreement 26
Waiver of Performance of Obligations 27
Effect on Employee Benefit Plans 27
Certain U. S. Federal Income Tax Consequences 27
Resale of Norwest Common Stock 29
Stock Exchange Listing 29
Accounting Treatment 30
Expenses 30
COMPARISON OF RIGHTS OF HOLDERS OF FNB COMMON STOCK AND
NORWEST COMMON STOCK 31
General 31
Capital Stock 31
Directors 32
Amendment of Certificate of Incorporation and Bylaws 32
Shareholder Approval of Mergers and Asset Sale 33
Appraisal Rights 33
Special Meetings 34
Directors Duties 34
Action Without a Meeting 35
Limitation of Director Liability 35
Indemnification of Officers and Directors 35
Dividends 37
Corporate Governance Procedures; Nomination of
Directors 37
INFORMATION ABOUT FNB AND THE BANK 38
2
<PAGE>
General 38
Regulation and Supervision 38
Properties 38
Competition 39
Legal Proceedings 39
Market Information and Dividends 39
Principal Shareholders and Security Ownership of FNB 40
Management of FNB 42
FNB MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION 46
General 46
Financial Condition 46
Results of Operation 47
Certain Selected Statistical Information 53
CERTAIN REGULATORY AND OTHER CONSIDERATIONS PERTAINING TO
NORWEST 59
Bank Regulatory Agencies 59
Bank Holding Company Activities; Interstate Banking 59
Dividend Restrictions 60
Holding Company Structure 61
Regulatory Capital Standards and Related Matters 61
FDIC Insurance 64
Fiscal and Monetary Policies 64
Competition 65
EXPERTS 66
LEGAL OPINIONS 66
MANAGEMENT OF NORWEST AND ADDITIONAL INFORMATION 67
INDEX TO FNB FINANCIAL STATEMENTS
APPENDIX A AGREEMENT AND PLAN OF REORGANIZATION
APPENDIX B AGREEMENT AND PLAN OF MERGER
APPENDIX C SECTIONS 53-15-3 AND 53-15-4 OF THE NEW MEXICO BUSINESS
CORPORATION ACT
3
<PAGE>
AVAILABLE INFORMATION
Norwest is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). You may review and copy such reports, proxy statements and other
information at the public reference facilities of the Commission, located in
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, Suite 1300, New York,
New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. You may also access these materials through the
Commission's Internet Web site located at http://www.sec.gov. You may obtain
copies of these materials at prescribed rates by writing to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. You
may also review annual, quarterly and current reports, proxy statements and
other information concerning Norwest 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.
Norwest has filed a registration statement on Form S-4 (File No.
333-______) (the "Registration Statement") with the Commission registering under
the Securities Act of 1933, as amended (the "Securities Act"), the shares of
Norwest Common Stock to be issued in the Merger. As permitted by the Commission,
this Proxy Statement-Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits thereto. You may review or
obtain a copy of the Registration Statement in the manner described above.
In deciding whether to approve the Reorganization Agreement, you should
rely only on the information contained or incorporated by reference in this
Proxy Statement-Prospectus or in the documents enclosed with this Proxy
Statement-Prospectus. Neither Norwest nor FNB has authorized any person to
provide you with any additional or contrary information or representations
concerning either company or the Merger.
The information contained in this Proxy Statement-Prospectus is as of
May 9, 1997. You should not assume that the delivery to you of this Proxy
Statement-Prospectus or the issuance to you of shares of Norwest Common Stock
means that there has been no change in the business prospects, financial
condition or other affairs of Norwest or FNB since May 9, 1997 or that the
information contained or incorporated by reference in this Proxy
Statement-Prospectus is correct or complete as of any time after May 9, 1997.
The Commission allows Norwest to update much of the information contained or
incorporated by reference in this Proxy Statement-Prospectus pursuant to
subsequent filings with the Commission (see "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE" below).
4
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
As permitted by the Commission, Norwest has incorporated into this Proxy
Statement-Prospectus certain information contained in documents filed by Norwest
with the Commission. These documents contain important information concerning
Norwest and its business prospects and financial condition. Except to the extent
superseded by the information contained in this Proxy Statement-Prospectus, the
information contained in each document incorporated by reference is considered
to be part of this Proxy Statement-Prospectus and therefore to have been
provided to you at the time you receive this Proxy Statement-Prospectus. In
addition, each document filed by Norwest with the Commission subsequent to the
date hereof and prior to the Special Meeting will be incorporated into and
considered part of this Proxy Statement-Prospectus. There may be information
contained in these documents that supersedes or modifies statements and other
information contained or incorporated by reference in this Proxy
Statement-Prospectus. Generally, you will not receive a copy of any of these
documents unless you request a copy in the manner described below.
The following Norwest documents have been incorporated by reference in
this Proxy Statement-Prospectus. Each document was filed with the Commission
under file number 1-2979.
(1) Norwest's annual report on Form 10-K for the year ended December 31,
1996;
(2) Norwest's current reports on Form 8-K filed on January 23, 1997 and
April 21, 1997;
(3) Norwest's current report on Form 8-K filed on May 1, 1996
containing a description of the Norwest Common Stock; and
(4) Norwest's registration statement on Form 8-A dated December 6, 1988, as
amended pursuant to Form 8-A/A dated June 29, 1993, relating to
preferred stock purchase rights attached to shares of Norwest Common
Stock.
You should review the documents listed in (3) and (4) above for a
description of the Norwest Common Stock and certain rights and restrictions
relating thereto, including voting, dividend and preferred stock purchase
rights.
YOU MAY OBTAIN COPIES OF THE FOREGOING DOCUMENTS (OTHER THAN CERTAIN
EXHIBITS) UPON REQUEST IN WRITING OR BY TELEPHONE AS FOLLOWS:
CORPORATE SECRETARY
NORWEST CORPORATION
NORWEST CENTER
SIXTH AND MARQUETTE
MINNEAPOLIS, MN 55479-1026
TELEPHONE (612) 667-8655
FAX (612) 667-4399
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, YOUR REQUEST SHOULD BE RECEIVED BY
NORWEST BY JUNE 5, 1997.
5
<PAGE>
SUMMARY
The following is a summary of certain information relating to the
Merger. There may be additional information contained elsewhere in this document
or in the documents incorporated by reference that may affect your decision
whether to approve the Merger. For that reason, you should read this document
(including the appendices), as well as the documents incorporated by reference,
in their entirety. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" for a
list of the documents concerning Norwest incorporated by reference and
instructions on how to obtain copies of these documents.
PARTIES TO THE MERGER
NORWEST. Norwest Corporation ("Norwest") is a diversified financial
services company organized under the laws of Delaware in 1929 and registered
under the Bank Holding Company Act of 1956, as amended (the "Bank Holding
Company Act"). Through its subsidiaries and affiliates, Norwest provides retail,
commercial and corporate banking services, as well as a variety of other
financial services, including 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, 1996, Norwest had consolidated total assets of $80.2
billion, total deposits of $50.1 billion and total stockholders' equity of $6.1
billion. Based on total assets at December 31, 1996, Norwest was the 12th
largest commercial banking organization in the United States.
Norwest's principal executive offices are located at Norwest Center,
Sixth and Marquette, Minneapolis, Minnesota 55479, and its telephone number is
(612) 667-1234. As used in this Proxy Statement-Prospectus, the term "Norwest"
means Norwest and its consolidated subsidiaries.
Additional information concerning Norwest is included in Norwest's
documents incorporated herein by reference. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
FNB. FNB is a one-bank holding company organized under the laws of New
Mexico in 1986 and registered under the Bank Holding Company Act. The principal
asset of FNB is the common stock of its subsidiary, The First National Bank of
Tucumcari (the "Bank"). As of December 31, 1996, FNB had consolidated total
assets of approximately $92.2 million and total shareholders' equity of
approximately $9.0 million. FNB had net income of $635,096 for the year ended
December 31, 1996. FNB's principal executive offices are located at 302 South
First Street, Tucumcari, New Mexico 88401, and its telephone number at that
address is (505) 461-3602. As used in this Proxy Statement-Prospectus, unless
otherwise indicated or the context requires otherwise, the term "FNB" means FNB
and the Bank.
The Bank is a national banking association chartered in 1901 that has
banking offices in Tucumcari, Santa Rosa and Las Vegas, New Mexico. The Bank is
a full service, independent community bank that provides a full range of
commercial banking services, including traditional deposit services and
commercial, interim construction, consumer, home improvement, real estate,
agricultural and industrial loans. See "INFORMATION ABOUT FNB AND THE BANK" and
FNB's Consolidated Financial Statements included elsewhere herein for additional
information concerning FNB and the Bank.
6
<PAGE>
SPECIAL MEETING AND VOTE REQUIRED
SPECIAL MEETING. The Special Meeting will be held on June 11, 1997 at
302 South First Street, Tucumcari, New Mexico, at 10:00 a.m., local time, for
the purpose of voting on a proposal to approve the Reorganization Agreement.
Only holders of record of FNB Common Stock at the close of business on May ___,
1997 (the "Record Date") will be entitled to receive notice of and to vote at
the Special Meeting. At the Record Date, there were 29,953 shares of FNB Common
Stock outstanding and entitled to vote at the Special Meeting. For additional
information relating to the Special Meeting, see "MEETING INFORMATION."
VOTE REQUIRED. Approval of the Reorganization Agreement requires the
affirmative vote of the holders of a majority of the outstanding shares of FNB
Common Stock. Holders of FNB Common Stock are entitled to one vote per share
owned of record on the Record Date. If a majority of the votes eligible to be
cast by the holders of FNB Common Stock do not vote in favor of approval of the
Reorganization Agreement, FNB will remain a separate entity. As of the Record
Date, directors and executive officers of FNB and their affiliates owned
beneficially or controlled the voting of approximately 22,787 shares of FNB
Common Stock, representing approximately 76.1% of the shares of FNB Common Stock
outstanding on that date. Accordingly, these persons have the ability to approve
the Merger without the concurrence of any other shareholder. FNB's directors and
executive officers have informed FNB that they presently intend to vote all of
their shares in favor of approval of the Reorganization Agreement. See "MEETING
INFORMATION--Record Date; Voting Rights; Vote Required."
THE MERGER
EFFECT OF THE MERGER. If the Reorganization Agreement is approved and
the Merger becomes effective, a wholly-owned subsidiary of Norwest will merge
with FNB, with FNB being the surviving corporation in the Merger and becoming a
wholly-owned subsidiary of Norwest. In the Merger, each share of FNB Common
Stock outstanding immediately prior to the Merger (other than shares as to which
statutory dissenters' rights have been validly exercised and not forfeited) will
be automatically converted into and represent the right to receive shares of
Norwest Common Stock and cash in lieu of fractional shares thereof. The number
of shares of Norwest Common Stock you will be entitled to receive will be
determined by multiplying the exchange ratio by the number of shares of FNB
Common Stock owned by you.
EXCHANGE RATIO. The exchange ratio will be determined in accordance with
the formula set forth in paragraph 1(a) of the Reorganization Agreement. Under
the formula, the exchange ratio will equal the "Adjusted Norwest Shares" divided
by the number of shares of FNB Common Stock outstanding immediately prior to the
Effective Time of the Merger. The Adjusted Norwest Shares will be based on the
"Norwest Measurement Price," or the average of the closing prices of a share of
Norwest Common Stock, as reported on the NYSE during the 20 trading day period
ending on the last trading day before the Special Meeting. There are currently
29,953 shares of FNB Common Stock outstanding. Under the Reorganization
Agreement, the number of shares of FNB Common Stock that will be outstanding
immediately prior to the Merger may not be increased or decreased without the
consent of Norwest. As a result, in applying the formula to determine the range
of possible exchange ratios, you may assume that there will be 29,953 shares of
FNB Common Stock outstanding immediately prior to the Merger.
The Adjusted Norwest Shares number (and thus the exchange ratio) will be
determined as follows:
(1) If the Norwest Measurement Price is equal to or greater than $40.25,
then the Adjusted Norwest Shares will be 304,472. In this case, the
exchange ratio would equal 304,472 divided by 29,953, or 10.165.
7
<PAGE>
(2) If the Norwest Measurement Price is equal to or less than $36.25, then
the Adjusted Norwest Shares will be 338,069. In this case, the exchange
ratio would equal 338,069 divided by 29,953, or 11.287.
(3) If the Norwest Measurement Price is less than $40.25 and more than
$36.25, then the Adjusted Norwest Shares will be the number obtained by
dividing $12,255,000 by the Norwest Measurement Price. Thus, for
example, if the Norwest Measurement Price is $38, the Adjusted Norwest
Shares would be $12,255,000 divided by $38, or 322,500. In this example,
the exchange ratio would equal 322,500 divided by 29,953, or 10.767.
See "THE MERGER--Merger Consideration" for additional information on the
exchange ratio formula..
REASONS FOR THE MERGER AND RECOMMENDATION OF THE FNB BOARD. At a meeting of
FNB's board of directors (the "FNB Board") held on January 17, 1997, after
considering the terms and conditions of the Reorganization Agreement, the FNB
Board approved the Reorganization Agreement. The FNB Board believes that the
Merger is advisable and in the best interests of FNB and its shareholders and
recommends that shareholders of FNB approve the Reorganization Agreement. In
reaching its determination to enter into the Reorganization Agreement, the FNB
Board considered a number of factors, including but not limited to the
following: the current and prospective economic environment and competitive
constraints facing independent community banks such as the Bank; the FNB Board's
view of reasonably available alternatives for the shareholders; the increased
liquidity and diversification of risk that the Merger would provide to FNB's
shareholders; and the FNB Board's view that the consideration to be received by
FNB's shareholders pursuant to the Reorganization Agreement was the highest
price reasonably obtainable. For a discussion of the circumstances surrounding
the Merger and the factors considered by the FNB Board in making its
recommendation, see "THE MERGER--Background of and Reasons for the Merger."
THE BOARD OF DIRECTORS OF FNB UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE IN FAVOR OF APPROVAL OF THE REORGANIZATION AGREEMENT.
CONDITIONS TO THE MERGER; TERMINATION OF THE REORGANIZATION AGREEMENT.
The obligations of Norwest and FNB to effect the Merger are subject to the
satisfaction or, if permissible under the Reorganization Agreement, waiver of a
number of conditions, in addition to approval of the Reorganization Agreement by
FNB's shareholders. The Reorganization Agreement is subject to termination by
one or more parties at any time prior to the Effective Time of the Merger upon
the occurrence of certain specified events. See "THE MERGER--Conditions to the
Merger" and "--Termination of Reorganization Agreement."
REGULATORY APPROVALS. The Merger is subject to the prior approval of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board")
and the Director of the Financial Institutions Division of the Regulation and
Licensing Department of the state of New Mexico. Norwest has filed applications
with these authorities requesting approval of the Merger; however, there can be
no assurance that the necessary regulatory approval will be obtained or as to
the timing or conditions of such approval. See "THE MERGER--Regulatory
Approvals."
EFFECTIVE TIME AND CLOSING OF THE MERGER. If the Reorganization
Agreement is approved at the Special Meeting and all other conditions to the
Merger have been satisfied or waived, the parties expect the Merger to become
effective (the "Effective Time of the Merger") at 11:59 p.m. on the date the
required documents relating to the Merger are filed with and accepted by the New
Mexico State Corporation Commission in accordance with the relevant provisions
of the New Mexico Business Corporation Act ("NMBCA"). The parties expect to file
the required documents as soon as practicable following approval of the
Reorganization
8
<PAGE>
Agreement at the Special Meeting. See "THE MERGER--Conditions to the Merger" and
"--Regulatory Approvals."
COMPETING TRANSACTIONS. Subject to certain exceptions, FNB and the Bank,
and their respective directors, officers, representatives and agents, are
prohibited under the Reorganization Agreement from directly or indirectly
soliciting, authorizing the solicitation of or entering into any discussions
with any party other than Norwest concerning certain transactions involving the
acquisition of FNB's or the Bank's capital stock or assets. See "THE
MERGER--Competing Transactions."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. In the Merger, FNB's
directors and executive officers will receive the same consideration for their
shares of FNB Common Stock as the other shareholders of FNB will receive for
their shares of FNB Common Stock. Certain members of the FNB Board and
management, however, may be deemed to have interests in the Merger that are in
addition to and separate from the interests of FNB's shareholders generally.
These interests include, among others: the Employment and Non-Competition
Agreements executed by H. Barton Jones and Craig L. Cosner; the termination of
certain Salary Continuation Agreements between the Bank and nine of its officers
in consideration of the payment of an aggregate of approximately $373,000 to
such officers; the offer to any officer, director or employee of FNB or the Bank
to purchase from FNB or the Bank any life insurance policy with respect to such
individual, which has FNB as the beneficiary thereof, at a price equal to the
cash value thereof; and provisions in the Reorganization Agreement relating to
the continuation of certain director and officer indemnification rights and the
maintenance of certain directors' and officers' liability insurance policies.
See "INFORMATION ABOUT FNB AND THE BANK--Management of FNB--Interests of
Management and Others in Certain Transactions."
DIRECTORS AND OFFICERS OF FNB AFTER THE MERGER. Following the Effective
Time of the Merger, Norwest will be the sole shareholder of FNB and, for that
reason, will be in a position to elect or appoint all of the directors and
officers of FNB.
DISSENTERS' RIGHTS. Under New Mexico law, holders of FNB Common Stock
will have the right to dissent from the Merger and, subject to certain
conditions, receive a cash payment equal to the fair value of their shares.
Failure to comply strictly with the statutory procedures in the exercise of
dissenters' rights will nullify such rights. For more information concerning
dissenters' rights and the procedures to be followed to exercise such rights,
see "THE MERGER--Dissenters' Rights" and Appendix C.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES. It is intended that the
Merger will be treated as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and that as a
result (a) no gain or loss will be recognized by the holders of FNB Common Stock
upon receipt of Norwest Common Stock in exchange therefor pursuant to the
Merger, except for cash received in lieu of fractional shares; (b) the aggregate
adjusted tax basis of the Norwest Common Stock received by the holders of FNB
Common Stock will be the same as the aggregate adjusted tax basis of the FNB
Common Stock exchanged therefor reduced by the amount allocable to fractional
share interests for which cash is received; and (c) the holding period of the
shares of Norwest Common Stock received by the holders of FNB Common Stock will
include the holding period of the FNB Common Stock, provided the shares of FNB
Common Stock were held as a capital asset as of the Effective Time of the
Merger. See "THE MERGER-- Certain U.S. Federal Income Tax Consequences."
Consummation of the Merger is conditioned upon the receipt by FNB of an opinion
of Bracewell & Patterson, L.L.P., Houston, Texas, counsel for FNB, substantially
to such effect.
9
<PAGE>
THE U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE MERGER MAY BE
DIFFERENT FOR PARTICULAR TYPES OF FNB SHAREHOLDERS OR IN LIGHT OF EACH FNB
SHAREHOLDER'S PERSONAL INVESTMENT CIRCUMSTANCES. FOR THAT REASON, FNB
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S.
FEDERAL INCOME TAX CONSEQUENCES THAT MAY BE RELEVANT TO THEM IN CONNECTION WITH
THE MERGER, AS WELL AS THE APPLICATION TO THEM OF ANY STATE, LOCAL, FOREIGN, OR
OTHER TAX LAWS AND THE POSSIBLE EFFECT OF CHANGES IN SUCH LAWS.
MARKET INFORMATION
On January 16, 1997 (the last business day preceding public announcement
of the Reorganization Agreement) and on May , 1997 (the last practicable date
prior to the mailing of this Proxy Statement-Prospectus), the closing prices per
share of Norwest Common Stock (as reported on the NYSE composite tape) were
$46.25 and $_____, respectively. The market price for Norwest Common stock will
fluctuate between the date of this Proxy Statement-Prospectus and the Effective
Time of the Merger, which may be a period of several weeks or more. As a result,
the market value per share of the Norwest Common Stock that shareholders of FNB
ultimately receive in the Merger could be more or less than its market value on
the date of this Proxy Statement-Prospectus. No assurance may be given
concerning the market price of the Norwest Common Stock before or after the
Effective Time of the Merger.
There is no public market for FNB Common Stock. See "INFORMATION
ABOUT FNB AND THE BANK--Market Information and Dividends."
COMPARISON OF RIGHTS OF HOLDERS OF FNB COMMON STOCK AND NORWEST COMMON STOCK
As of the date of this Proxy Statement-Prospectus, the rights of FNB's
shareholders are governed by the NMBCA and the FNB Articles and FNB Bylaws. At
the Effective Time of the Merger, FNB's shareholders will become stockholders of
Norwest. For that reason, their rights will thereafter be governed by the
Delaware General Corporation Law (the "DGCL") and the Norwest Certificate and
Norwest Bylaws. See "COMPARISON OF RIGHTS OF HOLDERS OF FNB COMMON STOCK AND
NORWEST COMMON STOCK" for additional information and for definitions of certain
capitalized terms.
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
FNB Common Stock on a historical and pro forma equivalent basis giving effect to
the Merger using the purchase method of accounting. (For a description of the
purchase method of accounting and the related effects on the historical
financial statements of Norwest, see "THE MERGER--Accounting Treatment.") The
historical data for Norwest for the year ended December 31, 1996 included in the
table are derived from the audited consolidated financial statements of Norwest
(including the related notes thereto) incorporated by reference into this Proxy
Statement-Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." The
historical data for FNB for the year ended December 31, 1996 included in the
table are derived from FNB's audited consolidated financial statements included
in the Proxy Statement-Prospectus.
The data in the table are based on the assumption that 304,472 shares of
Norwest Common Stock will be issued in the Merger. This number is based on an
assumed Norwest Measurement Price of $40.25 or more and the resulting exchange
ratio of 10.165 shares of Norwest Common Stock for each share of FNB Common
Stock. The exchange ratio of 10.165 shares of Norwest Common Stock for each
share of FNB Common Stock is referred to in the footnotes to the table as the
"assumed exchange ratio." The actual Norwest Measurement Price (and thus the
actual exchange ratio) will not be determined until the end
10
<PAGE>
of a 20-trading day measurement period ending on the last trading day before the
Special Meeting. See "THE MERGER--Merger Consideration" for the definition of
the term Norwest Measurement Price.
The comparative per common share data set forth in the following table
are not necessarily indicative of the results of the future operations of the
combined entity or the actual results that would have occurred had the Merger
become effective prior to the periods indicated.
<TABLE>
<CAPTION>
Norwest Common Stock FNB Common Stock
-------------------- ----------------------
Pro Forma Pro Forma
Historical Combined Historical Equivalent
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
BOOK VALUE (1):
December 31, 1996 $15.94 15.95 300.32 162.13
DIVIDENDS DECLARED (2):
Year Ended December 31, 1996 1.05 1.05 8.00 10.67
NET INCOME (3):
Year Ended December 31, 1996 3.07 3.07 21.20 31.21
</TABLE>
(1) The pro forma combined book value per share of Norwest Common Stock
represents the historical total combined common stockholders' equity for
Norwest and FNB divided by total pro forma common shares of the combined
entities. The pro forma equivalent book value per share of Norwest
Common Stock represents the pro forma combined book value per share
multiplied by the assumed exchange ratio of 10.165.
(2) Assumes no changes in cash dividends per share by Norwest. The pro forma
equivalent dividends per share of FNB Common Stock represent cash
dividends declared per share of Norwest Common Stock multiplied by the
assumed exchange ratio of 10.165.
(3) The pro forma combined net income per share of Norwest Common Stock
(based on fully diluted net income and weighted average number of common
and common equivalent shares) is based upon the combined historical net
income for Norwest and FNB divided by the average pro forma common and
common equivalent shares of the combined entities. The pro forma
equivalent net income per share of FNB Common Stock represents the pro
forma combined net income per share multiplied by the assumed exchange
ratio of 10.165.
SELECTED CONSOLIDATED FINANCIAL DATA
NORWEST. The following table sets forth certain selected historical
consolidated financial information for Norwest. The income statement and balance
sheet data for Norwest included in the selected consolidated financial data for
each of the five years ended December 31, 1996 are derived from the audited
consolidated financial statements of Norwest for such five-year period. The data
for Norwest should be read in conjunction with Norwest's consolidated financial
statements (including the related notes thereto) incorporated herein by
reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
11
<PAGE>
NORWEST CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------------------
1996 1995 1994 1993(1) 1992(2)
(In millions except per share amounts)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income.................. $6,318.3 5,717.3 4,393.7 3,946.3 3,806.4
Interest expense................. 2,617.0 2,448.0 1,590.1 1,442.9 1,610.6
-------- ------- ------- ------- -------
Net interest income............ 3,701.3 3,269.3 2,803.6 2,503.4 2,195.8
Provision for credit losses...... 394.7 312.4 164.9 158.2 270.8
Non-interest income.............. 2,564.6 1,848.2 1,638.3 1,585.0 1,273.7
Non-interest expenses............ 4,089.7 3,382.3 3,096.4 3,050.4 2,553.1
-------- ------- ------- ------- -------
Income before income taxes..... 1,781.5 1,422.8 1,180.6 879.8 645.6
Income tax expense............... 627.6 466.8 380.2 266.7 175.6
-------- ------- ------- ------- -------
Income before cumulative
effect of a
change in accounting method.... 1,153.9 956.0 800.4 613.1 470.0
Cumulative effect on years prior
to 1992 of
change in accounting method...... -- -- -- -- (76.0)
-------- ------- ------- ------- -------
Net income....................... $1,153.9 956.0 800.4 613.1 394.0
======== ======= ======= ======= =======
PER COMMON SHARE DATA
Net income per share:
Primary:
Before cumulative effect of a
change in accounting method.. $ 3.07 2.76 2.45 1.89 1.44
Cumulative effect on years
prior to
1992 of change in accounting
method -- -- -- -- (0.25)
------- -------- -------- ------- ------
Net income................... $ 3.07 2.76 2.45 1.89 1.19
======= ======== ======== ======= ======
Fully diluted:
Before cumulative effect of
a change in accounting method $ 3.07 2.73 2.41 1.86 1.42
Cumulative effect on years
prior to
1992 of change in accounting
method -- -- -- -- (0.23)
------- ------ ------ ------ -----
Net income................... $ 3.07 2.73 2.41 1.86 1.19
======= ====== ====== ====== ======
Dividends declared per common
share ........................... $ 1.050 0.900 0.765 0.640 0.540
BALANCE SHEET DATA At period end:
Total assets................... $80,175.4 72,134.4 59,315.9 54,665.0 50,037.0
Long-term debt................. 13,082.2 13,676.8 9,186.3 6,850.9 4,553.2
Total shareholders' equity..... 6,064.2 5,312.1 3,846.4 3,760.9 3,371.8
</TABLE>
12
<PAGE>
(1) On January 14, 1994, First United Bank Group, Inc. ("First United"), a
$3.9 billion bank holding company headquartered in Albuquerque, New
Mexico, was acquired by Norwest in a pooling of interests transaction.
Norwest's historical results have been restated to include the
historical results of First United. Appropriate Norwest items reflect an
increase in First United's provision for credit losses of $16.5 million
to conform with Norwest's credit loss reserve practices and methods and
$83.2 million in charges for merger-related expenses, including
termination costs, systems and operations costs, and investment banking,
legal, and accounting expenses.
(2) On February 9, 1993, Lincoln Financial Corporation ("Lincoln"), a $2.0
billion bank holding company headquartered in Fort Wayne, Indiana, was
acquired by Norwest in a pooling of interests transaction. Norwest's
historical results have been restated to include the historical results
of Lincoln. Appropriate Norwest items reflect an increase in Lincoln's
provision for credit losses of $60.0 million and $33.5 million in
Lincoln's provisions and expenditures for costs related to restructuring
activities.
13
<PAGE>
FNB. The following table sets forth certain selected historical
consolidated financial information for FNB. The income statement and balance
sheet data for FNB included in the selected consolidated financial data for the
year ended December 31, 1996 are derived from the audited consolidated financial
statements of FNB for such year. The selected consolidated financial data for
FNB for the year ended December 31, 1995 are derived from the unaudited
consolidated financial statements of FNB for such year. All financial data
derived from unaudited financial statements reflect, in the opinion of FNB's
management, all adjustments (consisting of only normal recurring adjustments)
necessary for a fair presentation of such data. The data for FNB should be read
in conjunction with FNB's consolidated financial statements (including the
related notes thereto) included in this Proxy Statement-Prospectus.
THE FIRST NATIONAL BANKSHARES, INC. AND SUBSIDIARY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED
DECEMBER 31
--------------------
1996 1995
---- ----
INCOME STATEMENT DATA
Interest Income $6,865 6,613
Interest expense 2,755 2,695
----- -----
Net interest income 4,110 3,918
Provision for credit losses 107 90
----- -----
Net interest income after
provision for loan losses 4,003 3,828
Non-interest income 999 861
Non-interest expense 4,011 3,684
----- -----
Income before income tax expense 991 1,005
Income tax expense 356 225
----- -----
Net income $ 635 780
====== ======
PER COMMON SHARE DATA
Net income $21.20 26.04
Dividends declared 8.00 8.00
BALANCE SHEET DATA At period end:
Assets $92,201 89,153
Long-term debt -- --
Total shareholders' equity 8,996 8,628
14
<PAGE>
SHARE PRICES AND DIVIDENDS FOR NORWEST COMMON STOCK
The following table sets forth the high and low sales prices per share of
the Norwest Common Stock, and the cash dividends paid on such Norwest Common
Stock, for the below quarterly periods, which correspond to Norwest's quarterly
fiscal periods for financial reporting purposes. The prices for Norwest Common
Stock are as reported on the NYSE Composite Tape. There is no public market for
FNB Common Stock.
Norwest Common Stock
High Low Dividends
------- ------ ---------
1995
First Quarter $26.250 22.625 0.210
Second Quarter 29.375 25.125 0.210
Third Quarter 32.750 26.875 0.240
Fourth Quarter 34.750 29.250 0.240
1996
First Quarter 37.125 30.500 0.240
Second Quarter 37.500 33.000 0.270
Third Quarter 41.000 32.000 0.270
Fourth Quarter 46.875 40.750 0.270
1997
First Quarter 53.250 42.750 0.300
Second Quarter
(through April__,
1997)
15
<PAGE>
MEETING INFORMATION
GENERAL
This Proxy Statement-Prospectus is being furnished to holders of FNB
Common Stock in connection with the solicitation of proxies by the FNB Board for
use at the Special Meeting and at any adjournments or postponements thereof. The
Special Meeting will be held on June 11, 1997 at 10:00 a.m., local time, at 302
South First Street, Tucumcari, New Mexico.
At the Special Meeting, shareholders of FNB will consider and vote upon
a proposal to approve the Reorganization Agreement. The FNB Board is not aware
as of the date of this Proxy Statement-Prospectus of any business to be acted
upon at the Special Meeting other than the proposal to approve the
Reorganization Agreement. If other matters are properly brought before the
Special Meeting or any adjournments or postponements thereof, the persons
appointed as proxies will have discretion to vote or act on such matters
according to their best judgment.
RECORD DATE; VOTING RIGHTS; VOTE REQUIRED
The FNB Board has fixed the close of business on May ___, 1997 as the
record date for the determination of shareholders of FNB entitled to receive
notice of and to vote at the Special Meeting (the "Record Date"). On the Record
Date there were 29,953 shares of FNB Common Stock outstanding and entitled to
vote. Holders of FNB Common Stock are entitled to one vote per share held of
record on the Record Date. The presence in person or by proxy at the Special
Meeting of the holders of a majority of the shares of FNB Common Stock
outstanding on the Record Date will constitute a quorum for the transaction of
business at the Special Meeting.
Under the NMBCA and the FNB Articles and FNB Bylaws, approval of the
Reorganization Agreement will require the affirmative vote of the holders of a
majority of the outstanding shares of FNB Common Stock. Directors and executive
officers of FNB and their affiliates beneficially owned as of the Record Date an
aggregate of approximately 22,787 shares, or approximately 76.1%, of the
outstanding shares of FNB Common Stock. Accordingly, these persons may approve
the merger without the concurrence of any other shareholder. FNB has been
informed that its directors and executive officers and their affiliates
presently intend to vote their shares of FNB Common Stock in favor of approval
of the Reorganization Agreement.
A failure to vote, either by not returning the enclosed proxy or by
checking the "Abstain" box thereon, will have the same effect as a vote against
approval of the Reorganization Agreement. See "--Voting and Revocation of
Proxies."
If a majority of the votes eligible to be cast by the holders of FNB
Common Stock do not vote in favor of approval of the Reorganization Agreement,
FNB will remain a separate entity.
16
<PAGE>
VOTING AND REVOCATION OF PROXIES
Shares of FNB Common Stock represented by a proxy properly signed and
received at or prior to the Special Meeting, unless subsequently revoked, will
be voted at the Special Meeting in accordance with the instructions thereon. If
a proxy is signed and returned without indicating any voting instructions,
shares of FNB Common Stock represented by such proxy will be voted FOR approval
of the Reorganization Agreement. Any proxy given pursuant to this solicitation
may be revoked by the person giving it at any time before the proxy is voted by
filing either an instrument revoking it or a duly executed proxy bearing a later
date with the secretary of FNB prior to or at the Special Meeting or by voting
the shares subject to the proxy in person at the Special Meeting. Attendance at
the Special Meeting will not by itself constitute a revocation of a proxy.
A proxy may indicate that all or a portion of the shares represented
thereby are not being voted with respect to a specific proposal. This could
occur, for example, when a broker is not permitted to vote shares held in the
name of a nominee on certain proposals in the absence of instructions from the
beneficial owner. Shares that are not voted with respect to a specific proposal
will be considered as not present for such proposal, even though such shares
will be considered present for purposes of determining a quorum and voting on
other proposals. Abstentions on a specific proposal will be considered as
present but will not be counted as voting in favor of such proposal. The
proposal to approve the Reorganization Agreement must be approved by the holders
of a majority of the shares of FNB Common Stock outstanding on the Record Date.
Because the proposal to approve the Reorganization Agreement requires the
affirmative vote of a specified percentage of outstanding shares, the nonvoting
of shares or abstentions with regard to this proposal will have the same effect
as voting against the proposal.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees
of FNB and the Bank may solicit proxies from the shareholders of FNB, either
personally or by telephone or other form of communication. None of the foregoing
persons who solicit proxies will be specifically compensated for such services.
Nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable expenses incurred in sending proxy material to beneficial owners. FNB
will bear its own expenses in connection with any solicitation of proxies for
the Special Meeting. See "THE MERGER--Expenses."
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE TO
THE SHAREHOLDERS OF FNB. SHAREHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER
THE INFORMATION PRESENTED IN THIS PROXY STATEMENT-PROSPECTUS AND TO COMPLETE,
DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO FNB IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE.
17
<PAGE>
THE MERGER
This section of the Proxy Statement-Prospectus describes certain aspects
of the Merger. The following description does not purport to be complete and is
qualified in its entirety by reference to the Reorganization Agreement, a copy
of which is attached as Appendix A to this Proxy Statement-Prospectus and
incorporated herein by reference. Shareholders are urged to read the
Reorganization Agreement in its entirety.
Parenthetical references are to sections of the Reorganization
Agreement. FNB and the Bank are referred to in the Reorganization Agreement as
"FNBI" and "FNBI Subsidiary," respectively.
GENERAL
At the Effective Time of the Merger, a wholly-owned subsidiary of
Norwest will be merged with FNB, with FNB being the surviving corporation in the
Merger and becoming a wholly-owned subsidiary of Norwest. Except with respect to
fractional shares and shares as to which dissenters' rights have been exercised,
if the Reorganization Agreement is approved and the Merger becomes effective,
each share of FNB Common Stock outstanding immediately prior to the Effective
Time of the Merger will be automatically converted into and represent the right
to receive shares of Norwest Common Stock. See "--Merger Consideration" below.
Following the Effective Time of the Merger, Norwest will be the sole shareholder
of FNB. Shares of Norwest Common Stock issued and outstanding immediately before
the Effective Time of the Merger will remain issued and outstanding immediately
after the Effective Time of the Merger.
MERGER CONSIDERATION
SHARES OF NORWEST COMMON STOCK. Except with respect to fractional shares
as described below and shares as to which dissenters' rights have been
exercised, if the Reorganization Agreement is approved and the Merger becomes
effective, you will be entitled to receive shares of Norwest Common Stock in
exchange for shares of FNB Common Stock owned by you. The number of shares of
Norwest Common Stock you will be entitled to receive will be determined by
multiplying the exchange ratio by the number of shares of FNB Common Stock owned
by you immediately prior to the Merger.
The exchange ratio will be determined in accordance with the formula set
forth in paragraph 1(a) of the Reorganization Agreement. The formula provides
that the exchange ratio will equal the "Adjusted Norwest Shares" divided by the
number of shares of FNB Common Stock outstanding immediately prior to the
Effective Time of the Merger. The Adjusted Norwest Shares number is based on the
"Norwest Measurement Price," which is defined as the average of the closing
prices of a share of Norwest Common Stock, as reported on the NYSE during the 20
trading day period ending on the last trading day before the Special Meeting.
Under the terms of the Reorganization Agreement, the maximum number of shares of
FNB Common Stock that may be outstanding immediately prior to the Effective Time
of the Merger is 29,953 shares. (paragraph 2(c)) In addition, FNB is prohibited
under the Reorganization Agreement from redeeming or purchasing shares of FNB
Common Stock without the consent of Norwest. (paragraph 4(b)) As a result, for
purposes of applying the formula, you may assume that there will be 29,953
shares of FNB Common Stock outstanding immediately prior to the Effective Time
of the Merger.
18
<PAGE>
The Adjusted Norwest Shares number (and thus the exchange ratio) will be
determined as follows:
(1) If the Norwest Measurement Price is equal to or greater than $40.25,
then the Adjusted Norwest Shares will be 304,472. In this case, the
exchange ratio would equal 304,472 divided by 29,953, or 10.165.
(2) If the Norwest Measurement Price is equal to or less than $36.25, then
the Adjusted Norwest Shares will be 338,069. In this case, the exchange
ratio would equal 338,069 divided by 29,953, or 11.287.
(3) If the Norwest Measurement Price is less than $40.25 and more than
$36.25, then the Adjusted Norwest Shares will be the number obtained by
dividing $12,255,000 by the Norwest Measurement Price. Thus, for
example, if the Norwest Measurement Price is $38, the Adjusted Norwest
Shares would be $12,255,000 divided by 38, or 322,500. In this example,
the exchange ratio would equal 322,500 divided by 29,953, or 10.767.
The closing price of a share of Norwest Common Stock on the effective date of
the Merger may be higher or lower than the Norwest Measurement Price.
CASH IN LIEU OF REMAINING FRACTIONAL SHARES. In the event the aggregate
number of shares of Norwest Common Stock you are entitled to receive in the
Merger does not equal a whole number, you will receive cash in lieu of the
fractional share. The cash payment will be equal to the product of the
fractional part of the share of Norwest Common Stock multiplied by the average
of the closing prices of a share of Norwest Common Stock as reported by the
consolidated tape of the NYSE for each of the five trading days immediately
preceding the Effective Time of the Merger. (paragraph 1(c))
BACKGROUND OF AND REASONS FOR THE MERGER
Since the early 1990s, FNB management has monitored developments in bank
acquisitions in New Mexico, along with developments in the banking industry
generally. During this time, members of the FNB Board became concerned that
industry trends toward competition, consolidation and the increased use of
technology could combine to erode FNB's customer base. In 1994, a representative
of Norwest's then existing operation in New Mexico contacted management of FNB,
stating that Norwest had an interest in establishing a presence in the markets
served by the Bank and inquiring whether FNB had any interest in being acquired
by Norwest. While FNB was not interested in pursuing discussions at that time,
this inquiry confirmed that competition from larger financial institutions
utilizing increasingly sophisticated technology would be a factor in the future
in FNB's markets.
Subsequent to 1994, FNB continued to monitor bank acquisition activity
in New Mexico, identifying and investigating in an informal way the institutions
that served New Mexico. At the same time, FNB continued to observe anecdotal
evidence of the increasing competition in the banking industry, and the need for
significant investments in technology to provide the products and services
necessary to obtain and retain customers. In January 1996, the Chairman met with
FNB's traditional legal and accounting advisors to discuss FNB's future. As a
result of these discussions, the FNB Board determined that it was time to
investigate whether a merger with a larger institution would be in the best
interests of its shareholders. Based on its informal investigations, senior
management of FNB had formed the belief that a stock-for-stock transaction with
Norwest afforded the best opportunity for
19
<PAGE>
the FNB shareholders. If a satisfactory arrangement could be negotiated with
Norwest, FNB believed that it would be in the interests of its shareholders to
manage the acquisition process affirmatively, rather than to wait for a second
approach from Norwest or an offer from another acquiror. Accordingly, in
February 1996 the Chairman contacted the Norwest representative who had
previously contacted FNB to ascertain whether Norwest would still be interested
in discussing the acquisition of FNB. The Norwest representative responded
affirmatively, and undertook to begin the process.
The acquisition process proceeded deliberately, and while it was ongoing
FNB considered whether approaching other potential acquirors would reduce the
time necessary to complete a transaction and result in a comparable value to
shareholders. After considering the other institutions active in New Mexico,
including transactions completed by these parties and the price and liquidity of
their common equity securities, FNB concluded that a transaction with Norwest,
if it could be completed, would be preferable to a transaction with other
potential acquirors. Accordingly, FNB determined to continue its negotiations
with Norwest.
In August 1996, a Norwest representative indicated to FNB a willingness
to discuss a cash merger transaction valued at $12,500,000. After due
consideration, FNB indicated its disappointment with the both the form and
amount of consideration, as well as the taxable nature of the transaction.
Following further negotiations, Norwest's representative tendered a proposal in
September 1996 to acquire FNB for 340,000 shares of Norwest Common Stock. As a
result, FNB and Norwest eventually signed a nonbinding letter of intent
providing for the acquisition of FNB for shares of Norwest Common Stock
containing the price ranges (or "collars") eventually included in the
Reorganization Agreement. During November 1996 Norwest completed its due
diligence examination of FNB and the Bank and thereafter submitted several draft
agreements for review by FNB and its legal and accounting advisors, which
included certain modifications based on the results of Norwest's review. The
negotiation process concluded on January 17, 1997 with the execution of the
Reorganization Agreement.
In reaching its decision to approve the terms of the Reorganization
Agreement, the FNB Board considered a number of factors, including, without
limitation, the following:
1. The familiarity of the FNB Board with FNB's business, operations,
financial condition, earnings and prospects, and its investigation (directly
and through its advisors) of similar matters concerning Norwest.
2. The current and prospective economic environment and competitive
constraints facing FNB, including specifically the superior products and
services which larger competitors could offer to customers and the need for
substantial investments by FNB in technology to compete with such
competitors.
3. The limited alternatives available to FNB and the relation of the
price to be received by the FNB shareholders in the Merger to the FNB
Board's view of the value of these limited alternatives, as well as the
timing and likelihood of actually receiving, and the risks associated with
pursuing, such alternatives.
4. The expectation that the receipt of the Norwest Common Stock
generally will be a tax-free transaction to the FNB shareholders, allowing
them to defer the recognition of this gain.
5. The FNB Board's evaluation of the risks to the consummation of the
Merger, including the risks associated with obtaining all necessary
regulatory approvals without
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the imposition of terms or conditions which would fail to satisfy the
conditions to the consummation of the Merger.
6. The increased liquidity that the Norwest Common Stock would
provide to current FNB shareholders.
In its deliberations, the FNB Board did not assign any specific weights
to these or any other factors.
Based on the foregoing and other factors, the FNB Board concluded that
the Merger is in the best interests of FNB and its shareholders. ACCORDINGLY,
THE BOARD OF DIRECTORS OF FNB UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
IN FAVOR OF THE APPROVAL OF THE REORGANIZATION AGREEMENT.
DISSENTERS' RIGHTS
Shareholders of FNB are entitled to exercise dissenters' rights under
Sections 53-15-3 and 53-15-4 of the NMBCA. Shareholders electing to demand the
appraisal of their shares may not vote in favor of the Merger and must deliver a
written objection to the Merger to FNB at its principal executive offices either
before the date of the Special Meeting or before the taking of the vote on the
Merger at the Special Meeting. By properly executing a proxy card with no voting
instructions indicated thereon, a shareholder will vote in favor of the approval
and adoption of the Reorganization Agreement and, accordingly, will not be
entitled to exercise dissenters' rights in connection with the Merger. If the
Merger is approved, a shareholder who did not vote in favor of the Merger may,
within ten days after the date on which the vote on the Merger is taken, make
written demand on FNB, as the surviving corporation, for payment of the fair
value of the shareholder's shares in cash. Such demand will be sufficient if it
reasonably informs FNB of the identity of the shareholder and that the
shareholder intends thereby to demand the appraisal of the shareholder's shares.
Because a proxy or vote against the Merger will not constitute such a demand, a
separate written demand is required. Failure to comply with these procedures,
including without limitation the failure to demand payment within ten days
following approval of the Merger Agreement by the FNB shareholders, will cause
the shareholder to lose his dissenters' rights with respect to such shares.
Within ten days after the Effective Time of the Merger, FNB will give
written notice to each shareholder who has made a demand for appraisal of the
effectiveness of the Merger and will make a written offer to each such
shareholder to pay for such shares at a specified price deemed by FNB to be the
fair value of the shares. The notice and offer must be accompanied by FNB's
balance sheet as of the last available date (but no more than 12 months prior to
the making of the offer) and a profit and loss statement for the 12-month period
ended on the date of the balance sheet. If, within 30 days after the Effective
Time of the Merger, the shareholder and FNB reach an agreement as to the fair
value of the shareholder's shares, FNB will remit the fair value payment agreed
upon to the shareholder within 90 days after the Effective Time of the Merger
and upon surrender of the certificates representing such shares. If FNB and the
shareholder do not agree upon the fair value of the shareholder's shares within
such 30-day period, then, within 30 days after receipt of written demand from
any dissenting shareholder which is given within 60 days after consummation of
the Merger, FNB shall, or at FNB's election at any time within such 60-day
period FNB may, file a petition in any court of competent jurisdiction in the
county where FNB's registered office is located (the "Court"), asking that the
Court determine the fair value of the shares. If FNB fails to file such a
petition, any shareholder demanding appraisal rights may do so on FNB's behalf.
All shareholders asserting appraisal rights will
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be made parties to any court action filed to determine such fair value. No
demand for appraisal may be withdrawn without the consent of FNB. If a demand is
withdrawn with the consent of FNB, the shareholder's status will be restored and
he will participate in the Merger in accordance with its terms.
At a hearing on a petition for appraisal, the Court may, in its
discretion, appoint one or more appraisers to receive evidence and to recommend
a decision on the question of fair value. The appraisers shall have such power
and authority as may be specified in the order of their appointment. The fair
value of the shares is to be determined exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest, if any, to be paid upon the amount determined to be the
fair value. The fair value of the shares, as determined by the Court, together
with interest, if any, will be required to be paid by FNB to all dissenting
holders of FNB Common Stock who have complied with Section 53-15-4.
The Court will assess the costs and expenses of such proceeding,
including reasonable compensation for and the expenses of the appraiser, but
excluding fees and expenses of counsel and experts, against FNB, except that the
Court may assess such costs and expenses as it deems appropriate against any or
all of the dissenting shareholders if it finds that their failure to accept
FNB's offer of payment was arbitrary, vexatious, or otherwise not in good faith.
The Court may award fees of counsel and experts in amounts the Court finds
reasonable against FNB if the determined fair value of the shares materially
exceeds the amount offered by FNB or if FNB fails to make a required offer.
Upon receiving a demand for payment from a dissenting shareholder, FNB
is required to make an appropriate notation in its shareholder records. Within
20 days of demanding payment for such shareholder's shares, each holder of
shares represented by certificates demanding payment shall submit the
certificates to the corporation for notation thereon that such demand has been
made. The failure of a shareholder to do so shall, at the option of FNB,
terminate such shareholder's right to seek appraisal of the shares unless a
court of competent jurisdiction, for good and sufficient cause shown, otherwise
directs.
From and after the Effective Time of the Merger, no shareholder who has
demanded appraisal rights will be entitled to vote such shareholder's shares of
FNB Common Stock for any purpose or to receive payment of dividends or other
distributions on such stock.
Any demands, notices, or other documents required to be sent to FNB
should be sent to FNB at the address at the forepart of this Proxy
Statement-Prospectus.
THE FOREGOING SUMMARY OF DISSENTERS' RIGHTS DOES NOT PURPORT TO BE A
COMPLETE STATEMENT OF THE PROCEDURE OUTLINED IN THE RELEVANT PROVISIONS OF THE
NMBCA, WHICH ARE REPRODUCED IN THEIR ENTIRETY AS APPENDIX C TO THIS PROXY
STATEMENT-PROSPECTUS. FURTHERMORE, BECAUSE OF THE COMPLEXITY OF THE PROCEDURES
DESCRIBED ABOVE, ANY SHAREHOLDER WISHING TO EXERCISE THE RIGHT TO AN APPRAISAL
MAY WISH TO CONSULT WITH COUNSEL.
SURRENDER OF CERTIFICATES
Promptly following the Effective Time of the Merger, Norwest Bank
Minnesota, National Association, acting in the capacity of exchange agent for
Norwest (the "Exchange Agent"), will mail to each holder of record of shares of
FNB Common Stock a form of letter of transmittal, together with instructions for
the exchange of such holder's stock certificates for a certificate representing
Norwest Common Stock.
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SHAREHOLDERS OF FNB SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
Upon surrender to the Exchange Agent of one or more certificates for FNB
Common Stock together with a properly completed letter of transmittal, there
will be issued and mailed to the holder a certificate representing the number of
whole shares of Norwest Common Stock to which such holder is entitled and, if
applicable, a check for the amount representing any remaining fractional share
(without interest). A certificate for Norwest Common Stock may be issued in a
name other than the name in which the surrendered certificate is registered only
if (i) the certificate surrendered is properly endorsed and is otherwise in
proper form for transfer and (ii) the person requesting the issuance of such
certificate either pays to the Exchange Agent any transfer or other taxes
required by reason of the issuance of a certificate for such shares in a name
other than the registered holder of the certificate surrendered or establishes
to the satisfaction of the Exchange Agent that such taxes have been paid or are
not due.
All Norwest Common Stock issued pursuant to the Merger will be deemed
issued as of the Effective Time of the Merger. No dividends in respect of the
Norwest Common Stock with a record date after the Effective Time of the Merger
will be paid to the former shareholders of FNB entitled to receive certificates
for shares of Norwest Common Stock until such shareholders surrender their
certificates representing shares of FNB Common Stock. Upon such surrender, there
shall be paid to the shareholder in whose name the certificates representing
such shares of Norwest Common Stock are issued any dividends the record and
payment dates of which shall have been after the Effective Time of the Merger
and before the date of such surrender. After such surrender, there shall be paid
to the person in whose name the certificate representing such shares of Norwest
Common Stock is issued, on the appropriate dividend payment date, any dividend
on such shares of Norwest Common Stock which shall have a record date after the
Effective Time of the Merger, as the case may be, and prior to the date of
surrender, but a payment date subsequent to the surrender. In no event shall the
persons entitled to receive such dividends be entitled to receive interest on
amounts payable as dividends.
CONDITIONS TO THE MERGER
CONDITIONS TO THE OBLIGATIONS OF NORWEST AND FNB. The obligations of
both Norwest and FNB to effect the Merger are subject to the satisfaction as of
the Effective Time of the Merger or, if permissible under the Reorganization
Agreement, waiver of a number of conditions, including, among others, the
following: (i) the approval of the Reorganization Agreement by the requisite
vote of FNB's shareholders; (ii) the receipt of all requisite regulatory
approvals; (iii) the receipt by FNB of an opinion of counsel to FNB regarding
certain federal income tax effects of the Merger; (iv) absence of any order
issued by any court or governmental authority of competent jurisdiction
restraining, enjoining or otherwise prohibiting consummation of the Merger; and
(v) the effectiveness of the Registration Statement. See "-- Certain U.S.
Federal Income Tax Consequences." (paragraph 6)
CONDITIONS TO THE OBLIGATION OF FNB. The obligation of FNB to effect the
Merger is subject to the satisfaction as of the Effective Time of the Merger or,
if permissible under the Reorganization Agreement, waiver of certain additional
conditions, including, among others, the following: (i) the performance by
Norwest in all material respects of the agreements made by Norwest in the
Reorganization Agreement and the truthfulness in all material respects of the
representations made by Norwest in the Reorganization Agreement; (ii) the
approval for listing on the NYSE and CHX of the shares of Norwest Common Stock
to be
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issued in the Merger and (iii) the absence of any occurrence or circumstance
which has had or might reasonably be expected to have a material adverse effect
on the financial condition, results of operation or business of Norwest and its
subsidiaries taken as a whole (other than changes in banking laws or regulations
that affect the banking industry generally or changes in the general level of
interest rates). (paragraph 7)
CONDITIONS TO THE OBLIGATION OF NORWEST. The obligation of Norwest to
effect the Merger is subject to the satisfaction as of the Effective Time of the
Merger or, if permissible under the Reorganization Agreement, waiver of certain
additional conditions, including, among others, the following: (i) the
performance by FNB in all material respects of the agreements made by FNB in the
Reorganization Agreement and the truthfulness in all material respects of the
representations made by FNB in the Reorganization Agreement; (ii) the absence of
any condition or requirement in any approval, license or consent relating to FNB
or the Bank that, in the good faith judgment of Norwest, is unreasonably
burdensome to Norwest; (iii) at any time since January 17, 1997 (the date of the
Reorganization Agreement) the total number of shares of FNB Common Stock
outstanding and subject to issuance upon exercise (assuming for this purpose
that phantom shares and other share equivalents constitute FNB Common Stock) of
all warrants, options, conversion rights (including equity securities
convertible into FNB Common Stock), phantom shares or other share equivalents
shall not have exceeded 29,953; (iv) Norwest shall have entered into written
employment agreements with H. Barton Jones and Craig L. Cosner containing terms
reasonably acceptable to the parties thereto; and (v) the absence of any
occurrence or circumstance which has had or might reasonably be expected to have
a material adverse effect on the financial condition, results of operation or
business of FNB and its subsidiaries taken as a whole (other than changes in
banking laws or regulations that affect the banking industry generally or
changes in the general level of interest rates). (paragraph 8)
See paragraphs 6, 7 and 8 of the Reorganization Agreement for additional
conditions to the Merger becoming effective.
REGULATORY APPROVALS
The Merger is subject to prior approval by the Federal Reserve Board
under the Bank Holding Company Act and by the Director of Financial Institutions
Division of the Regulation and Licensing Department of the state of New Mexico.
Norwest has filed applications with these authorities requesting approval of the
Merger; however, there can be no assurance that the necessary regulatory
approval will be obtained or as to the timing of or conditions placed on such
approval.
The approval of any application merely implies satisfaction of
regulatory criteria for approval, which do not include review of the Merger from
the standpoint of the adequacy of the consideration to be received by, or
fairness to, shareholders. Regulatory approvals do not constitute an endorsement
or recommendation of the proposed Merger.
Norwest and FNB are not aware of any governmental approvals or
compliance with banking laws and regulations that are required for the Merger to
become effective other than those described above. The parties currently intend
to seek to obtain any other approval and to take any other action that may be
required to effect the Merger. There can be no assurance that any required
approval or action can be obtained or taken prior to the Special Meeting. The
receipt of all necessary regulatory approvals is a condition to effecting the
Merger. See "--Conditions to the Merger" and "--Termination of Reorganization
Agreement."
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CONDUCT OF BUSINESS PENDING THE MERGER
BY FNB. FNB and the Bank are each required to maintain their corporate
existence in good standing, maintain the general character of their business and
conduct their business in the ordinary and usual manner. In addition, without
the prior written consent of Norwest, neither FNB nor the Bank may (a) renew any
existing loan or extend any additional credit to its established customers for
an amount in excess of $500,000; (b) establish any new customer borrowing
relationship in excess of $100,000; (c) enter into any material agreement,
contract, commitment or capital improvement exceeding $25,000 (other than
banking transactions in the ordinary course of business and in accordance with
policies and procedures in effect on the date of the Reorganization Agreement);
(d) make any investments except in the ordinary course of business for terms of
up to one year and in amounts of $100,000 or less; (e) 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; (f) sell or otherwise dispose of any of its assets or properties other
than in the ordinary course of business; (g) declare, set aside, make or pay any
dividend or other distribution with respect to its capital stock except (1)
prior to the Effective Time of the Merger FNB may declare and pay semi-annual
dividends on FNB Common Stock, in accordance with applicable law and regulation,
not to exceed $4.00 per share per semi-annual period, or a quarterly equivalent
thereto; provided, however that shareholders of FNB shall be entitled to a
dividend on FNB Common Stock or Norwest Common Stock, but not both, in the
calendar quarter in which the closing of the Merger occurs, and (2) any dividend
declared by the board of directors of the Bank in accordance with applicable law
and regulation; (h) redeem, purchase or otherwise acquire, directly or
indirectly, any of the capital stock of FNB; or (i) increase the compensation of
any director, officer or executive employee of FNB, except pursuant to existing
employment agreements, compensation plans and practices. (paragraph 4)
BY NORWEST. Norwest is required to conduct its business and to cause its
significant subsidiaries to conduct their respective businesses in compliance
with all material obligations and duties imposed by laws, regulations, rules and
ordinances or by judicial orders, judgments and decrees applicable to them or to
their businesses or properties. (paragraph 5)
See paragraphs 4 and 5 of the Reorganization Agreement for additional
restrictions on the conduct of business by FNB and Norwest pending the Merger.
COMPETING TRANSACTIONS
FNB and the Bank, and their respective directors, officers,
representatives and agents, are prohibited under the Reorganization Agreement
from directly or indirectly soliciting, authorizing the solicitation of, or
entering into any discussions with any third party concerning any offer or
possible offer to (i) purchase (A) any shares of common stock, (B) any option or
warrant to purchase shares of common stock, (C) any security convertible into
shares of common stock or (D) any other equity security of FNB or the Bank; (ii)
make a tender or exchange offer for any shares of common stock or other equity
security of FNB or the Bank; (iii) purchase, lease or otherwise acquire the
assets of FNB or the Bank except in the ordinary course of business; or (iv)
merge, consolidate or otherwise combine with FNB or the Bank. If any third party
makes an offer or inquiry to FNB or the Bank concerning any of the foregoing,
FNB or the Bank, as applicable, is required to promptly disclose such offer or
inquiry (including the terms thereof) to Norwest. (paragraph 4(h))
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CERTAIN ADDITIONAL AGREEMENTS
FNB. FNB has also agreed under the Reorganization Agreement to (i) if
requested by Norwest, amend, effective as of the Effective Time of the Merger,
certain employee benefit plans of FNB and the Bank; (ii) establish, immediately
prior to the Effective Time of the Merger, such additional accruals and reserves
as may be necessary to conform FNB's accounting and credit loss reserve
practices and methods to those of Norwest and Norwest's plans with respect to
the conduct of FNB's business after the Effective Time of the Merger and, to the
extent permitted by generally accepted accounting principles, provide for costs
and expenses related to effecting the transactions contemplated by the
Reorganization Agreement; (iii) obtain and deliver title commitments, boundary
surveys and appraisals for each of its bank facilities; (iv) take all actions
necessary to effect the dissolution of The First Security Trust Company under
the NMBCA; and (v) use its best efforts to obtain and deliver to Norwest prior
to the Effective Time of the Merger signed representations substantially in the
form attached as Exhibit B to the Reorganization Agreement from each executive
officer, director or shareholder of FNB who may reasonably be deemed an
"affiliate" of FNB within the meaning of each term used in Rule 145 of the
Securities Act. (paragraph 4)
NORWEST. Norwest has agreed under the Reorganization Agreement to (i)
take certain action to maintain FNB's directors' and officers' liability
insurance policies in effect as of the date of the Reorganization Agreement; and
(ii) for a period of up to 15 days prior to the Closing, permit FNB and its
representatives to examine the books, records and properties of Norwest and to
interview officers, employees and agents of Norwest. For more information
concerning the directors' and officers' liability insurance policies, see
"INFORMATION ABOUT FNB AND THE BANK--Management of FNB--Interests of Management
and Others in Certain Transactions."
For information concerning additional agreements and covenants of FNB
and Norwest, see paragraphs 4 and 5 of the Reorganization Agreement.
TERMINATION OF REORGANIZATION AGREEMENT
Subject to the satisfaction of certain notice requirements, either
Norwest or FNB may terminate the Reorganization Agreement at any time prior to
the Effective Time of the Merger, whether before or after approval of the
Reorganization Agreement by FNB's shareholders, pursuant to the mutual written
consent of each party or upon the occurrence or existence of either of the
following events or conditions: (i) the Merger has not become effective by
September 30, 1997, unless such failure of the Merger to become effective is due
to the failure of the party seeking termination to perform or observe in all
material respects the covenants and agreements to be performed or observed by it
under the Reorganization Agreement; or (ii) any court or governmental authority
of competent jurisdiction shall have issued a final order restraining, enjoining
or otherwise prohibiting the transactions contemplated by the Reorganization
Agreement. (paragraph 10)
AMENDMENT OF REORGANIZATION AGREEMENT
The Reorganization Agreement may be amended by the parties thereto,
pursuant to action taken by their respective boards of directors or pursuant to
authority delegated by their respective boards of directors, at any time before
or after approval of the Reorganization Agreement by FNB's shareholders,
provided that, after the Reorganization Agreement is approved by FNB's
shareholders, no amendment may be made to the
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Reorganization Agreement that changes in a manner adverse to FNB's shareholders
the consideration to be received by FNB's shareholders in the Merger. (paragraph
10)
WAIVER OF PERFORMANCE OF OBLIGATIONS
Either party to the Reorganization Agreement may, by a signed writing,
give any consent, take any action with respect to the termination of the
Reorganization Agreement or otherwise, or waive any inaccuracies in the
representations and warranties of the other party or compliance by the other
party with any of the covenants or conditions contained in the Reorganization
Agreement. (paragraph 10)
EFFECT ON EMPLOYEE BENEFIT PLANS
The Reorganization Agreement provides that, subject to any eligibility
requirements applicable to such plans, employees of FNB shall be entitled to
participate in those Norwest employee benefit and welfare plans specified in the
Reorganization Agreement. The eligible employees of FNB shall enter each of such
plans no later than the first day of the calendar quarter which begins at least
32 days after the Effective Time of the Merger. FNB's employees will generally
continue to participate in welfare and retirement plans maintained by FNB until
entering Norwest's plans. FNB employees will receive credit for past service
with FNB for the purpose of satisfying any eligibility and vesting periods under
certain, but not all, of Norwest's benefit plans. FNB employees will not be
subject to any pre-existing condition exclusions when entering a Norwest welfare
benefit plan, except for the Norwest Long Term Care Plan. (paragraph 9)
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
This description of certain U.S. federal income tax considerations with
respect to the Merger is included solely for the information of FNB
shareholders. No information is provided with respect to the consequences of any
applicable state, local, or foreign tax laws. Applicability of the alternative
minimum tax and other tax consequences of the Merger to an FNB shareholder will
depend upon the individual situation of such shareholder. Furthermore, special
tax considerations may apply to FNB shareholders who are insurance companies,
securities dealers, financial institutions, and foreign persons. Therefore, EACH
FNB SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR CONCERNING THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER.
It is intended that the Merger will be treated as a reorganization
within the meaning of Section 368(a) of the Code and that, accordingly, for
federal income tax purposes: (i) no gain or loss will be recognized by Norwest
or FNB as a result of the Merger; (ii) no gain or loss will be recognized by
holders of FNB Common Stock upon the receipt of Norwest Common Stock in exchange
for FNB Common Stock pursuant to the Merger, except as discussed below with
respect to cash received in lieu of a fractional share interest in common stock;
(iii) the aggregate adjusted tax basis of the shares of Norwest Common Stock
received by the holders of FNB Common Stock surrendered in exchange therefor
will be equal to the tax basis of such shareholder's shares of FNB Common Stock
(reduced by the amount allocable to fractional share interests for which cash is
received); and (iv) the holding period of the shares of Norwest Common Stock
received by the holders of FNB Common Stock will include the holding period of
the FNB Common Stock, provided the shares of FNB Common Stock were held as a
capital asset as of the Effective Time of the Merger.
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FNB does not intend to apply for a ruling from the IRS with respect to
the federal income tax consequences of the Merger. Instead, it intends to rely
on the opinion of its legal counsel. Consummation of the Merger is conditioned
upon receipt by FNB of the opinion of Bracewell & Patterson, L.L.P., Houston,
Texas, dated as of the closing date of the Merger, substantially to the effect
that, on the basis of facts, representations and assumptions set forth or
referred to in such opinion, the principal federal income tax consequences of
the Merger under current law will be as set forth in items (ii)-(iv) above. An
opinion of counsel is not binding upon the IRS or the courts. The tax opinion
will be based upon certain factual assumptions and upon certain representations
and assurances made by FNB. The tax opinion will not address the consequences of
the Merger on FNB shareholders under applicable state or local income tax laws.
One of the requirements for tax-free reorganization treatment is that
shareholders of the acquired corporation acquire a substantial and continuing
interest in the acquiring corporation. The tax opinion received by FNB will be
based on the assumption that the shareholders of FNB have no plan or intention
at the time of the Merger to sell or otherwise dispose of an amount of Norwest
Common Stock to be received in the Merger that would reduce their aggregate
ownership of Norwest Common Stock to a number of shares having in the aggregate
a value at the time of the Merger of less than 50% of the total value of FNB
Common Stock outstanding immediately prior to the Merger. For purposes of such
determination, shares of FNB Common Stock that are exchanged for cash or other
property, or surrendered by FNB shareholders exercising dissenters' appraisal
rights, or exchanged for cash in lieu of the issuance of fractional shares of
Norwest Common Stock, will be treated as outstanding shares of FNB Common Stock
immediately prior to the Merger.
Holders of FNB Common Stock who participate in the Merger and who
receive cash in lieu of a fractional share of Norwest Common Stock will be
treated as having received such cash in redemption of such fractional share
interest. Each such shareholder must determine his or her taxable gain or loss
on such redemption. The amount of gain or loss will be the difference between
the cash received and the basis of the fractional share interest surrendered.
Provided the FNB Common Stock and the fractional share interest were held as a
capital asset at the time of the redemption, such gain or loss will constitute
capital gain or loss, and such gain or loss will be long term capital gain or
loss if the holding period for such fractional share interest was greater than
one year.
Holders of FNB Common Stock who do not participate in the Merger and who
receive cash pursuant to the exercise of dissenters' rights must consult with
their individual tax advisors to determine the correct income tax treatment of
such amount. Such tax treatment will depend upon the individual situation of
such holders; receipt of cash on exercise of dissenters' rights could either
constitute (i) a taxable proceed from the sale of FNB Common Stock or (ii) a
dividend distribution received on account of such stock.
Shareholders of FNB stock who receive Norwest Common Stock pursuant to
the Merger will receive certain rights to acquire Norwest preferred stock under
certain circumstances. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" for
a list of the documents containing information concerning the preferred stock
purchase rights. Based upon the current ruling position of the IRS, such rights
will not constitute other property the receipt of which will be taxable to such
shareholders.
FNB shareholders should also be aware that the IRS may examine
transactions taking place before, contemporaneously with, or after a
reorganization to determine whether reorganization treatment is appropriate, or
in some cases to determine whether shareholders will be taxed on other economic
benefits that are included as part of the overall transaction.
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Thus, loan transactions between parties, compensation arrangements, noncompete
agreements, consulting agreements, and other transactions could be reviewed by
the IRS and be determined to constitute taxable income to specific parties to
the Merger or could be a basis for assertion that reorganization treatment is
not appropriate for the Merger. Furthermore, if the IRS were to establish as to
some FNB shareholders that part of the Norwest Common Stock received in the
Merger is severable from the Merger, resulting in a proportionally increased
equity interest being received in the Merger by other FNB shareholders, FNB
shareholders whose equity interests were deemed to be constructively increased
by the Merger may be treated as having received a taxable stock dividend. THUS,
NOTWITHSTANDING THE TAX OPINION, SHAREHOLDERS SHOULD CONSULT WITH THEIR TAX
ADVISORS AS TO THE TAX CONSEQUENCES OF THE MERGER.
Under Section 3406 of the Code, FNB shareholders may be subject to
"backup withholding" at the rate of 31% on "reportable payments" to be received
by them if they fail to furnish their correct taxpayer identification numbers or
for certain other reasons. Norwest will report to these persons and to the IRS
for each calendar year the amount of any reportable payments during that year
and the amount of tax withheld, if any, with respect to those reportable
payments.
The Code also imposes an alternative minimum tax and excise taxes on
certain types of transactions. Applicability of such taxes is usually
controlled, in whole or in part, by other matters unrelated to the Merger or by
the unique characteristics of the particular taxpayer. ACCORDINGLY, FNB
SHAREHOLDERS ARE ENCOURAGED TO CONSULT THEIR TAX ADVISORS IF THEY ARE OR MIGHT
BE SUBJECT TO SUCH TAXES.
RESALE OF NORWEST COMMON STOCK
The shares of Norwest Common Stock issuable to shareholders of FNB upon
the Merger becoming effective have been registered under the Securities Act.
Such shares may be traded freely and without restriction by those shareholders
not deemed to be "affiliates" of FNB or Norwest, as that term is defined in the
rules under the Securities Act. Norwest Common Stock received by those
shareholders of FNB who are deemed to be "affiliates" of FNB may be resold
without registration as provided for by Rule 145 or as otherwise permitted under
the Securities Act. Persons who may be deemed to be affiliates of FNB generally
include individuals or entities that control, are controlled by or are under
common control with, FNB and may include the executive officers and directors of
FNB as well as certain principal shareholders of FNB. In the Reorganization
Agreement, FNB has agreed to use its best efforts to obtain and deliver prior to
the Effective Time of the Merger signed representations by each executive
officer, director or shareholder of FNB who may reasonably be deemed an
affiliate of FNB 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. (paragraph 4(k)) This
Proxy Statement-Prospectus does not cover any resales of Norwest Common Stock
received by affiliates of FNB.
STOCK EXCHANGE LISTING
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 the Merger becoming effective. Consummation of the
Merger is conditioned on the authorization for listing of such shares on the
NYSE and CHX. (paragraph 6)
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ACCOUNTING TREATMENT
Norwest will account for the acquisition of FNB using the purchase
method of accounting. For that reason, the consideration to be paid in the
Merger will be allocated to assets acquired and liabilities assumed based on
their estimated fair values at the Effective Time of the Merger and the results
of FNB's operations will be included in Norwest's results of operation from and
after the Effective Time of the Merger.
The unaudited pro forma data included in this Proxy Statement-
Prospectus for the Merger have been prepared using the purchase method of
accounting. See "SUMMARY--Comparative Per Common Share Data."
EXPENSES
Except as otherwise provided in the Reorganization Agreement, Norwest
and FNB will each pay their own expenses in connection with the Merger,
including fees and expenses of their respective independent auditors and
counsel.
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COMPARISON OF RIGHTS OF HOLDERS OF
FNB COMMON STOCK AND NORWEST COMMON STOCK
The following is a comparison of certain rights of holders of FNB Common
Stock with the rights of holders of Norwest Common Stock. It is not intended to
be complete and is qualified in its entirety by reference to the relevant
provisions of the laws and documents discussed below. Additional information
concerning the rights of holders of Norwest Common Stock is provided in
Norwest's current report on Form 8-K filed with the Commission on May 1, 1996
and incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
GENERAL
FNB is incorporated under the laws of New Mexico. The rights of FNB's
shareholders are currently governed by the New Mexico Business Corporation Act
(the "NMBCA") and by FNB's articles of incorporation and bylaws (respectively,
the "FNB Articles" and "FNB Bylaws"). Norwest is incorporated under the laws of
Delaware. The rights of Norwest's stockholders are governed by the Delaware
General Corporation Law (the "DGCL") and by Norwest's certificate of
incorporation and bylaws (respectively, the "Norwest Certificate" and "Norwest
Bylaws"). If FNB's shareholders approve the Reorganization Agreement and the
Merger becomes effective, shareholders of FNB will become stockholders of
Norwest. For that reason, after the Effective Time of the Merger, their rights
will be governed by the DGCL and the Norwest Certificate and Norwest Bylaws.
The NMBCA uses the term "shareholder" to refer to a holder of capital
stock of a New Mexico corporation. The DGCL uses the term "stockholder" to refer
to a holder of capital stock of a Delaware corporation. Accordingly, this Proxy
Statement-Prospectus uses the term shareholder to refer to a holder of FNB
Common Stock and the term stockholder to refer to a holder of Norwest Common
Stock.
CAPITAL STOCK
FNB. The FNB Articles authorize the issuance of 100,000 shares of common
stock, par value $1.00 per share, and no shares of preferred stock. As of the
Record Date, 29,953 shares of FNB Common Stock were issued and outstanding.
Since no shares of preferred stock are authorized, issued or outstanding by FNB
as of the date of this Proxy Statement-Prospectus, no class or series has any
preference over the FNB Common Stock with respect to dividends and distributions
upon the liquidation of FNB.
NORWEST. The Norwest Certificate currently authorizes the issuance of
500,000,000 shares of Norwest Common Stock, 5,000,000 shares of preferred stock,
without par value, and 4,000,000 shares of preference stock, without par value.
Norwest's stockholders have approved an amendment to the Norwest Certificate to
increase the authorized shares of Norwest Common Stock to 1,000,000,000 shares.
For a description of the Norwest Common Stock and certain rights and
restrictions relating thereto and for certain information concerning Norwest
preferred stock and preference stock, see Norwest's current report on Form 8-K
filed on May 1, 1996 and Norwest's registration statement on Form 8-A dated
December 6, 1988, as amended pursuant to Form 8-A/A dated June 29, 1993. Copies
of these documents may be obtained as provided in the section entitled
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
DIRECTORS
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FNB. The FNB Bylaws provide for a board of directors of ten members of
at least 18 years of age, subject to decrease to as few as five members and
increase to as many as 25 members upon the affirmative vote of a majority of the
members of the board of directors. Directors are elected at the annual meeting
of the shareholders of FNB by the affirmative vote of a majority of a quorum and
hold office until the next annual meeting of shareholders and thereafter until a
successor has been elected and qualified. Directors are removable with or
without cause by the vote of the holders of a majority of the shares entitled to
vote in an election of directors at a meeting of shareholders called expressly
for that purpose. Vacancies in the FNB Board are filled by the affirmative vote
of the remaining directors, though less than a quorum, and the person so elected
serves the unexpired term of his predecessor. The FNB Articles require that
directors be elected by cumulative voting.
NORWEST. The Norwest Bylaws provide for a board of directors consisting
of not less than 10 nor more than 23 persons, each serving for a term of one
year or until his or her earlier death, resignation or removal. The number of
directors of Norwest is currently fixed at 16. Directors of Norwest may be
removed with or without cause by the affirmative vote of the holders of a
majority of the shares of Norwest capital stock entitled to vote thereon.
Vacancies on the Norwest Board may be filled by a majority of the remaining
directors or, in the event a vacancy is not so filled or if no director remains,
by the stockholders. Directors of Norwest are elected by plurality of the votes
of shares of Norwest capital stock entitled to vote thereon present in person or
by proxy at the meeting at which directors are elected. The Norwest Certificate
does not currently permit cumulative voting in the election of directors.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
FNB. Generally, under the NMBCA, amendments to articles of incorporation
require the affirmative vote of the holders of a majority of the shares entitled
to vote on the proposed amendment. Where class voting is required by the NMBCA,
approval requires the affirmative vote of the holders of both a majority of the
shares of each class entitled to vote on the proposed amendment and a majority
of the total shares entitled to vote thereon. The FNB Bylaws provide that the
board of directors may alter, amend, or repeal the FNB Bylaws, in whole or in
part, from time to time.
NORWEST. The Norwest Certificate may be amended only if the proposed
amendment is approved by the Norwest Board and thereafter approved by a majority
of the outstanding stock entitled to vote thereon and by a majority of the
outstanding stock of each class entitled to vote thereon as a class. The Norwest
Bylaws may be amended by a majority of the Norwest Board or by a majority of the
outstanding stock entitled to vote thereon. Shares of Norwest Preferred Stock
and Norwest Preference Stock currently authorized in the Norwest Certificate may
be issued by the Norwest Board without amending the Norwest Certificate or
otherwise obtaining the approval of Norwest's stockholders.
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SHAREHOLDER APPROVAL OF MERGERS AND ASSET SALES
In addition to being subject to the laws of New Mexico and Delaware,
respectively, as discussed below, both FNB and Norwest, as bank holding
companies, are subject to various provisions of federal law with respect to
mergers, consolidations and certain other corporate transactions. See "CERTAIN
REGULATORY AND OTHER CONSIDERATIONS PERTAINING TO NORWEST."
FNB. Except as described below, the affirmative vote of a majority of
the outstanding shares of FNB Common Stock entitled to vote thereon (unless any
class of shares is entitled to vote thereon as a class, in which event approval
of a majority of the shares entitled to vote as a class and of the total shares
entitled to vote thereon) is required to approve an amendment to the FNB
Articles, a merger or consolidation involving FNB, a sale, lease, exchange or
other disposition of all or substantially all of FNB's assets outside the normal
course of business or the voluntary dissolution of FNB. Approval of a merger or
sale of assets transaction by the shareholders at a meeting thereof requires
that notice be given in the manner provided in the NMBCA and the FNB Bylaws at
least 20 days prior to the date of the meeting. No vote of shareholders is
required, however, with respect to a merger in which FNB is the surviving
corporation and owns at least 90% of the merged corporation's shares prior to
the merger.
NORWEST. Except as described below, the affirmative vote of a majority
of the outstanding shares of Norwest Common Stock entitled to vote thereon is
required to approve a merger or consolidation involving Norwest or the sale,
lease or exchange of all or substantially all of Norwest's corporate assets. No
vote of the stockholders is required, however, in connection with a merger in
which Norwest is the surviving corporation and (i) the agreement of merger for
the merger does not amend in any respect the Norwest Certificate, (ii) each
share of capital stock outstanding immediately before the merger is to be an
identical outstanding or treasury share of Norwest after the merger, and (iii)
the number of shares of capital stock to be issued in the merger (or to be
issuable upon conversion of any convertible instruments to be issued in the
merger) does not exceed 20% of the shares of Norwest's capital stock outstanding
immediately before the merger.
APPRAISAL RIGHTS
FNB. Under the NMBCA, shareholders of FNB are entitled to exercise
dissenters' rights and obtain payment of the fair value of their shares in cash
if FNB engages in certain transactions. The transactions which give rise to
dissenters' rights under New Mexico law are (i) mergers and consolidations to
which the corporation is a party (unless the shareholders of the surviving
corporation are not entitled to a vote with respect thereto); (ii) any sale or
exchange of all or substantially all of the property and assets of the
corporation not made in the usual and regular course of business, including a
sale in dissolution, but excluding a sale pursuant to a court order or a sale
for cash on terms requiring that all or substantially all of the net proceeds of
sale be distributed to the shareholders in accordance with their respective
interests within one year of the sale; (iii) any plan of exchange to which the
corporation is a party as the corporation the shares of which are to be
acquired; (iv) any amendment to the articles of incorporation which materially
and adversely affects the rights appurtenant to the shares of the dissenting
shareholders by altering or abolishing a preferential right of the shares,
creating, altering or abolishing a redemption or sinking fund right in respect
of the shares, or excluding or limiting the right of any holder of such to
shares to vote on any manner, or to cumulate his votes; and (v) any other
corporate action for which the articles of incorporation, bylaws, or
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a resolution of the board of directors provides for a right to dissent. See the
more detailed discussion under the caption "THE MERGER--Dissenters' Rights."
NORWEST. Section 262 of the DGCL provides for stockholder appraisal
rights in connection with mergers and consolidations generally; however,
appraisal rights are not available to holders of any class or series of stock
that, at the record date fixed to determine stockholders entitled to receive
notice of and to vote at the meeting to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 stockholders, so long as stockholders receive shares
of the surviving corporation or another corporation whose shares are so listed
or designated or held by more than 2,000 stockholders. Norwest Common Stock is
listed on the NYSE and the CHX and currently held by more than 2,000
stockholders. For these reasons, assuming that the other conditions described
above are satisfied, holders of Norwest Common Stock will not have appraisal
rights in connection with mergers and consolidations involving Norwest.
SPECIAL MEETINGS
FNB. Under the NMBCA, a special meeting of FNB's shareholders may be
called by the President, the FNB Board, the holders of not less than ten percent
of all of the shares entitled to vote at the meeting and such other persons as
may be authorized by the articles of incorporation or bylaws. The FNB Bylaws
permit special meetings of shareholders to be called by the persons authorized
by the NMBCA to call such meetings, and do not authorize any additional persons
to call such meetings.
NORWEST. Under the DGCL, special meetings of stockholders may be called
by the board of directors or by such persons as may be authorized in the
certificate of incorporation or bylaws. The Norwest Bylaws provide that a
special meeting of stockholders may be called only by the Chairman of the Board,
a Vice Chairman, the President or a majority of the Norwest Board. As such,
holders of Norwest Common Stock do not have the ability to call a special
meeting of stockholders.
DIRECTORS DUTIES
FNB. Under the NMBCA, a director is required to perform his or her
duties as a director in good faith, in a manner he or she believes to be in or
not opposed to the best interests of the corporation, and with such care as an
ordinarily prudent person would use under similar circumstances in a like
position. The NMBCA further provides that in determining what is in or not
opposed to the best interests of the corporation, a director must consider the
interests of the corporation's shareholders and may consider (i) the interests
of the corporation's employees, suppliers, creditors, and customers; (ii) the
economy of the state and the nation; (iii) the impact of any action upon the
communities in or near which the corporation's facilities or operations are
located; and (iv) the long-term interests of the corporation and its
shareholders, including the possibility that those interests may be best served
by the continued independence of the corporation.
NORWEST. Unlike the NMBCA, the DGCL does not specifically enumerate
directors' duties. In addition, the DGCL does not contain any provision
equivalent to the New Mexico statute specifying what factors a director must and
may consider in determining a corporation's best interests. However, judicial
decisions in Delaware have established that
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directors, in performing their duties, are bound to use that amount of care
which ordinarily prudent men would use in similar circumstances.
ACTION WITHOUT A MEETING
FNB. Under the NMBCA and the FNB Bylaws, any action required or
permitted to be taken at a meeting of the FNB Board (including a committee
thereof) or shareholders of FNB may be taken without a meeting if a consent in
writing, setting forth the action so taken, is signed by all of the directors
(or committee members), or all of the shareholders entitled to vote with respect
to the subject matter thereof, as the case may be. Such consent has the effect
as a unanimous vote of the Board (or the committee thereof) or the shareholders,
as applicable. Action by less than unanimous consent of the Board or the
shareholders is not permitted under the NMBCA or the FNB Bylaws.
NORWEST. As permitted by Section 228 of the DGCL and the Norwest
Certificate, any action required or permitted to be taken at a stockholders'
meeting may be taken without a meeting pursuant to the written consent of the
holders of the number of shares that would have been required to effect the
action at an actual meeting of the stockholders.
LIMITATION OF DIRECTOR LIABILITY
FNB. Unlike the DGCL, the NMBCA does not contain any provisions limiting
or eliminating the liability of the directors of a New Mexico corporation for
monetary damages for a breach by a director of his fiduciary duty as a director.
NORWEST. The Norwest Certificate provides that a director (including an
officer who is also a director) of Norwest shall not be liable personally to
Norwest or its stockholders for monetary damages for breach of fiduciary duty as
a director, except for liability arising out of (i) any breach of the director's
duty of loyalty to Norwest or its stockholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) payment of a dividend or approval of a stock repurchase in violation
of Section 174 of the DGCL, or (iv) any transaction from which the director
derived an improper personal benefit. This provision protects Norwest's
directors against personal liability for monetary damages from breaches of their
duty of care. It does not eliminate the director's duty of care and has no
effect on the availability of equitable remedies, such as an injunction or
rescission, based upon a director's breach of his duty of care.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
FNB. Under the NMBCA and the FNB Bylaws, a director of FNB is not liable
for any action taken as a director or for any failure to take any action if he
or she performed the duties of a director's office in good faith, with the care
an ordinarily prudent person in a similar position would exercise under similar
circumstances, and in a manner the director believes to be in the best interests
of the corporation.
Under the NMBCA and the FNB Bylaws, FNB may indemnify its officers and
directors made a party to any proceeding, whether civil or criminal, from any
judgments, penalties, fines, settlements, and reasonable expenses, including
attorneys' fees, if such person was made a party to the action by reason of the
fact that he or she was an officer or director of FNB and he or she conducted
himself or herself in good faith and reasonably believed (i) in the case of
conduct in his or her official capacity with FNB, that his or her conduct was in
the best interests of FNB; (ii) in all other cases, that his or her conduct was
at least not
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opposed to FNB's best interests; and (iii) in the case of criminal proceedings,
that he or she had no reasonable cause to believe the conduct was unlawful.
No indemnification is available where the officer or director is
adjudged liable to FNB or in which the officer or director has been adjudged
liable on the basis that he or she improperly received a personal benefit. If
the FNB Board is of the opinion, reasonably based on the facts, circumstances,
and outcome of the proceeding, that the director has been wholly successful, on
the merits or otherwise, in the defense of the proceeding, then indemnification
of the director for reasonable expenses incurred in the proceeding is mandatory.
A court of appropriate jurisdiction, upon application of the director, may order
indemnification if the court determines that the director has been wholly
successful in the defense of the proceeding or if the court determines that the
director is fairly and reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not the director has met the statutory
standards of conduct or has been liable for receiving an improper personal
benefit. If the action was by or in the right of FNB (a "derivative action"),
indemnification is only available for any reasonable expenses incurred.
The FNB Bylaws provide that expenses incurred in defending any action
may be paid by FNB in advance of the final disposition of such action upon
receipt of an undertaking by a director or officer to repay such amount unless
it is ultimately determined that he or she is entitled to be indemnified. The
indemnification provided by the FNB Bylaws is substantially similar to the
indemnification provisions in the NMBCA.
NORWEST. The Norwest Certificate provides that Norwest must indemnify,
to the fullest extent authorized by the DGCL, each person who was or is made a
party to, is threatened to be made a party to, or is involved in, any action,
suit, or proceeding because he is or was a director or officer of Norwest (or
was serving at the request of Norwest as a director, trustee, officer, employee,
or agent of another entity) while serving in such capacity against all expenses,
liabilities, or loss incurred by such person in connection therewith, provided
that indemnification in connection with a proceeding brought by such person will
be permitted only if the proceeding was authorized by the Norwest Board. The
Norwest Certificate also provides that Norwest must pay expenses incurred in
defending the proceedings specified above in advance of their final disposition,
provided that if so required by the DGCL, such advance payments for expenses
incurred by a director or officer may be made only if he undertakes to repay all
amounts so advanced if it is ultimately determined that the person receiving
such payments is not entitled to be indemnified.
The Norwest Certificate authorizes Norwest to provide similar
indemnification to employees or agents of Norwest.
Pursuant to the Norwest Certificate, Norwest may maintain insurance, at
its expense, to protect itself and any directors, officers, employees or agents
of Norwest or another entity against any expense, liability or loss, regardless
of whether Norwest has the power or obligation to indemnify that person against
such expense, liability or loss under the DGCL.
The right to indemnification is not exclusive of any other right which
any person may have or acquire under any statute, provision of the Norwest
Certificate or Norwest Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
DIVIDENDS
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In addition to restrictions imposed under New Mexico and Delaware law,
respectively, as discussed below, FNB and Norwest are subject to Federal Reserve
Board policies regarding payment of dividends, which generally limit dividends
to operating earnings. See "CERTAIN REGULATORY AND OTHER CONSIDERATIONS
PERTAINING TO NORWEST."
FNB. Under the NMBCA, FNB's Board of Directors may authorize and FNB may
pay dividends to its shareholders, provided that no such distribution of
dividends may be made if, after giving effect thereto, either (i) FNB would be
unable to pay its debts as they become due in the usual course of its business
or (ii) FNB's total assets would be less than the sum of its total liabilities
and the amount payable, in any liquidation, in respect of all shares having
liquidation preference.
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.
CORPORATE GOVERNANCE PROCEDURES; NOMINATION OF DIRECTORS
FNB. Unlike the Norwest Bylaws, the FNB Bylaws do not contain any
advance notice requirements or other information procedures to be followed in
order to nominate a person to serve as a director or to propose an item of
business for consideration at a meeting of FNB shareholders.
NORWEST. The Norwest Bylaws contain detailed advance notice and
informational procedures which must be complied with in order for a stockholder
to nominate a person to serve as a director. The Norwest Bylaws generally
require a stockholder to give notice of a proposed nominee in advance of the
stockholders meeting at which directors will be elected. In addition, the
Norwest Bylaws contain detailed advance notice and informational procedures
which must be followed in order for a Norwest stockholder to propose an item of
business for consideration at a meeting of Norwest stockholders.
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INFORMATION ABOUT FNB AND THE BANK
GENERAL
FNB is a one-bank holding company registered under the Bank Holding
Company Act. FNB was incorporated and organized as a New Mexico business
corporation in 1986 for the purpose of acquiring the Bank and the First National
Bank of Santa Rosa, which acquisition was completed in 1986. The First National
Bank of Santa Rosa was merged into the Bank in 1993. FNB's principal executive
offices are located at 302 South First Street, Tucumcari, New Mexico 88401, and
its telephone number at that address is (505) 461-3602.
The Bank is a national banking association chartered in 1901, which has
its principal place of business at 302 South First Street, Tucumcari, New Mexico
88401. It has branches located in the towns of Santa Rosa and Las Vegas, New
Mexico. The Bank's market area consists primarily of areas located principally
within Quay, San Miguel, and Guadalupe counties, New Mexico, and to a lesser
extent parts of Harding, Curry and DeBaca counties. The Bank had total assets of
approximately $92.2 million at December 31, 1996. The Bank is a full service,
independent community bank which provides a full range of commercial banking
services, including traditional deposit services and commercial, interim
construction, consumer, home improvement, real estate, agricultural, and
industrial loans.
REGULATION AND SUPERVISION
As a bank holding company, FNB is subject to regulation by and files
quarterly reports with the Federal Reserve Board. The Federal Reserve Board is
authorized to conduct examinations of FNB and any of its subsidiaries. The
Federal Reserve Board may also exercise cease and desist powers over bank
holding companies and their nonbank affiliates if their actions represent unsafe
or unsound practices or violations of law.
The Bank and its operations are affected by various restrictions and
requirements under the laws of the United States and the State of New Mexico.
Under these generally applicable federal and state restrictions and
requirements, the Bank must maintain reserves against deposits and is restricted
with respect to the nature and amount of loans which it may make, the interest
that it may charge on those loans and the conditions under which it may pay
dividends on its capital stock.
PROPERTIES
FNB conducts its operations in the Bank's principal offices located at
302 South First Street, Tucumcari, New Mexico. The principal asset of FNB is the
common stock of the Bank. As a bank holding company, FNB conducts its operations
through its subsidiary, the Bank.
The Bank owns its principal executive offices and main banking facility
in Tucumcari, New Mexico, as well as its branch location in Santa Rosa, New
Mexico. It leases its branch in Las Vegas from Furr's Supermarkets, Inc. under a
five-year lease expiring in 2001. Set forth below is certain information
regarding the principal properties of FNB and the Bank:
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Approximate
Location Address Square Footage Date Opened
- -------------------------------------------------------------------------------
Tucumcari, N.M. 302 South First Street 30,000 1974
Las Vegas, N.M. 206 Mills Avenue 598 1996
Santa Rosa, N.M. 490 Corona Avenue 7,500 1980
The Bank's main banking facility consists of a single structure located
in Tucumcari, New Mexico. The main facility is a 30,000 square foot structure
which houses the Bank's lending and teller operations, accounting, computer, and
electronic data processing facilities, as well as the executive offices of the
Bank and FNB. The branch in Las Vegas is located inside a Furr's supermarket.
The Santa Rosa branch is a single-story building. In addition to its banking
facilities, FNB owns an 4,080 square foot warehouse in Tucumcari used for
storage.
COMPETITION
The Bank experiences competition in both attracting deposits and lending
funds. Competition in lending comes principally from other commercial banks,
credit unions, savings and loan associations, the farm credit system, and
various regional and national brokerage firms offering alternative financial
products in the Bank's market area. To a lesser extent, the Bank competes with
mortgage companies and insurance companies. Competition for deposits comes
principally from other commercial banks, savings and loan associations, and
credit unions. The primary factors in competing for deposits among these
institutions are interest rates paid on accounts and extent of services offered.
LEGAL PROCEEDINGS
The nature of the Bank's business causes it to be involved in routine
legal proceedings from time to time. Management of the Bank believes that there
are no pending or threatened legal proceedings which, upon resolution, would
have a material adverse effect on the financial condition or results of
operation of the Bank.
MARKET INFORMATION AND DIVIDENDS
MARKET INFORMATION; SHAREHOLDERS
There has been no public market for the shares of FNB Common Stock. As
of the date of this Proxy Statement-Prospectus, there are issued and outstanding
29,953 shares of FNB Common Stock, held by approximately 42 holders of record.
DIVIDENDS
During 1996 and 1995 FNB declared annual dividends on FNB Common Stock
totaling $8.00 per share. The amount of dividends that FNB is permitted to pay
is limited by the supervisory policy of the Federal Reserve Board.
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PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT OF FNB
Set forth below are the names and addresses of, and the number of shares
and the percentage of outstanding shares beneficially owned as of the record
date for the Special Meeting by, each holder of record who owns of record, or
who is known by FNB to be the beneficial owner of, more than five percent of the
outstanding shares of FNB Common Stock. The FNB Common Stock is the only class
of equity security of FNB outstanding. Each shareholder named below has sole
voting and investment power with respect to the shares shown in the table,
unless otherwise indicated.
Name and address Amount and Nature of
of Beneficial Owner Beneficial Ownership Percent of Class
------------------- -------------------- ----------------
H. Barton Jones
302 South First Street
Tucumcari, NM 88401 14,091(a) 47%
Gregory W. Jones
302 South First Street
Tucumcari, NM 88401 5,951(b) 19.9%
Yetta Hoover Bidegain
P.O. Box 865
Tucumcari, NM 88401 2,427(c) 8.1%
Phillip Bidegain
P.O. Box 865
Tucumcari, NM 88401 1,548 (d) 5.2%
(a) Includes 12,591 shares held directly by Mr. Jones and 1,500 shares
held by the Maxine A. Jones Estate Trust, of which Mr. Jones serves as
co-trustee and as to which he shares voting and dispositive power. Excludes
1,348 shares held by Mr. Jones' spouse, as to which he disclaims beneficial
ownership.
(b) Excludes 10 shares held by Mr. Jones' spouse, as to which he
disclaims beneficial ownership.
(c) Includes (i) 1,548 shares held by Ms. Bidegain and her spouse as
co-trustees under a trust agreement dated October 20, 1989, as to which Ms.
Bidegain shares voting and dispositive power, and (ii) 879 shares held by
T-4 Cattle Company, a general partner in which Ms. Bidegain serves as
general partner.
(d) Represents shares held by Mr. Bidegain and his spouse as co-trustees
under a trust agreement dated October 20, 1989. Mr. Bidegain shares voting
and dispositive power with respect to these shares with his spouse. Excludes
879 shares held by T-4 Cattle Company, a general partnership in which Mr.
Bidegain's spouse serves as general partner, as to which Mr. Bidegain
disclaims beneficial ownership.
Set forth below are the numbers of shares of FNB Common Stock held by
each director and executive officer, and by all directors and executive officers
as a group of FNB, as of the record date for the Special Meeting. For
information concerning the positions of such persons with FNB see "-- Management
of FNB." Each shareholder named below has sole voting and investment power over
the shares shown in the table unless otherwise indicated.
40
<PAGE>
Amount and Nature of
Beneficial
Name Ownership Percent of Class
---- --------- ----------------
H. Barton Jones 14,091(a) 47.0%
Craig L. Cosner 670(b) 2.2%
Phillip Bidegain 1,548(c) 5.2%
Pelagio Campos 75 *
Pete Campos 10 *
E. Bruce Thomas 225 *
Gregory W. Jones 5,951(d) 19.9%
Robert J. McClelland 10(e) *
Judy Aragon 10 *
Stephen W. Bower 197 *
Directors and executive officers
as a group (11 persons) 22,787 76.1%
- ---------------------------
* Less than one percent.
(a) Includes 12,591 shares held directly by Mr. Jones and 1,500
shares held by the Maxine A. Jones Estate Trust, of which Mr. Jones
serves as co-trustee and as to which he shares voting and dispositive
power. Excludes 1,348 shares held by Mr. Jones' spouse, as to which he
disclaims beneficial ownership.
(b) Mr. Cosner shares voting and dispositive power with
respect to these shares with his spouse.
(c) Represents shares held by Mr. Bidegain and his spouse as
co-trustees under a trust agreement dated October 20, 1989. Mr. Bidegain
shares voting and dispositive power with respect to these shares with
his spouse. Excludes 879 shares held by T-4 Cattle Company, a general
partnership in which Mr. Bidegain's spouse serves as general partner, as
to which Mr. Bidegain disclaims beneficial ownership.
(d) Excludes 10 shares held by Mr. Jones' spouse, as to which he
disclaims beneficial ownership.
(e) Represents shares held by Mr. McClelland and his spouse as
co-trustees under a trust agreement dated October 20, 1979. Mr.
McClelland shares voting and dispositive power with respect to these
shares with his spouse.
41
<PAGE>
MANAGEMENT OF FNB
BOARD OF DIRECTORS
The following table sets forth information as of the Record Date
concerning the members of the Board of Directors of FNB:
Name Age Position with FNB and Business Experience
- --------------------------------------------------------------------------------
H. Barton Jones 54 Chairman of the Board of Directors, Chief
Executive Officer and President of FNB and
Chairman of the Board of Directors and Chief
Executive Officer of the Bank for more than
the last five years.
Craig L. Cosner 47 Executive Vice President and a Director of
FNB and President and a Director of the Bank
for more than the last five years.
E. Bruce Thomas 50 Senior Vice President, Secretary-Treasurer
and Director of FNB and Senior Vice
President, Cashier and a Director of the
Bank for more than the last five years.
Phillip Bidegain 73 Director of FNB and the Bank. For more than
the last five years, General Manager of the
T-4 Cattle Company located in Quay County,
New Mexico.
Judy Aragon 45 Director, Assistant Secretary and Loan
Review Officer of FNB and Director, Senior
Vice President and Loan Review Officer of
the Bank for more than the last five years.
Pelagio Campos 79 Director of FNB and the Bank. For more than
the last five years, an independent rancher
in Guadalupe County, New Mexico.
Pete Campos 43 Director of FNB and the Bank. For more than
the last five years, Assistant
Superintendent, Las Vegas, New Mexico city
school system and State Senator.
Robert J. McClelland 65 Director of FNB and the Bank. For more than
the last five years, a pharmacist in
Tucumcari, N.M.
Stephen W. Bowen 80 Director of FNB and the Bank. For more than
the last five years, an attorney in
Tucumcari, N.M.
Gregory W. Jones 30 Director and Vice President of FNB; and
Director of the Bank for more than the last
five years.
Mr. H. Barton Jones is the father of Mr. Gregory Jones.
42
<PAGE>
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
In considering the recommendation of the FNB Board of Directors with
respect to the Reorganization Agreement, shareholders should be aware that
certain executive officers and directors of FNB have certain interests in the
Merger that are in addition to the interests of the shareholders of FNB
generally. The FNB Board of Directors was aware of these interests and
considered them, among other matters, in approving the Reorganization Agreement.
Pursuant to the Reorganization Agreement, Norwest has agreed, among
other things, to (i) indemnify FNB's directors and executive officers for any
claims arising out of the Merger, (ii) for a period of three years after the
Effective Time of the Merger, use its best efforts to continue in force FNB's
existing directors' and officers' liability insurance for pre-closing claims
arising out of occurrences prior to the Effective Time of the Merger, provided
that the cost to do so does not exceed 125% of the pre-closing cost of such
insurance, and (iii) ensure that all rights to indemnification in FNB's Articles
of Incorporation and Bylaws, and in the Articles of Association and Bylaws of
the Bank, as in effect prior to the merger, shall, with respect to claims
arising out of occurrences prior to the Effective Time of the Merger and with
respect to those persons who are covered by such provisions prior to the
Effective Time of the Merger, survive the Merger and continue in full force and
effect.
Certain of the principal shareholders of FNB and the directors and
executive officers of FNB and the Bank are presently customers of the Bank or
are officers, directors, or shareholders of corporations, or owners of a
participation or other interest in entities or ventures which currently have or
in the past have had transactions with the Bank. In order to comply with
regulations promulgated under the Federal Reserve Act, such transactions are
required to be made in the ordinary course of business of the Bank, on
substantially the same terms, including interest rate, collateral, and repayment
terms, as those prevailing at the time for comparable transactions with other
persons not affiliated with the Bank or FNB, and should not involve more than
the normal risk of collectability or present other unfavorable features. The
aggregate indebtedness to the Bank of its and FNB's principal shareholders,
executive officers, and directors, and their affiliates, directly or indirectly,
as of February 28, 1997, was $1,491,381 or approximately 15.3% of shareholders'
equity at such date.
No loans to any director or executive officer of FNB or the Bank or any
of the respective "associates" of such person are past due, on non-accrual,
restructured, considered a potential problem loan, or classified as substandard,
doubtful, or loss by regulatory examiners.
As of the record date, the directors and executive officers of FNB owned
approximately 22,787 shares of FNB Common Stock, representing 76.1% of such
class. Such shares will be converted into shares of Norwest Common Stock in the
Merger on the same basis as the shares of FNB Common Stock held by the other FNB
shareholders. Each of the directors and executive officers of FNB has separately
indicated his intention to vote in favor of the Merger.
Employment Agreements. It is a condition to the obligations of Norwest
to consummate the transactions contemplated by the Reorganization Agreement that
Messrs. Barton Jones and Craig Cosner execute and deliver employment agreements
with Norwest containing terms and conditions satisfactory to Norwest.
43
<PAGE>
Mr. Jones has entered into an Employment and Non-Competition Agreement
with Norwest and the Bank dated as of January 30, 1997, which provides for Mr.
Jones' employment by Norwest as Chairman and Chief Executive Officer of the Bank
for a one year period effective the date immediately following the closing of
the acquisition. Mr. Jones will receive a salary of $99,100 per year during the
term of the agreement, and will be eligible to participate in all Norwest
benefit plans available to regular employees of Norwest in similar positions,
other than the Norwest Corporation Severance Pay Plan. The agreement terminates
on the earlier of the expiration of the one year term, or employee's death,
voluntary resignation or termination by Norwest for fraud, dishonesty or the
violation of Norwest's Code of Ethics. The agreement provides that, at the end
of its stated term, Mr. Jones will be paid a separation payment of $75,000
payable in two equal installments, the first at the end of the employment term
and the second nine months thereafter. The separation payment is made in
consideration of Mr. Jones' agreement that for a period of 18 months after the
end of the employment term he will not, by himself or through others, directly
or indirectly engage in the business of banking within the counties of Quay,
Guadalupe, Harding, Curry and San Miguel, New Mexico, including but not limited
to (i) engaging in the commercial banking or thrift business, (ii) aiding or
assisting anyone in engaging in the commercial banking or thrift business, (iii)
reestablishing or reopening any business similar to the business of Norwest or
its successor, (iv) in any manner becoming interested directly or indirectly, as
employee, owner, partner, shareholder, director, officer or otherwise, in a
commercial banking or thrift business (excluding stock ownership of less than
five percent in public corporations), (v) disclosing any confidential or
proprietary information regarding any customer or prospective customer of
Norwest or the Bank or any product, service or system thereof, (vi) soliciting
any employee of Norwest or the Bank for the purpose of encouraging that employee
to leave the employee of Norwest or the Bank, or (vii) attempting to divert any
of the business that Norwest has a reasonable expectation of obtaining by
soliciting, contacting or communicating with any customer or potential customer
of Norwest or the Bank for its products or services.
Mr. Cosner has entered into an Employment and Non-Competition Agreement
with Norwest and the Bank dated as of January 30, 1997, which provides for Mr.
Cosner's employment by Norwest as President and Chief Operating Officer of the
Bank for a one year period effective the date immediately following the closing
of the acquisition. Mr. Cosner will receive a salary of $90,000 per year during
the term of the agreement, and will be eligible to participate in all Norwest
benefit plans available to regular employees of Norwest in similar positions,
other than the Norwest Corporation Severance Pay Plan. The agreement terminates
on the earlier of the expiration of the one year term, or employees' death,
voluntary resignation or termination by Norwest for fraud, dishonesty or the
violation of Norwest's Code of Ethics. The agreement provides that, at the end
of its stated term, Mr. Cosner will be paid a separation payment of $50,000
payable in two equal installments, the first at the end of the employment term
and the second six months thereafter. The separation payment is made in
consideration of Mr. Cosner's agreement that for a period of 12 months after the
end of the employment term he will not, by himself or through others, directly
or indirectly engage in the business of banking within the counties of Quay,
Guadalupe, Harding, Curry and San Miguel, New Mexico, including but not limited
to (i) engaging in the commercial banking or thrift business, (ii) aiding or
assisting anyone in engaging in the commercial banking or thrift business, (iii)
reestablishing or reopening any business similar to the business of Norwest or
its successor, (iv) in any manner becoming interested directly or indirectly, as
employee, owner, partner, shareholder, director, officer or otherwise, in a
commercial banking or thrift business (excluding stock ownership of less than
five percent in public corporations), (v) disclosing any confidential or
proprietary information regarding any customer or prospective customer of
Norwest or the Bank or any product, service or system thereof, (vi) soliciting
any employee of Norwest or the Bank for the purpose of encouraging that employee
to leave the employee of Norwest or the Bank, or
44
<PAGE>
(vii) attempting to divert any of the business that Norwest has a reasonable
expectation of obtaining by soliciting, contacting or communicating with any
customer or potential customer of Norwest or the Bank for its products or
services.
Settlement of Salary Continuation Agreements. In 1985, the Bank entered
into Salary Continuation Agreements with nine of its officers requiring the
payment of additional compensation by the Bank to such employees or their
designated beneficiaries for a period of time after employee's retirement from
active service with the Bank, or termination of such employment by reason of the
employee's death. The agreements provided for a fixed benefit based on the
officer's salary at that time, to be paid over a ten year period. These nine
employees include Messrs. Barton Jones, Craig Cosner and Bruce Thomas, Ms. Judy
Aragon and Ms. Patsy Gresham, each of whom is either a director or executive
officer of FNB. The Reorganization Agreement requires that FNB, as soon as
practicable after execution of the Reorganization Agreement, but in any event
prior to closing, offer each FNB officer or employee who is a party to an
outstanding Salary Continuation Agreement with FNB or the Bank the opportunity
to terminate such agreement in consideration of the receipt of a cash payment
equal to the present value of the Salary Continuation Agreement calculated using
a discount rate reasonably acceptable to Norwest. As required by the
Reorganization Agreement, FNB has offered to the nine employees who are parties
to such agreements the sum of $373,004 in the aggregate in termination of such
agreements, with such termination to be effective, and such payment to be due,
contemporaneously with the consummation of the Merger. Of such amount, Messrs.
Barton Jones, Cosner and Thomas, and Ms. Aragon and Ms. Gresham, were offered
$139,086, $69,809, $66,520, $17,392 and $29,841, respectively, to terminate
their Salary Continuation Agreements, and each of them has accepted such offer
and entered into a Termination Agreement with FNB and the Bank providing for
such payment. All of the remaining officers have also accepted the offer to
terminate their Salary Continuation Agreements.
45
<PAGE>
FNB MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
GENERAL
The following is FNB management's discussion and analysis of the significant
factors affecting FNB's results of operations and financial condition. This
should be read in conjunction with FNB's audited and unaudited consolidated
financial statements and accompanying footnotes and other selected financial
data presented elsewhere herein.
FNB, a one bank holding company headquartered in Tucumcari, New Mexico,
derives substantially all of its revenues and income from the operation of its
wholly-owned subsidiary, the Bank. The Bank is a full service, independent
community bank that provides a full range of commercial banking services. See
"INFORMATION ABOUT FNB AND THE BANK--General." References to the operations of
FNB include the operations of the Bank, unless the context otherwise requires.
FNB's earnings depend primarily on the Bank's net interest income, the
difference between the income earned on the Bank's loans and investments and the
interest paid on its deposits. Among the factors affecting net interest income
are the type, volume and quality of the Bank's assets, the type and volume of
its deposits, and the relative sensitivity of the Bank's interest earning assets
and its interest bearing deposits to changes in interest rates. See "--Certain
Selected Statistical Information-- Average Balance Sheets and Average Yields
Earned and Rates Paid." In addition, the Bank's income is significantly affected
by the fees it receives from other banking services, by its required provisions
for loan losses and by the level of its operating expenses. All aspects of the
Bank's operations are affected generally by market, economic and competitive
conditions, particularly those in Eastern New Mexico.
FINANCIAL CONDITION
Total assets increased by $3,047,275, or 3.4%, during 1996 to $92,200,520 at
December 31, 1996 following an increase of $1,475,878 or 1.7%, during 1995 to
$89,153,245 at December 31, 1995. The increase in 1996 was primarily the result
of opening the Las Vegas, New Mexico branch and an increase in deposits of
$2,613,877 and net earnings of $635,096. The increase in 1995 was primarily the
result of an increase in deposits of $313,000 and net earnings of $779,782.
Loans increased approximately 2.8% during 1996 by $1,635,223 to $59,655,309
at December 31, 1996, and increased $748,438 during 1995 to $58,020,286 at
December 31, 1995. The increase in loans during 1996 was primarily the result of
new loans in Las Vegas, New Mexico. The increase in loans in 1995 was primarily
attributable to increases in demand for all classes of loans.
Investment securities decreased during 1996 by $969,554, or 5.4%, to
$17,047,817 at December 31, 1996 and increased $3,400,037, or 23.3%, during 1995
to $18,017,371 at December 31, 1995. The increases during 1995 occurred
primarily in securities of the U.S. Treasury, U.S. Government Agencies and state
and political subdivisions. The decrease during 1996 was primarily used to fund
an increase in loans to customers and is largely attributable to the opening of
the Las Vegas branch and strong loan demand. The 1995 increase was funded by a
decrease in federal funds sold.
46
<PAGE>
For other information relating to FNB's financial condition, see
"--Certain Selected Statistical Information."
RESULTS OF OPERATIONS
Net interest income is the primary source of income for FNB and represents
the amount by which interest and fees generated by earning assets exceed the
cost of funds, primarily interest paid to the Banks' depositors on interest
bearing accounts. The "interest rate spread" is the difference in the average
annual interest rate received by the Bank on its interest earning assets and the
average annual interest rate paid by the Bank on its interest bearing
liabilities. The "net interest margin" is the quotient obtained by dividing net
interest income by average earning assets, and thus takes into account any
imbalance between the volume of interest earning assets when compared to the
volume of interest bearing liabilities, which is not considered in the
calculation of interest rate spread. Where net interest margin exceeds interest
rate spread, it usually means that the volume of interest earning assets (such
as loans) exceeds the volume of interest bearing liabilities (such as interest
bearing deposits).
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
EARNINGS PERFORMANCE
FNB earned net income of $635,096 in 1996 and $779,782 in 1995. The 18.6%
decrease in net income of $144,686 in 1996 compared to 1995 is attributable to
increases in non-interest expenses and income taxes of $326,723 (or 8.9%) and
$130,850 (or 58.2%), respectively, partially offset by a 4.9% increase in net
interest income of $191,585 and a 16.0% increase in non-interest income of
$138,307. The increase in income taxes in 1996 was attributable to the recording
of a deferred tax asset during 1995 resulting from the unrealized loss on
investments included in stockholders' equity and changes in other timing
differences. Non-interest expenses increased principally because of the startup
costs of opening the Las Vegas, New Mexico branch.
The consolidated return on average assets was .7% in 1996 compared to .9% in
1995. Return on average stockholders' equity was 7.2% in 1996 compared to 9.3%
in 1995. The decline in these ratios was primarily attributable to the decreases
in net income discussed in the preceding paragraph. On a per share basis, net
income for the years 1996 and 1995 was $21.20 and $26.03, respectively.
The following is a condensed summary of the statements of operations:
CONDENSED SUMMARY OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
% Increase/
(Decrease)
1996 1995 1995 to 1996
---- ---- ------------
<S> <C> <C> <C>
Net interest income $ 4,110 3,918 4.9%
Provision for loan losses 107 90 18.9
Non-interest income 999 861 16.0
Non-interest expense 4,011 3,684 8.9
Income taxes 356 225 58.2
</TABLE>
47
<PAGE>
<TABLE>
<S> <C> <C> <C>
Net income 635 780 (18.6)
</TABLE>
48
<PAGE>
NET INTEREST INCOME
FNB's net interest income is affected by changes in yields earned on
interest earning assets and rates paid on interest bearing deposits and other
borrowed funds, referred to as "rate change." It is also affected by changes in
the amount and mix of interest earning assets and interest bearing liabilities,
referred to as "volume change."
The following table is provided to show the percentage of change in interest
income and expense from significant interest-bearing assets and liabilities:
NET INTEREST INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Percentage
increase
1996 1995 1995 to 1996
----------- ------------ --------------
<S> <C> <C> <C>
Interest income:
Loans $ 5,619 5,413 3.8%
Investment securities 1,063 1,033 2.9
Federal funds sold and other 183 167 9.6
--------- ---------
Total interest income 6,865 6,613 3.8
--------- ---------
Interest expense:
Deposits 2,755 2,695 2.2
--------- ---------
Total interest expense 2,755 2,695 2.2
--------- ---------
Net interest income $ 4,110 3,918 4.9
========= =========
</TABLE>
The following table presents average asset and liability balances and
percentage changes:
AVERAGE ASSET/LIABILITY BALANCES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Percentage
increase
(decrease)
1996 1995 1995 to 1996
---------- ---------- --------------
<S> <C> <C> <C>
Loans $58,838 57,646 2.1%
Investment securities 17,533 16,317 7.5
Federal funds sold 1,475 3,075 (52.0)
------- ---------
Total average interest earning
assets $77,846 77,038 1.0
======= =========
Deposits
Non-interest-bearing $15,632 16,093 (2.9)
Interest-bearing 65,210 63,285 3.0
------- ---------
Total average interest-bearing
deposits $65,210 63,285 3.0
======= =========
</TABLE>
49
<PAGE>
The following table shows the average interest yield on interest-earning
assets and the average interest rate paid on interest-bearing liabilities:
INTEREST RATE SPREAD
<TABLE>
<CAPTION>
1996 1995
------ ----
<S> <C> <C>
Average yield earned:
Loans 9.55% 9.39
Investment securities 6.07 6.33
Federal funds sold 5.15 4.94
---- ----
Total interest-earning assets 8.82 8.56
Average rates paid:
Interest-bearing deposits 4.23 4.26
---- ----
Total interest-bearing
liabilities 4.23 4.26
---- ----
Interest rate spread 4.59 4.30
==== ====
The following table shows the net yield on interest-earning assets:
NET INTEREST MARGIN
<CAPTION>
Year Ended December 31,
-------------------------------
1996 1995
---- ----
<S> <C> <C>
Average yield earned 8.82% 8.56
Interest expense to average earning
assets 3.54 3.50
---- ----
Net interest margin 5.28 5.09
==== ====
</TABLE>
Net interest income increased from $3,918,408 in 1995 to $4,109,993 in 1996,
an improvement of 4.9%. During the year ended December 31, 1996, interest rates
in the United States were generally stable.
Total interest income increased to $6,865,439 or 3.8% in 1996 as compared to
$6,613,484 in 1995. Earning asset yields were increased slightly to 8.82% in
1996 from 8.56% in 1995. The higher net interest income was also attributable to
a 2.1% increase in average loans to $58,838,000 in 1996, compared to $57,646,000
in 1995. See "--Certain Selected Statistical Information" for information
regarding FNB's average balances during the two years ended December 31, 1996
and 1995.
Total interest expense in 1996 of $2,775,446 increased 2.2% from $2,695,076
in 1995. This increase was attributable primarily to an increase in average
interest-bearing liabilities of $1,925,000 in 1996 from 1995. The interest rate
paid on interest bearing deposits remained essentially unchanged from 1995 to
1996.
50
<PAGE>
PROVISION FOR LOAN LOSSES
The provision for loan losses is charged to earnings to bring the total
allowance for loan losses to a level deemed appropriate by management based on
management's evaluation of the loan portfolio, economic conditions, prior loss
experience, review of specific problem loans, and other pertinent factors.
Actual losses on loans are charged against the allowance and recoveries on
charged-off loans are credited to the allowance. FNB's provision for loan losses
was $107,005 and $90,000 in 1996 and 1995, respectively. See "--Comparison of
the Years Ended December 31,1996 and 1995--Earnings Performance." Net loans
charged off were $89,176 and $64,778 in 1996 and 1995, respectively.
The allowance for loan losses as a percentage of loans was .92% at December
31,1996 and at December 31, 1995.
NON-INTEREST INCOME
The following table presents a summary of non-interest income and percentage
changes:
NON-INTEREST INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31, % Increase/
----------------------- (Decrease)
1996 1995 1995 to 1996
---- ---- ------------
<S> <C> <C> <C>
Service charges on deposit accounts $720 591 21.8%
Other service charges and fees 197 196 .5
Earnings from life insurance owned 62 67 (7.5)
Dividends 11 7 57.1
Capital gain distribution from
securities available for sale 9 -- --
------ ------
Total $999 861 16.0%
==== ===
</TABLE>
The Bank's principal source of non-interest income is service charges on
deposit accounts. Other sources are dividends from life insurance policies owned
by the Bank, dividends, and a variety of other service charges and fees,
including safe deposit box rental and printed check sales.
Non-interest income increased 16.0% to $998,985 in 1996 compared to $860,679
in 1995. The increase in 1996 was primarily due to an increase in service
charges on deposit accounts.
NON-INTEREST EXPENSE
The following table presents a summary of non-interest expenses and
percentage changes:
51
<PAGE>
NON-INTEREST EXPENSE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31, % Increase/
----------------------- (Decrease)
1996 1995 1995 to 1996
---- ---- ------------
<S> <C> <C> <C>
Salaries and employee benefits $2,151 1,949 10.4%
Depreciation and amortization 348 286 21.7
Postage and office supplies 317 336 (5.7)
Equipment rentals and maintenance 163 158 3.2
Occupancy 156 125 24.8
Legal and professional 119 84 41.7
Data processing 98 79 24.1
Communication 97 59 64.4
Business development 81 91 (11.0)
Trust company operations, net of
revenues 73 57 28.1
FDIC and regulatory fees 38 123 (69.1)
Other 370 337 9.8
------- -------
Total $4,011 3,684 8.9
====== =====
</TABLE>
Total non-interest expense increased 8.9% to $4,010,877 in 1996, compared to
$3,684,154 in 1995. These increases were largely attributable to increases in
salaries and benefits and professional fees related to the opening of the Las
Vegas bank. FDIC insurance assessments decreased to $37,898 in 1996 from
$122,978 in 1995. The decrease was primarily due to decreased premium rates and
examination timing in these periods.
INCOME TAXES
FNB is subject to Federal and New Mexico income taxes which fluctuate from
period to period with fluctuations in FNB's earnings performance. Income taxes,
as a percentage of net income before income taxes, increased from 22.4% in 1995
to 35.9% in 1996 due to the recording of a deferred tax asset during 1995
resulting from the unrealized loss on investments included in stockholders'
equity and changes in other timing differences.
STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In February 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes." Under SFAS 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. During 1995,
52
<PAGE>
FNB adopted SFAS 109. The change in method of accounting for income taxes had no
significant effect except for the recording of a deferred tax asset as described
above.
The Financial Accounting Standards Board has issued Statement 114 ("SFAS
114"), "Accounting by Creditors for Impairment of a Loan" and Statement 118
("SFAS 118"), "Accounting by Creditors for Impairment of a Loan -- Income
Recognition and Disclosures." These Statements apply to all creditors and all
loans, including those that are restructured in troubled debt restructurings
with a modification of terms. Excluded are large groups of homogeneous loans
with small balances that are evaluated collectively, loans measured at fair
value or at the lower of cost or fair value, leases and debt securities. SFAS
114 and SFAS 118 require loans to which they apply, to be measured at the
discounted amounts of their expected future cash flows using the loan's
effective interest rate or at the observable market price or the fair value of
the collateral for collateral dependent loans. The Statements are effective for
fiscal years beginning after December 15, 1994. The adoption of SFAS 114 and
SFAS 118 by the Bank during 1995 had no significant effect.
Effective January 1, 1994, FNB adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Accordingly, beginning on January 1, 1994, pursuant to FNB's
investment policy, certain securities are designated to be available for sale
and are reported at estimated fair value (based on quoted market prices). Net
unrealized gains and losses on such securities are not included in earnings, but
are reported, net of income taxes, as a separate component of stockholders'
equity. On January 1, 1994, FNB recorded a decrease of $291,222 in stockholders'
equity. At December 31, 1996 the stockholders' equity component for net
unrealized loss on securities available for sale was $223,683. The remaining
securities are deemed to be held to maturity, and are reported at amortized
cost. On December 31, 1996 net unrealized gains on securities held to maturity
were approximately $61,355. The $223,683 net decrease in stockholders' equity
discussed above and the $61,355 net unrealized appreciation of held to maturity
securities as of December 31, 1996 was largely attributable to changes in market
interest rates.
FUNDING SOURCES AND LIQUIDITY MANAGEMENT
FNB relies primarily on the Bank for its source of cash to pay its operating
expenses and to pay dividends. During 1995 and 1996, FNB paid annual dividends
at the rate of $8.00 per share, which aggregated to $239,624 per year. The cash
flow from the Bank to FNB comes in the form of dividends. At December 31, 1996,
FNB estimates that the Bank has excess accumulated earnings of approximately
$3,500,000 available for distribution, subject to regulatory approval and other
applicable requirements.
The assets of the Bank are primarily funded through the use of borrowings in
the form of deposits. The maintenance of an adequate level of liquidity is
necessary to ensure that sufficient funds are available to meet customers' loan
demand and deposit withdrawals. The primary sources of asset liquidity consist
of federal funds, maturing loans and investment securities.
The Bank's funds management committee is charged with the responsibility of
maintaining an adequate level of liquidity and managing the risks associated
with interest rate changes while sustaining stable growth in net interest
income. The Bank's basic strategy is to minimize interest rate risk through
matching the repricing periods of earning assets and interest-bearing
liabilities.
CAPITAL MANAGEMENT OF THE BANK
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 the rules effective December 31, 1995,
53
<PAGE>
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 of at least 8.0% of risk-weighted assets.
Tier 1 capital consists principally of stockholders' equity less goodwill. Total
capital is comprised of Tier 1 capital, certain debt instruments and a portion
of the allowance for loan losses.
The Bank's actual risk-based capital requirement and excess risk-based
capital at December 31, 1996 (dollars in thousands) are summarized as follow:
<TABLE>
<CAPTION>
December 31, 1996
-----------------
Amount Percent(1)
------ ---------
<S> <C> <C>
Tier 1 Capital $9,223 14.89
Allowable portion of allowance for loan losses 551 .89
Total risk-based capital 9,774 15.78
Risk-based capital requirement 4,954 8.00
Excess risk based capital 4,820 7.78
</TABLE>
- ---------
(1) Percentage based on risk-weighted assets of $61,922,000 at December 31,
1996.
As a supplement to the risk-based capital guidelines, the Federal Reserve
Board has also adopted a minimum ratio of Tier I capital to total average assets
known as the Tier 1 leverage ratio. The principal objective of this measure is
to place a constraint on the maximum degree to which a banking organization can
leverage its equity capital base. This regulation has established a minimum
level of Tier 1 capital to total assets of 4.0%. The actual Tier 1 leverage
ratio of the Bank was 15.78%, at December 31, 1996.
INFLATION
Management has considered the effects and potential effects of inflation on
its past and future operations and earnings performance. Inflation has not had
in recent years, nor is it expected to have in the foreseeable future, a
significant effect on the Company's operations or earnings performance.
CERTAIN SELECTED STATISTICAL INFORMATION
The following tables set forth certain comparative information with respect
to FNB's operations during the periods or as of the dates indicated.
The following table sets forth the carrying value of securities held by FNB:
54
<PAGE>
SECURITIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
-------------
Investment Type 1996 1995
---- ----
<S> <C> <C>
U.S. Treasury and agencies $12,499 13,453
State and political subdivisions 3,404 3,363
Mortgage-backed securities 34 43
Mutual fund of U.S. Treasury and Federal agencies 1,111 1,158
------- -------
Total $17,048 18,017
======= =======
</TABLE>
The following table sets forth certain statistical information and should be
read in conjunction with the consolidated financial statements of FNB:
AVERAGE BALANCE SHEETS AND AVERAGE YIELDS EARNED AND RATES PAID
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------
1996 1995
----------------------------------------------------------
Average Average
Average yield/ Average yield/
Assets balance Interest rate balance Interest rate
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans $58,838 5,619 9.55% $57,646 $5,413 9.39%
Investment securities 17,533 1,063 6.07 16,317 1,033 6.33
Federal funds sold 1,475 157 5.15 3,075 152 4.94
-------- -------- ---- -------- -------- ----
Total earning assets 77,846 6,839 8.82 77,038 6,598 8.56
Allowance for loan losses (542) -- -- (520) -- --
Cash and due from banks 6,919 26 -- 5,860 15 --
Other assets 6,453 -- -- 6,037 -- --
-------- -------- -------- -------- --
Total Assets $90,676 6,865 8.82 $88,415 6,613 8.56
======== ======== ==== ======== ======== ====
Liabilities and Stockholders'
Equity
Non-interest-bearing deposits $15,632 -- -- $16,093 -- --
Interest-bearing deposits 65,210 2,755 4.23% 63,285 2,695 4.26%
Other liabilities 1,022 -- -- 825 -- --
Stockholders' Equity 8,812 -- -- 8,212 -- --
-------- -------- -- -------- -------- --
Total liabilities and
stockholders' equity $90,676 $2,775 4.23% $88,415 2,695 4.26%
======== ======== ===== ======== ======== ====
Net interest income $4,110 3,918
======== ========
Interest rate spread (a) 4.59 4.30
==== ====
Net interest margin (b) 5.28 5.06
==== ====
</TABLE>
- -----------------------------
55
<PAGE>
(a) The net interest spread is the difference between the average rate on
total interest-earning assets and interest-bearing liabilities.
(b) The net interest margin is net interest income divided by average
interest-earning assets.
The following table reflects the contractual maturity distribution of each
security category and the approximate weighted-average yield at December 31,
1996:
MATURITY DISTRIBUTION OF INVESTMENT PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Maturing
--------------------------------------------------------
In one
year After After Weighted
or 1-5 5-10 After Average
Investment Type less years years 10 years Total Yield%
- -------------------------------------- ------- --------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities $ -- 999 -- -- 999 5.99%
U.S. governmental agency securities 500 11,000 -- -- 11,500 6.12
State and political subdivisions
Tax exempt 500 2,179 496 -- 3,175 4.84(1)
Taxable 5 34 37 153 229 10.39
Mortgage-backed securities -- 6 28 -- 34 8.46
Mutual funds 1,111 -- -- -- 1,111 6.76
------ ------- ------ ------ ------- ----
Total $2,116 14,218 561 153 17,048 6.43
====== ======= ====== ====== ======= ====
</TABLE>
(1) Represents a federal tax equivalent yield of 7.41%.
The following table classifies loans by major category as of December 31,
1995 and 1996:
LOAN PORTFOLIO ANALYSIS
(DOLLARS IN THOUSANDS)
December 31,
-------------------------
1996 1995
--------------------------------- ------------ -------------
Commercial business $11,623 17,792
Agricultural 8,064 6,660
Real Estate:
Commercial 9,350 8,029
Residential 15,243 12,843
Farm and ranch 3,327 2,187
Commercial paper, net 3,388 3,355
Consumer 8,660 7,154
-------- -----
Total Loans $59,655 58,020
The following table presents maturities and sensitivities of loans to
changes in interest rates as of December 31, 1996:
56
<PAGE>
MATURITY DISTRIBUTION AND INTEREST RATE SENSITIVITY OF LOAN PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
After
One year 1-5 After
of less years 5 years Total
------------------------------------ -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Maturities
Commercial business and
Agricultural $ 3,926 9,700 6,061 19,687
Real Estate 5,472 13,816 8,632 27,920
Commercial paper 522 1,764 1,102 3,388
Consumer 1,973 4,115 2,572 8,660
---------- ----------- ----------- -----------
Total 11,893 29,395 18,367 59,655
========== =========== =========== ===========
Sensitivities
Amount of loans due after five
years which have
Predetermined
interest rates -- -- 1,609 1,609
Floating/adjustable rates -- -- 16,758 16,758
---------- ----------- ----------- -----------
Total -- -- 18,367 18,367
========== =========== =========== ===========
</TABLE>
The following table sets forth certain information regarding FNB's
nonaccrual, restructured and past due loans as of December 31, 1996 and 1995:
NONACCRUAL, RESTRUCTURED AND PAST DUE LOANS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Nonaccrual loans $135 142
Restructured loans -- --
Loans past due 90 days or
more and still accruing 224 153
--------- ---------
$359 295
========= =========
</TABLE>
The impact on interest income for the years ended December 31, 1996 and 1995
for nonaccrual and restructured loans was approximately $15,000 and $-0-,
respectively.
The following table sets forth an allocation of the allowance for loan
losses as of December 31, 1995 and 1996:
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
------------
1996 1995
---- ----
Allowance Allowance
Loans for loan Loans for loan
outstanding losses outstanding losses
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
57
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Commercial & Agricultural $19,687 193 24,452 187
Real estate 27,920 83 23,059 80
Consumer 8,660 275 7,154 266
Commercial paper 3,388 -- 3,355 --
----------- ---------- ---------- -----------
$59,655 551 58,020 533
=========== ========== ========== ===========
</TABLE>
The following table presents a detailed analysis of FNB's allowance for loan
losses as of December 31, 1995 and 1996:
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------
1996 1995
--------------------------------------------------------------------------
<S> <C> <C>
Balance beginning of year $ 533 508
Provision for loan losses 107 90
------- -------
Charge-offs:
Commercial and Agricultural 5 1
Consumer 127 96
Real Estate -- --
--------- ---------
Total loan losses 132 97
Recoveries:
Commercial and Agricultural 15 6
Consumer 28 24
Real Estate -- 2
---------- ---------
Total recoveries 43 32
-------- --------
Net charge-offs 89 65
-------- --------
Balance end of year $ 551 533
======= =======
Net charge-offs as a percent of
average loans .151% .113
Allowance for loan losses to:
Total loans at period-end .92 .92
Net charge-offs 619.10 820.00
Provision for loan losses to average
loans .94 .93
</TABLE>
The following table sets forth the remaining maturities for time deposits of
$100,000 or more as of December 31, 1996:
MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three
months 3-6 6-12 Over 12
or less months months months Total
------- ------ ------ ------- -----
<S> <C> <C> <C> <C> <C>
Certificates and other time
deposits $1,687 1,975 305 2,206 6,173
====== ===== === ===== =====
</TABLE>
58
<PAGE>
CERTAIN REGULATORY AND OTHER
CONSIDERATIONS PERTAINING TO NORWEST
Norwest and its banking subsidiaries are subject to extensive regulation by
federal and state agencies. The regulation of bank holding companies and their
subsidiaries is intended primarily for the protection of depositors, federal
deposit insurance funds and the banking system as a whole and is not in place to
protect stockholders or other investors.
As discussed in more detail below, this regulatory environment, among other
things, may (a) restrict Norwest's ability to pay dividends on Norwest Common
Stock, (b) require Norwest to provide financial support to one or more of its
banking subsidiaries, (c) require Norwest and its banking subsidiaries to
maintain capital balances in excess of those desired by management, and/or (d)
require Norwest to pay higher deposit insurance premiums as a result of the
deterioration in the financial condition of depository institutions in general.
BANK REGULATORY AGENCIES
Norwest Corporation, as a bank holding company, is subject to regulation
by the Federal Reserve Board under the Bank Holding Company Act.
Norwest's national banking subsidiaries are regulated primarily by the
Office of the Comptroller of the Currency ("OCC"). Its state-chartered banking
subsidiaries are regulated primarily by the Federal Deposit Insurance
Corporation ("FDIC") and applicable state banking agencies. Its savings and loan
association subsidiary is regulated primarily by the Office of Thrift
Supervision ("OTS"). Norwest's federally insured banking subsidiaries and
savings and loan subsidiary are also subject to regulation by the FDIC.
Norwest has other financial services subsidiaries that are subject to
regulation by the Federal Reserve Board and other applicable federal and state
agencies. For example, Norwest's brokerage subsidiary is subject to regulation
by the Securities and Exchange Commission, the National Association of
Securities Dealers, Inc. and state securities regulators. Norwest's insurance
subsidiaries are subject to regulation by applicable state insurance regulatory
agencies. Other nonbank subsidiaries of Norwest are subject to the laws and
regulations of both the federal government and the various states in which they
conduct business.
BANK HOLDING COMPANY ACTIVITIES; INTERSTATE BANKING
A bank holding company is generally prohibited under the Bank Holding
Company Act from engaging in nonbanking (i.e., commercial or industrial)
activities, subject to certain exceptions. Specifically, the activities of a
bank holding company, and those companies that it controls or in which it holds
more than 5% of the voting stock, are limited to banking or managing or
controlling banks, furnishing services to its subsidiaries and such other
activities that the Federal Reserve Board determines to be so closely related to
banking as to be a "proper incident thereto." In determining whether an activity
is sufficiently related to banking, the Federal Reserve Board will consider
whether the performance of such activity by the bank holding company can
reasonably be expected to produce benefits to the public (e.g., greater
convenience, increased competition or gains in efficiency) that outweigh
possible adverse effects (e.g., undue concentration of resources, decreased or
unfair competition, conflicts of interest or unsound banking practices).
Under the Reigle-Neal Interstate Banking and Branching Act of 1994 (the
"Interstate Banking Act"), which became effective on September 29, 1995, a bank
holding company may acquire banks in states other than its home state, subject
to any state requirement that the bank has been organized and operating for a
minimum period of time, not to exceed five years, and the requirement that the
bank holding company not control, prior to or following the proposed
acquisition, more than 10% of the total amount of deposits of insured
59
<PAGE>
depository institutions nationwide or, unless it is the bank holding company's
initial entry into the state, more than 30% of such deposits in the state (or
such lesser or greater amount set by the state).
The Interstate Banking Act also authorizes banks to merge across state
lines (thereby creating interstate branches) effective June 1, 1997. States may
opt out of the Interstate Banking Act (thereby prohibiting interstate mergers in
the state) or opt in early (thereby allowing interstate mergers prior to June 1,
1997). Norwest will be unable to consolidate its banking operations in one state
with those of another state if either state in question has opted out of the
Interstate Banking Act. The state of Texas has opted out of the Interstate
Banking Act. The state of Montana has opted out until at least the year 2000.
Norwest's acquisitions of banking institutions and other companies
generally are subject to the prior approval of the Federal Reserve Board and
other applicable federal or state regulatory authorities. In determining whether
to approve a proposed bank acquisition, federal banking regulators will
consider, among other factors, the effect of the acquisition on competition, the
public benefits expected to be received from the consummation of the
acquisition, the projected capital ratios and levels on a post-acquisition
basis, and the acquiring institution's record of addressing the credit needs of
the communities it serves, including the needs of low and moderate income
neighborhoods, consistent with the safe and sound operation of the bank, under
the Community Reinvestment Act of 1977, as amended.
DIVIDEND RESTRICTIONS
Norwest is a legal entity separate and distinct from its banking and other
subsidiaries. Its principal source of funds to pay dividends on its common and
preferred stock and debt service on its debt is dividends from its subsidiaries.
Various federal and state statutes and regulations limit the amount of dividends
that may be paid to Norwest by its banking subsidiaries without regulatory
approval.
Most of Norwest's banking subsidiaries are national banks. A national bank
must obtain the prior approval of the OCC to pay a dividend if the total of all
dividends declared by the bank in any calendar year would exceed the bank's net
income for that year combined with its retained net income for the preceding two
calendar years, less any required transfers to surplus or a fund for the
retirement of any preferred stock.
The OTS imposes substantially similar restrictions on the payment of
dividends to Norwest by its savings and loan association subsidiary. Norwest's
state-chartered banking subsidiaries also are subject to dividend restrictions
under applicable state law.
If, in the opinion of the applicable federal regulatory agency, a
depository institution 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), the regulator
may require, after notice and hearing, that such bank cease and desist from such
practice. The OCC has indicated that the payment of dividends would constitute
an unsafe and unsound practice if the payment would deplete a depository
institution's capital base to an inadequate level. Under the Federal Deposit
Insurance Act, an insured depository institution may not pay any dividend if the
institution is undercapitalized or if the payment of the dividend would cause
the institution to become undercapitalized. In addition, federal bank regulatory
agencies have issued policy statements which provide that depository
institutions and their holding companies should generally pay dividends only out
of current operating earnings.
The ability of Norwest's banking subsidiaries to pay dividends to
Norwest may also be affected by various minimum capital requirements for banking
organizations, as described
60
<PAGE>
below. In addition, the right of Norwest to participate in the assets or
earnings of a subsidiary is subject to the prior claims of creditors of the
subsidiary.
HOLDING COMPANY STRUCTURE
Transfer of Funds from Banking Subsidiaries. Norwest's banking
subsidiaries are subject to restrictions under federal law that limit the
transfer of funds or other items of value from such subsidiaries to Norwest and
its nonbanking subsidiaries (including Norwest, "affiliates") in so-called
"covered transactions." In general, covered transactions include loans and other
extensions of credit, investments and asset purchases, as well as other
transactions involving the transfer of value from a banking subsidiary to an
affiliate or for the benefit of an affiliate. Unless an exemption applies,
covered transactions by a banking subsidiary with a single affiliate are limited
to 10% of the banking subsidiary's capital and surplus and, with respect to all
affiliates in the aggregate, to 20% of the banking subsidiary's capital and
surplus. Also, loans and extensions of credit to affiliates generally are
required to be secured in specified amounts.
Source of Strength Doctrine. The Federal Reserve Board has a policy that
a bank holding company is expected to act as a source of financial and
managerial strength to each of its subsidiary banks and, under appropriate
circumstances, to commit resources to support each such subsidiary bank. This
support may be required at times when the bank holding company may not have the
resources to provide it. Capital loans by a bank holding company to any of its
subsidiary banks are subordinate in right of payment to deposits and certain
other indebtedness of the subsidiary bank. In addition, 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.
Depositor Preference. The Federal Deposit Insurance Act (the "FDI Act")
provides that, in the event of the "liquidation or other resolution" of an
insured depository institution, the claims of depositors of the institution
(including the claims of the FDIC as subrogee of insured depositors) and certain
claims for administrative expenses of the FDIC as a receiver will have priority
over other general unsecured claims against the institution. If an insured
depository institution fails, insured and uninsured depositors, along with the
FDIC, will have priority in payment ahead of unsecured, nondeposit creditors,
including the institution's parent holding company.
Liability of Commonly Controlled Institutions. Under the FDI Act, an
insured depository institution is generally liable for any loss incurred, or
reasonably expected to be incurred, by the FDIC in connection with (a) the
default of a commonly controlled insured depository institution or (b) any
assistance provided by the FDIC to a commonly controlled 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.
REGULATORY CAPITAL STANDARDS AND RELATED MATTERS
Risk-Based Capital. The Federal Reserve Board, the OCC and the FDIC have
adopted substantially similar risk-based and leverage capital guidelines for
banking organizations. The guidelines are intended to ensure that banking
organizations have adequate capital given the risk levels of their assets and
off-balance sheet commitments.
The risk-based capital ratio is determined by classifying assets and
certain off-balance sheet financial instruments into weighted categories, with
higher levels of capital being required for those categories perceived as
representing greater risk. Under the capital guidelines, a banking
organization's total capital is divided into two tiers. "Tier 1 capital"
61
<PAGE>
consists of common equity, retained earnings, qualifying noncumulative perpetual
preferred stock, a limited amount of qualifying cumulative perpetual preferred
stock and minority interests in the equity accounts of consolidated
subsidiaries, less certain items such as goodwill and certain other intangible
assets. "Tier 2 capital" consists of hybrid capital instruments, perpetual debt,
mandatory convertible debt securities, a limited amount of subordinated debt,
preferred stock that does not qualify as Tier 1 capital, and a limited amount of
the allowance for credit losses.
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 currently 8%. The minimum Tier 1 capital to risk-adjusted assets is 4%. As of
December 31, 1996, Norwest's total capital and Tier 1 capital to risk-adjusted
assets ratios were 10.42% and 8.63%, respectively.
The Federal Reserve Board also requires bank holding companies to comply
with minimum leverage ratio guidelines. The leverage ratio is the ratio of a
bank holding company's Tier 1 capital to its total consolidated quarterly
average assets, less goodwill and certain other intangible assets. The
guidelines require a minimum leverage ratio of 3% for bank holding companies
that meet certain specified criteria, including having the highest supervisory
rating. All other bank holding companies are required to maintain a minimum
leverage ratio of 4% to 5%. The Federal Reserve Board has not advised Norwest of
any specific leverage ratio applicable to it. As of December 31, 1996, Norwest's
leverage ratio was 6.15%.
The Federal Reserve Board's capital guidelines 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. Also, the guidelines
indicate that the Federal Reserve Board will 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 (excluding intangibles) to total assets (excluding intangibles).
Norwest's banking subsidiaries are subject to risk-based and leverage
capital guidelines substantially similar to those imposed by the Federal Reserve
Board on bank holding companies.
Other Measures of Capital Adequacy and Safety and Soundness. In
assessing a banking organization's capital adequacy, federal bank regulatory
agencies will also consider the organization's credit concentration risk and
risks associated with nontraditional activities, as well as the organization's
ability to manage those risks. This evaluation will be performed as part of the
organization's regular safety and soundness examination.
Effective January 1, 1998, federal bank regulatory agencies will require
banking organizations that engage in significant trading activity to calculate a
charge for market risk. Organizations may opt to comply effective January 1,
1997. Significant trading activity, for this purpose, means trading activity of
at least 10% of total assets or $1 billion, calculated on a consolidated basis
for bank holding companies. Federal bank regulators may apply the market risk
measure to other banks and bank holding companies if the agency deems necessary
or appropriate for safe and sound banking practices. Each agency may exclude
organizations that it supervises that otherwise meet the criteria under certain
circumstances. The market risk charge will be included in the calculation of an
organization's risk-based capital ratios. Norwest did not engage in significant
trading activity during the year ended December 31, 1996.
As an additional means to identify problems in the financial management
of depository institutions, the FDI Act requires federal bank regulatory
agencies to establish certain non-capital safety and soundness standards for
institutions for which they are the primary
62
<PAGE>
federal regulator. The standards relate generally to operations and management,
asset quality, interest rate exposure and executive compensation. The agencies
are authorized to take action against institutions that fail to meet such
standards.
Prompt Corrective Action. The FDI Act requires federal bank regulatory
agencies to take "prompt corrective action" with respect to FDIC-insured
depository institutions that do not meet minimum capital requirements. A
depository institution's treatment for purposes of the prompt corrective action
provisions will depend upon how its capital levels compare to various capital
measures and certain other factors, as established by regulation.
Federal bank regulatory agencies have adopted regulations that classify
insured depository institutions into one of five capital-based categories. The
regulations use the total capital ratio, the Tier 1 capital ratio and the
leverage ratio as the relevant measures of capital. A depository institution is
(a) "well capitalized" if it has a risk-adjusted total capital ratio of at least
10%, a Tier 1 capital ratio of at least 6% and a leverage ratio of at least 5%
and is not subject to any order or written directive to maintain a specific
capital level; (b) "adequately capitalized" if it has a risk-adjusted total
capital ratio of at least 8%, a Tier 1 capital ratio of at least 4% and a
leverage ratio of at least 4% (3% in some cases) and is not well capitalized;
(c) "undercapitalized" if it has a risk-adjusted total capital ratio of less
than 8%, a Tier 1 capital ratio of less than 4% or a leverage ratio of less than
4% (3% in some cases); (d) "significantly undercapitalized" if it has a
risk-adjusted total capital ratio of less than 6%, a Tier 1 capital ratio of
less than 3% or a leverage ratio of less than 3%; and (e) "critically
undercapitalized" if its tangible equity is less than 2% of total assets. As of
December 31, 1996, all of Norwest's insured depository institutions met the
criteria for well capitalized institutions as set forth above.
A depository institution's primary federal bank regulator is authorized
to downgrade the institution's capital category to the next lower category upon
a determination that the institution is engaged in an unsafe or unsound
condition or is engaged in an unsafe or unsound practice. An unsafe or unsound
practice can include receipt by the institution of a less than satisfactory
rating on its most recent examination with respect to its asset quality,
management, earnings or liquidity.
The FDI Act 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 as a result be
undercapitalized. Undercapitalized depository institutions are subject to a wide
range of limitations on operations and activities (including asset growth) 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 the plan. The aggregate
liability of the parent holding company is limited to the lesser of (a) 5% of
the depository institution's total assets at the time it became undercapitalized
or (b) the amount which is necessary (or would have been necessary) to bring the
institution into compliance with all capital standards applicable with respect
to the institution as of the time it fails to comply with the plan. If an
undercapitalized 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.
63
<PAGE>
FDIC INSURANCE
The FDIC insures the deposits of Norwest's depository institution
subsidiaries through the Bank Insurance Fund (BIF) or, in the case of deposits
held by its savings and loan association subsidiary or deposits held by banking
subsidiaries as a result of savings and loan associations acquired by Norwest,
through the Savings Association Insurance Fund (SAIF). The amount of FDIC
assessments paid by each BIF member institution is based on its relative risk of
default as measured by regulatory capital ratios and other factors.
Specifically, the assessment rate is based on the institution's capitalization
risk category and supervisory subgroup category. 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 category 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 BIF assessment rate currently ranges from zero to 27 cents per $100
of domestic deposits, with Subgroup A institutions assessed at a rate of zero
and Subgroup C institutions assessed at a rate of 27 cents. The FDIC may
increase or decrease the assessment rate schedule on a semiannual basis. An
increase in the rate assessed one or more of Norwest's banking subsidiaries
could have a material adverse effect on Norwest's earnings, depending on the
amount of the increase. The FDIC is authorized to terminate a depository
institution's deposit insurance upon a finding by the FDIC that the
institution's financial condition is unsafe or unsound or that the institution
has engaged in unsafe or unsound practices or has violated any applicable rule,
regulation, order or condition enacted or imposed by the institution's
regulatory agency. The termination of deposit insurance with respect to one or
more of Norwest's subsidiary depository institutions could have a material
adverse effect on Norwest's earnings, depending on the collective size of the
particular institutions involved.
Deposits insured by SAIF are currently assessed at the BIF rate of zero
to 27 cents per $100 of domestic deposits. The SAIF assessment rate may increase
or decrease as is necessary to maintain the designated SAIF reserve ratio of
1.25% of insured deposits.
Effective January 1, 1997, all FDIC-insured depository institutions must
pay an annual assessment to provide funds for the payment of interest on bonds
issued by the Financing Corporation, a federal corporation chartered under the
authority of the Federal Housing Finance Board. The bonds (commonly referred to
as FICO bonds) were issued to capitalize the Federal Savings and Loan Insurance
Corporation. Until December 31, 1999 or when the last savings and loan
association ceases to exist, whichever occurs first, depository institutions
will pay approximately 6.4 cents per $100 of SAIF-assessable deposits and
approximately 1.3 cents per $100 of BIF-assessable deposits.
Subject to certain conditions, BIF and SAIF will be merged into one
insurance fund effective January 1, 1999.
FISCAL AND MONETARY POLICIES
Norwest's business and earnings are affected significantly by the fiscal
and monetary policies of the federal government and its agencies. Norwest is
particularly affected by the policies of the Federal Reserve Board, which
regulates the supply of money and credit in the United States. Among the
instruments of monetary policy available to the Federal Reserve are (a)
conducting open market operations in United States government securities,
64
<PAGE>
(b) changing the discount rates of borrowings of depository institutions,
(c) imposing or changing reserve requirements against depository institutions'
deposits, and (d) imposing or changing reserve requirements against certain
borrowing by banks and their affiliates. These methods are used in varying
degrees and combinations to directly affect the availability of bank loans and
deposits, as well as the interest rates charged on loans and paid on deposits.
For that reason alone, the policies of the Federal Reserve Board have a material
effect on the earnings of Norwest's banking subsidiaries and, thus, those of
Norwest.
COMPETITION
The financial services industry is highly competitive. Norwest's
subsidiaries compete with traditional financial services providers, such as
banks, savings and loan associations, credit unions, finance companies, mortgage
banking companies, insurance companies, and money market and mutual fund
companies. They also face increased competition from non-banking institutions
such as brokerage houses and insurance companies, as well as from financial
services subsidiaries of commercial and manufacturing companies. Many of these
competitors enjoy the benefits of advanced technology, fewer regulatory
constraints and lower cost structures.
The financial services industry is likely to become even more
competitive as further technological advances enable more companies to provide
financial services. These technological advances may diminish the importance of
depository institutions and other financial intermediaries in the transfer of
funds between parties.
65
<PAGE>
EXPERTS
The consolidated financial statements of Norwest and subsidiaries as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, 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 The First National Bankshares,
Inc. and subsidiaries as of December 31, 1996 and for the year then ended
included in this Proxy Statement-Prospectus are included herein in reliance on
the report of Rogoff, Diamond & Walker LLP, independent certified public
accountants, upon the authority of said firm as experts in accounting and
auditing.
LEGAL OPINIONS
A legal opinion to the effect that the shares of Norwest Common Stock
offered hereby, when issued in accordance with the Reorganization Agreement,
will be validly issued, fully paid and nonassessable, has been rendered by
Stanley S. Stroup, Executive Vice President and General Counsel of Norwest
Corporation. As of December 31, 1996, Mr. Stroup was the beneficial owner of
119,055 shares, and held options, exercisable within 60 days of December 31,
1996, to acquire 240,493 additional shares, of Norwest Common Stock.
The material U.S. Federal income tax consequences of the Merger to FNB's
shareholders will be passed upon for FNB by the law firm of Bracewell &
Patterson, L.L.P., Houston, Texas.
66
<PAGE>
MANAGEMENT OF NORWEST AND ADDITIONAL INFORMATION
Certain information relating to the executive compensation, voting
securities and the principal holders thereof, certain relationships and related
transactions, and other related matters concerning Norwest is included or
incorporated by reference in its Annual Report on Form 10-K for the year ended
December 31, 1996, which is incorporated in this Proxy Statement-Prospectus by
reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Shareholders
of FNB desiring copies of such documents may contact Norwest at the addresses or
phone numbers indicated under "AVAILABLE INFORMATION."
67
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
OF THE FIRST NATIONAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996:
Report of Independent Certified Public Accountants......................F-2
Consolidated Balance Sheet..............................................F-3
Consolidated Statement of Earnings and Retained Earnings................F-5
Consolidated Statement of Cash Flows....................................F-7
Notes to Consolidated Financial Statements..............................F-9
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED):
Consolidated Balance Sheet.............................................F-23
Consolidated Statement of Earnings and Retained Earnings...............F-24
Consolidated Statement of Cash Flows...................................F-25
F-1
<PAGE>
[LETTERHEAD OF ROGOFF, DIAMOND & WALKER LLP APPEARS HERE]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
The First National Bankshares, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of The First
National Bankshares, Inc. and Subsidiaries as of December 31, 1996, and
the related consolidated statements of earnings and retained earnings and
cash flows for the year then ended. These consolidated financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The First
National Bankshares, Inc. and Subsidiaries as of December 31, 1996, and
the consolidated results of their operations and their cash flows for the
year then ended, in conformity with generally accepted accounting
principles.
/s/ Rogoff, Diamond & Walker LLP
Albuquerque, New Mexico
March 26, 1997
F-2
[FOOTER OF LETTERHEAD OF ROGOFF, DIAMOND & WALKER LLP APPEARS HERE]
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1996
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Cash and due from banks $ 7,557,309
Interest-bearing deposits with banks 378,683
Federal funds sold 1,500,000
-----------
Total cash and cash equivalents 9,435,992
Securities held to maturity (note B) 15,937,178
Securities available for sale (note B) 1,110,639
-----------
Total investment securities 17,047,817
Loans (note C) 59,655,309
Allowance for credit losses (note C) (551,317)
-----------
Net loans 59,103,992
Interest receivable 1,352,706
Other real estate owned 203,607
Cash value of life insurance 1,844,982
Other assets 206,505
Federal Reserve Bank stock 120,000
Federal Home Loan Bank stock 267,300
Premises and equipment, net (note D) 2,617,619
-----------
6,612,719
-----------
$ 92,200,520
-----------
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-3
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - CONTINUED
December 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
Non interest-bearing deposits $ 15,750,214
Interest-bearing deposits (note E) 66,398,961
-----------
Total deposits 82,149,175
Accrued interest payable 506,672
Income tax payable 17,000
Accrued expenses 462,051
Deferred income tax liability 70,000
-----------
Total liabilities 83,204,898
COMMITMENTS AND CONTINGENCIES (notes F, H, I and J)
Common stock, $1 par value - authorized 100,000 shares,
outstanding 29,953 shares 29,953
Additional paid-in-capital 1,896,800
Retained earnings 7,212,552
Net unrealized loss on securities available for sale, net of
deferred income tax asset of $80,000 (143,683)
-----------
Total stockholders' equity 8,995,622
-----------
$ 92,200,520
-----------
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-4
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
Year ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Interest income
Loans and commercial paper $ 5,618,929
Investment securities 1,063,549
Federal funds sold and interest-bearing accounts 182,961
-----------
Total interest income 6,865,439
Interest expense on deposits 2,755,446
-----------
Net interest income 4,109,993
Provision for credit losses 107,005
-----------
Net interest income after provision for credit losses 4,002,988
-----------
Non-interest income
Service charges on deposit accounts 720,066
Other fees and service charges 196,859
Earnings from life insurance owned 62,206
Dividends 10,625
Capital gain distribution from securities
available for sale 9,229
-----------
Total non-interest income 998,985
-----------
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-5
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS AND
RETAINED EARNINGS - CONTINUED
Year ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Non-interest expenses
Salaries and employee benefits $ 2,151,456
Other 369,739
Depreciation and amortization 348,320
Postage and office supplies 316,953
Equipment rentals and maintenance 163,061
Occupancy 155,845
Legal and professional 119,300
Data processing 97,649
Communication 97,121
Business development 80,469
Trust company operations, net of revenues of $25,628 73,066
FDIC assessment and regulatory examination fees 37,898
-----------
Total non-interest expenses 4,010,877
-----------
Income before income taxes 991,096
Income tax expense (note G) 356,000
-----------
NET INCOME 635,096
Retained earnings at beginning of year 6,817,080
Dividends paid 239,624
-----------
Retained earnings at end of year $ 7,212,552
===========
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-6
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities
Net income $ 635,096
Adjustments to reconcile net income to net cash flows
from operating activities
Change in provision for credit losses 17,829
Depreciation and amortization 348,320
Capital gain distribution from securities available for sale (9,229)
Interest receivable (59,988)
Cash value of life insurance (62,206)
Other assets 79,076
Accrued interest payable 78,426
Income tax payable (41,292)
Accrued expenses (31,232)
Deferred income tax liability 80,000
------------
Net cash flows from operating activities 1,034,800
------------
Cash flows from investing activities
Proceeds from maturities of investment securities 6,550,000
Proceeds from capital gain distribution 9,229
Purchases of investment securities held to maturity (5,628,424)
Purchases of Federal Home Loan Bank stock (5,000)
Net increase in loans (1,711,328)
Purchases of premises and equipment (538,837)
------------
Net cash flows used in investing activities (1,324,360)
------------
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-7
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Year ended December 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Cash flows from financing activities
Demand, NOW, and IMMA deposits $ 2,377,708
Time deposits 236,169
Dividends paid (239,624)
-----------
Net cash flows from financing activities 2,374,253
-----------
Net increase in cash and cash equivalents 2,084,693
Cash and cash equivalents at beginning of year 7,351,299
-----------
Cash and cash equivalents at end of year $ 9,435,992
===========
SUPPLEMENTAL INFORMATION
- ------------------------
Interest paid $ 2,677,020
===========
Income taxes paid $ 317,292
===========
Transfer of loans to other real estate owned,
net of payments received $ 76,105
===========
Interest received on loans $ 6,805,451
===========
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statement.
F-8
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the corporation's significant accounting policies applied in
the preparation of the accompanying financial statements follows.
1. Operations
The First National Bankshares, Inc. (the corporation) is a bank holding
company which was organized in 1988, and at that time acquired 100%
ownership of The First National Bank of Tucumcari, Tucumcari, New Mexico,
and the First National Bank of Santa Rosa, Santa Rosa, New Mexico. In
September 1991, The First Security Trust Company, a wholly owned subsidiary,
was formed. On January 1, 1993, The First National Bank of Tucumcari and the
First National Bank of Santa Rosa were merged, resulting in the Santa Rosa
bank becoming a branch of The First National Bank of Tucumcari. The
corporation opened a branch bank in Las Vegas, New Mexico in 1996. The First
Security Trust Company was closed during 1996.
The corporation provides retail, commercial, and corporate banking services.
2. Consolidation
The consolidated financial statements include the accounts of the
corporation and its subsidiaries, The First National Bank of Tucumcari and
The First Security Trust Company. Significant intercompany accounts and
transactions have been eliminated.
3. Cash and cash equivalents
For purposes of the consolidated statement of cash flows, the corporation
considers cash and due from banks, interest-bearing deposits with banks and
federal funds sold to be cash equivalents.
4. Securities
Investment securities which the corporation intends to hold until maturity
are stated at cost, adjusted for amortization of premiums and accretion of
discounts using a method that approximates level yield. Investments which
the corporation intends to hold for indefinite periods of time, including
securities that management intends to use as part of its asset/liability
management strategy, or that may be sold in response to changes in interest
rates, changes in prepayment risk, the need to increase regulatory capital
or similar factors, are classified as available for sale.
F-9
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Effective January 1, 1994, the corporation adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" (SFAS 115). Accordingly, investment
securities available for sale are measured at fair value. Net unrealized
gains and losses, net of deferred taxes, on investment securities available
for sale are excluded from earnings and reported as a separate component of
stockholders' equity until realized. The classification of securities is
determined at the date of purchase and subsequent transfers, if any, between
security classifications are recorded at fair value.
Realized gains and losses on sales of securities are computed by the
specific identification method at the time of disposition and are recorded
in non-interest income.
Trading account securities are purchased with the intent to earn a profit by
trading or selling the securities. These securities are stated at fair
value. Adjustments to the fair value are reported in other non-interest
income. The corporation has no securities classified as trading account
securities.
5. Loans
Loans are stated at their principal amount. Interest income is recognized on
an accrual basis except when a loan is past due and is placed on non-accrual
status by the loan committee. When a loan is placed on non-accrual status,
uncollected interest accrued in prior years is charged against the allowance
for credit losses. Interest income is subsequently recognized only to the
extent cash payments are received. A loan is returned to accrual status when
principal and interest are no longer past due and collectibility is no
longer doubtful.
Restructured loans are those on which concessions in principal amount or
interest rate terms have been made as a result of deterioration in a
borrower's financial condition.
Interest on these loans is accrued at the new terms.
Unearned discount on consumer loans is recognized by the interest method or
other methods for which results are not materially different from the
interest method. Loan origination fees and certain direct origination costs,
where material, are capitalized and recognized as an adjustment of the yield
of the related loan.
F-10
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Effective January 1, 1995, the corporation adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan" and Statement of Financial Accounting Standards No. 118, "Accounting
by Creditors for Impairment of a Loan - - Income Recognition and
Disclosures". Under the corporation's credit policies and practices, all
non-accrual and restructured commercial, agricultural, construction, and
commercial real estate loans meet the definition of impaired loans under
SFAS 114 and 118. For purposes of this definition, certain loans where only
the principal repayment time-schedule terms have been modified are not
considered restructured, and therefore not considered impaired. Impaired
loans as defined by SFAS 114 and 118 exclude certain consumer and
residential real estate loans. Loan impairment is measured based on the
present value of expected future cash flows discounted at the loan's
effective interest rate or, as a practical expedient, at the observable
market price of the loan or the fair value of the collateral if the loan is
collateral dependent. The adoption of SFAS 114 and 118 did not affect the
corporation's financial position or results of operation.
6. Allowance for Credit Losses
The allowance for credit losses is based upon management's evaluation of a
number of factors, including credit loss experience, risk analyses of loan
portfolios, as well as current and expected economic conditions. It is
reasonably possible that economic or other factors could deteriorate at any
time in the future, causing a change in management's estimate of the
allowance for credit losses that would be material to the financial
statements.
Charge-offs are loans or portions thereof evaluated as uncollectible. Other
consumer loans are charged off when certain delinquency criteria are met,
unless fully secured.
7. Premises and equipment
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Owned properties and equipment are depreciated on a
straight-line basis over their estimated useful lives.
The costs of improvements are capitalized. Maintenance and repairs, as well
as gains and losses on dispositions of premises and equipment, are included
in non-interest expenses.
F-11
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
8. Other Real Estate Owned
Other real estate owned is stated at the lower of cost or appraised value.
When a property is acquired, the excess of the recorded investment in the
property over fair value, if any, is charged to the allowance for credit
losses. Subsequent declines in the estimated fair value, net operating
results, and gains or losses on disposition of the property are included in
other non-interest expenses.
9. Income Taxes
The corporation and its subsidiaries file consolidated federal and state
income tax returns. The effects of current or deferred taxes are recognized
as a current and deferred tax liability or asset based on current tax laws.
Accordingly, income tax expense in the consolidated statements of income
includes charges or credits to properly reflect the current and deferred tax
asset or liability.
10. Management Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements,
as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-12
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE B - INVESTMENT SECURITIES
The amortized cost and fair values of investment securities at December 31,
1996, was:
<TABLE>
<CAPTION>
AMORTIZED NET UNREALIZED
COST GAINS (LOSSES) FAIR VALUE
------------ --------------- -------------
<S> <C> <C> <C>
Securities held to maturity
U.S. Treasury and obligations
of Federal agencies $ 12,499,266 $ 15,288 $ 12,514,554
State, municipal and housing-
tax exempt 3,403,672 45,172 3,448,844
Mortgage backed securities of
Federal agencies 34,240 895 35,135
----------- ----------- ------------
Total securities held to
maturity $ 15,937,178 $ 61,355 $ 15,998,533
========== =========== ============
Securities available for sale
Mutual fund of U.S. Treasury
and Federal agencies $ 1,334,322 $ (223,683) $ 1,110,639
=========== =========== ============
</TABLE>
F-13
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE B - INVESTMENT SECURITIES - CONTINUED
The carrying and fair values of investment securities by maturity at
December 31, 1996, were:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
------------ ------------
<S> <C> <C>
Securities held to maturity
One year or less $ 1,004,978 $ 1,010,044
One year through five years 14,215,506 14,239,372
Five years through ten years 570,694 573,527
Ten years 146,000 175,590
---------- -----------
Total securities held to maturity 15,937,178 15,998,533
---------- -----------
Securities available for sale
One year or less 1,334,322 1,110,639
Thereafter - -
---------- ----------
Total securities $ 17,271,500 $ 17,109,172
============ ============
<CAPTION>
Interest income on investment securities for the year ended December 31
1996, was:
Securities held to maturity
U.S. Treasury and Federal agencies $ 798,791
State, municipal and housing-tax exempt 195,763
Mortgage backed securities of Federal agencies 3,120
-----------
997,674
Securities available for sale
Mutual fund of U.S. Treasury and Federal agencies 65,875
-----------
Total interest income on securities $ 1,063,549
===========
Investment securities carried at $7,686,560, with market approximating
carrying cost, were pledged to secure public or trust deposits or for other
purposes at December 31, 1996.
Realized gains from the sale of investment securities for the year ended
December 31, 1996, were:
Securities available for sale
Capital gain distribution from mutual funds $ 9,229
===========
</TABLE>
F-14
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE B - INVESTMENT SECURITIES - CONTINUED
The 1996 increase in net unrealized holding loss totaling $47,978 on
available-for-sale securities, mutual funds, has been included as a decrease
in the separate component of stockholders' equity in the accompanying
financial statements.
NOTE C - LOANS
The carrying values of loans at December 31, 1996, were:
<TABLE>
<S> <C>
Residential real estate $ 15,242,802
Commercial 11,622,925
Commercial real estate 9,350,788
Consumer 8,659,684
Agricultural 8,064,285
Commercial paper 3,387,848
Farm and ranch real estate 3,326,977
-----------
Total loans $ 59,655,309
===========
<CAPTION>
Changes in the allowance for credit losses for the year ended December 31,
1996, were:
Balance at beginning of year $ 533,488
Provision for credit losses 107,005
Charge-offs (132,172)
Recoveries 42,996
-----------
Balance at end of year $ 551,317
===========
<CAPTION>
Total non-performing assets and 90 day past due loans were approximately:
Impaired loans
Non-accrual $ 135,000
Other impaired 432,000
-----------
Total impaired loans 567,000
Other real estate owned 204,000
-----------
Total non-performing assets 771,000
Other loans past due 90 days or more 100,000
-----------
Total impaired assets and 90 day past due loans $ 871,000
===========
</TABLE>
F-15
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE C - LOANS - CONTINUED
Certain of the impaired assets were not subject to a related allowance for
credit losses because of the net realizable value of loan collateral,
guarantees and other factors.
There were no material commitments to lend additional funds to customers
whose loans were classified as non-accrual at December 31, 1996.
Loans to executive officers and directors and their affiliates (related
parties) of the corporation and its subsidiaries, made in the ordinary
course of business, were approximately $1,720,000 at December 31, 1996.
NOTE D - PREMISES AND EQUIPMENT
The carrying value, at cost, of premises and equipment at December 31, 1996,
was:
<TABLE>
<S> <C>
Land $ 207,500
Premises and improvements 2,978,053
Furniture, fixtures and equipment 2,880,080
-----------
6,065,633
Less accumulated depreciation and amortization 3,448,014
-----------
Premises and equipment, net $ 2,617,619
===========
NOTE E - DEPOSITS
Certificates of deposit over $100,000 at December 31, 1996 aggregated
$6,173,477.
<CAPTION>
At December 31, 1996, the scheduled maturities of certificates of deposit
are as follows:
1997 $ 20,561,753
1998 5,350,678
1999 1,806,230
-----------
$ 27,718,661
===========
</TABLE>
Overdrafts reclassified as loans on the accompanying balance sheet totaled
approximately $108,000 at December 31, 1996.
F-16
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE F - EMPLOYEE BENEFIT PLAN
RETIREMENT PLANS
The corporation's noncontributory defined benefit retirement plan covers all
full-time employees, age 21 and older, who complete one year of service.
Pension benefits provided are based on the employee's highest compensation
in three consecutive years during the last ten years of employment. The
corporation's funding policy is to maintain adequate assets to provide for
both benefits earned to date and those expected to be earned in the future.
The plan's funded status at December 31, 1996, is presented below:
Actuarial present value of benefit obligations:
<TABLE>
<S> <C>
Actuarial present value of accumulated benefit
obligation, including vested benefits of $1,529,609 $(1,747,907)
Effect of projected future compensation (616,843)
-----------
Projected benefit obligation for services rendered to date (2,364,750)
Plan assets at fair value, consisting of cash, U.S.
Treasury and agency obligations and $135,617 of
annuity contracts issued by a third party 1,825,298
-----------
Projected benefit obligation in excess of plan assets (539,452)
Unrecognized net liability at January 1, 1989 being
recognized over average future service of plan participants 69,628
Unrecognized prior service cost 27,625
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions 443,490
-----------
Prepaid pension cost $ 1,291
===========
Net pension benefit cost for 1996 consists of:
Service cost - benefits earned during the period $ 75,652
Interest cost on projected benefit obligation 156,790
Actual return on plan assets (52,333)
Net amortization and deferral (71,190)
-----------
Net periodic pension cost $ 108,919
===========
</TABLE>
F-17
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE F - EMPLOYEE BENEFIT PLAN - CONTINUED
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
was 7.25% and 4.5% respectively. The expected long-term rate of returns on
assets was 8.25%. It is management's policy to fund accrued pension
liabilities annually.
OTHER POST-RETIREMENT BENEFITS
In October 1985, the corporation entered into salary continuation agreements
with nine employees to pay monthly retirement benefits for ten years. The
agreements, which have been settled with the employees, will require the
corporation to pay approximately $373,000 to terminate the retirement
benefits. In addition, a healthcare and retirement benefit agreement was
entered into on February 2, 1995, which requires the company to pay
healthcare and retirement benefits to a former employee. The retirement
payments are $1,500 per month through April 1999 and $460 per month from May
1999 through February 2004. The healthcare benefits, which are estimated at
$460 per month, must be provided until the former employee's spouse reaches
age 65, which will occur in 1998. The liability for these retirement
benefits, present value calculated at December 31, 1996, using an 8% rate of
return, is included as accrued expenses on the accompanying balance sheet.
Expense related to change in the present value calculation totaled $10,587
during the year ended December 31, 1996. These benefits are anticipated to
be funded out of current operations when paid.
F-18
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE G - INCOME TAXES
Components of income tax expense for the year ended December 31, 1996, were:
<TABLE>
<S> <C>
Current
Federal $ 276,000
State -
----------
Total current 276,000
Deferred
Federal 70,000
State 10,000
----------
Total deferred 80,000
----------
Total $ 356,000
===========
<CAPTION>
The net deferred tax asset included the following major temporary
differences at December 31, 1996:
Deferred tax liabilities
Depreciation $ 60,000
Cash value of life insurance 270,000
Other 10,000
----------
Total deferred tax liabilities 340,000
----------
Deferred tax assets
Provision for credit losses 70,000
Expenses deducted when paid 10,000
Unrealized loss on securities available for sale 80,000
Post-retirement benefits other than pensions 140,000
Other 50,000
----------
Total deferred tax assets 350,000
----------
Net deferred tax asset $ (10,000)
==========
</TABLE>
F-19
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE G - INCOME TAXES - CONTINUED
The corporation has determined that it is not required to establish a
valuation reserve for the deferred tax asset since it is more likely than
not that the deferred tax asset of $80,000 will be principally realized
through future reversals of existing taxable temporary differences, and, to
a lesser extent, future taxable income.
The deferred tax asset/liability related to SFAS 115 had no impact on 1995
or 1994 income tax expense as the effect of unrealized gains and losses, net
of taxes, was recorded in stockholders' equity.
The current income tax provision reconciled to the tax computed at the
statutory Federal rate was:
<TABLE>
<S> <C> <C>
Tax at statutory rate $ 337,000 34%
Adjusted for tax-exempt income (58,000) (3%)
Other, net (3,000) (1%)
---------- -----------
$ 276,000 30%
=========== ===========
</TABLE>
The corporation has New Mexico net operating loss carryforwards totaling
approximately $370,000 which expire through 1998.
NOTE H - COMMITMENTS AND CONTINGENT LIABILITIES
At December 31, 1996, the corporation and its subsidiary, the First National
Bank of Tucumcari, were obligated under a noncancelable lease for premises
in Las Vegas, New Mexico, with an initial term of five years with two
options for five year extensions. The initial lease term expires in 2001.
The renewal periods provide for increased rentals. Rental expense amounted
to $10,325 in 1996. Future minimum rental payments under this lease at
December 31, 1996, were:
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
----------
<S> <C>
1997 $ 17,700
1998 17,700
1999 17,700
2000 17,700
2001 7,325
----------
Total minimum rental payments $ 78,125
==========
</TABLE>
F-20
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE H - COMMITMENTS AND CONTINGENT LIABILITIES - CONTINUED
To meet the financing needs of its customers and as part of its overall risk
management strategy, (not for trading purposes), the corporation is a party
to financial instruments with off-balance sheet risk. These financial
instruments include commitments to extend credit, unused lines of credit and
letters of credit. Such financial instruments are recorded in the financial
statements when they are funded or related funds are received.
The corporation'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 amount of
those instruments. A summary of the approximate contractual amounts of these
financial instruments as of December 31, 1996, follows:
Commitments to extend credit $ 1,650,000
==========
Letters of credit $ 75,000
===========
Unused lines of credit $ 4,200,000
==========
Commitments to extend credit generally have fixed expiration dates or other
termination clauses. 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 amount of collateral obtained is
based on management's credit evaluation of the counterparty. Collateral held
varies, but may include cash, marketable securities, accounts receivable,
inventory, property, plant and equipment, and income-producing commercial
properties.
NOTE I - SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
Most of the corporation's business activity is with customers located in
eastern New Mexico. As of December 31, 1996, the corporation was creditor
for approximately $11 million of farm and ranch loans, repayment of which is
dependent in large part on the price of livestock, which may vary
significantly from year to year. These agricultural loans are generally
secured by livestock, equipment and, whenever possible, real estate. The
loans are expected to be repaid from cash flow of the debtors operations.
During 1996, the cattle market suffered a decline in prices. Despite the
decline in cattle prices, credit losses from lending in this volatile
industry compare favorably with the corporation's loan portfolio as a whole.
F-21
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
December 31, 1996
NOTE J - REGULATORY MATTERS
The corporation is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulators that, if undertaken, could
have a direct material effect on the corporation's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the corporation must meet specific capital guidelines
that involve quantitative measures of the corporation's assets, liabilities,
and certain off-balance-sheet items as calculated under regulatory
accounting practices. The corporation's capital amounts and classification
are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the corporation to maintain minimum amounts and ratios of total and
Tier I capital to risk-weighted assets, and of Tier I capital to average
assets. Management believes, as of December 31, 1996, that the corporation
meets all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the Office of the
Comptroller of the Currency categorized the corporation as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the corporation must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios. There are no
conditions or events since that notification that management believes have
changed the corporation's category. As of December 31, 1996, the
corporation's total capital to risk-weighted assets ratio was 15.8% when the
requirements to be well capitalized under prompt corrective action
provisions was 10.0%. Tier I capital to risk-weighted assets was 14.9% when
the requirement to be well capitalized was 6.0%
NOTE K - SUBSEQUENT EVENT
On January 16, 1997, the corporation's board of directors approved a merger
agreement with Norwest Corporation wherein the corporation will become a
wholly-owned subsidiary of Norwest. The transaction is an all stock exchange
and is expected to be accounted for using the purchase method of accounting.
The merger must be approved by the corporation's stockholders and by
regulatory agencies and is expected to be completed during 1997.
F-22
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(UNAUDITED)
ASSETS
CASH AND DUE FROM BANKS $ 5,526,930
INTEREST BEARING DEPOSITS WITH BANKS 374,369
FEDERAL FUNDS SOLD 1,450,000
-----------
TOTAL CASH AND CASH EQUIVALENTS 7,351,299
SECURITIES HELD TO MATURITY 16,858,754
SECURITIES AVAILABLE FOR SALE 1,158,617
-----------
TOTAL INVESTMENT SECURITIES 18,017,370
LOANS 58,020,086
ALLOWANCE FOR LOAN LOSS (533,488)
-----------
TOTAL NET LOANS 57,486,598
ACCRUED INTEREST RECEIVABLE 1,292,718
OTHER REAL ESTATE OWNED 127,502
CASH VALUE OF LIFE INSURANCE 1,782,776
PREMISES AND EQUIPMENT 2,427,102
OTHER ASSETS 285,581
FEDERAL RESERVE BANK STOCK 120,000
FEDERAL HOME LOAN BANK STOCK 262,300
-----------
TOTAL OTHER ASSETS 6,297,977
TOTAL ASSETS $89,153,245
===========
LIABILITIES
NONINTEREST BEARING DEPOSITS $15,514,273
INTEREST BEARING DEPOSITS 64,021,025
-----------
TOTAL DEPOSITS 79,535,298
ACCRUED INTEREST PAYABLE 428,246
INCOME TAX PAYABLE 58,292
OTHER ACCRUED EXPENSES PAYABLE 503,299
-----------
TOTAL OTHER LIABILITIES 989,837
TOTAL LIABILITIES 80,525,134
STOCKHOLDERS EQUITY
COMMON STOCK 29,953
ADDITIONAL PAID IN CAPITAL 1,896,800
RETAINED EARNINGS 6,817,063
NET UNREALIZED LOSS ON AVAILABLE
FOR SALE INVESTMENTS (115,705)
-----------
TOTAL STOCKHOLDER EQUITY 8,628,111
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $89,153,245
===========
F-23
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
INTEREST INCOME:
LOANS AND COMMERCIAL PAPER $5,413,367
INVESTMENT SECURITIES 1,032,879
FED FUNDS SOLD 167,238
----------
TOTAL INTEREST INCOME 6,613,484
INTEREST EXPENSE ON DEPOSITS 2,695,076
NET INTEREST INCOME 3,918,408
PROVISION FOR LOAN LOSSES 90,000
----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3,828,408
----------
NON INTEREST INCOME:
SERVICE CHARGES ON DEPOSIT ACCOUNTS 590,999
OTHER FEES AND CHARGES 195,658
EARNINGS FROM LIFE INSURANCE OWNED 66,821
DIVIDENDS 7,200
-----------
TOTAL NON INTEREST INCOME 860,678
NON INTEREST EXPENSE:
SALARIES AND EMPLOYEE BENEFITS 1,948,996
OTHER 337,324
DEPRECIATION AND AMORTIZATION 285,953
POSTAGE AND OFFICE SUPPLIES 335,942
EQUIPMENT RENTAL AND MAINTENANCE 157,757
OCCUPANCY 125,197
LEGAL AND PROFESSIONAL 84,399
DATA PROCESSING 79,469
COMMUNICATION 59,145
BUSINESS DEVELOPMENT 90,429
NET TRUST COMPANY OPERATIONS 56,565
FDIC ASSESSMENT/OCC EXAM FEES 122,978
----------
TOTAL NON INTEREST EXPENSE 3,684,154
INCOME BEFORE INCOME TAXES 1,004,932
INCOME TAX EXPENSE 225,150
----------
NET INCOME $ 779,782
==========
RETAINED EARNINGS AT DECEMBER 31, 1994 $6,276,905
NET INCOME FOR 1995 $ 779,782
DIVIDENDS PAID DURING 1995 $ (239,624)
----------
RETAINED EARNINGS AT DECEMBER 31, 1995 $6,817,063
==========
F-24
<PAGE>
THE FIRST NATIONAL BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 779,782
CHANGES IN PROVISION FOR LOAN LOSSES 25,221
DEPRECIATION AND AMORTIZATION 293,788
INTEREST RECEIVABLE (150,751)
CASH VALUE OF LIFE INSURANCE (66,822)
OTHER 3,737
ACCRUED INTEREST PAYABLE 184,286
INCOME TAX PAYABLE 58,292
ACCRUED EXPENSES 76,720
DEFERRED INCOME TAX LIABILITY 10,000
-----------
NET CASH FLOWS FROM OPERATING ACTIVITIES 1,214,253
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM MATURITIES OF INVESTMENT SECURITIES 1,540,000
PROCEEDS FROM SALE OF EQUIPMENT 27,745
PURCHASES OF INVESTMENT SECURITIES HELD TO MATURITY (4,679,170)
NET INCREASE IN LOANS (748,438)
PURCHASES OF PREMISES AND EQUIPMENT (595,445)
------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (4,455,308)
CASH FLOWS FROM FINANCING ACTIVITIES:
DEPOSITS, NET 313,472
DIVIDENDS PAID (239,624)
------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 73,848
------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,167,207)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 10,518,506
------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 7,351,299
============
SUPPLEMENTAL INFORMATION:
INTEREST PAID $ 2,510,790
============
INCOME TAXES PAID 156,867
============
INTEREST RECEIVED ON LOANS $ 6,462,741
============
F-25
<PAGE>
APPENDIX A
AGREEMENT
AND
PLAN OF REORGANIZATION
<PAGE>
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as
of the 17th day of January, 1997, by and between THE FIRST NATIONAL BANKSHARES,
INC. ("FNBI"), a New Mexico 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 FNBI (the "Merger")
pursuant to a 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 FNBI of the par value
of $1.00 per share ("FNBI Common Stock") outstanding immediately prior to the
time the Merger becomes effective in accordance with the provisions of the
Merger Agreement into shares of voting Common Stock of Norwest of the par value
of $1-2/3 per share ("Norwest Common Stock"),
NOW, THEREFORE, to effect such reorganization and in consideration of
the premises and the mutual covenants and agreements contained herein, the
parties hereto do hereby represent, warrant, covenant and agree as follows:
1. Basic Plan of Reorganization
(a) Merger. Subject to the terms and conditions contained herein, a
------
wholly-owned subsidiary of Norwest ("Merger Co.") will be merged by statutory
merger with and into FNBI pursuant to the Merger Agreement, with FNBI as the
surviving corporation, in which merger each share of FNBI Common Stock
outstanding immediately prior to the Effective Time of the Merger (as defined
below) (other than shares as to which statutory dissenters' appraisal rights
have been exercised) will be converted into and exchanged for the number of
shares of Norwest Common Stock determined by dividing the Adjusted Norwest
Shares (as defined below) by the number of shares of FNBI Common Stock then
outstanding. The "Adjusted Norwest Shares" shall mean the following:
(i) If the average of the closing prices of a share of Norwest Common
Stock as reported on the consolidated tape of the New York Stock
Exchange during the period of 20 trading days ending on the day
immediately preceding the meeting of the shareholders of FNBI
held to vote on this Agreement and the Merger Agreement (the
"Norwest Measurement Price") is equal to or greater than $40.25,
the Adjusted Norwest Shares shall be 304,472.
(ii) If the Norwest Measurement Price is equal to or less than $36.25,
the Adjusted Norwest Shares shall be 338,069.
(iii) If the Norwest Measurement Price is less than $40.25 but more
than $36.25, the Adjusted Norwest Shares shall be the number
determined by dividing $12,255,000 by the Norwest Measurement
Price.
(b) Norwest Common Stock Adjustments. If, between the date hereof and
--------------------------------
the Effective Time of the Merger (as defined in subparagraph (d) below), 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, readjustment, or similar transaction,
or if a stock dividend thereon shall be declared with a record date within such
period (a "Common Stock Adjustment"), then the number of
A-1
<PAGE>
shares of Norwest Common Stock into which a share of FNBI Common Stock shall be
converted pursuant to subparagraph (a) above and/or the price of such shares for
the purposes of calculating the Norwest Measurement Price will be appropriately
and proportionately adjusted so that the number of such shares of Norwest Common
Stock into which a share of FNBI Common Stock shall be converted will equal the
number of shares of Norwest Common Stock which the holder of a share of FNBI
Common Stock would have received pursuant to such reclassification,
recapitalization, split-up, combination, exchange of shares, readjustment or
similar transaction or stock dividend, had the record date therefor been
immediately following the Effective Time of the Merger (as defined in
subparagraph (d) below).
(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 immediately preceding the
Effective Date of the Merger (as defined in subparagraph (d) below).
(d) Mechanics of Closing Merger. Subject to the terms and conditions set
---------------------------
forth herein, the Merger Agreement shall be executed and it and the Articles of
Merger shall be filed with the State Corporation Commission of New Mexico within
ten (10) business days following the satisfaction or waiver of all conditions
precedent set forth in paragraphs 6 and 7 of this Agreement or on such other
date as may be agreed to by the parties (the "Closing Date"). Each of the
parties agrees to use its best efforts to cause the Merger to be completed as
soon as practicable after the receipt of approval by the FNBI shareholders of
this Agreement and the Merger Agreement, 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 or such later date as is set forth in the Merger Agreement is
herein referred to as the "Effective Date of the Merger". The Effective Time of
the Merger shall be 11:59 p.m. Tucumcari, New Mexico 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 FNBI 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,
or at such other place as the parties shall mutually agree.
2. Representations and Warranties of FNBI. FNBI represents and warrants
to Norwest as follows:
(a) Organization and Authority. FNBI is a corporation duly organized,
--------------------------
validly existing and in good standing under the laws of the State of New Mexico,
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 FNBI and the FNBI Subsidiaries (as defined in
paragraph 2(b) below) taken as a whole and has corporate power and authority to
own its properties and assets and to carry on its business as it is now being
conducted. FNBI 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").
FNBI has furnished Norwest true and correct copies of its articles of
incorporation and bylaws, as amended.
A-2
<PAGE>
(b) FNBI's Subsidiaries. Schedule 2(b) sets forth a complete and correct
-------------------
list of all of FNBI's subsidiaries as of the date hereof (individually an "FNBI
Subsidiary" and collectively the "FNBI 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 FNBI. No equity security of any FNBI
Subsidiary is or may be required to be issued by reason of any option, warrant,
scrip, right to subscribe to, call or commitment of any character whatsoever
relating to, or security or right convertible into, shares of any capital stock
of such subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any FNBI Subsidiary is bound to issue additional shares of
its capital stock, or any option, warrant or right to purchase or acquire any
additional shares of its capital stock. Subject to 12 U.S.C. ss. 55 (1982), all
of such shares so owned by FNBI are fully paid and nonassessable and, except as
set forth on Schedule 2(b), are owned by it free and clear of any lien, claim,
charge, option, encumbrance or agreement with respect thereto. Each FNBI
Subsidiary is a corporation or national banking association duly organized,
validly existing, duly qualified to do business and in good standing under the
laws of its jurisdiction of incorporation, and has corporate power and authority
to own or lease its properties and assets and to carry on its business as it is
now being conducted. Except as set forth on Schedule 2(b), FNBI 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 FNBI consists of
--------------
100,000 shares of common stock, $1.00 par value, of which as of the close of
business on September 30, 1996, 29,953 shares were outstanding and no shares
were held in the treasury. The maximum number of shares of FNBI Common Stock
(assuming for this purpose that phantom shares and other share-equivalents,
constitute FNBI 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 29,953. All of the outstanding shares of
capital stock of FNBI 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 or other rights obligating FNBI or any FNBI Subsidiary to issue, sell or
otherwise dispose of, or to purchase, redeem or otherwise acquire, any shares of
capital stock of FNBI or any FNBI Subsidiary. Since September 30, 1996, no
shares of FNBI capital stock have been issued, purchased, redeemed or otherwise
acquired, directly or indirectly, by FNBI or any FNBI Subsidiary and, except as
set forth on Schedule 2(c), no dividends or other distributions have been
declared, set aside, made or paid to the shareholders of FNBI.
(d) Authorization. FNBI 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 FNBI and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors of FNBI.
Subject to such approvals of shareholders and of government agencies and other
governing boards having regulatory authority over FNBI as may be required by
statute or regulation, this Agreement and the Merger Agreement are valid and
binding obligations of FNBI enforceable against FNBI in accordance with their
respective terms.
Except as set forth on Schedule 2(d), neither the execution, delivery
and performance by FNBI of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor compliance
by FNBI 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
A-3
<PAGE>
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 FNBI or any FNBI Subsidiary under any of
the terms, conditions or provisions of (x) its articles of incorporation or by-
laws or (y) any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which FNBI or any
FNBI Subsidiary is a party or by which it may be bound, or to which FNBI or any
FNBI Subsidiary or any of the properties or assets of FNBI or any FNBI
Subsidiary may be subject, or (ii) subject to compliance with the statutes and
regulations referred to in the next paragraph, to the best knowledge of FNBI,
violate any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to FNBI or any FNBI Subsidiary or any of their respective
properties or assets.
Other than in connection or in compliance with the provisions of the
Securities Act of 1933 and the rules and regulations thereunder (the "Securities
Act"), the Securities Exchange Act of 1934 and the rules and regulations
thereunder (the "Exchange Act"), the securities or blue sky laws of the various
states or filings, consents, reviews, authorizations, approvals or exemptions
required under the BHC Act or the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act"), and filings required to effect the Merger under New
Mexico law, no notice to, filing with, exemption or review by, or authorization,
consent or approval of, any public body or authority is necessary for the
consummation by FNBI of the transactions contemplated by this Agreement and the
Merger Agreement.
(e) FNBI Financial Statements. The unaudited balance sheets of FNBI and
-------------------------
FNBI's Subsidiaries as of December 31, 1995 and 1994 and related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
two years ended December 31, 1995, and the unaudited consolidated balance sheets
of FNBI and FNBI's Subsidiaries as of September 30, 1996, and the related
unaudited consolidated statements of operations, changes in stockholders' equity
and cash flows for the nine months then ended (collectively, the "FNBI Financial
Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis and present fairly (subject
to normal recurring adjustments) the consolidated financial position of FNBI and
FNBI's Subsidiaries at the dates and the consolidated results of operations and
cash flows of FNBI and FNBI's Subsidiaries for the periods stated therein.
(f) Reports. Since December 31, 1990, each of FNBI and the FNBI
-------
Subsidiaries has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with (i) the
Federal Reserve Board, (ii) the Federal Deposit Insurance Corporation (the
"FDIC"), (iii) the United States Comptroller of the Currency (the "Comptroller")
and (iv) 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 "FNBI Reports". As of their respective
dates, the FNBI Reports complied in all material respects with all the rules and
regulations promulgated by the 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 FNBI Reports have been made available to
Norwest by FNBI. FNBI is not required to file reports with the Securities and
Exchange Commission (the "SEC") pursuant to either Section 12 or Section 15(d)
of the Exchange Act.
(g) Properties and Leases. Except as may be reflected in the FNBI
---------------------
Financial Statements, and except for any lien for current taxes not yet
delinquent, FNBI and each FNBI 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 FNBI's consolidated balance
sheet as of September 30, 1996, and to all real and personal property acquired
since such date, except such real and personal property as has been
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disposed of in the ordinary course of business. All leases of real property
pursuant to which FNBI or any FNBI Subsidiary, as lessee, leases real property,
which leases are described on Schedule 2(g), are valid and effective in
accordance with their respective terms, and there is not, under any such lease,
any material existing default by FNBI or such FNBI Subsidiary or any event
which, with notice or lapse of time or both, would constitute such a material
default. Substantially all FNBI's and each FNBI 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 FNBI and the FNBI Subsidiaries has filed all federal,
-----
state, county, local and foreign tax returns, including information returns,
required to be filed by it and has 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 FNBI and the FNBI Subsidiaries for
the fiscal year ended December 31, 1992, and for all fiscal years prior thereto,
are for the purposes of routine audit by the Internal Revenue Service closed
because of the statute of limitations, and no claims for additional taxes for
such fiscal years are pending. Except as set forth on Schedule 2(h), (i) neither
FNBI nor any FNBI Subsidiary is a party to any pending action or proceeding, nor
to the best knowledge of FNBI is any such action or proceeding threatened by any
governmental authority, for the assessment or collection of taxes, interest,
penalties, assessments or deficiencies and (ii) no issue has been raised by any
federal, state, local or foreign taxing authority in connection with an audit or
examination of the tax returns, business or properties of FNBI or any FNBI
Subsidiary which has not been settled, resolved and fully satisfied. Each of
FNBI and the FNBI Subsidiaries has paid all taxes owed or which it is required
to withhold from amounts owing to employees, creditors or other third parties.
The consolidated balance sheet as of September 30, 1996, referred to in
paragraph 2(e) hereof, includes adequate provision for all accrued but unpaid
federal, state, county, local and foreign taxes, interest, penalties,
assessments or deficiencies of FNBI and the FNBI Subsidiaries with respect to
all periods through the date thereof.
(i) Absence of Certain Changes. Since September 30, 1996, there has been
--------------------------
no change in the business, financial condition or results of operations of FNBI
or any FNBI 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 FNBI and the FNBI Subsidiaries taken as a whole.
(j) Commitments and Contracts. Except as set forth on Schedule 2(j),
-------------------------
neither FNBI nor any FNBI Subsidiary is a party or subject to any of the
following (whether written or oral, express or implied):
(i) any employment contract or understanding pursuant to which
FNBI or any FNBI Subsidiary has any current or future obligation or
liability (including any understandings or obligations with respect to
severance pay, termination pay or fringe benefits), other than solely an
obligation of confidentiality, with any present or former officer,
director, employee or consultant (other than those which are terminable
at will by FNBI or such FNBI Subsidiary);
(ii) any plan, contract or understanding providing for any bonus,
pension, option, deferred compensation, retirement payment, profit
sharing or similar arrangement with respect to any present or former
officer, director, employee or consultant;
(iii) any labor contract or agreement with any labor union;
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<PAGE>
(iv) any contract containing covenants which (a) limit the
ability of FNBI or any FNBI Subsidiary to compete in any line of
business or with any person, (b) involve any restriction of the
geographical area in which, or method by which, FNBI or any FNBI
Subsidiary may carry on its business (other than as may be required by
law or applicable regulatory authorities), or (c) require FNBI or any
FNBI Subsidiary to deal exclusively with any vendor, service provider or
other third party;
(v) any other contract or agreement which is a "material
contract" within the meaning of Item 601(b)(10) of Regulation S-K;
(vi) any lease of personal property with annual rental payments
aggregating $10,000 or more;
(vii) any other contract or agreement that has a term of one year
or more and annual payments of $25,000 or more;
(viii) any agreement or commitment with respect to the Community
Reinvestment Act with any state or federal bank regulatory authority or
any other party; or
(ix) 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. In connection with the preparation
--------------------------------
of its unaudited financial statements for the year ended December 31, 1995, FNBI
did not request from legal counsel letters with respect to contingencies.
Schedule 2(k) contains a list of all legal and regulatory proceedings pending
against FNBI or any FNBI Subsidiary as of the date hereof. Neither FNBI nor any
FNBI Subsidiary is a party to any pending or, to the best knowledge of FNBI,
threatened, claim, action, suit, investigation or proceeding, or is subject to
any order, judgment or decree, except for matters which, in the aggregate, will
not have, or cannot reasonably be expected to have, a material adverse effect on
the business, financial condition or results of operations of FNBI and the FNBI
Subsidiaries taken as a whole.
(l) Insurance. Each of FNBI and the FNBI Subsidiaries is presently
---------
insured, and during each of the past five calendar years (or during such lesser
period of time as FNBI has owned such FNBI Subsidiary) has been insured, for
reasonable amounts with insurance companies that, to the best knowledge of FNBI,
are financially sound and reputable 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. FNBI has delivered to Norwest correct and complete copies of all
material policies of insurance of FNBI and the FNBI Subsidiaries currently in
effect.
(m) Compliance with Laws. Each of FNBI and the FNBI 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 FNBI or such FNBI Subsidiary;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect and, to the best knowledge of FNBI, no suspension or
cancellation of any of them is threatened; and all such filings, applications
and registrations are current. The conduct by each of FNBI and the FNBI
Subsidiaries of its business and the condition and use of its properties does
not violate or infringe, in any respect material to any such business, any
applicable domestic (federal, state or local) or foreign law, statute,
ordinance,
A-6
<PAGE>
license or regulation, other than laws, statutes, ordinances, licenses or
regulations relating to environmental liability, as to which FNBI makes only the
representations and warranties set forth in paragraph 2(v) herein. Neither FNBI
nor any FNBI 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 which reasonably
could be expected to have a material adverse effect on the business or
properties of FNBI and the FNBI Subsidiaries taken as a whole. 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 FNBI or
any FNBI Subsidiary which reasonably could be expected to have a material
adverse effect on the business or properties of FNBI and the FNBI Subsidiaries
taken as a whole.
(n) Labor. No work stoppage involving FNBI or any FNBI Subsidiary is
-----
pending or, to the best knowledge of FNBI, threatened. Neither FNBI nor any FNBI
Subsidiary is involved in, or to the best knowledge of FNBI threatened with or
affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding which could materially and adversely affect the business of FNBI or
such FNBI Subsidiary.
(o) Material Interests of Certain Persons. Except as set forth on
-------------------------------------
Schedule 2(o), to the best knowledge of FNBI no officer or director of FNBI or
any FNBI Subsidiary, or any "associate" (as such term is defined in Rule l4a-1
under the Exchange Act) of any such officer or director, has any interest in any
material contract or property (real or personal), tangible or intangible, used
in or pertaining to the business of FNBI or any FNBI Subsidiary.
Schedule 2(o) sets forth a correct and complete list of any loan or
other extension of credit from FNBI or any FNBI Subsidiary to any present
officer, director, employee or any associate or related interest of any such
person which was required under Regulation O of the Federal Reserve Board to be
approved by or reported to FNBI's or such FNBI Subsidiary's Board of Directors.
(p) FNBI 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 FNBI or any FNBI 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 FNBI or any FNBI Subsidiary, are those set forth on Schedule 2(p)(i)
(the "Plans"). No Plan is a "multi-employer plan" within the meaning of
Section 3(37) of ERISA.
(ii) Each Plan is and has been in all material respects operated
and administered in accordance with its provisions and applicable law.
Except as set forth on Schedule 2(p)(ii), FNBI or the FNBI Subsidiaries
have received favorable determination letters from the Internal Revenue
Service under the provisions of the Tax Reform Act of 1986 ("TRA `86")
for each of the Plans to which the qualification requirements of Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
apply. FNBI knows of no reason that any Plan 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 knows
of no reason that each related trust is not exempt from taxation under
Section 501(a) of the Code.
(iii) The present value of all benefits vested and all benefits
accrued under each Plan which is subject to Title IV of ERISA did not,
in each case, as determined for purposes of reporting on Schedule B to
the Annual Report on Form 5500 of each
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<PAGE>
such Plan as of the end of the most recent Plan year, exceed the value
of the assets of the Plan allocable to such vested or accrued benefits.
(iv) Except as disclosed in Schedule 2(p)(iv), and to the best
knowledge of FNBI, no Plan or any trust created thereunder or 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 has violated any of the fiduciary
standards under Part 4 of Title I of ERISA, which could subject, to the
best knowledge of FNBI or any FNBI Subsidiary, such Plan or trust, or
any trustee, fiduciary or administrator thereof, or any party dealing
with any such Plan or trust, to the tax or penalty on prohibited
transactions imposed by said Section 4975 or would result in material
liability to FNBI and the FNBI Subsidiaries taken as a whole.
(v) No Plan subject to Title IV of ERISA or any trust created
thereunder has been terminated, nor have there been any "reportable
events", as that term is defined in Section 4043 of ERISA, with respect
to any Plan, other than those events which may result from the
transactions contemplated by this Agreement and the Merger Agreement.
(vi) No Plan or any trust created thereunder has incurred any
"accumulated funding deficiency", as such term is defined in Section 412
of the Code (whether or not waived), during the last five Plan years
which would result in a material liability.
(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 FNBI or
any FNBI 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 FNBI and the
--------------------
FNBI Subsidiaries supplied or to be supplied by FNBI for inclusion in (i) a
Registration Statement on Form S-4 to be filed with the SEC by Norwest for the
purpose of registering the shares of Norwest Common Stock to be exchanged for
shares of FNBI Common Stock pursuant to the provisions of the Merger Agreement
(the "Registration Statement"), (ii) the proxy statement to be mailed to FNBI's
shareholders in connection with the meeting to be called to consider the Merger
(the "Proxy Statement") and (iii) any other documents to be filed with the SEC
or any regulatory authority in connection with the transactions contemplated
hereby or by the Merger Agreement will, at the respective times such documents
are filed with the SEC or any regulatory authority and, in the case of the
Registration Statement, when it becomes effective and, with respect to the Proxy
Statement, when mailed, and, in the case of the Proxy Statement as amended or
supplemented at the time of the meeting of shareholders referred to in paragraph
4(c), contain an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. All documents FNBI and
the FNBI Subsidiaries are responsible for filing with the SEC and with 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 FNBI nor any FNBI Subsidiary is under any obligation, contingent or
otherwise, which will survive the
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<PAGE>
Merger, by reason of any agreement to register any of its securities under the
Securities Act.
(s) Brokers and Finders. Neither FNBI nor any FNBI 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 FNBI or any FNBI Subsidiary in connection with this Agreement
and the Merger Agreement or the transactions contemplated hereby and thereby.
(t) Administration of Trust Accounts. Each of FNBI and the FNBI
--------------------------------
Subsidiaries has properly administered in all respects material and which could
reasonably be expected to be material to the financial condition of FNBI and the
FNBI 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 FNBI,
any FNBI Subsidiary, nor to the best knowledge of FNBI any director, officer or
employee of FNBI or any FNBI 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 FNBI and the FNBI
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 FNBI nor any FNBI Subsidiary is in default, nor
-----------
has any event occurred which, with the passage of time or the giving of notice,
or both, would constitute a default, under any material agreement, indenture,
loan agreement or other instrument to which it is a party or by which it or any
of its assets is bound or to which any of its assets is subject, the result of
which has had or could reasonably be expected to have a material adverse effect
upon FNBI and the FNBI Subsidiaries taken as a whole. To the best of FNBI's
knowledge, all parties with whom FNBI or any FNBI Subsidiary has material
leases, agreements or contracts or who owe to FNBI or any FNBI Subsidiary
material obligations, other than with respect to those arising in the ordinary
course of the banking business of the FNBI 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
reasonably be expected to result in the imposition on FNBI or any FNBI
Subsidiary of, any liability related 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 ("CERCLA"), pending
or, to the best of FNBI's knowledge, threatened against FNBI or any FNBI
Subsidiary the result of which has had or could reasonably be expected to have a
material adverse effect upon FNBI and FNBI's Subsidiaries taken as a whole; to
the best of FNBI's knowledge there is no reasonable basis for any such
proceeding, claim or action; and to the best of FNBI's knowledge neither FNBI
nor any FNBI 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. FNBI has provided Norwest with copies of all
environmental assessments, reports, studies and other documents in its
possession that set forth the results of investigations designed to assess
compliance with or liability under environmental laws with respect to each bank
facility and each non-residential OREO property.
3. Representations and Warranties of Norwest. Norwest represents and
warrants to FNBI as follows:
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<PAGE>
(a) Organization and Authority. Norwest is a corporation duly organized,
--------------------------
validly existing and in good standing under the laws of the State of Delaware,
is duly qualified to do business and is in good standing in all jurisdictions
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and failure to be so qualified would have a
material adverse effect on Norwest and its subsidiaries taken as a whole and has
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted. Norwest is registered as a bank
holding company with the Federal Reserve Board under the BHC Act.
(b) Norwest Subsidiaries. Schedule 3(b) sets forth a complete and
--------------------
correct list as of December 31, 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, 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, 1996, 980,000 shares of Cumulative
Tracking Preferred Stock, at $200 stated value, 11,949 shares of ESOP Cumulative
Convertible Preferred Stock, at $1,000 stated value, 23,190 shares of 1995 ESOP
Cumulative Convertible Preferred Stock, at $1,000 stated value, and 30,951
shares of 1996 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, 1996, 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, 1996, 375,533,625
shares were outstanding and 5,191,076 shares were held in the treasury. All of
the outstanding shares of capital stock of Norwest have been duly and validly
authorized and issued and are fully paid and nonassessable.
(d) Authorization. Norwest has the corporate power and authority to
-------------
enter into this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by Norwest and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Norwest. No approval or consent by the stockholders
of Norwest is necessary for the execution and delivery of this Agreement and the
Merger Agreement and the consummation of the transactions contemplated hereby
and thereby. Subject to such approvals of government agencies and other
governing boards having regulatory authority over Norwest as may be required by
statute or regulation, this Agreement is a valid and binding obligation of
Norwest enforceable against Norwest in accordance with its terms.
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)
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<PAGE>
violate, conflict with, or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration of,
or result in the creation of, any lien, security interest, charge or encumbrance
upon any of the properties or assets of Norwest or any Norwest Subsidiary under
any of the terms, conditions or provisions of (x) its certificate of
incorporation or by-laws or (y) any material note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which Norwest or any Norwest Subsidiary is a party or by which it may be bound,
or to which Norwest or any Norwest Subsidiary or any of the properties or assets
of Norwest or any Norwest Subsidiary may be subject, or (ii) subject to
compliance with the statutes and regulations referred to in the next paragraph,
to the best knowledge of Norwest, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to Norwest or any
Norwest Subsidiary or any of their respective properties or assets.
Other than in connection with or in compliance with (i) the provisions
of the Securities Act, the Exchange Act, the securities or blue sky laws of the
various states and filings, consents, reviews, authorizations, approvals or
exemptions required under the BHC Act or the HSR Act, and (ii) filings required
to effect the Merger under New Mexico law, no notice to, filing with, exemption
or review by, or authorization, consent or approval of, any public body or
authority is necessary for the consummation by Norwest of the transactions
contemplated by this Agreement and the Merger Agreement.
(e) Norwest Financial Statements. The consolidated balance sheets of
----------------------------
Norwest and Norwest's subsidiaries as of December 31, 1995 and 1994 and related
consolidated statements of income, stockholders' equity and cash flows for the
three years ended December 31, 1995, together with the notes thereto, certified
by KPMG Peat Marwick and included in Norwest's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995 (the "Norwest 10-K") as filed with the
SEC, and the unaudited consolidated balance sheets of Norwest and its
subsidiaries as of September 30, 1996 and the related unaudited consolidated
statements of income and cash flows for the three months then ended included in
Norwest's Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 1996, as filed with the SEC (collectively, the "Norwest Financial
Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis and present fairly (subject,
in the case of financial statements for interim periods, to normal recurring
adjustments) the consolidated financial position of Norwest and its subsidiaries
at the dates and the consolidated results of operations, changes in financial
position and cash flows of Norwest and its subsidiaries for the periods stated
therein.
(f) Reports. Since December 31, 1990, each of Norwest and the Norwest
-------
Subsidiaries 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. Norwest has provided FNBI with copies of its Form 10-K for
the year ended December 31, 1995, its Form 10-Q for the quarters ended March 31,
June 30 and September 30, 1996 and its Proxy Statement dated March 19, 1996.
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<PAGE>
(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, 1996 included in Norwest's
Quarterly Report on Form 10-Q for the period then ended, and to all real and
personal property acquired since such date, except such real and personal
property has been disposed of in the ordinary course of business. All leases of
real property and all other leases material to Norwest or any Norwest Subsidiary
pursuant to which Norwest or such Norwest Subsidiary, as lessee, leases real or
personal property, are valid and effective in accordance with their respective
terms, and there is not, under any such lease, any material existing default by
Norwest or such Norwest Subsidiary or any event which, with notice or lapse of
time or both, would constitute such a material default. Substantially all
Norwest's and each Norwest Subsidiary's buildings and equipment in regular use
have been well maintained and are in good and serviceable condition, reasonable
wear and tear excepted.
(h) Taxes. Each of Norwest and the Norwest Subsidiaries has filed all
-----
material federal, state, county, local and foreign tax returns, including
information returns, required to be filed by it, and paid or made adequate
provision for the payment of all taxes owed by it, including those with respect
to income, withholding, social security, unemployment, workers compensation,
franchise, ad valorem, premium, excise and sales taxes, and no taxes shown on
such returns to be owed by it or assessments received by it are delinquent. The
federal income tax returns of Norwest and the Norwest Subsidiaries for the
fiscal year ended December 31, 1979, and for all fiscal years prior thereto, are
for the purposes of routine audit by the Internal Revenue Service closed because
of the statute of limitations, and no claims for additional taxes for such
fiscal years are pending. Except only as set forth on Schedule 3(h), (i) neither
Norwest nor any Norwest Subsidiary is a party to any pending action or
proceeding, nor to Norwest's knowledge is any such action or proceeding
threatened by any governmental authority, for the assessment or collection of
taxes, interest, penalties, assessments or deficiencies which could reasonably
be expected to have any material adverse effect on Norwest and its subsidiaries
taken as a whole, and (ii) no issue has been raised by any federal, state, local
or foreign taxing authority in connection with an audit or examination of the
tax returns, business or properties of Norwest or any Norwest Subsidiary which
has not been settled, resolved and fully satisfied, or adequately reserved for.
Each of Norwest and the Norwest Subsidiaries has paid all taxes owed or which it
is required to withhold from amounts owing to employees, creditors or other
third parties.
(i) Absence of Certain Changes. Since September 30, 1996, there has been
--------------------------
no change in the business, financial condition or results of operations of
Norwest or any Norwest Subsidiary which has had, or may reasonably be expected
to have, a material adverse effect on the business, financial condition or
results of operations of Norwest and its subsidiaries taken as a whole.
(j) Commitments and Contracts. Except as set forth on Schedule 3(j), as
-------------------------
of September 30, 1996, neither Norwest nor any Norwest Subsidiary is a party or
subject to any of the following (whether written or oral, express or implied):
(i) any labor contract or agreement with any labor union;
(ii) any contract not made in the ordinary course of business
containing covenants which materially limit the ability of Norwest or
any Norwest Subsidiary to compete in any line of business or with any
person or which involve any material restriction of the geographical
area in which, or method by which, Norwest or any Norwest Subsidiary may
carry on its business (other than as may be required by law or
applicable regulatory authorities); or
A-12
<PAGE>
(iii) any other contract or agreement which is a "material
contract" within the meaning of Item 601(b)(10) of Regulation S-K.
(k) Litigation and Other Proceedings. Neither Norwest nor any Norwest
--------------------------------
Subsidiary is a party to any pending or, to the best knowledge of Norwest,
threatened claim, action, suit, investigation or proceeding, or is subject to
any order, judgment or decree, except for matters which, in the aggregate, will
not have, or cannot reasonably be expected to have, a material adverse effect on
the business, financial condition or results of operations of Norwest and its
subsidiaries taken as a whole.
(l) Insurance. 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 or such
Subsidiary; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect, and to the best knowledge of Norwest, no
suspension or cancellation of any of them is threatened; and all such filings,
applications and registrations are current. The conduct by Norwest and each
Norwest Subsidiary of its business and the condition and use of its properties
does not violate or infringe, in any respect material to any such business, any
applicable domestic (federal, state or local) or foreign law, statute,
ordinance, license or regulation. Neither Norwest nor any Norwest Subsidiary is
in default under any order, license, regulation or demand of any federal, state,
municipal or other governmental agency or with respect to any order, writ,
injunction or decree of any court. Except for statutory or regulatory
restrictions of general application, no federal, state, municipal or other
governmental authority has placed any restrictions on the business or properties
of Norwest or any Norwest Subsidiary which reasonably could be expected to have
a material adverse effect on the business or properties of Norwest and its
subsidiaries taken as a whole.
(n) Labor. No work stoppage involving Norwest or any Norwest Subsidiary
-----
is pending or, to the best knowledge of Norwest, threatened. Neither Norwest nor
any Norwest Subsidiary is involved in, or threatened with or affected by, any
labor dispute, arbitration, lawsuit or administrative proceeding which could
materially and adversely affect the business of Norwest or such Norwest
Subsidiary.
(o) Norwest Benefit Plans.
---------------------
(i) As of May 1, 1996, the only "employee benefit plans" within
the meaning of Section 3(3) of ERISA for which Norwest or any Norwest
Subsidiary acts as plan sponsor as defined in ERISA Section 3(16)(B)
with respect to which any liability under ERISA or otherwise exists or
may be incurred by Norwest or any Norwest Subsidiary are those set forth
on Schedule 3(o)(i) (the "Norwest Plans"). No Norwest Plan is a
"multi-employer plan" within the meaning of Section 3(37) of ERISA.
A-13
<PAGE>
(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 applied for favorable determination letters
from the Internal Revenue Service under the provisions of TRA `86 for
the Norwest Corporation Pension Plan and the Norwest Corporation Savings
Investment Plan. 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
knows of no reason that each related trust is not exempt from taxation
under Section 501(a) of the Code.
(iii) The present value of all benefits vested and all benefits
accrued under each Norwest Plan which is subject to Title IV of ERISA
did not, in each case, as determined for purposes of reporting on
Schedule B to the Annual Report on Form 5500 of each such Norwest Plan
as of the end of the most recent Plan year, exceed the value of the
assets of the Norwest Plans allocable to such vested or accrued
benefits.
(iv) Except as set forth on Schedule 3(o)(iv), and to the best
knowledge of Norwest, no Norwest Plan or any trust created thereunder,
or 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 has violated any of the fiduciary
standards under Part 4 of Title I of ERISA, which could subject, to the
best knowledge of Norwest, such Norwest Plan or trust, or any trustee,
fiduciary or administrator thereof, or any party dealing with any such
Norwest Plan or trust, to the tax or penalty on prohibited transactions
imposed by said Section 4975 or would result in material liability to
Norwest and its subsidiaries taken as a whole.
(v) Except as set forth on Schedule 3(o)(v), no Norwest Plan
which is subject to Title IV of ERISA or any trust created thereunder
has been terminated, nor have there been any "reportable events" as that
term is defined in Section 4043 of ERISA with respect to any Norwest
Plan, other than those events which may result from the transactions
contemplated by this Agreement and the Merger Agreement.
(vi) No Norwest Plan or any trust created thereunder has incurred
any "accumulated funding deficiency", as such term is defined in Section
412 of the Code (whether or not waived), during the last five Norwest
Plan years which would result in a material liability.
(vii) Neither the execution and delivery of this Agreement and
the Merger Agreement nor the consummation of the transactions
contemplated hereby and thereby will (i) result in any material payment
(including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or employee
or former employee of Norwest under any Norwest Plan or otherwise, (ii)
materially increase any benefits otherwise payable under any Norwest
Plan or (iii) result in the acceleration of the time of payment or
vesting of any such benefits to any material extent.
(p) Registration Statement, etc. None of the information regarding
---------------------------
Norwest and its subsidiaries supplied or to be supplied by Norwest for inclusion
in (i) the Registration Statement, (ii) the Proxy Statement, or (iii) any other
documents to be filed with the SEC or any regulatory authority in connection
with the transactions contemplated hereby or by the Merger Agreement will, at
the respective times such 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
A-14
<PAGE>
Proxy Statement as amended or supplemented at the time of the meeting of
shareholders referred to in paragraph 4(c), contain an untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents Norwest and the Norwest Subsidiaries are
responsible for filing with the SEC and with any other regulatory authority in
connection with the Merger will comply as to form in all material respects with
the provisions of applicable law.
(q) Brokers and Finders. Neither Norwest nor any Norwest Subsidiary nor
-------------------
any of their respective officers, directors or employees has employed any broker
or finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted directly
or indirectly for Norwest or any Norwest Subsidiary in connection with this
Agreement and the Merger Agreement or the transactions contemplated hereby and
thereby.
(r) No Defaults. Neither Norwest nor any Norwest Subsidiary is in
-----------
default, nor has any event occurred which, with the passage of time or the
giving of notice or both, would constitute a default under any material
agreement, indenture, loan agreement or other instrument to which it is a party
or by which it or any of its assets is bound or to which any of its assets is
subject, the result of which has had or could reasonably be expected to have a
material adverse effect upon Norwest and its subsidiaries taken as a whole. To
the best of Norwest's knowledge, all parties with whom Norwest or any Norwest
Subsidiary has material leases, agreements or contracts or who owe to Norwest or
any Norwest Subsidiary material obligations other than with respect to those
arising in the ordinary course of the banking business of the Norwest
Subsidiaries are in compliance therewith in all material respects.
(s) Environmental Liability. There is no legal, administrative, or other
-----------------------
proceeding, claim, or action of any nature seeking to impose, or that could
reasonably be expected to result in the imposition on Norwest or any Norwest
Subsidiary of, any liability related to the release of hazardous substances as
defined under any local, state or federal environmental statute, regulation or
ordinance including, without limitation, CERCLA, pending or to the best of
Norwest's knowledge, threatened against Norwest or any Norwest Subsidiary, the
result of which has had or could reasonably be expected to have a material
adverse effect upon Norwest and its subsidiaries taken as a whole; to the best
of Norwest's knowledge there is no reasonable basis for any such proceeding,
claim or action; and, to the best of Norwest's knowledge, neither Norwest nor
any Norwest Subsidiary is subject to any agreement, order, judgment, or decree
by or with any court, governmental authority or third party imposing any such
environmental liability.
(t) Merger Co. As of the Closing Date, Merger Co. will be a corporation
---------
duly organized, validly existing, duly qualified to do business and in good
standing under the laws of the State of New Mexico, and will have corporate
power and authority to own or lease its properties and assets and to carry on
its business. As of the Closing Date, Merger Co. will not have conducted any
business or own any significant assets or owe any significant liabilities.
4. Covenants of FNBI. FNBI covenants and agrees with Norwest as follows:
(a) Affirmative Covenants. Except as otherwise contemplated by this
---------------------
Agreement, from the date hereof until the Effective Time of the Merger, each of
FNBI and the FNBI Subsidiaries will:
(i) maintain its corporate existence in good standing,
maintain the general character of its business and conduct its business
in its ordinary and usual manner;
A-15
<PAGE>
(ii) extend credit in accordance with existing lending
policies to established customers of the Bank, except that other than
pursuant to commitments made prior to the date of this Agreement it
shall not, without the prior written consent of Norwest (which consent
shall be deemed granted unless written objection is received by FNBI
within five business days of any request for such approval), (A) renew
any existing loan or extend any additional credit to its established
customers for an amount in excess of $500,000; or (B) establish any new
customer borrowing relationship in excess of $100,000;
(iii) maintain proper business and accounting records in
accordance with generally accepted principles;
(iv) maintain its properties in good repair and condition,
ordinary wear and tear excepted;
(v) maintain in all material respects presently existing
insurance coverage;
(vi) 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;
(vii) use its best efforts to obtain any approvals or
consents required to maintain existing leases and other contracts in
effect following the Merger;
(viii) comply in all material respects with all laws,
regulations, ordinances, codes, orders, licenses and permits applicable
to the properties and operations of FNBI and each FNBI Subsidiary, the
non-compliance with which reasonably could be expected to have a
material adverse effect on FNBI and the FNBI Subsidiaries taken as a
whole; and
(ix) permit Norwest and its representatives (including
KPMG Peat Marwick) to examine its books, records and properties and to
interview itsofficers, 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 FNBI.
(b) Negative Covenants. Except as otherwise contemplated by this
------------------
Agreement, from the date hereof until the Effective Time of the Merger, each of
FNBI and the FNBI Subsidiaries will not (without the prior written consent of
Norwest):
(i) amend or otherwise change its articles of
incorporation or association or bylaws;
(ii) 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;
(iii) authorize or incur any long-term debt (other than
deposit liabilities) or mortgage, pledge or subject to lien or other
encumbrance any of its properties, except in the ordinary course of
business;
A-16
<PAGE>
(iv) enter into any material agreement, contract or
commitment in excess of $25,000, except banking transactions in the
ordinary course of business and in accordance with policies and
procedures in effect on the date hereof;
(v) make any investments except investments made by bank
subsidiaries in the ordinary course of business having a maturity at
issuance of not more than one year and in amounts of $100,000 or less;
(vi) amend or terminate any Plan except as required by
law, or make any contributions to any Plan except as required by the
terms of such Plan in effect as of the date hereof;
(vii) declare, set aside, make or pay any dividend or
other distribution with respect to its capital stock except (A) between
the date hereof and the Effective Date of the Merger, FNBI may declare
and pay semi-annual dividends on FNBI Common Stock, in accordance with
applicable law and regulation, not to exceed $4.00 per share per
semi-annual period, or a quarterly equivalent thereto; provided,
however, that the shareholders of FNBI shall be entitled to a dividend
on FNBI Common Stock or Norwest Common Stock, but not both, in the
calendar quarter in which the Closing shall occur, and (B) any dividend
declared by the Board of Directors of a FNBI Subsidiary in accordance
with applicable law and regulation;
(viii) redeem, purchase or otherwise acquire, directly or
indirectly, any of the capital stock of FNBI;
(ix) increase the compensation of any officers, directors
or executive employees, except pursuant to existing compensation plans
and practices; or
(x) sell or otherwise dispose of any shares of the capital
stock of any FNBI 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 FNBI will duly call,
-------------------
and will cause to be held not later than twenty-five (25) business days
following the effective date of the Registration Statement referred to in
paragraph 5(c) hereof, a meeting of its shareholders and will direct that this
Agreement and the Merger Agreement be submitted to a vote at such meeting. The
Board of Directors of FNBI will (i) cause proper notice of such meeting to be
given to its shareholders in compliance with the New Mexico Business Corporation
Act and other applicable law and regulation, (ii) recommend by the affirmative
vote of the Board of Directors a vote in favor of approval of this Agreement and
the Merger Agreement, and (iii) use its best efforts to solicit from its
shareholders proxies in favor thereof.
(d) Information Supplied by FNBI. FNBI will furnish or cause to be
----------------------------
furnished to Norwest all the information concerning FNBI and the FNBI
Subsidiaries required for inclusion in the Registration Statement referred to in
paragraph 5(c) hereof, and in any statement or application made by Norwest to
any governmental body in connection with the transactions contemplated by this
Agreement. No financial statement for any fiscal year or for any interim period
furnished pursuant to this paragraph need be covered by the audit report or
review report of any firm of independent accountants; provided however, that if
the consolidated financial statements of FNBI as of and for the year ended
December 31, 1996 shall be included in the Registration Statement, such
financial statements shall include the audit report of Rogoff, Diamond and
Walker, LLP and shall be accompanied by the consent of such firm to the use of
such financial statements in the Registration Statement.
A-17
<PAGE>
(e) Regulatory Approvals. FNBI will take all necessary corporate and
--------------------
other action and use its best efforts to obtain all approvals of regulatory
authorities, consents and other approvals required of FNBI 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) Delivery of Closing Documents. FNBI will use its best efforts to
-----------------------------
deliver at the Closing all opinions, certificates and other documents required
to be delivered by it at the Closing.
(g) Confidential Information. FNBI will hold in confidence all nonpublic
------------------------
documents and information concerning Norwest and its subsidiaries furnished to
FNBI 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 FNBI's outside professional
advisers in connection with this Agreement, with the same undertaking from such
professional advisers. In the event that FNBI or its representatives receive a
request pursuant to judicial or regulatory process to disclose such confidential
information, FNBI will, unless prohibited by law, promptly notify Norwest of
such request and will cooperate with Norwest, at Norwest's expense, to obtain a
protective order or other reliable assurance that confidential treatment will be
accorded to such confidential information. If the transactions contemplated by
this Agreement shall not be consummated, such confidential treatment 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 FNBI, in the public domain, or later acquired by FNBI on a nonconfidential
basis) and, upon request, all such documents, any copies thereof and extracts
therefrom shall immediately be returned to Norwest.
(h) Competing Transactions. Neither FNBI, nor any FNBI 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 FNBI or any FNBI 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 FNBI or any FNBI Subsidiary except in
the ordinary course of business, or (iv) to merge, consolidate or otherwise
combine with FNBI or any FNBI Subsidiary. If any corporation, partnership,
person or other entity or group makes an offer or inquiry to FNBI or any FNBI
Subsidiary concerning any of the foregoing, FNBI or such FNBI Subsidiary will
promptly disclose such offer or inquiry, including the terms thereof, to
Norwest.
(i) Public Disclosure. FNBI shall consult with Norwest as to the form,
-----------------
substance and timing 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. Prior to the Effective Date of the Merger, FNBI and
-------------
each FNBI Subsidiary will take all action necessary, required or requested by
Norwest (i) to comply with the provisions of paragraph 9 hereof relating to the
qualified pension and welfare benefit plans and all non-qualified benefit plans
and compensation arrangements as of the Effective Date of the Merger, (ii) to
amend the Plans to comply with the provisions of the TRA and regulations
thereunder and other applicable law, and (iii) to submit application to the
Internal Revenue Service for a favorable determination letter for each of the
Plans which is subject to the qualification requirements of Section 401(a) of
the Code, provided that FNBI and each FNBI Subsidiary will not be required to
submit such application to the Internal
A-18
<PAGE>
Revenue Service if the Internal Revenue Service does not accept such
applications prior to the Effective Date of the Merger.
(k) Affiliate Letters. FNBI shall use its best efforts to obtain and
-----------------
deliver to Norwest at least 32 days prior to the Effective Date of the Merger
signed representations, substantially in the form attached hereto as Exhibit B,
by each executive officer, director or shareholder of FNBI who may reasonably be
deemed an "affiliate" of FNBI within the meaning of such term as used in Rule
145 under the Securities Act.
(l) Accounting Practices. Prior to the Effective Date of the Merger,
--------------------
FNBI shall establish such additional accruals and reserves as may be necessary
(i) to conform FNBI's accounting and credit loss reserve practices and methods
to those of Norwest, consistent with Norwest's plans with respect to the conduct
of FNBI's business following the Merger and (ii) to the extent permitted by
generally accepted accounting principles, to provide for the costs and expenses
relating to the consummation by FNBI of the Merger and the other transactions
contemplated by this Agreement.
(m) Environmental Reports. FNBI shall obtain, at its sole expense, Phase
---------------------
I environmental assessments for each bank facility and each non-residential OREO
property. Oral reports of such environmental assessments shall be delivered to
Norwest no later than February 18, 1997 , and written reports shall be delivered
to Norwest no later than March 18, 1997. FNBI 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. FNBI shall
obtain a survey and assessment of all potential asbestos containing material in
owned or leased properties (other than OREO property), and a written report of
the results shall be delivered to Norwest within four weeks of the date of this
Agreement.
(n) Title Commitments and Surveys. FNBI shall obtain from a company
-----------------------------
reasonably acceptable to Norwest, at FNBI's sole expense, commitments for title
insurance (at a reasonable market value) and boundary surveys for each owned
bank facility, which commitments and surveys shall be delivered to Norwest no
later than February 18, 1997.
(o) Dissolution of Trust Company. As soon as practicable, but in any
----------------------------
event prior to the Effective Date of the Merger, FNBI shall have (i) taken all
appropriate actions and done all things necessary to complete the voluntary
dissolution of The First Security Trust Company ("First Security") pursuant to
the New Mexico Business Corporation Act; (ii) filed articles of dissolution of
First Security with the Corporation Commission of the State of New Mexico and
received a certificate of dissolution of First Security therefrom; and (iii)
surrendered its trust certificate of authority to the director of the financial
institutions division of the New Mexico Regulation and Licensing Department
pursuant to the New Mexico Trust Company Act.
(p) Life Insurance Policies. Prior to the Effective Date of the Merger,
-----------------------
FNBI shall afford any officer, director or employee of FNBI or any FNBI
Subsidiary who is covered by a life insurance policy or policies having FNBI or
any FNBI Subsidiary as the beneficiary thereof the opportunity to purchase such
policy or policies at the cash value thereof reflected on the books of FNBI or
the applicable FNBI Subsidiary.
(q) Salary Continuation Agreements. As soon as practicable, but in any
------------------------------
event prior to the Effective Date of the Merger, FNBI shall offer each FNBI
officer or employee who is a party to an outstanding Salary Continuation
Agreement with FNBI or any FNBI Subsidiary the opportunity to terminate such
Agreement in consideration of the receipt of a cash payment equal to the present
value thereof calculated using a discount rate reasonably acceptable to Norwest,
and FNBI shall memorialize the termination of such Salary Continuation
Agreements in writing in a manner reasonably acceptable to Norwest.
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<PAGE>
5. Covenants of Norwest. Norwest covenants and agrees with FNBI as
follows:
(a) Affirmative Covenants. 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) Information Supplied by Norwest. Norwest will furnish to FNBI all
-------------------------------
the information concerning Norwest required for inclusion in a proxy statement
or statements to be sent to the shareholders of FNBI, or in any statement or
application made by FNBI to any governmental body in connection with the
transactions contemplated by this Agreement.
(c) Registration Statement. As promptly as practicable after the
----------------------
execution of this Agreement, Norwest will file with the SEC a registration
statement on Form S-4 (the "Registration Statement") under the Securities Act
and any other applicable documents, relating to the shares of Norwest Common
Stock to be delivered to the shareholders of FNBI pursuant to the Merger
Agreement, and will use its best efforts to cause the Registration Statement to
become effective. At the time the Registration Statement becomes effective, the
Registration Statement will comply in all material respects with the provisions
of the Securities Act and the published rules and regulations thereunder, and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not false or misleading, and at the time of mailing thereof to the FNBI
shareholders, at the time of the FNBI 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 FNBI or
any FNBI Subsidiary for use in the Registration Statement or the Prospectus.
(d) Stock Exchange Listing. 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) Norwest Shares. The shares of Norwest Common Stock to be issued by
--------------
Norwest to the shareholders of FNBI 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 FNBI 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. Norwest
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<PAGE>
will endeavor to furnish FNBI with copies of all such filings contemporaniously
with their submission to the applicable authorities, and will furnish FNBI with
copies of all documents evidencing such consents and approvals, and all
correspondence received from such authorities with respect thereto, promptly
upon receipt thereof.
(g) Other Regulatory Approvals. 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 FNBI to obtain all such approvals and
consents required by FNBI. Norwest will endeavor to furnish FNBI with copies of
all such filings contemporaniously with their submission to the applicable
authorities, and will furnish FNBI with copies of all documents evidencing such
consents and approvals, and all correspondence received from such authorities
with respect thereto, promptly upon receipt thereof.
(h) Confidential Information. Norwest will hold in confidence all
------------------------
nonpublic documents and information concerning FNBI and FNBI'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. In the event that Norwest or its
representatives receive a request pursuant to judicial or regulatory process to
disclose such confidential information, Norwest will, unless prohibited by law,
promptly notify FNBI of such request and will cooperate with FNBI, at FNBI's
expense, to obtain a protective order or other reliable assurance that
confidential treatment will be accorded to such confidential information. If the
transactions contemplated by this Agreement shall not be consummated, such
confidential treatment shall be maintained and such information shall not be
used in competition with FNBI (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 on a nonconfidential basis) and, upon
request, all such documents, copies thereof or extracts therefrom shall
immediately thereafter be returned to FNBI.
(i) Corporate Merger Filings. Norwest will file any documents or
------------------------
agreements required to be filed in connection with the Merger under the New
Mexico Business Corporation Act.
(j) Delivery of Closing Documents. Norwest will use its best efforts to
-----------------------------
deliver at the Closing all opinions, certificates and other documents required
to be delivered by it at the Closing.
(k) Public Disclosure. Norwest shall consult with FNBI as to the form,
-----------------
substance and timing of any proposed press release or other proposed public
disclosure of matters related to this Agreement or to any of the transactions
contemplated hereby.
(l) Access to Information. For a period not exceeding fifteen (15) days
---------------------
prior to the Closing Date, Norwest will permit FNBI and its representatives to
examine its books, records and properties and interview officers, employees and
agents of Norwest at all reasonable times when it is open for business. No such
examination by FNBI or its representatives shall in any way affect, diminish or
terminate any of the representations, warranties or covenants of Norwest herein
expressed.
(m) Favorable Accounting Treatment. 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.
Norwest shall use its best efforts to obtain and deliver to FNBI, prior to the
Effective Date of the Merger, signed representations from
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<PAGE>
the directors and executive officers of Norwest to the effect that, except for
de minimus dispositions which will not disqualify the Merger as a pooling of
interests, they will not dispose of shares of Norwest or FNBI during the period
commencing 30 days prior to the Effective Date of the Merger and ending upon
publication by Norwest of financial results including at least 30 days of
combined operations of FNBI and Norwest.
(n) Indemnification Rights. From and after the Effective Time of the
----------------------
Merger: (i) Norwest shall indemnify, defend and hold harmless the officers,
directors and employees of FNBI and the FNBI Subsidiaries (the "Indemnified
Parties") against all losses, expenses, claims, damages or liabilities arising
out of the transactions contemplated by this Agreement to the fullest extent
permitted or required under FNBI's or a FNBI Subsidiary's Certificate of
Incorporation or Articles of Incorporation or Association and By-laws as in
effect as of the Effective Time of the Merger; and (ii) Norwest shall ensure
that all rights to indemnification and all limitations of liability existing in
favor of an Indemnified Party in FNBI's Certificate of Incorporaton or By-laws
or in similar governing documents of any FNBI Subsidiary, as applicable in the
particular case and as in effect on the date hereof, shall, with respect to
claims arising from facts or events that occurred before the Effective Time of
the Merger, survive the Merger and continue in full force and effect. Nothing
contained in this paragraph 5(n) shall be deemed to preclude the liquidation,
consolidation or merger of FNBI or any FNBI Subsidiary, in which case all of
such rights to indemnification and limitations on liability shall be deemed to
so survive and continue as contractual rights notwithstanding any such
liquidation or consolidation or merger. Notwithstanding anything to the contrary
contained in this paragraph 5(n), nothing contained herein shall require Norwest
or FNBI to indemnify any person who was a director, officer or employee of FNBI
or any FNBI Subsidiary to a greater extent than FNBI or any FNBI Subsidiary is,
as of the date of this Agreement, required to indemnify any such person.
(o) Directors' & Officers' Liability Insurance. For a period of three
------------------------------------------
years after the Effective Time of the Merger, Norwest shall use its best efforts
to cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by FNBI (provided that Norwest may
substitute therefor policies of at least the same coverage and amount containing
terms and conditions which are substantially no less advantageous) with respect
to claims arising from facts or events which occurred before the Effective Time
of the Merger; provided, however, that in no event shall Norwest be obligated to
-------- -------
expend, in order to maintain or provide insurance coverage pursuant to this
paragraph 5(o) any amount per annum in excess of 125% of the amount of the
annual premiums paid as of the date hereof by FNBI for such insurance (the
"Maximum Amount") and provided further that, prior to the Effective Time of the
Merger, FNBI shall notify the appropriate directors' and officers' liability
insurers of the Merger and of all pending or threatened claims, actions, suits,
proceedings or investigations asserted or claimed against any officer, director,
employee or other person covered by such policies, or circumstances likely to
give rise thereto, in accordance with terms and conditions of the applicable
policies. If the amount of the annual premiums necessary to maintain or procure
such insurance coverage exceeds the Maximum Amount, Norwest shall use reasonable
efforts to maintain the most advantageous policies of directors' and officers'
insurance obtainable for an annual premium equal to the Maximum Amount.
(p) Exchange of Shares. At or prior to the Effective Time of the Merger,
------------------
Norwest shall deposit, or shall cause to be deposited, with Norwest Bank
Minnesota, N.A. (the "Agent"), for the benefit of the holders of certificates
representing shares of FNBI Common Stock (the "Certificates"), for exchange in
accordance herewith and the Merger Agreement, a certificate or certificates
representing the shares of Norwest Common Stock and the cash in lieu of
fractional shares to be issued and paid pursuant hereto and the Merger Agreement
in exchange for outstanding shares of FNBI Common Stock.
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<PAGE>
In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Norwest, the
posting by such person of a bond in such amount as Norwest may reasonably direct
as indemnity against any claim that may be made against it with respect to such
Certificate, the Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Norwest Common Stock and cash in lieu of fractional
shares deliverable in respect thereof pursuant hereto and the Merger Agreement.
As soon as practicable after the Effective Time of the Merger, the Agent
shall mail to each holder of record of a Certificate or Certificates a form
letter of transmittal and instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Norwest Common
Stock and the cash in lieu of fractional shares into which the shares of Company
Common Stock represented by such certificates shall have been converted pursuant
hereto and the Merger Agreement.
(q) Delivery of Norwest Reports. From the date hereof to the Effective
---------------------------
Date of the Merger, Norwest shall use its best efforts to deliver to FNBI, when
reasonably available, Norwest's Quarterly Reports on Form 10-Q and Norwest's
Annual Reports on Form 10-K as filed with the SEC under the Exchange Act.
(r) Filing of SEC Reports. From and after the Effective Date of the
---------------------
Merger, Norwest shall file all reports with the SEC necessary to permit the
stockholders of FNBI who may be deemed "underwriters" (within the meaning of
Rule 145 under the Securities Act) of FNBI Common Stock to sell Norwest Common
Stock received by them in connection with the Merger pursuant to Rules 144 and
145(d) under the Securities Act if they would otherwise be so entitled;
provided, however, that Norwest is otherwise obligated to file such reports with
the SEC.
6. Conditions Precedent to Each Party's Obligation. The respective
obligations of each party to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions:
(a) Shareholder Approval. 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 FNBI required for approval of a plan of merger in
accordance with the provisions of FNBI's Articles of Incorporation and the New
Mexico Business Corporation Act.
(b) Regulatory Approvals. Norwest shall have received approval by the
--------------------
Federal Reserve Board and by such other governmental agencies as may be required
by law of the transactions contemplated by this Agreement and the Merger
Agreement and all waiting and appeal periods prescribed by applicable law or
regulation shall have expired.
(c) No Injunctions or Restraints. 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.
(d) Listing of Norwest Common Stock. The shares of Norwest Common Stock
-------------------------------
to be delivered to the stockholders of FNBI 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.
(e) Tax Opinion. FNBI shall have received an opinion, dated as of the
-----------
Closing Date, of counsel to FNBI 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 FNBI Common Stock upon receipt of
Norwest Common Stock except for cash received in lieu of
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<PAGE>
fractional shares;(iii) the basis of the Norwest Common Stock received by the
shareholders of FNBI will be the same as the basis of FNBI Common Stock
exchanged therefor; and (iv) the holding period of the shares of Norwest Common
Stock received by the shareholders of FNBI will include the holding period of
the FNBI Common Stock, provided such shares of FNBI Common Stock were held as a
capital asset as of the Effective Time of the Merger.
(f) Registration Statement; Blue Sky Approvals. 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 shall 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.
(g) Consents Under Agreements. FNBI and each FNBI Subsidiary shall have
-------------------------
obtained any and all material consents or waivers from other parties to loan
agreements, leases or other contracts material to FNBI's or such Subsidiary's
business required for the consummation of the Merger, and each of FNBI and the
FNBI Subsidiaries shall have obtained any and all material permits,
authorizations, consents, waivers and approvals required for the lawful
consummation by it of the Merger.
7. Conditions Precedent to the Obligation of FNBI. The obligation of
FNBI 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 FNBI:
(a) Representations and Warranties. 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) Performance of Norwest's Obligations. 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) Norwest Compliance Certificate. FNBI 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 7.
(d) No Material Adverse Change. Since September 30, 1996, no change
--------------------------
shall have occurred and no circumstances shall exist which have had or might
reasonably be expected to have a material adverse effect on the financial
condition, results of operations or business of Norwest and its subsidiaries
taken as a whole (other than changes in banking laws or regulations, or
interpretations thereof, that affect the banking industry generally or changes
in the general level of interest rates).
8. 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-24
<PAGE>
(a) Representations and Warranties. 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 FNBI and the FNBI
Subsidiaries taken as a whole as if made at the Time of Filing.
(b) Performance of FNBI's Obligations. FNBI shall have, or shall have
---------------------------------
caused to be, performed and observed in all material respects all covenants,
agreements and conditions hereof to be performed or observed by it at or before
the Time of Filing.
(c) FNBI Compliance Certificate. Norwest shall have received a favorable
---------------------------
certificate, dated as of the Effective Date of the Merger, signed by the
Chairman or President and by the Secretary or Assistant Secretary of FNBI, as to
the matters set forth in subparagraphs (a) and (b) of this paragraph 8.
(d) Absence of Burdensome Conditions. No approvals, licenses or consents
--------------------------------
granted by any regulatory authority shall contain any condition or requirement
relating to FNBI or any FNBI Subsidiary that, in the good faith judgment of
Norwest, is unreasonably burdensome to Norwest.
(e) FNBI Shares. At any time since the date hereof, the total number of
-----------
shares of FNBI Common Stock outstanding and subject to issuance upon exercise
(assuming for this purpose that phantom shares and other share-equivalents
constitute FNBI Common Stock) of all warrants, options, conversion rights,
phantom shares or other share-equivalents shall not have exceeded 29,953.
(f) Accounting Treatment. The Merger shall qualify as a "pooling of
--------------------
interests" for accounting purposes, and Norwest shall have received from Rogoff,
Diamond and Walker, LLP an opinion to that effect.
(g) CEO/CFO Letter. Norwest shall have received from the Chief Executive
--------------
Officer and Chief Financial Officer of FNBI a letter, dated as of the effective
date of the Registration Statement and updated through the date of Closing, in
form and substance satisfactory to Norwest, to the effect that:
(i) the interim quarterly financial statements of FNBI included
or incorporated by reference in the Registration Statement are prepared
in accordance with generally accepted accounting principles applied on a
basis consistent with the audited financial statements of FNBI;
(ii) the amounts reported in the interim quarterly financial
statements of FNBI agree with the general ledger of FNBI;
(iii) the annual and quarterly financial statements of FNBI and
the FNBI 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 FNBI and the FNBI Subsidiaries as may be
included in the Registration Statement to a date 5 days prior to the
effective date of the Registration Statement or 5 days prior to the
Closing, there are no increases in long-term debt, changes in
A-25
<PAGE>
the capital stock or decreases in stockholders' equity of FNBI and the
FNBI Subsidiaries, except in each case for changes, increases or
decreases which the Registration Statement discloses have occurred or
may occur or which are described in such letters. For the same period,
there have been no decreases in consolidated net interest income,
consolidated net interest income after provision for credit losses,
consolidated income before income taxes, consolidated net income and net
income per share amounts of FNBI and the FNBI Subsidiaries, or in income
before equity in undistributed income of subsidiaries, in each case as
compared with the comparable period of the preceding year, except in
each case for changes, increases or decreases which the Registration
Statement discloses have occurred or may occur or which are described in
such letters;
(v) they have reviewed certain amounts, percentages, numbers of
shares and financial information which are derived from the general
accounting records of FNBI and the FNBI 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 FNBI and the
FNBI Subsidiaries and have found them to be in agreement with financial
records and analyses prepared by FNBI included in the annual and
quarterly financial statements, except as disclosed in such letters.
(h) Casualty Losses, etc. FNBI and the FNBI Subsidiaries considered as a
--------------------
whole shall not have sustained since September 30, 1996 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.
(i) Environmental Liability. There shall be no reasonable basis for any
-----------------------
proceeding, claim or action of any nature seeking to impose, or that could
reasonably be expected to result in the imposition on FNBI or any FNBI
Subsidiary of, any liability related to the release of hazardous substances as
defined under any local, state or federal environmental statute, regulation or
ordinance, including without limitation CERCLA, which has had or could
reasonably be expected to have a material adverse effect upon FNBI and the FNBI
Subsidiaries taken as a whole.
(j) No Material Adverse Change. Except for the effects of compliance by
--------------------------
FNBI with the provisions of paragraphs 4(a)(ii), 4(b)(v) and 4(l) hereof, since
September 30, 1996, no change shall have occurred and no circumstances shall
exist which have had or might reasonably be expected to have a material adverse
effect on the financial condition, results of operations or business of FNBI and
the FNBI 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).
(k) Employment Agreements. Norwest shall have entered into written
---------------------
employment agreements with H. Barton Jones and Craig L. Cosner under terms
acceptable to Norwest, FNBI, and the respective employees.
9. Employee Benefit Plans. Each person who is an employee of FNBI or any
FNBI Subsidiary as of the Effective Date of the Merger ("FNBI Employees") shall
be eligible for participation in the employee welfare and retirement plans of
Norwest, as in effect from time to time, as follows:
(a) Employee Welfare Benefit Plans. Each FNBI Employee shall be eligible
------------------------------
for participation in the employee welfare benefit plans of Norwest listed below
subject to any eligibility requirements applicable to such plans, with full
credit for years of service to FNBI and the FNBI Subsidiaries and not subject to
any pre-existing condition exclusions, except (i) in the case of the Long Term
Care Plan, FNBI Employees' eligibility will be subject to pre-
A-26
<PAGE>
existing conditions, and (ii) in the case of Norwest retiree medical benefits,
FNBI Employees will not receive credit for years of service to FNBI. Each FNBI
Employee shall enter such plans not later than the first day of the calendar
quarter that begins at least 32 days after the Effective Date of the Merger (the
"Entry Date"):
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
Until the Entry Date for a given Norwest welfare benefit plan, Norwest agrees to
continue for the benefit of the FNBI Employees the comparable FNBI welfare
benefit plans numbered 1 through 5 under the caption "ERISA Section 3(1) Plans"
under Schedule 2(p).
For the purpose of determining each FNBI Employee's benefit for the year in
which the Merger occurs under the Norwest Vacation Program, vacation taken by an
FNBI Employee prior to the Merger in the year in which the Merger occurs will be
deducted from the total Norwest benefit for that year. FNBI Employees will also
receive credit under the Norwest Medical Plan for deductibles met under the FNBI
medical plan during the calendar year in which the Closing occurs.
(b) Employee Retirement Benefit Plans.
---------------------------------
(i) Each FNBI Employee shall be eligible for participation in the
Norwest Savings-Investment Plan (the "SIP"), subject to any eligibility
requirements applicable to the SIP, and shall enter the SIP, as a new
employee, not later than the first day of the calendar quarter that
begins at least 32 days after the Effective Date of the Merger.
(ii) Each FNBI Employee shall be eligible for participation in
the Norwest Pension Plan (with full credit for years of past service to
FNBI and the FNBI Subsidiaries for the purpose of satisfying any
eligibility and vesting periods, but not for the purpose of benefit
accrual, applicable to the Norwest Pension Plan) under the terms
thereof.
(iii) With respect to the Retirement Plan for Employees of The
First National Bankshares, Inc. and its Subsidiaries (the "FNBI Pension
Plan"), Norwest intends to merge the FNBI Pension Plan with and into the
Norwest Pension Plan, where FNBI Employees who participated in the FNBI
Pension Plan prior to the Effective Date of the Merger shall receive a
retirement benefit equal to the sum of (x) the benefits accrued under
the FNBI Pension Plan through the effective date of the merger of the
FNBI Pension Plan into the Norwest Pension Plan and (y) the benefits
accrued under the Norwest Pension Plan as set forth in subparagraph
(b)(ii) above from and after the effective date of the merger of said
Plans.
10. Termination and Amendment.
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<PAGE>
(a) Termination. This Agreement may be terminated at any time prior to
-----------
the Time of Filing:
(i) by mutual written consent of the parties hereto;
(ii) by either of the parties hereto upon written notice to the
other party if the Merger shall not have been consummated by September
30, 1997, 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 FNBI 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) Effect of Termination. Termination of this Agreement under this
---------------------
paragraph 10 shall not release, or be construed as so releasing, either party
hereto from any liability or damage to the other party hereto arising out of the
breaching party's willful and material breach of the warranties and
representations made by it, or willful and material failure to perform any of
its covenants, agreements, duties or obligations arising hereunder, and the
obligations under paragraphs 4(g), 5(h) and 11 shall survive such termination.
(c) Amendment. At any time before the Time of Filing, the parties
---------
hereto, by action taken by their respective Boards of Directors or pursuant to
authority delegated by their respective Boards of Directors, may amend this
Agreement; provided, however, that no amendment after approval hereof by the
shareholders of FNBI 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.
(d) Waiver and Other Action. Either party hereto may, by a signed
-----------------------
writing, give any consent, take any action pursuant to this paragraph 10 or
otherwise, or waive any inaccuracies in the representations and warranties by
the other party or compliance by the other party with any of the covenants and
conditions herein; provided, however, that any such consent or waiver shall not
operate as a consent to any other or subsequent matter or a waiver of, or
estoppel with respect to, any other or subsequent inaccuracy or failure to
comply.
11. Expenses. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by FNBI and the FNBI Subsidiaries shall be borne by
FNBI, and all such expenses incurred by Norwest shall be borne by Norwest.
12. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, but shall not be assignable by either party hereto without the prior
written consent of the other party.
13. Third Party Beneficiaries. Except as provided in paragraph 5(n),
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.
14. 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:
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<PAGE>
If to Norwest:
Norwest Corporation
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Attention: Secretary
If to FNBI:
The First National Bankshares, Inc.
302 South First Street
Tucumcari, New Mexico 88401
Attention: Chairman and CEO
or to such other address with respect to a party as such party shall notify the
other in writing as above provided.
15. 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.
16. Captions. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
17. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
18. Non-Survival of Representations and Warranties. No representation or
warranty contained in the Agreement or the Merger Agreement, or contained in a
certificate delivered pursuant to the Agreement or the Merger Agreement, shall
survive the Merger of Merger Co. with and into FNBI or, except as set forth in
paragraph 10(b), the termination of this Agreement. The agreements contained in
paragraphs 5(n), 5(r) and 11 shall survive the Merger.
19. 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 THE FIRST NATIONAL BANKSHARES, INC.
By: /s/ John E. Ganoe By: /s/ H. Barton Jones
---------------------------- -------------------------------
Its: Executive Vice President H. Barton Jones
---------------------------- Chairman, President and CEO
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<PAGE>
APPENDIX B
AGREEMENT
AND
PLAN OF MERGER
<PAGE>
AGREEMENT AND PLAN OF MERGER
BETWEEN
THE FIRST NATIONAL BANKSHARES, INC.
a New Mexico corporation
(the surviving corporation)
AND
NORWEST FNB MERGER CO.
a New Mexico corporation
(the merged corporation)
This Agreement and Plan of Merger dated as of April 28, 1997 (the
"Agreement"), between The First National Bankshares, Inc., a New Mexico
corporation (hereinafter sometimes called "Company" and sometimes called the
"surviving corporation") and Norwest FNB Merger Co., a New Mexico 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 State
Corporation Commission of the State of New Mexico on March 31, 1997, and said
corporation is now a corporation subject to and governed by the provisions of
the New Mexico Business Corporation Act. Merger Co. has authorized capital stock
of 1,000 shares of common stock having a par value of $1.00 per share ("Merger
Co. Common Stock"), of which 1,000 shares were outstanding as of the date
hereof; and
WHEREAS, Company was incorporated by Articles of Incorporation filed in
the office of the State Corporation Commission of the State of New Mexico on
August 27, 1986 and said corporation is now a corporation subject to and
governed by the provisions of the New Mexico Business Corporation Act. Company
has authorized capital stock of 100,000 shares of Common Stock, par value $1.00
per share ("Company Common Stock") of which 29,953 shares were outstanding and
no shares were held in the treasury as of September 30, 1996; and
WHEREAS, Norwest Corporation and Company are parties to an Agreement and
Plan of Reorganization dated as of January 17, 1997 (the "Reorganization
Agreement"), setting forth certain representations, warranties and covenants in
connection with the merger provided for herein; and
WHEREAS, the directors, or a majority of them, of each of the
constituent corporations respectively deem it advisable for the welfare and
advantage of said corporations and for the best interests of the respective
shareholders of said corporations that said corporations merge and that Merger
Co. be merged with and into Company, with Company continuing as the surviving
corporation, on the terms and conditions hereinafter set forth in accordance
with the provisions of the New Mexico Business Corporation Act, which statute
permits such merger;
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; and
NOW, THEREFORE, the parties hereto, subject to the approval of the
shareholders of Company and of Merger Co., in consideration of the premises and
of the mutual covenants and agreements contained herein and of the benefits to
accrue to the parties hereto, have agreed and do hereby agree that Merger Co.
shall be merged with and into Company pursuant to the laws of the State of New
Mexico, and do hereby agree upon, prescribe and set forth the terms and
conditions of the merger of Merger Co. with and into Company, the mode of
carrying said merger into effect, the manner and basis of converting the shares
of Company Common Stock into shares
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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
Company, 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 The First National Bankshares, Inc.
SECOND: The Articles of Incorporation of Company at the time of merger
shall be the Articles of Incorporation of the surviving corporation until
amended according to law:
THIRD: The Bylaws of Company at the time of merger shall be amended as
set forth below and, as so amended, shall be and remain the Bylaws of the
surviving corporation until further amended according to the provisions of the
Articles of Incorporation of the surviving corporation or of said Bylaws:
Article IV, Section 4.2 of the Bylaws is amended in its entirety to read
as follows:
4.2. Number, Tenure and Qualifications. The board of directors of
the Corporation shall consist of one or more directors. The number of
directors shall be determined by the stockholders at each annual
meeting. The authorized number of directors may be increased by the
stockholders or the board and decreased by the stockholders. The
directors shall be elected at each annual meeting of the stockholders,
and each director elected shall hold office until his or her successor
is elected and qualified or until his or her earlier resignation or
removal. Directors need not be stockholders or residents of the State of
New Mexico.
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 the merger until their
respective successors are elected and qualify:
William H. Queenan
Stanley S. Stroup
John T. Thornton
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
Stanley S. Stroup Vice President
Charles D. White Vice President and Chief Financial Officer
Michael A. Graf Vice President
David A. Stautz Vice President
Robert J. Murphy Vice President
James A. Horton Vice President
Margaret M. Weber Secretary
Rachelle M. Graham Assistant Secretary
SIXTH: The manner and basis of converting the shares of Company Common
Stock into cash or shares of shares of Norwest Common Stock shall be as follows:
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1. Each share of Company Common Stock outstanding immediately prior to
the time of the merger (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 number of shares of Company Common Stock then outstanding. The
"Adjusted Norwest Shares" shall mean the following:
(a) If the average of the closing prices of a share of Norwest
Common Stock as reported on the consolidated tape of the New York
Stock Exchange during the period of 20 trading days ending on the
day immediately preceding the meeting of the shareholders of
Company held to vote on this Agreement and the Reorganization
Agreement (the "Norwest Measurement Price") is equal to or
greater than $40.25, the Adjusted Norwest Shares shall be
304,472.
(b) If the Norwest Measurement Price is equal to or less than
$36.25, the Adjusted Norwest Shares shall be 338,069.
(c) If the Norwest Measurement Price is less than $40.25, but
more than $36.25, the Adjusted Norwest Shares shall be the number
determined by dividing $12,255,000 by the Norwest Measurement
Price.
2. As soon as practicable after the merger becomes effective, each
holder of a certificate for shares of Company 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 Company
Common Stock shall not be transferable on the books of the surviving
corporation but shall be deemed to evidence the right to receive (except
for the payment of dividends as provided below) ownership of the number
of whole shares of Norwest Common Stock into which such shares of
Company Common Stock have been converted on the basis above set forth;
provided, however, until the holder of such certificate for Company
Common Stock shall have surrendered the same for exchange as above set
forth, no dividend payable to holders of record of Norwest Common Stock
as of any date subsequent to the effective date of merger shall be paid
to such holder with respect to the Norwest Common Stock, if any,
represented by such certificate, but, upon surrender and exchange
thereof as herein provided, there shall be paid by the surviving
corporation or the Agent to the record holder of such certificate for
Norwest Common Stock issued in exchange therefor an amount with respect
to such shares of Norwest Common Stock equal to all dividends that shall
have been paid or become payable to holders of record of Norwest Common
Stock between the effective date of merger and the date of such
exchange.
3. If between the date of the Reorganization Agreement and the time of
merger, shares of Norwest Common Stock shall be changed into a different
number of shares or a different class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of
shares, readjustment, or similar transaction, 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 into which a share of
Company 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 Company Common
Stock shall be converted will equal the number of shares of Norwest
Common Stock which the holder of a share of Company Common Stock would
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have received pursuant to such reclassification, recapitalization,
split-up, combination, exchange of shares, readjustment, or similar
transaction, 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 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 immediately preceding the effective date of 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 Articles of
Merger (as described in subparagraph 1(b) of this Article Seventh) shall
be delivered to and filed and accepted by the State Corporation
Commission of the State of New Mexico; provided, however, that all of
the following actions shall have been taken in the following order:
a. This Agreement shall be approved and adopted on behalf of
Merger Co. and Company in accordance with the New Mexico Business
Corporation Act; and
b. Articles of merger (with this Agreement attached as part
thereof) with respect to the merger, setting forth the
information required by the New Mexico Business Corporation Act,
shall be executed by the Chairman of the Board, the President or
a Vice President of Merger Co. and by the Secretary or an
Assistant Secretary of Merger Co., and by the Chairman of the
Board, the President or a Vice President of Company and by the
Secretary or an Assistant Secretary of Company, and shall be
filed in the office of the State Corporation Commission of the
State of New Mexico in accordance with the New Mexico Business
Corporation Act.
2. The merger shall become effective as of 11:59 p.m. (the "time of
merger") on the effective date of merger.
EIGHTH: At the time of merger:
1. The separate existence of Merger Co. shall cease, and the
corporate existence and identity of Company shall continue as the
surviving corporation.
2. The merger shall have the other effects prescribed by Section 53-
14-6 of the New Mexico Business Corporation Act.
NINTH: The following provisions shall apply with respect to the
merger provided for by this Agreement:
1. If at any time the surviving corporation shall consider or be advised
that any further assignment or assurance in law or other action is
necessary or desirable to vest, perfect or confirm in the surviving
corporation the title to any property or rights of Merger Co. acquired
or to be acquired as a result of the merger provided for herein, the
proper
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officers and directors of Company and Merger Co. may execute and deliver
such deeds, assignments and assurances in law and take such other action
as may be necessary or proper to vest, perfect or confirm title to such
property or right in the surviving corporation and otherwise carry out
the purposes of this Agreement.
2. For the convenience of the parties and to facilitate the filing of
this Agreement, any number of counterparts hereof may be executed and
each such counterpart shall be deemed to be an original instrument.
3. This Agreement and the legal relations among the parties hereto shall
be governed by and construed in accordance with the laws of the State of
New Mexico.
4. This Agreement cannot be altered or amended except pursuant to an
instrument in writing signed by both of the parties hereto.
5. At any time prior to the filing of Articles of Merger with the State
Corporation Commission of the State of New Mexico, 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.
6. The registered office of the surviving corporation in the State of
New Mexico shall be 119 East Marcy, Santa Fe, NM 87501, and the name of
the registered agent of the Company at such address is C T Corporation
System.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Agreement and
Plan of Merger to be signed in their respective corporate names by the
undersigned officers, pursuant to authority duly given by their respective
Boards of Directors, all as of the day and year first above written.
THE FIRST NATIONAL
BANKSHARES, INC.
By: _________________________________
Its: _________________________________
Attest:
- --------------------------
Secretary
NORWEST FNB MERGER CO.
By: ________________________________
Its: ________________________________
Attest:
- ---------------------------
Secretary
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APPENDIX C
SECTIONS 53-15-3 AND 53-15-4
OF THE
NEW MEXICO BUSINESS CORPORATION ACT
<PAGE>
53-15-3 Right of Shareholders to Dissent and Obtain Payment for Shares
A. Any shareholder of a corporation may dissent from, and obtain payment
for the shareholder's shares in the event of, any of the following corporate
actions:
(1) any plan of merger or consolidation to which the corporation
is a party, except as provided in Subsection C of this section;
(2) any sale of exchange of all or substantially all of the
property and assets of the corporation not made in the usual and regular
course of its business, including a sale in dissolution, but not
including a sale pursuant to an order of a court having jurisdiction in
the premises or a sale for cash on terms requiring that all or
substantially all of the net proceeds of sale be distributed to the
shareholders in accordance with their respective interests within one
year after the date of sale;
(3) any plan of exchange to which the corporation is a party as
the corporation the shares of which are to be acquired;
(4) any amendment of the articles of incorporation which
materially and adversely affects the rights appurtenant to the shares of
the dissenting shareholder in that it:
(a) alters or abolishes a preferential right of such
shares;
(b) creates, alters or abolishes a right in respect of the
redemption of such shares, including a provision respecting a
sinking fund for the redemption or repurchase of such shares;
(c) alters or abolishes an existing preemptive right of
the holder of such shares to acquire shares or other securities;
or
(d) excludes or limits the right of the holder of such
shares to vote on any matter, or to cumulate his votes, except as
such right may be limited by dilution through the issuance of
shares or other securities with similar voting rights; or
(5) any other corporate action taken pursuant to a shareholder
vote with respect to which the articles of incorporation, the bylaws or
a resolution of the board of directors directs that dissenting
shareholders shall have a right to obtain payment for their shares.
B. (1) A record holder of shares may assert dissenters' rights as to
less than all of the shares registered in his name only if the holder dissents
with respect to all the shares beneficially owned by any one person and
discloses the name and address of the person or persons on whose behalf the
holder dissents. In that event, his rights shall be determined as if the shares
as to which he has dissented and his other shares were registered in the names
of different shareholders.
(2) A beneficial owner of shares who is not the record holder may
assert dissenters' rights with respect to shares held on his behalf, and shall
be treated as a dissenting shareholder under the terms of this section and
Section 53-15-4 NMSA 1978 if he submits to the corporation at the time of or
before the assertion of these rights a written consent of the record holder.
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C. The right to obtain payment under this section shall not apply to the
shareholders of the surviving corporation in a merger if a vote of the
shareholders of such corporation is not necessary to authorize such merger.
D. A shareholder of a corporation who has a right under this section to
obtain payment for his shares shall have no right at law or in equity to attack
the validity of the corporate action that gives rise to his right to obtain
payment, nor to have the action set aside or rescinded, except when the
corporate action is unlawful or fraudulent with regard to the complaining
shareholder or to the corporation.
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53-15-4 Rights of Dissenting Shareholders
A. Any shareholder electing to exercise his right of dissent shall file
with the corporation, prior to or at the meeting of shareholders at which the
proposed corporate action is submitted to a vote, a written objection to the
proposed corporate action. If the proposed corporate action is approved by the
required vote and the shareholder has not voted in favor thereof, the
shareholder may, within ten days after the date on which the vote was taken or
if a corporation is to be merged without a vote of its shareholders into another
corporation any of its shareholders may, within twenty-five days after the plan
of the merger has been mailed to the shareholders, make written demand on the
corporation, or, in the case of a merger or consolidation, on the surviving or
new corporation, domestic or foreign, for payment of the fair value of the
shareholder's shares, and, if the proposed corporate action is effected, the
corporation shall pay to the shareholder, upon the determination of the fair
value, by agreement or judgment as provided herein, and, in the case of shares
represented by certificates, the surrender of such certificates the fair value
thereof as of the day prior to the date on which the vote was taken approving
the proposed corporate action, excluding any appreciation or depreciation in
anticipation of the corporate action. Any shareholder failing to make demand
within the prescribed ten-day or twenty-five day period shall be bound by the
terms of the proposed corporate action. Any shareholder making such demand shall
thereafter be entitled only to payment as in this section provided and shall not
be entitled to vote or to exercise any other rights of a shareholder.
B. No such demand may be withdrawn unless the corporation consents
thereto. If, however, the demand is withdrawn upon consent, or if the proposed
corporate action is abandoned or rescinded or the shareholders revoke the
authority to effect the action, or if, in the case of a merger, on the date of
the filing of the articles of merger the surviving corporation is the owner of
all the outstanding shares of the other corporation, domestic and foreign, that
are parties to the merger, or if no demand or petition for the determination of
fair value by a court has been made or filed within the time provided in this
section, or if a court of competent jurisdiction determines that the shareholder
is not entitled to the relief provided by this section, then the right of the
shareholder is to be paid the fair value of his shares ceases and his status as
a shareholder shall be restored, without prejudice, to any corporate proceedings
which may have been taken during the interim.
C. Within ten days after such corporate action is effected, the
corporation, or, in the case of a merger or consolidation, the surviving or new
corporation, domestic or foreign, shall give written notice thereof to each
dissenting shareholder who has made demand as provided in this section and shall
make a written offer to each such shareholder to pay for such shares at a
specified price deemed by the corporation to be the fair value thereof. The
notice and offer shall be accompanied by a balance sheet of the corporation, the
shares of which the dissenting shareholder holds, as of the latest available
date and not more than twelve months prior to the making of the offer, and a
profit and loss statement of the corporation for the twelve-months' period ended
on the date of the balance sheet.
D. If within thirty days after the date on which the corporate action
was effected the fair value of the shares is agreed upon between any dissenting
shareholder and the corporation, payment therefor shall be made within ninety
days after the date on which the corporate action was effected, and, in the case
of shares represented by certificates, upon surrender of the certificates. Upon
payment of the agreed value, the dissenting shareholder shall cease to have any
interest in the shares.
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E. If, within the period of thirty days, a dissenting shareholder and
the corporation do not so agree, then the corporation, within thirty days after
receipt of written demand from any dissenting shareholder, given within sixty
days after the date on which corporate action was effected, shall, or at its
election at any time within the period of sixty days may, file a petition in any
court of competent jurisdiction in the county in this state where the registered
office of the corporation is located praying that the fair value of the shares
be found and determined. If, in the case of a merger or consolidation, the
surviving or new corporation is a foreign corporation without a registered
office in this state, the petition shall be filed in the county where the
registered office of the domestic corporation was last located. If the
corporation fails to institute the proceeding as provided in this section, any
dissenting shareholder may do so in the name of the corporation. All dissenting
shareholders, wherever residing, shall be made parties to the proceeding as an
action against their shares quasi in rem. A copy of the petition shall be served
on each dissenting shareholder who is a resident of this state and shall be
served by registered or certified mail on each dissenting shareholder who is a
nonresident. Service on nonresidents shall also be made by publication as
provided by law. The jurisdiction of the court shall be plenary and exclusive.
All shareholders who are parties to the proceeding shall be entitled to judgment
against the corporation for the amount of the fair value of their shares. The
court may, if it so elects, appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as specified in the order of their
appointment or on an amendment thereof. The judgment shall be payable to the
holders of uncertificated shares immediately, but to the holders of shares
represented by certificates only upon and concurrently with the surrender to the
corporation of certificates. Upon payment of the judgment, the dissenting
shareholder ceases to have any interest in the shares.
F. The judgment shall include an allowance for interest at such rate as
the court may find to be fair and equitable, in all circumstances, from the date
on which the vote was taken on the proposed corporate action to the date of
payment.
G. The costs and expenses of any such proceeding shall be determined by
the court and shall be assessed against the corporation, but all or any part of
the costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding to whom the corporation made an offer to pay for the shares if
the court finds that the action of the shareholders in failing to accept the
offer was arbitrary or vexatious or not in good faith. Such expenses include
reasonable compensation for and reasonable expenses of the appraisers, but
exclude the fees and expenses of counsel for and experts employed by any party;
but if the fair value of the shares as determined materially exceeds the amount
which the corporation offered to pay therefor, or if no offer was made, the
court in its discretion may award to any shareholder who is a party to the
proceeding such sum as the court determines to be reasonable compensation to any
expert employed by the shareholder in the proceeding, together with reasonable
fees of legal counsel.
H. Upon receiving a demand for payment from any dissenting shareholder,
the corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty days after demanding payment for his shares, each holder
of shares represented by certificates demanding payment shall submit the
certificates to the corporation for notation thereon that such demand has been
made. His failure to do so shall, at the option of the corporation, terminate
his rights under this section unless a court of competent jurisdiction, for good
and sufficient cause shown, otherwise directs. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made are transferred, any new certificate issued therefor
shall bear similar notation, together with the name of the original dissenting
holder of the shares, and a transferee of
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the shares acquires by such transfer no rights in the corporation other than
those which the original dissenting shareholder had after making demand for
payment of the fair value thereof.
I. Shares acquired by a corporation pursuant to payment of the agreed
value therefor or to payment of the judgment entered therefor, as in this
section provided, may be held and disposed of by the corporation as in the case
of other treasury shares, except that, in the case of a merger or consolidation,
they may be held and disposed of as the plan of merger or consolidation may
otherwise provide.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes indemnification
of directors and officers of a Delaware corporation under certain circumstances
against expenses, judgments and the like in connection with an action, suit or
proceeding. Article Fourteenth of Norwest's Restated Certificate of
Incorporation provides for broad indemnification of directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits: Parenthetical references to exhibits in the description of Exhibits
3.1, 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.2, 4.1 and 4.2 below are
incorporated by reference from such exhibits to the indicated
reports of Norwest filed with the Securities and Exchange
Commission under File No. 1-2979.
2.1 -- Agreement and Plan of Reorganization dated January 17, 1997 between
The First National Bankshares, Inc. and Norwest Corporation
(included in Proxy Statement-Prospectus as Appendix A).
2.2 -- Agreement and Plan of Merger dated April 28, 1997 between The First
National Bankshares, Inc. and Norwest FNB Merger Co. (included in
Proxy
Statement-Prospectus as Appendix B).
3.1 -- Restated Certificate of Incorporation, as amended (incorporated
by reference to Exhibit 3(b) to Norwest's Current Report on Form
8-K dated June 28, 1993 and Exhibit 3 to Norwest's Current Report
on Form 8-K dated July 3, 1995).
3.1.1-- Certificate of Designations of Powers, Preferences, and Rights
of Norwest ESOP Cumulative Convertible Preferred Stock
(incorporated by reference to Exhibit 4 to Norwest's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1994).
3.1.2-- Certificate of Designations of Powers, Preferences, and Rights
of Norwest Cumulative Tracking Preferred Stock (incorporated by
reference to Exhibit 3 to Norwest's Current Report on Form 8-K
dated January 9, 1995).
3.1.3-- Certificate of Designations of Powers, Preferences, and Rights
of Norwest 1995 ESOP Cumulative Convertible Preferred Stock
(incorporated by reference to Exhibit 4 to Norwest's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995).
3.1.4-- Certificate of Designations with respect to the 1996 ESOP
Cumulative Convertible Preferred Stock (incorporated by reference
to Exhibit 3 to Norwest's Current Report on Form 8-K dated February
26, 1996).
3.2 -- By-Laws, as amended (incorporated by reference to Exhibit 4(c)
to Norwest's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1991).
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4 -- Rights Agreement, dated as of November 22, 1988, between Norwest
Corporation and Citibank, N.A. (incorporated by reference to
Exhibit 1 to Norwest's Form 8-A dated December 6, 1988).
4.1 -- Certificate of Adjustment, dated July 21, 1989, to Rights
Agreement (incorporated by reference to Exhibit 3 to Norwest's Form
8 dated July 21, 1989).
4.2 -- Certificate of Adjustment, dated June 28, 1993, to Rights Agreement
(incorporated by reference to Exhibit 4 to Norwest's Form 8-A/A
dated June 29, 1993).
5 -- Opinion of Stanley S. Stroup, counsel to Norwest.
8 -- Opinion of Bracewell & Patterson, L.L.P.*
23 -- Consent of Stanley S. Stroup (included as part of Exhibit 5 filed
herewith).
23.2 -- Consent of KPMG Peat Marwick LLP.
23.3 -- Consent of Rogoff, Diamond & Walker LLP.
23.4 -- Consent of Bracewell & Patterson, LLP (included as a part of
Exhibit 8).
24 -- Powers of Attorney.
99 -- Form of proxy for Special Meeting of Shareholders of The First
National Bankshares, Inc.
- ----------
*To be filed by amendment.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a posteffective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent posteffective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any
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deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) (ss.230.424(b) of this chapter)
if, in the aggregate, the changes in volume and price represent no
more than 20% change in the maximum offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information in
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such posteffective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a posteffective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
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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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis, State of
Minnesota, on April 24, 1997.
NORWEST CORPORATION
By: /s/ Richard M. Kovacevich
---------------------------------
Richard M. Kovacevich
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed on April 24, 1997 by the following
persons in the capacities indicated:
/s/ Richard M. Kovacevich Chairman 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
RICHARD M. KOVACEVICH ) Board of Directors*
RICHARD S. LEVITT )
RICHARD D. McCORMICK )
CYNTHIA H. MILLIGAN )
IAN M. ROLLAND )
MICHAEL W. WRIGHT )
- ----------
*Richard M. Kovacevich, by signing his name hereto, does hereby sign this
document on behalf of each of the directors named above pursuant to powers of
attorney duly executed by such persons.
/s/ Richard M. Kovacevich
----------------------------
Richard M. Kovacevich
Attorney-in-Fact
II-5
<PAGE>
INDEX TO EXHIBITS
Exhibit Form of
Number Description* Filing
- ------- ------------ --------
2.1 Agreement and Plan of Reorganization dated January 17, 1997
between The First National Bankshares, Inc. and Norwest
Corporation (included in Proxy Statement-Prospectus as
Appendix A).
2.2 Agreement and Plan of Merger dated April 28, 1997
between The First National Bankshares, Inc. and
Norwest FNB Merger Co. (included in Proxy Statement-
Prospectus as Appendix B).
3.1 Restated Certificate of Incorporation, as amended
(incorporated by reference to Exhibit 3(b) to Norwest's
Current Report on Form 8-K dated June 28, 1993 and Exhibit 3
to Norwest's Current Report on Form 8-K dated July 3, 1995).
3.1.1 Certificate of Designations of Powers, Preferences, and
Rights of Norwest ESOP Cumulative Convertible Preferred Stock
(incorporated by reference to Exhibit 4 to Norwest's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1994).
3.1.2 Certificate of Designations of Powers, Preferences, and Rights
of Norwest Cumulative Tracking Preferred Stock (incorporated
by reference to Exhibit 3 to Norwest's Current Report on Form
8-K dated January 9, 1995).
3.1.3 Certificate of Designations of Powers, Preferences, and Rights
of Norwest 1995 ESOP Cumulative Convertible Preferred Stock
(incorporated by reference to Exhibit 4 to Norwest's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995).
3.1.4 Certificate of Designations with respect to the 1996 ESOP
Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 3 to Norwest's Current Report on Form 8-K
dated February 26, 1996).
3.2 By-Laws, as amended (incorporated by reference to Exhibit 4(c)
to Norwest's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1991).
4 Rights Agreement, dated as of November 22, 1988, between Norwest
Corporation and Citibank, N.A. (incorporated by reference to
Exhibit 1 to Norwest's Form 8-A dated December 6, 1988).
4.1 Certificate of Adjustment, dated July 21, 1989, to Rights
Agreement (incorporated by reference to Exhibit 3 to Norwest's
Form 8 dated July 21, 1989).
<PAGE>
Exhibit Form of
Number Description* Filing
- ------- ------------ --------
4.2 Certificate of Adjustment, dated June 28, 1993, to
RightsAgreement (incorporated by reference to
Exhibit 4 to Norwest's Form 8-A/A dated June 29, 1993).
5 Opinion of Stanley S. Stroup, counsel to Norwest. Electronic
Transmission
8 Opinion of Bracewell & Patterson, L.L.P.** Electronic
Transmission
23.1 Consent of Stanley S. Stroup (included as part of
Exhibit 5 filed herewith).
23.2 Consent of KPMG Peat Marwick LLP. Electronic
Transmission
23.3 Consent of Rogoff, Diamond & Walker LLP. Electronic
Transmission
23.4 Consent of Bracewell & Patterson, LLP. (included
as part of Exhibit 8)
24 Powers of Attorney. Electronic
Transmission
99 Form of proxy for Special Meeting of Shareholders of Electronic
The First National Bankshares, Inc. Transmission
- ----------
* Parenthetical references to exhibits in the description of Exhibits 3.1,
3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.2, 4.1 and 4.2 are incorporated by reference
from such exhibits to the indicated reports of Norwest filed with the SEC
under File No. 1-2979.
** To be filed by amendment.
<PAGE>
EXHIBIT 5
[LETTERHEAD OF STANLEY S. STROUP]
April 24, 1997
Board of Directors
Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-1000
Ladies and Gentlemen:
In connection with the proposed registration under the Securities Act of
1933, as amended, of up to 375,000 shares of common stock, par value $1-2/3 per
share (the "Shares"), of Norwest Corporation, a Delaware corporation (the
"Corporation"), which are proposed to be issued by the Corporation in connection
with the merger (the "Merger") of a wholly-owned subsidiary of the Corporation
with The First National Bankshares, Inc., a New Mexico corporation, I have
examined such corporate records and other documents, including the Registration
Statement on Form S-4 relating to the Shares, and have reviewed such matters of
law as I have deemed necessary for this opinion, and I advise you that in my
opinion:
1. The Corporation is a corporation duly organized and existing under
the laws of the State of Delaware.
2. All necessary corporate action on the part of the Corporation has
been taken to authorize the issuance of the Shares in connection with the
Merger, and, when issued as described in the Registration Statement, the Shares
will be legally and validly issued, fully paid and nonassessable.
I consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Stanley S. Stroup
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Norwest Corporation:
We consent to the use of our report dated January 16, 1997 incorporated herein
by reference and to the reference to our firm under the heading "EXPERTS" in the
prospectus.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
April 24, 1997
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF ROGOFF, DIAMOND & WALKER LLP]
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors
The First National Bankshares, Inc. and Subsidiaries:
We consent to the use of our report dated March 26, 1997 included herein and to
the reference to our firm under the heading "EXPERTS" in the proxy
statement-prospectus.
/s/ Rogoff, Diamond & Walker LLP
Albuquerque, New Mexico
April 18, 1997
<PAGE>
EXHIBIT 24
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 375,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of The First National
Bankshares, Inc. and its subsidiaries, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of November, 1996.
/s/ David A. Christensen
-----------------------------------
David A. Christensen
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 375,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of The First National
Bankshares, Inc. and its subsidiaries, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of November, 1996.
/s/ Gerald J. Ford
----------------------------------
Gerald J. Ford
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 375,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of The First National
Bankshares, Inc. and its subsidiaries, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of November, 1996.
/s/ Pierson M. Grieve
---------------------------------
Pierson M. Grieve
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 375,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of The First National
Bankshares, Inc. and its subsidiaries, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of November, 1996.
/s/ Charles M. Harper
---------------------------------
Charles M. Harper
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 375,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of The First National
Bankshares, Inc. and its subsidiaries, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of November, 1996.
/s/ William A. Hodder
---------------------------------
William A. Hodder
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 375,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of The First National
Bankshares, Inc. and its subsidiaries, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of November, 1996.
/s/ Lloyd P. Johnson
---------------------------------
Lloyd P. Johnson
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 375,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of The First National
Bankshares, Inc. and its subsidiaries, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of November, 1996.
/s/ Richard M. Kovacevich
---------------------------------
Richard M. Kovacevich
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 375,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of The First National
Bankshares, Inc. and its subsidiaries, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of November, 1996.
/s/ Richard S. Levitt
----------------------------------
Richard S. Levitt
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 375,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of The First National
Bankshares, Inc. and its subsidiaries, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of November, 1996.
/s/ Richard D. McCormick
----------------------------------
Richard D. McCormick
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 375,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of The First National
Bankshares, Inc. and its subsidiaries, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of November, 1996.
/s/ Cynthia H. Milligan
----------------------------------
Cynthia H. Milligan
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 375,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of The First National
Bankshares, Inc. and its subsidiaries, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of November, 1996.
/s/ Ian M. Rolland
--------------------------------
Ian M. Rolland
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint LLOYD P. JOHNSON, RICHARD M. KOVACEVICH, STANLEY S.
STROUP, JOHN T. THORNTON AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 375,000 shares of Common Stock of the Corporation which may be issued
in connection with the acquisition by the Corporation of The First National
Bankshares, Inc. and its subsidiaries, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 26th day of November, 1996.
/s/ Michael W. Wright
-----------------------------------
Michael W. Wright
<PAGE>
EXHIBIT 99
THE FIRST NATIONAL BANKSHARES, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints _______________, _________________, and
____________, or any of them, as proxies to vote all shares of Common Stock the
undersigned is entitled to vote at the Special Meeting of Stockholders of The
First National Bankshares, Inc. ("FNB") to be held at the offices of FNB at 302
South First Street, Tucumcari, New Mexico on June 11, 1997, or at any
adjournment or postponement thereof, as follows, hereby revoking any proxy
previously given:
1. To approve the Agreement and Plan of Reorganization dated January 17,
1997 (the "Reorganization Agreement") between FNB and Norwest Corporation
("Norwest") and the related Agreement and Plan of Merger dated April 28, 1997
(the "Plan of Merger") pursuant to which a wholly-owned subsidiary of Norwest
will merge with FNB and FNB will become a wholly-owned subsidiary of Norwest
(the "Merger"), all upon the terms and subject to the conditions set forth in
the Reorganization Agreement and the Plan of Merger, copies of which are
included as Appendix A and Appendix B, respectively, in the accompanying Proxy
Statement-Prospectus; and to authorize such further action by the board of
directors and officers of FNB as may be necessary or appropriate to carry out
the intent and purposes of the Merger.
FOR |_| AGAINST |_| ABSTAIN |_|
2. In the discretion of the persons appointed proxies hereby on such other
matters as may properly come before the Special Meeting.
Shares represented by this proxy will be voted as directed by the
stockholder. The Board of Directors recommends a vote "FOR" proposal 1. If no
direction is supplied, the proxy will be voted "FOR" proposal 1.
Dated: ________________________________, 199__.
-----------------------------------------------
(Please sign exactly as name appears at left.)
-----------------------------------------------
(If stock is owned by more than one person, all
owners should sign. Persons signing as
executors, administrators, trustees, or in
similar capacities should so indicate.)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE FIRST NATIONAL BANKSHARES, INC.
