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As filed with Securities and Exchange Commission on October 10, 1997
Registration No. 333-32797
================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
Amendment No. 1
to
Form S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-------------------------------
Norwest Corporation
(Exact name of registrant as specified in its charter)
Delaware 6711 41-0449260
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-10007
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 Larry Temple
Norwest Corporation Larry Temple Attorney at Law
Norwest Center 400 West 15th Street
Sixth and Marquette Suite 1510
Minneapolis, Minnesota 55479-1026 Austin, TX 78701
------------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of the Registration
Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
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[WOODHAVEN LETTERHEAD APPEARS HERE]
October , 1997
Dear Shareholder:
Your board of directors has approved the acquisition of Woodhaven National
Bank by Norwest Corporation. Norwest will acquire Woodhaven through the
consolidation of Woodhaven with a newly-formed, wholly-owned subsidiary bank of
Norwest. Woodhaven will be the surviving bank in the consolidation. If the
consolidation is completed, Woodhaven will become a wholly-owned subsidiary of
Norwest and you will receive shares of Norwest common stock for your shares of
Woodhaven common stock. If you own options to purchase Woodhaven common stock,
your options will be converted into options to purchase Norwest common stock.
In the proposed consolidation, Norwest will exchange $10,000,000 in Norwest
common stock for all of the outstanding shares of Woodhaven common stock,
assuming for this purpose that shares issuable upon exercise of vested Woodhaven
stock options constitute outstanding shares of Woodhaven common stock. Based on
180,000 shares of Woodhaven common stock actually outstanding and another 12,200
shares issuable upon exercise of vested stock options, this works out to
approximately $52.03 ($10,000,000 divided by 192,200) in Norwest common stock
for each share of Woodhaven common stock. The Norwest common stock to be
exchanged in the Consolidation will be valued at the average closing price for
Norwest common stock over a fixed measurement period. For each share of
Woodhaven common stock you own, you will receive that number of shares (or
fractional share) of Norwest common stock equal to $52.03 divided by this
average.
Norwest cannot acquire Woodhaven without the approval of Woodhaven's
shareholders. We've called a special shareholders meeting to vote on the
matter. The meeting will be held on ___________ at _________________ at 6750
Bridge Street, Fort Worth, Texas 76112. If shareholders do not approve the
acquisition, Woodhaven will continue to operate as an independent bank.
Please read the following materials for information concerning the
consolidation and the special meeting. Also, please sign and return the
accompanying proxy card in the postage-paid envelope. This way, your shares will
be voted as you direct even if you can't attend the meeting.
Frank P. Talley, Jr.
Chairman of the Board
- --------------------------------------------------------------------------------
Whether or not your plan to attend the special meeting, please fill in, sign,
date, and promptly return the accompanying proxy card in the enclosed envelope.
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS.............................. 1
DEFINED TERMS.......................................................... 2
WHAT "INCORPORATED BY
REFERENCE" MEANS....................................................... 4
EXPLANATORY NOTE REGARDING NORWEST COMMON STOCK SPLIT.................. 4
PROXY STATEMENT-PROSPECTUS............................................. 5
SUMMARY............................................................... 6
Parties to the Consolidation......................................... 6
Reasons for the Consolidation........................................ 6
Approval of the Consolidation........................................ 7
Recommendation of the Woodhaven Board................................ 7
The Consolidation.................................................... 7
Comparative Per Common Share Data.................................... 13
Selected Historical Financial Information............................ 14
Share Prices and Dividends for Norwest Common Stock.................. 17
SPECIAL MEETING OF SHAREHOLDERS....................................... 18
Record Date.......................................................... 18
Voting Rights; Votes Required for Approval........................... 18
Solicitation of Proxies.............................................. 19
Other Matters........................................................ 19
THE CONSOLIDATION..................................................... 20
Purpose and Effect of the Consolidation.............................. 20
Background of and Reasons for the
Consolidation........................................................ 20
Interests of Woodhaven Management
in the Consolidation............................................... 21
Appraisal Rights..................................................... 22
Exchange of Certificates............................................. 24
Effect on Woodhaven Employee
Benefit Plans...................................................... 25
Certain U.S. Federal Income
Tax Consequences................................................... 25
Resale of Norwest Common Stock....................................... 26
Stock Exchange Listing............................................... 26
Accounting Treatment................................................. 27
THE REORGANIZATION AGREEMENT.......................................... 28
Basic Plan of Reorganization......................................... 28
Representations and Warranties....................................... 29
Certain Covenants.................................................... 29
Conditions to the Completion of the
Consolidation...................................................... 30
Termination of the Reorganization
Agreement.......................................................... 31
Termination Fee...................................................... 32
Effect of Termination................................................ 32
Waiver and Amendment................................................. 32
Expenses............................................................. 32
COMPARISON OF RIGHTS OF
WOODHAVEN COMMON STOCK AND
NORWEST COMMON STOCK.................................................. 33
Capital Stock........................................................ 33
Rights Plan.......................................................... 33
Directors............................................................ 33
Amendment of Certificate of Incorporation
and Bylaws......................................................... 34
Approval of Mergers and Asset
Sale............................................................... 34
Appraisal Rights..................................................... 34
Special Meetings..................................................... 35
Directors Duties..................................................... 35
Action Without a Meeting............................................. 35
Limitation of Director Liability..................................... 35
Indemnification of Officers and Directors............................ 36
Dividends............................................................ 36
Corporate Governance Procedures;.
Nomination of Directors............................................ 37
INFORMATION ABOUT WOODHAVEN........................................... 38
General.............................................................. 38
Competition.......................................................... 38
Regulation and Supervision........................................... 38
Employees............................................................ 39
Properties........................................................... 39
Legal Proceedings.................................................... 39
Description of Securities............................................ 40
Dividends and Dividend Policy........................................ 40
Holders and Market Information....................................... 40
Security Ownership of Management
and Principal Shareholders......................................... 40
WOODHAVEN'S MANAGEMENT'S
DISCUSSION AND ANALYSIS OF WOODHAVEN'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................. 41
Results of Operations................................................ 41
Liquidity............................................................ 47
Capital Resources.................................................... 47
Accounting Matters................................................... 48
Impact of Inflation, Changing Prices
and Monetary Policies.............................................. 48
CERTAIN REGULATORY AND
OTHER CONSIDERATIONS PERTAINING
TO NORWEST............................................................ 50
Bank Regulatory Agencies............................................. 50
Bank Holding Company Activities;
Interstate Banking................................................. 50
Dividend Restrictions................................................ 51
Holding Company Structure............................................ 51
Regulatory Capital Standards and
Related Matters..................................................... 52
FDIC Insurance....................................................... 54
<PAGE>
Fiscal and Monetary Policies......................................... 55
Competition.......................................................... 55
EXPERTS............................................................... 55
LEGAL MATTERS......................................................... 56
INFORMATION CONCERNING NORWEST
MANAGEMENT........................................................... 56
WHERE YOU CAN FIND MORE
INFORMATION........................................................... 56
INDEX TO WOODHAVEN FINANCIAL STATEMENTS............................... F-1
APPENDIX A AGREEMENT AND PLAN OF
REORGANIZATION
APPENDIX B UNITED STATES CODE TITLE
12, SECTION 215
APPENDIX C BANKING CIRCULAR 259
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A special meeting of shareholders of Woodhaven National Bank will be held
on ______________ at __________________ at the offices of Woodhaven, located
at 6750 Bridge Street, Fort Worth, Texas. The purpose of the meeting is to
vote on a proposal to approve the agreement and plan of reorganization between
Woodhaven and Norwest Corporation. This agreement provides for the
consolidation of Woodhaven with a newly-formed, wholly-owned subsidiary bank
of Norwest, and for Woodhaven to be the surviving bank. If the consolidation
is completed, Woodhaven will become a wholly-owned subsidiary of Norwest and
Woodhaven shareholders will receive shares of Norwest common stock for their
shares of Woodhaven common stock.
The record date for the special meeting is __________. Only shareholders
of record at the close of business on that date can vote at the meeting.
Daphne Hertel
Assistant Corporate Secretary
1
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DEFINED TERMS
Following are the definitions of certain terms used in this Proxy
Statement-Prospectus. Each term should be considered in the context in which
it is used.
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Adjusted Norwest Shares............ the number equal to $10,000,000 divided by
the Norwest Measurement Price.
Bank Holding Company Act........... Bank Holding Company Act of 1956.
Consolidation...................... the consolidation of Woodhaven with
Norwest Interim Bank Fort Worth, National
Association, as a result of which
Woodhaven will become a wholly-owned
subsidiary of Norwest.
DGCL............................... Delaware General Corporation Law.
Exchange Act....................... Securities Exchange Act of 1934.
Federal Reserve Board.............. Board of Governors of the Federal Reserve
System.
FDI Act............................ Federal Deposit Insurance Act.
FDIC............................... Federal Deposit Insurance Corporation.
Interstate Banking Act............. Reigle-Neal Interstate Banking and
Branching Act.
National Bank Act.................. National Bank Act.
Norwest............................ Norwest Corporation and its consolidated
subsidiaries.
Norwest Board...................... Norwest's board of directors.
Norwest Bylaws..................... Norwest's bylaws.
Norwest Certificate................ Norwest's restated certificate of
incorporation.
Norwest Common Stock............... Norwest's common stock, par value $1-2/3
per share.
Norwest Measurement Price.......... the average of the closing prices of a
share of Norwest Common Stock as reported
on the composite tape of the New York
Stock Exchange during the period of 20
trading days ending on the day immediately
before the special meeting of Woodhaven
shareholders.
OCC................................ Office of the Comptroller of the Currency.
OTS................................ Office of Thrift Supervision.
Option Exchange Ratio.............. the number equal to the Adjusted Norwest
Shares divided by the number of shares of
Woodhaven Common Stock outstanding as of
immediately before the Consolidation.
Reorganization Agreement........... the Agreement and Plan of Reorganization
dated March 18, 1997
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between Woodhaven and Norwest.
SEC................................ Securities and Exchange Commission.
Securities Act..................... Securities Act of 1933.
Woodhaven.......................... Woodhaven National Bank.
Woodhaven Articles................. Woodhaven's articles of association.
Woodhaven Board.................... Woodhaven's board of directors.
Woodhaven Bylaws................... Woodhaven's bylaws.
Woodhaven Common Stock............. Woodhaven's common stock, par value $5 per
share.
Woodhaven Options.................. the options to purchase shares of
Woodhaven Common Stock issued pursuant to
one of two separate stock option
agreements, each dated January 1, 1995.
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WHAT "INCORPORATED BY REFERENCE" MEANS
Incorporation by reference is a concept that allows Norwest to not
physically include in this Proxy Statement-Prospectus some of the information
about Norwest that may be important to your decision whether to approve the
Consolidation. The information is instead "incorporated" into this Proxy
Statement-Prospectus by reference to one or more documents previously filed
by Norwest with the SEC. For example, the information contained in Norwest's
consolidated financial statements for the years ended December 31, 1996 and
1995 may be important to your decision, as may be a detailed description of
Norwest's business. None of this information is physically included in this
Proxy Statement-Prospectus. Instead, this Proxy Statement-Prospectus refers
you to Norwest's annual report on Form 10-K, which is the document that
physically contains the financial statements and the most recent description
of Norwest's business.
Information that has been incorporated by reference is considered part of
this Proxy Statement-Prospectus, even though it is not physically included.
As a result, the information is considered to have been disclosed to you,
whether or not you obtain a copy of the document containing the information.
This Proxy Statement-Prospectus will indicate when information has been
incorporated by reference. It will also specify the document that physically
contains the information. As you read this Proxy Statement-Prospectus,
please make a list of the documents that you want to review in deciding
whether to approve the Consolidation. The section entitled "Where You Can
Find More Information" explains how to get copies of these documents.
EXPLANATORY NOTE REGARDING
NORWEST COMMON STOCK SPLIT
On September 23, 1997, the Norwest Board declared a two-for-one split of
Norwest Common Stock in the form of a 100% stock dividend. The stock
dividend was paid on October 10, 1997, to stockholders of record on October
2, 1997. As a result of the stock split, stockholders received one
additional share of Norwest Common Stock for each share they owned on
October 2, 1997. On October 14, 1997, Norwest Common Stock began trading at
half its pre-split price.
As required by the Reorganization Agreement, the number of shares of
Norwest Common Stock to be exchanged in the Merger has been adjusted to
reflect the stock split. The sections of this Proxy Statement-Prospectus
that discuss the number of shares of Norwest Common Stock issuable in the
Merger reflect this adjustment. This Proxy Statement-Prospectus will
indicate where other information has been adjusted or restated to reflect
the stock split.
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PROXY STATEMENT-PROSPECTUS
This document serves as both a proxy statement of Woodhaven and a
prospectus of Norwest. As a proxy statement, it is being provided to you
because the Woodhaven Board is soliciting your proxy for use at the special
meeting. As a prospectus, it is being provided to you because Norwest will
issue shares of Norwest Common Stock to you in the Consolidation in exchange
for your shares of Woodhaven Common Stock.
At the special meeting, Woodhaven shareholders will vote on the
Reorganization Agreement. The Reorganization Agreement provides for the
consolidation of Woodhaven with a newly-formed, wholly-owned subsidiary bank
of Norwest. Woodhaven will be the surviving bank in the Consolidation. If
the Consolidation is completed, Woodhaven will become a wholly-owned
subsidiary of Norwest and Woodhaven shareholders will receive shares of
Norwest Common Stock for their shares of Woodhaven Common Stock.
This Proxy Statement-Prospectus provides detailed information concerning
the Consolidation and the special meeting. The Reorganization Agreement is
attached to this Proxy Statement-Prospectus as Appendix A and is considered
part of this Proxy Statement-Prospectus. Woodhaven and Norwest encourage you
to read this entire Proxy Statement-Prospectus (including the appendixes)
carefully.
----------------------------
In deciding whether to vote for the Consolidation and receive shares of
Norwest Common Stock in exchange for your shares of Woodhaven Common Stock,
you should be aware that:
. Neither the SEC nor any state securities regulators have approved the
Norwest Common Stock offered by this Proxy Statement-Prospectus or
determined whether this Proxy Statement-Prospectus is accurate or
adequate. Any representation to the contrary is a criminal offense.
. The shares of Norwest Common Stock offered by this Proxy Statement-
Prospectus are not savings accounts, deposits or other obligations of
any bank or nonbank subsidiary of Norwest and are not insured by the
Federal Deposit Insurance Corporation or any other governmental agency.
. 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.
----------------------------
This Proxy Statement-Prospectus is dated October __, 1997.
It is first being mailed to Woodhaven shareholders on or about October __, 1997.
5
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SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
Consolidation fully, and for a more complete description of the legal terms of
the Consolidation, you should carefully read this document and the other
information available to you. See "Where You Can Find More Information."
<TABLE>
<CAPTION>
Parties to the Consolidation
<S> <C>
Norwest Corporation...... Norwest is a diversified financial services
Sixth and Marquette company organized under the laws of Delaware and
Minneapolis, Minnesota registered under the Bank Holding Company Act.
55479 Through its subsidiaries and affiliates, Norwest
(612) 667-1234 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 June 30, 1997, Norwest had consolidated total
assets of $83.9 billion, total deposits of $52.0
billion and total stockholders' equity of $6.5
billion. Based on total assets at June 30, 1997,
Norwest was the 11th largest commercial banking
organization in the United States.
Woodhaven National Bank.. Woodhaven is a national bank which has its
6750 Bridge Street domicile or principal office at 6750 Bridge Street
P. O. Box 24248 in Fort Worth, Texas. It has an additional branch
Fort Worth, Texas 76124 at 5100 Randol Mill Road in Fort Worth, Texas and
an operations center and mini bank at 5220 Boca
Raton in Fort Worth, Texas. Woodhaven provides a
full range of commercial and consumer banking
services to individuals and small and middle
market businesses in the areas of Fort Worth and
Tarrant County where its facilities are located.
As of June 30, 1997, Woodhaven had total deposits
of $62.5 million, total assets of $69.4 million
and total shareholders equity of $5.8 million.
Reasons for the
Consolidation............. Over many months prior to April 22, 1997, the
Woodhaven Board monitored developments in bank
acquisitions in Texas along with developments in
the banking industry generally. Recognizing both
the industry trends toward competition and
consolidation in the banking industry and the
potential need for significant investments in
technology to provide the products and services
necessary to obtain and retain customers, the
Woodhaven Board began to consider alternatives
that would permit all Woodhaven shareholders to
realize maximum value for their investment. One
requirement of all of the alternatives was that
every shareholder of Woodhaven should receive the
same amount for his or her stock as would be
available to be received by any other shareholder.
The Woodhaven Board subsequently determined that
Woodhaven shareholders would be best served by the
acquisition of
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Woodhaven by a company whose stock is listed on one
of the major stock exchanges (to create liquidity
for the shareholders), a company recognized as a
high performing, well regarded, and highly rated
financial institution nationwide. In addition, the
Woodhaven Board determined that the transaction
price must be adequate in terms of total
consideration and that the transaction would best
be structured as a non-taxable stock for stock
exchange so that each individual shareholder of
Woodhaven would have the opportunity to decide in
the future whether he or she desired to continue
with ownership of a bank investment or would prefer
to convert that ownership into cash by a sale.
Recommendation of the
Woodhaven Board............ The Woodhaven Board believes that the
Consolidation will meet the criteria recited above
and, for that reason, recommends that Woodhaven
shareholders approve the consolidation.
Approval of the
Consolidation............. The affirmative vote of at least two-thirds of the
shares of Woodhaven Common Stock outstanding is
required to approve the Consolidation.
Woodhaven's directors and officers, together with
their affiliates, own approximately 16.9% of the
shares of Woodhaven Common Stock outstanding as of
the record date for the special meeting. These
individuals have informed Woodhaven that they
intend to vote for the Consolidation.
Michael A. Myers, the beneficial owner of 111,850
shares of Woodhaven Common Stock, or approximately
62.1% of the outstanding shares of Woodhaven
Common Stock, has informed Woodhaven that he
intends to vote against the Consolidation based on
the current market price of Norwest Common Stock
(approximately $___ per share as of the date of
this Proxy Statement-Prospectus). If Mr. Myers
votes against the Consolidation, the Consolidation
will not be approved even if all other Woodhaven
shareholders vote for the Consolidation.
The Consolidation does not require the approval of
Norwest's stockholders.
The Consolidation.......... In the Consolidation, a newly-formed, wholly-owned
subsidiary bank of Norwest, will consolidate with
Woodhaven. Woodhaven will be the surviving bank
in the Consolidation. If the Consolidation is
completed, Woodhaven will become a wholly-owned
subsidiary of Norwest and Woodhaven shareholders
will receive shares of Norwest Common Stock for
their shares of Woodhaven Common Stock. The
Woodhaven Options will be converted into options
to purchase Norwest Common Stock.
The Consolidation will be governed by the
Reorganization Agreement. You are encouraged to
read this document carefully.
What Woodhaven
Shareholders
Will Receive
(see page 28)............... In the Consolidation, Norwest will exchange
$10,000,000 in Norwest Common Stock for all of the
outstanding shares of
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Woodhaven Common Stock, assuming for this purpose
that shares issuable upon exercise of vested
Woodhaven stock options constitute outstanding
shares of Woodhaven Common Stock. Based on 180,000
shares of Woodhaven Common Stock outstanding and
12,200 shares issuable upon exercise of Woodhaven
stock options, this works out to approximately
$52.03 ($10,000,000 divided by 192,200) in Norwest
Common Stock for each share of Woodhaven Common
Stock.
The Norwest Common Stock to be exchanged in the
Consolidation will be valued at the Norwest
Measurement Price. The Norwest Measurement Price
is the average of the closing prices of a share of
Norwest Common Stock as reported on the composite
tape of the New York Stock Exchange for the
20-trading day measurement period ending on the
last trading day before the special meeting. For
each share of Woodhaven Common Stock you own, you
will receive that number of shares (or fractional
share) of Norwest Common Stock equal to $52.03
divided by this average. For example, if the
Norwest Measurement Price is $30, then you would
receive approximately 1.73 shares of Norwest
Common Stock for each share of Woodhaven Common
Stock. If the Norwest Measurement Price is
$32.50, then you would receive approximately 1.60
shares.
What Woodhaven Option
Holders Will Receive
(see page 28)........... If you own a Woodhaven Option, your option will be
converted into an option to purchase shares of
Norwest Common Stock. Your converted option will
give you the right to purchase that number of
shares of Norwest Common Stock equal to the Option
Exchange Ratio multiplied by the total number of
shares of Woodhaven Common Stock subject to your
Woodhaven Option, rounded down to the nearest
share. The Option Exchange Ratio is equal to the
Adjusted Norwest Shares divided by the number of
shares of Woodhaven Common Stock outstanding
immediately before the Consolidation. The
Adjusted Norwest Shares is equal to $10,000,000
divided by the Norwest Measurement Price. For
example, if you own options to purchase 10,000
shares of Woodhaven Common Stock and the Norwest
Measurement Price is $30, and based on there being
180,000 shares of Woodhaven Common Stock
outstanding immediately before the Consolidation,
then the Option Exchange Ratio would be 1.8519
and you would receive options to purchase a total
of 18,519 shares of Norwest Common Stock. If in
this example the Norwest Measurement Price is
$32.50, then the Option Exchange Ratio would be
1.7094 and you would receive options to purchase
a total of 17,094 shares of Norwest Common Stock.
The exercise price per share of Norwest Common
Stock will be the exercise price of the Woodhaven
Options divided by the Option Exchange Ratio,
rounded down to the nearest cent. All Woodhaven
Options have an exercise price of $19 per share.
As a result, if the Norwest Measurement Price is
$30, and based on there being 180,000 shares of
Woodhaven Common Stock outstanding immediately
before the Consolidation, then the Option
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Exchange Ratio would be 1.8519 and the exercise
price per share of your Norwest option would be
$10.25. If in this example the Norwest
Measurement Price is $32.50, then the Option
Exchange Ratio would be 1.7094 and the exercise
price per share would be $11.11.
The exercise of Woodhaven Options, whether by you
or another holder, will increase the number of
shares of Woodhaven Common Stock outstanding. As
a result, it will affect the number of shares of
Norwest Common Stock subject to your converted
option, as well as the exercise price per share of
Norwest Common Stock of your converted options.
Management of Woodhaven
After the Consolidation. When the Consolidation is complete, Norwest will
own all of the outstanding shares of Woodhaven
Common Stock. As a result, Norwest will be able
to elect or appoint all of the directors and
officers of Woodhaven.
Additional Interests of
Woodhaven's Management
(see page 21)........... In deciding whether to approve the Consolidation,
you should be aware that members of Woodhaven's
management have other interests that are in
addition to or different from those of Woodhaven
shareholders generally. These interests include
the acceleration of the vesting of certain
Woodhaven Options, the conversion of the Woodhaven
Options to options to purchase shares of Norwest
Common Stock, and certain indemnification rights
and limitations of liability in favor of the
directors, officers and employees of Woodhaven.
After the Consolidation is completed, Woodhaven
President Ron J. Casey will receive a retention
bonus of $30,000 and Senior Vice President and
Cashier Debbie Koennecke will receive a $70,000
payment under a change of control incentive
agreement she had with Woodhaven. You should also
be aware that majority shareholder Michael A.
Myers and director Frank Talley also are
shareholders in Myers Bancshares, Inc. which owns
Continental State Bank located in Boyd, Texas.
Myers Bancshares, Inc. entered into a separate but
simultaneous Reorganization Agreement with Norwest
which would result (if approved by Myers
Bancshares, Inc. shareholders) in the merger of
Myers Bancshares, Inc. with Norwest with Myers
Bancshares, Inc. shareholders receiving Norwest
Common Stock.
Conditions to the
Consolidation
(see page 30)............ A number of conditions must be satisfied before
the Consolidation can be completed. Each party's
representations and warranties must be true, and
each party must perform its obligations under the
Reorganization Agreement. Also, there cannot be
any change since the date of the Reorganization
Agreement that has had, or might reasonably be
expected to have, an adverse effect on Woodhaven
or Norwest. Some of the conditions to the
Consolidation are subject to exceptions and/or to
a "materiality" standard. Certain conditions may
also be waived by the party entitled to assert the
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condition.
Qualification of the Consolidation for pooling of
interests accounting treatment is a condition to
Norwest's obligation to complete the
Consolidation. Norwest has been advised by its
independent auditors that the Consolidation will
not qualify for pooling treatment if Norwest's
acquisition of Myers Bancshares, Inc. is not
approved by Myers shareholders or for any other
reason is not completed.
Regulatory Approvals
(see page 24)........... Another condition to completion of the
Consolidation is approval of the Consolidation by
the Federal Reserve Board and the OCC. Norwest
received the approval of each of these agencies on
July 9, 1997.
Termination of the
Reorganization Agreement
(see page 31)........... Norwest and Woodhaven can agree to terminate the
Reorganization Agreement without completing the
Consolidation. Also, either party can terminate
the Reorganization Agreement before completion of
the Consolidation under various circumstances,
including:
. if a court or other governmental authority
prohibits the Consolidation;
. if the Consolidation is not completed by
November 15, 1997, unless the failure of the
Consolidation to occur on or before that date
is the fault of the party seeking to
terminate;
. if the Woodhaven Board, after obtaining the
advice of its lawyers, determines that a
competing offer to acquire Woodhaven is more
favorable than Norwest's offer;
Norwest can terminate the Reorganization Agreement
under various circumstances, including:
. if the Woodhaven Board withdraws its approval
of the Consolidation;
. if, after Woodhaven transfers, agrees to
transfer or receives an offer to transfer 25%
or more of its assets or voting stock,
Woodhaven shareholders do not approve the
Consolidation; or
. if the special meeting is not held before
September 30, 1997 and the Woodhaven Board
has failed to perform its obligations
regarding the special meeting.
Termination Fee (see
page 32).................. Woodhaven is required to pay Norwest a fee of
$300,000 if it terminates the Reorganization
Agreement because it has received a more favorable
offer. Woodhaven is also required to pay the
termination fee if Norwest terminates the
Reorganization Agreement under certain
circumstances and, before the termination
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or within 12 months afterwards, (a) Woodhaven
transfers or agrees to transfer 25% or more of its
assets or voting stock or (b) the Woodhaven Board
approves, or recommends that shareholders approve,
a transfer of 25% or more of Woodhaven's assets or
voting stock.
Accounting Treatment
(see page 27)........... Norwest will account for the Consolidation as a
pooling of interests, assuming all requirements for
a pooling transaction are satisfied. Norwest has
been advised by its independent auditors that,
under generally accepted accounting principles, the
Consolidation will not qualify as a pooling unless
Norwest's acquisition of Myers Bancshares is
completed. If the Consolidation does not qualify
for pooling of interests treatment, Norwest can
either (a) not complete the Consolidation or (b)
complete the Consolidation and treat it as a
purchase rather than a pooling of interests.
Norwest has not decided whether it will complete
the Consolidation if the Consolidation does not
qualify for pooling treatment.
Under the pooling of interests accounting method,
the assets and liabilities of Woodhaven will be
carried forward to Norwest at their historical
recorded values. Norwest will not restate its
balance sheet amounts and results of operations
for prior periods to reflect the combination of
Woodhaven with Norwest.
Under the purchase method, Norwest will record, at
fair value, the acquired assets of Woodhaven, less
the fair value of the liabilities of Woodhaven
assumed by Norwest. Norwest will record as
goodwill any difference between the total purchase
price and the sum of the fair values of
Woodhaven's net tangible and identifiable
intangible assets.
Under either accounting method, Norwest will
include in its results of operations the results
of Woodhaven's operations after the Consolidation.
Appraisal Rights
(see page 34
and Appendix B).......... Woodhaven shareholders who dissent from the
Consolidation are entitled to receive a cash
payment equal to the fair value of their shares of
Woodhaven Common Stock. To receive this cash
payment, dissenting shareholders must follow the
procedures outlined in Appendix B. Failure to
comply strictly with these procedures will result
in the forfeiture of appraisal rights.
U.S. Federal Income Tax
Consequences
(see page 25)............ The Consolidation has been structured so that
Woodhaven shareholders will not recognize any gain
or loss for U.S. federal income tax purposes as a
result of the Consolidation (except for cash
received in lieu of fractional shares). The
Consolidation is conditioned on the receipt by
Woodhaven of a legal opinion to this effect.
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Market Information (see
page 17)............... Norwest Common Stock is listed on the New York
Stock Exchange and the Chicago Stock Exchange
under the symbol NOB. On April 21, 1997, the last
full trading day before public announcement of the
Consolidation, Norwest Common Stock closed at
$23.0625 per share. On ____________, 1997, Norwest
Common Stock closed at $___ per share.
There is no public market for Woodhaven Common
Stock.
</TABLE>
12
<PAGE>
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
Woodhaven Common Stock on a historical and pro forma equivalent basis. The
pro forma data in the table shows the effect of the Consolidation using the
pooling of interests method of accounting. See "The Consolidation--
Accounting Treatment." The historical information should be read in
conjunction with (a) the selected consolidated financial data for Norwest
(and related notes) and the selected financial data for Woodhaven (and
related notes) appearing elsewhere in this Proxy Statement-Prospectus, (b)
the complete financial statements of Woodhaven appearing elsewhere in this
Proxy Statement-Prospectus and (c) the complete consolidated financial
statements of Norwest included in the documents incorporated by reference in
this Proxy Statement-Prospectus. See "Where You Can Find More Information."
The pro forma information assumes that 333,333 shares of Norwest Common
Stock will be issued in the Consolidation. This is the number of shares that
would be issued if the Norwest Measurement Price is $30. Based on 180,000
shares of Woodhaven Common Stock outstanding and 12,200 shares issuable upon
exercise of vested Woodhaven stock options, this would result in
approximately 1.73 shares of Norwest Common Stock being issued for each share
of Woodhaven Common Stock. The ratio of 1.73 shares of Norwest Common Stock
for each share of Woodhaven Common Stock is referred to in the footnotes to
the table as the "assumed share exchange ratio." The actual Norwest
Measurement Price (and thus the actual share exchange ratio) will not be
determined until the end of a 20-trading day measurement period ending on the
last trading day before the special meeting.
The assumed exchange ratio of 1.73 reflects the two-for-one Norwest Common
Stock split distributed in October 10, 1997. The Norwest historical
information presented in the table below has been restated to reflect the
stock split. See "EXPLANATORY NOTE REGARDING NORWEST COMMON STOCK SPLIT."
The information in the following table is not necessarily indicative of the
results of the future operations of the combined entity or the actual results
that would have occurred had the Consolidation become effective prior to the
periods indicated.
<TABLE>
<CAPTION>
Norwest Common Stock Woodhaven Common Stock
--------------------- ----------------------
Pro Forma Pro Forma
Historical Combined Historical Equivalent
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
BOOK VALUE (1):
June 30, 1997 $ 8.44 8.45 32.36 14.62
December 31, 1996 7.97 7.97 28.48 13.79
DIVIDENDS DECLARED (2):
Six Months Ended June
30, 1997 0.3000 0.3000 - 0.5190
Year Ended December 31, 1996 0.5250 0.5250 - 0.9083
Year Ended December 31, 1995 0.4500 0.4500 - 0.7785
Year Ended December 31, 1994 0.3825 0.3825 - 0.6617
NET INCOME (3):
Six Months Ended June
30, 1997 0.85 0.85 3.69 1.47
Year Ended December 31, 1996 1.54 1.54 6.04 2.66
Year Ended December 31, 1995 1.37 1.37 3.89 2.37
Year Ended December 31, 1994 1.21 1.21 2.51 2.09
</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 Woodhaven divided by total pro forma common shares of the
combined entities. The pro forma equivalent book value per share of
Woodhaven Common Stock represents the pro forma combined book value per
share of Norwest Common Stock multiplied by the assumed share exchange
ratio of 1.73.
(2) Assumes no changes in cash dividends per share by Norwest. The pro forma
equivalent dividends per share of Woodhaven Common Stock represent cash
dividends declared per share of Norwest Common Stock multiplied by the
assumed share exchange ratio of 1.73.
(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 Woodhaven divided by the average pro forma common
and common equivalent shares of the combined entities. The pro forma
equivalent net income per share of Woodhaven Common Stock represents the
pro forma combined net income per share multiplied by the assumed
exchange ratio of 1.73.
13
<PAGE>
Selected Historical Financial Information
The following selected financial information is to aid you in your
analysis of the financial aspects of the Consolidation. The information for
Norwest is derived from its historical financial statements (and related
notes) contained in its annual and quarterly reports and other information
filed with the SEC and should be read with that information. These reports
and other information are incorporated by reference into this Proxy
Statement-Prospectus. See "What Incorporation by Reference Means" and
"Where You Can Find More Information." The information for Woodhaven is
derived from its historical financial statements (and related notes)
contained elsewhere in this Proxy Statement-Prospectus. The historical
financial statements for Norwest and for Woodhaven for each of the full
years shown in the table have been audited; those for interim periods have
not been audited. The unaudited financial information reflects, in the
respective opinion of Norwest's and Woodhaven's management, all adjustments
(consisting only of normal recurring accruals) that are considered necessary
to present fairly the financial information for such periods. The results
of operations for any interim period are not necessarily indicative of
results for a full year, and historical results are not necessarily
indicative of future results.
The Norwest information has been restated to reflect the two-for-one
Norwest Common Stock split distributed on October 10, 1997. See
"EXPLANATORY NOTE REGARDING NORWEST COMMON STOCK SPLIT."
14
<PAGE>
Selected Historical Financial Information
Norwest Corporation and Subsidiaries
<TABLE>
<CAPTION>
Six Months Ended
June 30 Years Ended December 31
---------------------- ------------------------------------------------------------------
1997 1996 1996 1995 1994 1993(1) 1992(2)
---- ---- ---- ---- ---- ------- -------
(In millions except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income.................. $ 3,268.9 3,099.0 6,318.3 5,717.3 4,393.7 3,946.3 3,806.4
Interest expense................. 1,310.8 1,291.7 2,617.0 2,448.0 1,590.1 1,442.9 1,610.6
--------- -------- -------- -------- -------- -------- --------
Net interest income............ 1,958.1 1,807.3 3,701.3 3,269.3 2,803.6 2,503.4 2,195.8
Provision for credit losses...... 122.8 87.4 394.7 312.4 164.9 158.2 270.8
Non-interest income.............. 1,441.0 1,194.7 2,564.6 1,848.2 1,638.3 1,585.0 1,273.7
Non-interest expenses............ 2,161.2 1,954.3 4,089.7 3,382.3 3,096.4 3,050.4 2,553.1
--------- -------- -------- -------- -------- -------- --------
Income before income taxes..... 1,006.1 872.5 1,781.5 1,422.8 1,180.6 879.8 645.6
Income tax expense............... 352.8 315.7 627.6 466.8 380.2 266.7 175.6
--------- -------- -------- -------- -------- -------- --------
Income before cumulative effect
of a change in accounting
method......................... 653.3 556.8 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....................... $ 653.3 556.8 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.. $ 0.85 0.75 1.54 1.38 1.23 0.95 0.72
Cumulative effect on years
prior to 1992 of change in
accounting method............ -- -- -- -- -- -- (0.12)
--------- -------- -------- -------- -------- -------- --------
Net income................... $ 0.85 0.75 1.54 1.38 1.23 0.95 0.60
========= ======== ======== ======== ======== ======== ========
Fully diluted:
Before cumulative effect of a
change in accounting method.. $ 0.85 0.75 1.54 1.37 1.21 0.93 0.71
Cumulative effect on years
prior to 1992 of change in
accounting method............ -- -- -- -- -- -- (0.11)
--------- -------- -------- -------- -------- -------- --------
Net income................... $ 0.85 0.75 1.54 1.37 1.21 0.93 0.60
========= ======== ======== ======== ======== ======== ========
Dividends declared per
common share................... $ 0.3000 0.2550 0.5250 0.4500 0.3825 0.320 0.270
BALANCE SHEET DATA
At period end:
Total assets................... $83,856.3 77,849.3 80,175.4 72,134.4 59,315.9 54,665.0 50,037.0
Long-term debt................. 12,043.7 13,787.6 13,082.2 13,676.8 9,186.3 6,850.9 4,553.2
Total shareholders' equity..... 6,507.1 5,634.9 6,064.2 5,312.1 3,846.4 3,760.9 3,371.8
</TABLE>
- -------------------------------------------
(1) On January 14, 1994, Norwest acquired First United Bank Group, Inc.
("First United"), a $3.9 billion bank holding company headquartered in
Albuquerque, New Mexico, 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, Norwest acquired Lincoln Financial Corporation
("Lincoln"), a $2.0 billion bank holding company headquartered in Fort
Wayne, Indiana, 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.
15
<PAGE>
Selected Historical Financial Information
Woodhaven National Bank
(In thousands except per share and shares outstanding amounts)
<TABLE>
<CAPTION>
Six Months
Ended June 30 Years Ended December 31
------------------ ---------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income $ 3,073 $ 2,417 $ 5,224 $ 3,863 $ 2,596 $ 2,379 $ 2,645
Interest expense 1,085 849 1,821 1,360 684 717 997
-------- -------- -------- -------- -------- -------- --------
Net interest income 1,988 1,568 3,403 2,503 1,912 1,662 1,648
Provision for loan losses (credit) 45 160 238 122 84 (8) (19)
Non-interest income 259 235 484 391 419 407 709
Non-interest expenses 1,122 907 1,953 1,701 1,557 1,677 1,596
-------- -------- -------- -------- -------- -------- --------
Income before income taxes 1,080 736 1,696 1,071 690 400 780
Income tax expense 370 254 584 370 237 135 256
-------- -------- -------- -------- -------- -------- --------
Income before cumulative effect of
a change in accounting principle 710 482 1,112 701 453 265 524
Cumulative effect on years prior
to 1993 of change in accounting
principle - - - - - 107 -
-------- -------- -------- -------- -------- -------- --------
Income before extraordinary credit 710 482 1,112 701 453 372 524
Extraordinary credit - - - - - - 266
-------- -------- -------- -------- -------- -------- --------
Net Income $ 710 $ 482 $ 1,112 $ 701 $ 453 $ 372 $ 790
======== ======== ======== ======== ======== ======== ========
PER COMMON SHARE DATA
Net income per share:
Before cumulative effect of a
change in accounting principle
and extraordinary credit $ 3.94 $ 2.68 $ 6.18 $ 3.89 $ 2.51 $ 1.47 $ 2.91
Cumulative effect on years prior
to 1993 of change in accounting
principle - - - - - .60 -
Extraordinary credit - - - - - - 1.48
-------- -------- -------- -------- -------- -------- --------
Net Income $ 3.94 $ 2.68 $ 6.18 $ 3.89 $ 2.51 $ 2.07 $ 4.39
======== ======== ======== ======== ======== ======== ========
Dividends declared per common
share - - - - - - -
BALANCE SHEET DATA
At period end:
Total assets $ 69,449 57,856 67,937 56,011 38,161 36,166 34,970
Long-term debt - - - - - - -
Total shareholders' equity 5,824 4,412 5,127 4,036 3,270 2,854 2,482
</TABLE>
16
<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 Norwest Common Stock,
for the quarterly periods indicated and as adjusted to reflect the two-for-one
Norwest Common Stock split distributed on October 10, 1997. The prices for
Norwest Common Stock are as reported on the New York Stock Exchange. There is
no public market for Woodhaven Common Stock.
<TABLE>
<CAPTION>
Norwest Common Stock
--------------------
High Low Dividends
---- --- ---------
<S> <C> <C> <C>
1995
First Quarter $ 13.1250 11.3125 0.105
Second Quarter 14.6875 12.5625 0.105
Third Quarter 16.3750 13.4375 0.120
Fourth Quarter 17.3750 14.6250 0.120
1996
First Quarter 18.5625 15.2500 0.120
Second Quarter 18.7500 16.5000 0.135
Third Quarter 20.5000 16.0000 0.135
Fourth Quarter 23.4375 20.3750 0.135
1997
First Quarter 26.6250 21.3750 0.150
Second Quarter 29.6250 22.1875 0.150
Third Quarter 31.8750 28.1250 0.150
Fourth Quarter
(through October __, 1997)
</TABLE>
17
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS
Woodhaven is sending you this Proxy Statement-Prospectus to provide you
with information concerning the Consolidation and to solicit your proxy for use
at the special meeting of shareholders. The special meeting will be held at the
time and place described in the Notice of Special Meeting of Shareholders on
page 1 of this document. At the special meeting, shareholders of Woodhaven will
be asked to approve the Consolidation.
Record Date
Woodhaven has established ____________, 1997 as the record date for the
meeting. Only shareholders of record on that date are entitled to attend and
vote at the special meeting.
Voting Rights; Votes Required for Approval
On the record date, there were 180,000 shares of Woodhaven Common Stock
outstanding and entitled to vote at the special meeting. The holders of
Woodhaven Common Stock are entitled to one vote per share. The presence, in
person or by proxy, at the special meeting of the holders of a majority of the
outstanding shares is necessary for a quorum.
Approval of the Consolidation requires the affirmative vote, in person or
by proxy, of the holders of at least two-thirds of the outstanding shares of
Woodhaven Common Stock on the record date. Directors and executive officers of
Woodhaven and their affiliates beneficially owned on the record date a total of
30,350 shares, or approximately 16.9% of the outstanding shares of Woodhaven
Common Stock. Woodhaven has been informed that these shareholders intend to vote
in favor the Consolidation.
Michael A. Myers, the beneficial owner of 111,850 shares of Woodhaven
Common Stock, or approximately 62.1% of the outstanding shares of Woodhaven
Common Stock, has informed Woodhaven that he intends to vote against the
Consolidation based on the current market price of Norwest Measurement Price
(approximately $___ per share as of the date of this Proxy Statement
Prospectus). If Mr. Myers votes against the Consolidation, the Consolidation
will not be approved even if all other Woodhaven shareholders vote for the
Consolidation.
Voting and Revocation of Proxies
All shares of Woodhaven Common Stock represented at the special meeting by
a properly executed proxy will be voted in accordance with the instructions
indicated on the proxy, unless the proxy is revoked before a vote is taken. If
you sign and return a proxy without voting instructions, and do not revoke the
proxy, the proxy will be voted FOR approval of the Consolidation.
You may revoke your proxy at any time before it is voted by (a) filing
either an instrument revoking the proxy or a duly executed proxy bearing a later
date with the corporate secretary of Woodhaven before or at the special meeting
or (b) voting the shares subject to the proxy in person at the special meeting.
Attendance at the special meeting will not by itself result in your proxy being
revoked.
A proxy may indicate that all or a portion of the shares represented by the
proxy 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 that proposal, even though the 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 the proposal. The proposal to approve
the Consolidation must be approved by the holders of at least two-thirds of the
outstanding shares of Woodhaven Common Stock. Because the proposal requires the
affirmative vote of a specified percentage of outstanding shares, not voting on
a proposal will have the same effect as voting against the proposal.
18
<PAGE>
Solicitation of Proxies
In addition to solicitation by mail, directors, officers and employees of
Woodhaven may solicit proxies from Woodhaven shareholders, 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. Woodhaven will
bear its own expenses in connection with any solicitation of proxies for the
special meeting.
Other Matters
If an insufficient number of votes for the Consolidation is received before
the scheduled meeting date, Norwest and Woodhaven may decide to postpone or
adjourn the special meeting. If this happens, proxies that have been received
that either have been voted for the Consolidation or contain no instructions
will be voted for adjournment.
The Woodhaven Board is not aware of any business to be brought before the
special meeting other than the proposal to approve the Consolidation. If other
matters are properly brought before the special meeting or any adjournments or
postponements of the meeting, the persons appointed as proxies will have
authority to vote the shares represented by properly executed proxies in
accordance with their discretion and judgment as to the best interests of
Woodhaven.
19
<PAGE>
THE CONSOLIDATION
Purpose and Effect of the Consolidation
Norwest is using the Consolidation to acquire Woodhaven. As a result of the
Consolidation, Woodhaven will become a wholly-owned subsidiary of Norwest and
shareholders of Woodhaven will receive shares of Norwest Common Stock for their
shares of Woodhaven Common Stock. Norwest will own all of the outstanding shares
of Woodhaven Common Stock. Shareholders of Woodhaven will become stockholders of
Norwest, and their rights will be governed by the Norwest Certificate and
Norwest Bylaws rather than the Woodhaven Articles and Woodhaven Bylaws. See
"COMPARISON OF RIGHTS OF WOODHAVEN COMMON STOCK AND NORWEST COMMON STOCK."
Background of and Reasons for the Consolidation
Since the early 1990's, the Woodhaven Board has monitored developments in
bank acquisitions in Texas along with developments in the banking industry
generally. During that time, the Woodhaven Board became aware of the fact that
industry trends toward competition and consolidation might combine to erode the
customer base of Woodhaven. Moreover, the potential need for significant
investments in technology to provide the products and services necessary to
obtain and retain customers would impact both the cost of doing business and the
bank's profits.
The Woodhaven Board began to consider alternatives that would permit all
Woodhaven shareholders to realize maximum value for their investment. One
requirement of all of the alternatives was that every shareholder of Woodhaven
should receive the same amount for his or her stock as would be available to be
received by any other shareholder.
Norwest was identified as the banking company with the greatest interest in
Woodhaven. Negotiations were pursued with Norwest which concluded on April 22,
1997 with execution of the Reorganization Agreement.
In reaching its decision to approve the terms of the Reorganization
Agreement, the Woodhaven Board considered a number of factors, including,
without limitation, the following:
1. The familiarity of the Woodhaven Board and management with Woodhaven's
business, operations, financial condition, earnings and prospects, and
its information of similar matters concerning Norwest.
2. The current and prospective economic environment and competitive
constraints facing Woodhaven, including specifically the superior
products and services which larger competitors might offer to customers
and the need for substantial investments by Woodhaven in technology to
compete with such competitors.
3. The Woodhaven Board's and management's awareness that Norwest is
recognized as a high performing, well regarded, and highly rated
financial institution nationwide.
4. The monetary value of Norwest Common Stock offered to all Woodhaven
shareholders by Norwest (a) in absolute terms and (b) as compared to
recent merger and acquisition transactions involving other banks and
financial institutions in Texas and in this general area of Texas.
5. The price obtainable for Woodhaven Common Stock at this time compared
with the risk involved and possible price available at a later time.
6. The benefits of a consolidation with Norwest, including access to
Norwest's financial and management resources and customer products,
which could increase the services to the present customers of
Woodhaven.
7. The expectation that Norwest would retain the present employees of
Woodhaven to the fullest extent possible.
20
<PAGE>
8. The fact that the transaction would be structured as a non-taxable
stock for stock transaction so that each individual shareholder of
Woodhaven would have the opportunity to decide in the future whether he
or she desired to continue with ownership of a bank investment or would
prefer to convert that ownership into cash by a sale.
9. The fact that the Reorganization Agreement allows the Woodhaven Board
to accept an offer by another purchaser which is superior to the terms
of the Reorganization Agreement.
10. The results of operation and financial condition of Norwest and the
increased liquidity represented by Norwest Common Stock.
11. Norwest's successful experience in the acquisition of other banking
locations.
In its deliberations, the Woodhaven Board did not assign any specific
weights to these or any other factors.
Based on the foregoing and other factors, the Woodhaven Board concluded
that the reorganization is in the best interest of Woodhaven and its
shareholders. Accordingly, the Woodhaven Board recommends that shareholders vote
in favor of the approval of the Reorganization Agreement.
Additional Interests of Woodhaven Management in the Consolidation
In deciding whether to approve the Consolidation, you should be aware that
certain members of Woodhaven's management have interests in the Consolidation
that may be different from or in addition to the interests of Woodhaven
shareholders generally. These interests are discussed below.
Conversion of Woodhaven Options. Ron J. Casey, president and chief
executive officer of Woodhaven, and Stanley C. Davis, senior vice president of
Woodhaven, have Woodhaven Options to purchase 13,000 and 7,000 shares,
respectively, of Woodhaven Common Stock. Mr. Casey's Woodhaven Option vests and
becomes exercisable at the rate of 2,600 shares each year, beginning January 1,
1996. As of the date of this document, Mr. Casey can purchase 5,200 shares of
Woodhaven Common Stock. Mr. Davis's Woodhaven Option vests and becomes
exercisable at the rate of 1,400 shares each year, beginning January 1, 1996;
however, under the terms of his agreement with Woodhaven, the unvested portion
of Mr. Davis's Woodhaven Option was immediately vested when Woodhaven entered
into the Reorganization Agreement. As a result, as of the date of this document,
Mr. Davis has the right to purchase 7,000 shares of Woodhaven Common Stock--
4,200 shares more than he otherwise would have the right to purchase if
Woodhaven had not agreed to be acquired by Norwest.
As part of the Consolidation, Mr. Casey's and Mr. Davis's Woodhaven Options
will be converted into the right to receive shares of Norwest Common Stock. The
number of shares of Norwest Common Stock issuable upon exercise of the converted
Woodhaven Options, as well as the exercise price per share of Norwest Common
Stock, will be based on a formula. The formula is described in "THE
REORGANIZATION AGREEMENT--Basic Structure of the Consolidation--Conversion of
Woodhaven Options." The exercise of the converted Woodhaven Options will remain
subject to the vesting and other terms and conditions of the agreements under
which they were issued.
Indemnification of Woodhaven Directors, Officers and Employees. Under the
Reorganization Agreement, Norwest is required to indemnify and hold harmless the
directors, officers and employees of Woodhaven against claims, damages and
losses arising out of the Consolidation to the fullest extent permitted or
required under the Woodhaven Articles and Woodhaven Bylaws. Norwest is also
required to ensure that all rights to indemnification and limitations of
liability existing under the Woodhaven Articles and Woodhaven Bylaws with
respect to claims arising from facts or events that occurred before the
Consolidation will continue in full force and effect after the Consolidation.
21
<PAGE>
Payment to Officers. President Ron J. Casey will receive a retention bonus
of $30,000 when the transaction is consummated. Under a change of control
incentive agreement she has with Woodhaven, Senior Vice President and Cashier
Debbie Koennecke will receive $70,000 when the transaction is completed.
Sale of Myers Bancshares, Inc. to Norwest. Norwest has agreed to acquire
Myers Bancshares, Inc., a bank holding company located in Fort Worth, Texas, for
$20,000,000 in Norwest Common Stock. Myers Bancshares owns 8,820 shares of
Woodhaven Common Stock, or 4.9% of the outstanding shares of Woodhaven Common
Stock. Michael A. Myers, beneficial owner of 111,850 shares of Woodhaven Common
Stock, or approximately 62.1% of the outstanding shares of Woodhaven Common
Stock, beneficially owns 73 shares of Myers Bancshares, or 49.7% of the
outstanding shares of Myers Common Stock. Frank A. Talley, Jr., a director of
Woodhaven, owns 19,000 shares (10.56%) of Woodhaven Common Stock and two shares
(1.36%) of Myers Bancshares. Completion of the Consolidation is not conditional
on Norwest's acquisition of Myers Bancshares or vice versa. Nonetheless, Norwest
has been advised by its independent auditors that the Consolidation will not
qualify for pooling of interests accounting treatment if Norwest's acquisition
of Myers Bancshares is not completed. Qualification of the Consolidation for
pooling treatment is a condition to Norwest's obligation to complete the
Consolidation. Norwest has not decided whether it will waive this condition if
the condition is not satisfied. See "--Accounting Treatment" and "THE
REORGANIZATION AGREEMENT--Conditions to the Completion of the Consolidation."
Michael A. Myers Employment and Non-Competition Agreement. Commencing upon
completion of Norwest's acquisition of Myers Bancshares, Inc. or Woodhaven,
whichever is later, Norwest will employ Mr. Myers on a consultative basis as
chairman of the board of Continental State Bank, the bank subsidiary of Myers
Bancshares. The term of Mr. Myers' employment will be for one year, unless the
term is renewed or extended by Norwest and Mr. Myers. Mr. Myers will receive
annual compensation of $45,000. Following the termination of his employment with
Norwest, Mr. Myers will be subject to restrictions against engaging in the
business of banking in certain Texas counties for a period of 12 months. Mr.
Myers will receive a total of $45,000 for abiding by these restrictions, payable
in two equal installments. The first installment is payable when the
restrictions take effect--that is, after termination of his employment with
Norwest. The second installment is payable six months later.
Appraisal Rights
Under federal law, any shareholder of Woodhaven who objects to the
Consolidation has the right to receive cash equal to the value of the
shareholder's shares as measured on the date the Consolidation becomes
effective. This right is subject to the following conditions: (a) the
shareholder must vote against approval of the Consolidation at the special
meeting or give notice in writing at or before the special meeting to the
presiding officer that such shareholder dissents from the proposed
Consolidation; (b) the shareholder must, within 30 days after the effective date
of the Consolidation, make a written request for payment to the surviving bank;
and (c) the written request must be accompanied by surrender of the
shareholder's stock certificate(s). Any shareholder who votes against the
Consolidation at the special meeting, or who gives notice in writing at or
before the Special Meeting to the presiding officer that such shareholder
dissents, will be notified in writing of effective date of the Consolidation.
Failure to comply strictly with each of the foregoing conditions will result in
the loss of appraisal rights.
The value of the shares of any dissenting shareholder will be determined by
an appraisal made by a committee of three persons, one to be selected by the
majority vote of the dissenting shareholders, one by the board of directors of
the surviving bank, and the third by the two so chosen. The valuation agreed
upon by any two of the three appraisers will govern. If the value so fixed is
not satisfactory to any dissenting shareholder, that shareholder may, within
five days after being notified of the appraised value of such shareholder's
shares, appeal to the OCC, who will cause a reappraisal to be made which will be
final and binding as to the value of such shares. If a shareholder dissents and,
within 90 days from the effective date of the Consolidation, one or more of the
appraisers is not selected for any reason, or the appraisers fail to determine
the value of such shares, the OCC will, upon written request of any interested
party, cause an appraisal to be made which will be final and binding on all
parties.
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The expenses of the OCC in making the reappraisal or the appraisal, as the case
may be, will be paid by the surviving bank. The value of the shares ascertained
will be promptly paid to the dissenting shareholder by the surviving bank.
The foregoing is a summary of Title 12, Section 215 of the United States
Code. It is not a complete statement of the provisions of Section 215 and is
qualified in its entirety by reference to the relevant provisions of Section
215, the text of which is attached to this Proxy Statement-Prospectus as
Appendix B. Any shareholder of Woodhaven who desires to exercise dissenters'
appraisal rights should carefully review and comply with the relevant provisions
of Section 215. Appraisal rights will be forfeited if the procedural
requirements of Section 215 are not strictly complied with.
Attached to this Proxy Statement-Prospectus as Appendix C is a copy of
Banking Circular 259 regarding the valuation methods used by the OCC to estimate
the value of a bank's shares when the OCC is involved in the appraisal of shares
held by dissenting shareholders. The results of appraisals performed by the OCC
between January 1, 1985 and September 30, 1991 are also summarized in Appendix
C. You should consider carefully the information in Banking Circular 259 before
deciding whether to exercise your appraisal rights.
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Exchange of Certificates
After completion of the Consolidation, Norwest Bank Minnesota, National
Association, acting as exchange agent for Norwest, will mail to each holder of
record of shares of Woodhaven Common Stock a form of letter of transmittal,
together with instructions for the exchange of the holder's stock certificates
for a certificate representing Norwest Common Stock.
WOODHAVEN SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
No dividend or other distribution declared on Norwest Common Stock after
completion of the Consolidation will be paid to the holder of any certificates
for shares of Woodhaven Common Stock until after the certificates have been
surrendered for exchange.
When the exchange agent receives a surrendered certificate or certificates
from a shareholder, together with a properly completed letter of transmittal, it
will issue and mail to the shareholder a certificate representing the number of
shares of Norwest Common Stock to which the shareholder is entitled, plus the
amount in cash of any remaining fractional share and any cash dividends that are
payable with respect to the shares of Norwest Common Stock so issued. No
interest will be paid on the fractional share amount or amounts payable as
dividends or other distributions.
A certificate for Norwest Common Stock may be issued in a name other than
the name in which the surrendered certificate is registered if (a) the
certificate surrendered is properly endorsed and accompanied by all documents
required to transfer the shares to the new holder and (b) the person requesting
the issuance of the Norwest Common Stock certificate either pays to the exchange
agent in advance any transfer and other taxes due or establishes to the
satisfaction of the exchange agent that such taxes have been paid or are not
due.
The exchange agent will issue stock certificates for Norwest Common Stock
in exchange for lost, stolen or destroyed certificates for Woodhaven Common
Stock upon receipt of a lost certificate affidavit and a bond indemnifying
Norwest for any claim that may be made against Norwest as a result of the lost,
stolen or destroyed certificates.
After completion of the Consolidation, no transfers will be permitted on
the books of Woodhaven. If, after completion of the Consolidation, certificates
for Woodhaven Common Stock are presented for transfer to the exchange agent,
they will be canceled and exchanged for certificates representing Norwest Common
Stock.
None of Norwest, Woodhaven, the exchange agent or any other person will be
liable to any former holder of Woodhaven Common Stock for any amount delivered
in good faith to a public official pursuant to applicable abandoned property,
escheat or similar laws.
Regulatory Approvals
The Consolidation is subject to the prior approval of the Federal Reserve
Board and the OCC. The approval of the Federal Reserve Board is required because
Norwest is a bank holding company registered under the Bank Holding Company Act.
The approval of the OCC is required because Woodhaven is a national banking
association and the OCC is the primary regulator of national banks.
Norwest received the approval of the Federal Reserve Board and the OCC on
July 9, 1997.
The approval of an application means only that the regulatory criteria for
approval have been satisfied or waived. It does not mean that the approving
authority has determined that the consideration to be received by Woodhaven
shareholders is fair. Regulatory approval does not constitute an endorsement or
recommendation of the Consolidation.
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Norwest and Woodhaven are not aware of any governmental approvals or
compliance with banking laws and regulations that are required for the
Consolidation to become effective other than those described above. Norwest and
Woodhaven intend to seek any other approval and to take any other action that
may be required to effect the Consolidation. There can be no assurance that any
required approval or action can be obtained or taken prior to the special
meeting.
The Consolidation cannot be completed unless all necessary regulatory
approvals are granted. In addition, Norwest may elect not to complete the
Consolidation if any condition under which any regulatory approval is granted is
unreasonably burdensome to Norwest. See "THE REORGANIZATION AGREEMENT--
Conditions to the Completion of the Consolidation" and "--Termination of the
Reorganization Agreement."
Effect on Employee Benefit Plans
The Reorganization Agreement provides that, subject to any eligibility
requirements applicable to such plans, employees of Woodhaven will be entitled
to participate in those Norwest employee benefit and welfare plans specified in
the Reorganization Agreement. Eligible employees of Woodhaven will enter each of
such plans no later than the first day of the calendar quarter which begins at
least 32 days after completion of the Consolidation.
Certain U.S. Federal Income Tax Consequences of the Consolidation to Woodhaven
Shareholders
The following is a summary of the anticipated U.S. federal income tax
consequences of the Consolidation to Woodhaven shareholders. The summary is
based on the parties' understanding of the U.S. federal income tax laws as
currently in effect and as currently interpreted. It does not cover issues of
state, local or foreign taxation. Nor does it address all aspects of U.S.
federal income taxation that may be important to particular shareholders in
light of their personal circumstances or to shareholders subject to special
rules under U.S. federal income tax laws. Future legislation, regulations,
administrative rulings and court decisions may alter the tax consequences
summarized below.
The anticipated U.S. federal income tax consequences to Woodhaven
shareholders are as follows:
. A shareholder who receives shares of Norwest Common Stock in exchange
for shares of Woodhaven Common Stock will not recognize any gain or loss
on the receipt of the shares of Norwest Common Stock, except for cash
received in lieu of a fractional share. The shareholder's gain or loss
on the receipt of cash in lieu of a fractional share will equal the
difference between the cash received and the basis of the fractional
share exchanged.
. A shareholder's tax basis in the shares of Norwest Common Stock received
will be the same as the shareholder's tax basis in the shares of
Woodhaven Common Stock exchanged in the Consolidation, less any cash
received in lieu of fractional shares.
. The holding period of the shares of Norwest Common Stock received by a
shareholder will include the holding period of the shareholder's shares
of Woodhaven Common Stock exchanged in the Consolidation, but only if
the shares of Woodhaven Common Stock were held as a capital asset at the
time the Consolidation is completed.
Woodhaven is not required to complete the Consolidation unless it receives
an opinion of its counsel that these will be the U.S. federal income tax
consequences of the Consolidation. The opinion may make certain assumptions and
may rely on representations of the parties to the Consolidation as to factual
matters. It will represent counsel's judgment as to the tax status of the
Consolidation under the Code and will not be binding on the IRS. There is no
assurance that the IRS will not take a contrary position regarding the tax
consequences of the Consolidation. Nor is there is any assurance that the IRS
would not prevail in the event the tax consequences of the Consolidation were
litigated.
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Shareholders are urged to consult their own tax advisors as to the specific
tax consequences to them from the Consolidation.
Resale of Norwest Common Stock
The Norwest Common Stock issued in the Consolidation will be freely
transferable under the Securities Act, except for shares issued to Woodhaven
shareholders who are considered to be "affiliates" of Woodhaven or Norwest
under Rule 145 under the Securities Act or of Norwest under Rule 144 under
the Securities Act. The definition of "affiliate" is complex and depends on
the specific facts, but generally includes directors, executive officers, 10%
stockholders and other persons with the power to direct the management and
policies of the company in question.
Affiliates of Woodhaven may not sell the shares of Norwest Common Stock
received in the Consolidation except (a) pursuant to an effective
registration statement under the Securities Act, (b) in compliance with an
exemption from the registration requirements of the Securities Act or (c) in
compliance with Rule 144 and Rule 145 under the Securities Act. Generally,
those rules permit resales of stock received by affiliates so long as Norwest
has complied with certain reporting requirements and the selling stockholder
complies with certain volume and manner of sale restrictions.
Woodhaven has agreed to use its best efforts to deliver to Norwest signed
representations by each person who may be deemed to be an affiliate of
Woodhaven that (a) the person will not sell, transfer or otherwise dispose of
the shares of Norwest Common Stock to be received by the person in the
Consolidation except in compliance with the applicable provisions of the
Securities Act and the rules and regulations promulgated thereunder and (b)
the person will not sell or reduce the person's risk relative to any Norwest
Common Stock until such time as financial results covering at least 30 days
of post-Consolidation combined operations of Norwest and Woodhaven have been
published.
Norwest has agreed to use its best efforts to deliver to Woodhaven signed
representations of each director and each executive officer of Norwest that
such person will not sell any Norwest Common Stock or Woodhaven Common Stock
during the period beginning 30 days before the Consolidation and ending on
publication of financial results covering at least 30 days of combined
operations of Norwest and Woodhaven have been published.
This Proxy Statement-Prospectus does not cover any resales of Norwest
Common Stock received by affiliates of Woodhaven.
Stock Exchange Listing
The shares of Norwest Common Stock to be issued in the Consolidation will
be listed on the New York Stock Exchange and the Chicago Stock Exchange.
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Accounting Treatment
Pooling of Interests vs. Purchase--Determining Which Method to Apply. Under
generally accepted accounting principles, a business combination such as the
Consolidation is treated either as a pooling of interests or as a purchase.
A business combination is treated as a pooling transaction if it meets
certain specified criteria. A business combination that does not meet all of
these criteria is treated as a purchase.
Norwest will account for the Consolidation as a pooling of interests,
assuming all of the criteria for pooling treatment are satisfied. One of the
criteria for pooling treatment is that Woodhaven and Norwest, as the
combining entities in the Consolidation, each be relatively autonomous and
not part of a larger business. For this purpose, a company will be treated
as comprising part of a larger business if it is owned or controlled by one
or a few individuals and is in the same line of business as other companies
under common ownership or control. To qualify for pooling treatment in such
a case, all of the companies in the same line of business must be part of the
combination.
Michael A. Myers, the beneficial owner of approximately 62.1% of the
outstanding Woodhaven Common Stock, also is beneficial owner of approximately
49.7% of the outstanding voting stock of Myers Bancshares, Inc. and the sole
member of the board of directors of Myers Bancshares. Norwest has been
advised by its independent auditors that this is sufficient common ownership
or control to cause Myers and Woodhaven to be treated as part of the same
business. As a result, Norwest's position is that a business combination
involving Myers or Woodhaven, but not both, would not qualify for pooling of
interests accounting treatment because it would involve only part of this
business.
Contemporaneous with entering into the Reorganization Agreement, Norwest
agreed to acquire Myers Bancshares. The acquisition is subject to the
approval of Myers shareholders. As discussed above, if the Myers acquisition
is not approved by Myers shareholders or for any other reason is not
completed, Norwest has been advised by its independent auditors that the
Consolidation will not qualify for pooling of interests accounting treatment.
Qualification of the Consolidation for pooling of interests accounting
treatment is a condition to Norwest's obligation to complete the
Consolidation. Norwest has not decided whether it will waive this condition
if the condition is not satisfied. See "THE REORGANIZATION AGREEMENT--
Conditions to the Completion of the Consolidation."
If the Consolidation does not qualify for pooling treatment and Norwest
nonetheless completes the Consolidation, Norwest will account for the
Consolidation using the purchase method.
Treatment of the Consolidation under Pooling of Interests and Purchase
Methods. Under the pooling of interests method of accounting, the assets and
liabilities of Woodhaven will be carried forward to Norwest at their
historical recorded values. Because the Consolidation is not material to the
consolidated financial statements of Norwest, Norwest will not restate its
balance sheet amounts and results of operations for prior periods to reflect
the combination of Woodhaven with Norwest.
Under the purchase method of accounting, Norwest will record, at fair
value, the acquired assets of Woodhaven, less the fair value of the
liabilities of Woodhaven assumed by Norwest. Norwest will record as goodwill
any difference between the total purchase price and the sum of the fair
values of Woodhaven's net tangible and identifiable intangible assets.
Under either accounting method, Norwest will include in its results of
operations the results of Woodhaven's operations after the Consolidation.
The unaudited pro forma data included in this Proxy Statement-Prospectus
for the Consolidation have been prepared using the pooling of interests
method of accounting. See "SUMMARY--Comparative Per Common Share Data."
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THE REORGANIZATION AGREEMENT
The following is a summary of certain provisions of the Reorganization
Agreement, a copy of which is attached to this Proxy Statement-Prospectus as
Appendix A. The Reorganization Agreement is incorporated by reference into
this Proxy Statement-Prospectus. See "WHAT INCORPORATED BY REFERENCE MEANS."
This summary is qualified in its entirety by reference to the full text of
the Reorganization Agreement. Woodhaven shareholders are encouraged to read
this document carefully and in its entirety. Parenthetical references are to
the relevant paragraph or paragraphs of the Reorganization Agreement.
Basic Plan of Reorganization
Structure. The acquisition of Woodhaven by Norwest will be accomplished
through the consolidation of [merger co.], a newly-formed, wholly-owned
subsidiary bank of Norwest, with Woodhaven. Woodhaven will be the surviving
bank and will become a wholly-owned subsidiary of Norwest. Woodhaven
shareholders will receive shares of Norwest Common Stock for their shares of
Woodhaven Common Stock. Norwest stockholders will continue to own shares of
Norwest Common Stock. (paragraph 1(a))
Consideration.
Norwest Common Stock. As part of the Consolidation, each share of
Woodhaven Common Stock will be converted into the right to receive the number
of shares of Norwest Common Stock determined by dividing the Adjusted Norwest
Shares by the sum of (a) the number of shares of Woodhaven Common Stock
outstanding immediately before the Consolidation and (b) the number of shares
of Woodhaven Common Stock issuable pursuant to the exercise of vested and
exercisable Woodhaven Options. The "Adjusted Norwest Shares" will equal
$10,000,000 divided by the Norwest Measurement Price. The "Norwest
Measurement Price" means the average of the closing prices of a share of
Norwest Common Stock as reported on the composite tape of the New York Stock
Exchange during the period of 20 trading days ending on the day immediately
before the special meeting. (paragraph 1(a))
As of the date of this document, there are 180,000 shares of Woodhaven
Common Stock outstanding. There are also vested and exercisable Woodhaven
Options to purchase a total of 12,200 shares of Woodhaven Common Stock. The
Reorganization Agreement prohibits Woodhaven from issuing additional shares
of Woodhaven Common Stock or additional options to purchase Woodhaven Common
Stock without Norwest's consent. As a result, you may assume that the sum of
(a) and (b) above will be 192,200 shares. This means that the number of
shares (or fractional share) of Norwest Common Stock you will receive will
equal the Adjusted Norwest Shares divided by 192,200.
The price of Norwest Common Stock on the day the Consolidation is
completed may be higher or lower than the Norwest Measurement Price. No
adjustment will be made to the number of shares of Norwest Common Stock you
will receive to reflect fluctuations in the price of Norwest Common Stock
after the special meeting.
Cash in Lieu of Fractional Shares. If the aggregate number of shares of
Norwest Common Stock you will receive in the Consolidation 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 composite tape of the New
York Stock Exchange for each of the five trading days immediately before
completion of the Consolidation. (paragraph 1(c))
Conversion of Woodhaven Options. If you own an unexercised Woodhaven
Option, your option will be converted into an option to purchase shares of
Norwest Common Stock. The number of shares of Norwest Common Stock subject
to your converted option, as well as the exercise price per share of Norwest
Common Stock of your option, will be determined as described below. The
exercise of your converted option will remain subject
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to the vesting restrictions and other terms and conditions of the agreement
under which your Woodhaven Option were issued.
Number of Shares Subject to Your Options. Your Woodhaven Option will
be converted into the right to purchase that number of shares of Norwest
Common Stock equal to the Option Exchange Ratio multiplied by the total
number of shares of Woodhaven Common Stock subject to your Woodhaven Option,
rounded down to the nearest share. The Option Exchange Ratio is equal to the
Adjusted Norwest Shares divided by the number of shares of Woodhaven Common
Stock outstanding immediately before the Consolidation. The Adjusted Norwest
Shares is equal to $10,000,000 divided by the Norwest Measurement Price. For
example, if your Woodhaven Option gives you the right to purchase 10,000
shares of Woodhaven Common Stock and the Norwest Measurement Price is $30,
and based on there being 180,000 shares of Woodhaven Common Stock outstanding
immediately before the Consolidation, then the Option Exchange Ratio would
equal 1.8519 and you would have the right to purchase a total of 18,519
shares of Norwest Common Stock. If in this example the Norwest Measurement
Price is $32.50, then the Option Exchange Ratio would be 1.7094 and you would
have the right to purchase a total of 17,094 shares of Norwest Common Stock.
Exercise Price of Norwest Options. The exercise price per share of
Norwest Common Stock will be the exercise price of your Woodhaven Option
divided by the Option Exchange Ratio, rounded down to the nearest cent. All
Woodhaven Options have an exercise price of $19 per share. As a result, if
the Norwest Measurement Price is $30, and based on there being 180,000 shares
of Woodhaven Common Stock outstanding immediately before the Consolidation,
then the Option Exchange Ratio would be 1.8519 and the exercise price per
share of Norwest Common Stock would be $10.25. If the Norwest Measurement
Price is $32.50, then the Option Exchange Ratio would be 1.7094 and the
exercise price would be $11.11.
Exercise of Woodhaven Options Before the Consolidation. The exercise
of Woodhaven Options before the Consolidation, whether by you or another
holder of Woodhaven Options, will increase the number of shares of Woodhaven
Common Stock outstanding. As a result, it will affect the number of shares
of Norwest Common Stock subject to your option, as well as the exercise price
of your option. For example, if your Woodhaven Option entitles you to
purchase 10,000 shares of Woodhaven Common Stock and the Norwest Measurement
Price is $30, and assuming Woodhaven Options to purchase 5,000 shares have
been exercised, then the Option Exchange Ratio would be 1.8018 and you would
receive options to purchase a total of 18,018 shares of Norwest Common Stock.
In this example, the exercise price per share of the Norwest options would be
$10.54.
Completion of the Consolidation. Norwest and Woodhaven expect the
Consolidation to be completed promptly after approval of the Consolidation by
Woodhaven shareholders and the satisfaction (or waiver) of the conditions to
completion contained in the Reorganization Agreement, including the receipt
of all required regulatory approvals. (paragraph 1(d))
Representations and Warranties
The Reorganization Agreement contains various representations and
warranties by Norwest and Woodhaven as to, among other things, (a) their
organization and legal authority to engage in their respective businesses,
(b) their capitalization, (c) their corporate authority to enter into the
Reorganization Agreement and complete the Consolidation, (d) the absence of
certain material changes, (e) compliance with laws, (f) material contracts,
(g) absence of certain litigation, and (h) undisclosed liabilities.
(paragraphs 2 and 3) Because the representations and warranties do not
survive completion of the Consolidation, they function primarily as a due
diligence device and a closing condition (that is, they have to continue to
be true in all material respects until the Consolidation is completed).
Certain Covenants
The Reorganization Agreement contains various covenants and agreements that
govern the actions of Woodhaven and Norwest pending completion of the
Consolidation. Some of the more important covenants are summarized below.
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Conduct of Business.
Woodhaven. Woodhaven has agreed to maintain its corporate existence in
good standing, maintain the general character of its business, conduct its
business in the ordinary and usual manner, and extend credit in accordance
with existing lending policies. Subject to certain exceptions, Woodhaven is
required to obtain the consent of Norwest before it renews any existing loan
in excess of $200,000 or establishes any new customer borrowing relationship
of more than $100,000. The Reorganization Agreement places restrictions on
Woodhaven's ability to take certain actions without Norwest's consent,
including (a) incurring indebtedness, (b) granting rights to acquire shares
of its capital stock, (c) issuing shares of its capital stock, (d) declaring
dividends or purchasing its capital stock, (e) selling its assets and (f)
raising the compensation of officers and directors. (paragraphs 4(a) and
(b)) Some of these restrictions apply only if the amount in question exceeds
a threshold dollar value. Woodhaven is also prohibited from knowingly taking
any action that, with respect to Woodhaven, would disqualify the
Consolidation as a pooling of interests for accounting purposes.
Norwest. Norwest has agreed 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. Norwest and its significant
subsidiaries are prohibited from knowingly taking any action that, with
respect to Norwest, would disqualify the Consolidation as a pooling of
interests for accounting purposes. (paragraph 5)
Competing Transactions. Woodhaven has agreed not to directly or indirectly
solicit, authorize the solicitation of, or, except as noted below, enter into
any discussions with, any third party concerning any offer or possible offer
to (a) purchase its common stock, any security convertible into its common
stock, or any other equity security of Woodhaven (b) make a tender or
exchange offer for any shares of its common stock or other equity security of
Woodhaven, (c) purchase, lease or otherwise acquire the assets of Woodhaven
except in the ordinary course of business or (d) merge, consolidate or
otherwise combine with Woodhaven. Woodhaven may enter into discussions
concerning the foregoing and provide information on Woodhaven if the
Woodhaven Board concludes in good faith, after taking into account the
written advice of its outside counsel, that to fail to do so could reasonably
be determined to violate its fiduciary duty under applicable law. Woodhaven
has also agreed to promptly inform Norwest if any third party makes an offer
or inquiry concerning any of the foregoing. (paragraph 4(h))
Other Covenants. The Reorganization Agreement contains various other
covenants, including covenants relating to the preparation and distribution
of this Proxy Statement-Prospectus, access to information, and the listing on
the New York Stock Exchange and Chicago Stock Exchange of the shares of
Norwest Common Stock to be issued in the Consolidation. In addition,
Woodhaven has agreed to (a) establish such additional accruals and reserves
as is necessary to conform its accounting and credit loss reserve practices
and methods to those of Norwest and Norwest's plans with respect to the
conduct of Woodhaven's business after the Consolidation and (b) use its best
efforts to deliver to Norwest prior to completion of the Consolidation signed
representations substantially in the form attached as Exhibit B to the
Reorganization Agreement from each executive officer, director or shareholder
of Woodhaven who may reasonably be deemed an "affiliate" of Woodhaven within
the meaning of each term used in Rule 145 of the Securities Act. (paragraphs
4(k) and 4(l)) See "Resale of Norwest Common Stock."
Conditions to the Completion of the Consolidation
Under the Reorganization Agreement, various conditions are required to be
met before the parties are obligated to complete the Consolidation. For the
most part, these conditions are customary and include such items as the
receipt of shareholder, regulatory and listing approval and the receipt by
Woodhaven of a favorable tax opinion. The obligations of the parties are
also subject to the continued accuracy of the other party's representations
and warranties, the performance by the other party of its obligations under
the Reorganization Agreement, and, subject to certain exceptions, the absence
of any changes that have had or might be reasonably expected to have an
adverse effect on Woodhaven or Norwest. Some of the conditions to the
Consolidation are
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subject to exceptions and/or a "materiality" standard. Any condition to the
Consolidation may be waived by the party seeking to assert the condition.
(paragraphs 6 and 7)
Norwest's obligation to complete the Consolidation is conditional upon the
Consolidation qualifying for pooling of interests accounting treatment.
(paragraph 8(f)) Norwest has been advised by its independent auditors that,
under generally accepted accounting principles, the Consolidation will
qualify as a pooling transaction only if Norwest's acquisition of Myers
Bancshares, Inc. is completed. See "THE CONSOLIDATION--Additional Interests
of Woodhaven's Management in the Consolidation" and "--Accounting Treatment."
Termination of the Reorganization Agreement
Termination by Mutual Consent. Norwest and Woodhaven can agree to
terminate the Reorganization Agreement at any time before completion of the
Merger. (paragraph 10(a)(i))
Termination by Either Norwest or Woodhaven. Either Norwest or Woodhaven can
terminate the Reorganization Agreement if any of the following occurs:
. The Consolidation has not become effective by November 15, 1997
(provided this right to terminate will not be available to a party whose
failure to perform in all material respects any obligation under the
Reorganization Agreement resulted in the failure of the Consolidation to
occur on or before that date). (paragraph 10(a)(ii))
. A court or governmental authority of competent jurisdiction has issued a
final order restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Reorganization Agreement. (paragraph
10(a)(iii))
. The Woodhaven Board determines in good faith that a "Takeover Proposal"
constitutes a "Superior Proposal," except that Woodhaven can only
terminate the Reorganization Agreement if it has performed its
obligations under the Reorganization Agreement and pays Norwest a
termination fee of $300,000 at the time of termination. (paragraph
10(a)(iv))
"Takeover Proposal" means a bona fide proposal or offer by a person to
make a tender or exchange offer, or to engage in a merger, consolidation
or other business combination involving Woodhaven or to acquire in any
manner a substantial equity interest in, or all or substantially all of
the assets of, Woodhaven. "Superior Proposal" means a Takeover Proposal
that the Woodhaven Board determines in good faith, after taking into
account the advice of counsel, is more favorable to Woodhaven and its
shareholders than the Merger.
Termination by Norwest. Norwest can terminate the Reorganization Agreement
if:
. The Woodhaven Board withdraws or modifies in a manner materially adverse
to Norwest its approval of the Merger. (paragraph 10(a)(v))
. Woodhaven shareholders do not approve the Merger at the special meeting
after (1) an "Acquisition Event" occurs, (2) Woodhaven agrees to engage
in an Acquisition Event or (3) a third party makes a proposal to
Woodhaven or its shareholders to engage in an Acquisition Event.
(paragraph 10(a)(v))
. The special meeting is not held before September 30, 1997 and Woodhaven
has not performed its obligations under the Reorganization Agreement
regarding the special meeting. (paragraph 10(a)(v))
"Acquisition Event" means any of the following: (a) a merger,
consolidation or similar transaction involving Woodhaven or any
successor to Woodhaven (b) a purchase, lease or other acquisition in one
or
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a series of related transactions of assets of Woodhaven representing
25% or more of the consolidated assets of Woodhaven or (c) a purchase or
other acquisition (including by way of merger, consolidation, share
exchange or any similar transaction) in one or a series of related
transactions of beneficial ownership of securities representing 25% or
more of the voting power of Woodhaven in each case with or by a person
or entity other than Norwest or an affiliate of Norwest.
Termination Fee
If Norwest terminates the Reorganization Agreement because the Woodhaven
Board determines that a Takeover Proposal constitutes a Superior Proposal,
Woodhaven is required to pay Norwest a termination fee of $300,000 within
five business days after termination. Woodhaven is also required to pay
Norwest a termination fee of $300,000 if Norwest terminates the
Reorganization Agreement under one of the circumstances described in
"Termination by Norwest" above and before such termination or within 12
months after such termination (a) Woodhaven or any successor to Woodhaven
agrees to engage in an Acquisition Event or an Acquisition Event occurs or
(b) the Woodhaven Board approves an Acquisition Event or recommends to
Woodhaven shareholders to approve an Acquisition Event.
Effect of Termination
Generally, if either party terminates the Reorganization Agreement, it
becomes void without any liability to either party other than for willful and
material breaches occurring before termination; however, the provisions of
the Reorganization Agreement governing confidential information and expenses
incurred in connection with the Consolidation continue in effect after
termination of the Reorganization Agreement. (paragraph 10(b))
Waiver and Amendment
Either party may 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(d))
Norwest and Woodhaven can amend the Reorganization Agreement at any time
before the Consolidation is completed; however, the Reorganization Agreement
prohibits them from amending the Reorganization Agreement after Woodhaven
shareholders approve the Consolidation if the amendment would change in a
manner adverse to Woodhaven shareholders the consideration to be received by
Woodhaven shareholders in the Consolidation. (paragraph 10(c))
Expenses
Norwest and Woodhaven will each pay their own expenses in connection with
the Consolidation, including fees and expenses of their respective
independent auditors and counsel. Woodhaven will pay an unrelated party a
finder's fee of $100,000 in connection with the Consolidation.
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COMPARISON OF RIGHTS OF HOLDERS OF WOODHAVEN
COMMON STOCK AND NORWEST COMMON STOCK
Woodhaven is a national banking association chartered under the laws of the
United States. The rights of Woodhaven shareholders are governed by the
National Bank Act, the Woodhaven Articles and the Woodhaven Bylaws. Norwest
is incorporated under the laws the state of Delaware. The rights of Norwest
stockholders are governed by the DGCL, the Norwest Certificate and the
Norwest Bylaws. Upon completion of the Consolidation, Woodhaven shareholders
will become stockholders of Norwest. As a result, their rights will be
governed by the DGCL, the Norwest Certificate and the Norwest Bylaws.
The following is a summary of certain differences between the National
Bank Act and the DGCL, as well as differences between the Woodhaven
Articles and Woodhaven Bylaws and the Norwest Certificate and Norwest
Bylaws. You can find additional information concerning the rights of
Norwest stockholders in the Norwest Certificate and Norwest Bylaws
themselves and Norwest's current report on Form 8-K dated October 10, 1997
and filed with the SEC on October 14, 1997. Norwest's current report on
Form 8-K contains detailed information about Norwest Common Stock and the
preferred stock purchase rights that accompany shares of Norwest Common
Stock. It also provides information regarding the rights of the holders of
Norwest's preferred stock and preference stock, many of which directly
affect the rights of the holders of Norwest Common Stock. The information
set forth below concerning the outstanding shares of Norwest capital stock
supersedes the comparable information contained in the current report.
The Norwest Certificate and the Norwest Bylaws, as well as the current
report on Form 8-K, are incorporated into this Proxy Statement-Prospectus by
reference. See "WHAT INCORPORATION BY REFERENCE MEANS" AND "WHERE YOU CAN
FIND MORE INFORMATION."
Capital Stock
Norwest. The Norwest Certificate currently authorizes the issuance of
1,000,000,000 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. At June 30, 1997, there were 374,268,784 shares of Norwest
Common Stock outstanding, 1,046,234 shares of Norwest preferred stock
outstanding, and no shares of Norwest preference stock outstanding. These
outstanding share numbers have not been restated to reflect the two-for-one
split of Norwest Common Stock distributes on October 10, 1997. See
"EXPLANATORY NOTE REGARDING NORWEST COMMON STOCK SPLIT."
Woodhaven. The Woodhaven Articles authorize the issuance of 200,000 shares
of Woodhaven Common Stock, $5.00 par value. As of the record date for the
Special Meeting, there were 180,000 shares of Woodhaven Common Stock
outstanding.
Rights Plan
Norwest. Each share of Norwest Common Stock (including shares that will be
issued in the Consolidation) has attached to it one preferred share purchase
right. Once exercisable, each right allows the holder to purchase a
fractional share of Norwest's Series A Junior Participating Preferred Stock.
A right, by itself, does not confer on its holder any rights of a Norwest
stockholder, including the right to vote or receive dividends, until the
right is exercised. The rights trade automatically with shares of Norwest
Common Stock. The rights are designed to protect the interests of Norwest
and its stockholders against coercive takeover tactics. The rights are
intended to encourage potential acquirors to negotiate on behalf of all
stockholders the terms of any proposed takeover. Although not their purpose,
the rights may deter takeover proposals.
Woodhaven. Holders of Woodhaven Common Stock do not have any purchase
rights similar to holders of Norwest Corporation Common Stock. No other plan
similar to the Norwest rights plan exists.
Directors
Norwest. The Norwest Bylaws provide for a board of directors consisting of
not less than 10 nor more than 23 persons, each serving 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 15. Directors of Norwest may be
removed with or without cause by
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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 majority vote 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.
Woodhaven. The Woodhaven Articles and Woodhaven Bylaws provide for a board
of directors consisting of not less than five nor more than twenty-five
directors, each serving a term of one year or until his or her death or
resignation. The number of directors can be set by the board or the
shareholders and is currently set at five (5). Directors of Woodhaven are
elected by a majority of the votes cast at a meeting of shareholders at which
directors are elected and at which a quorum is present. Vacancies on the
board may be filled by the board or by the shareholders at a special meeting
of shareholders.
Amendment of Charter Document and Bylaws
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.
Woodhaven. Amendments to the Woodhaven Articles require approval of a
majority of the Woodhaven Board and the affirmative vote of the holders of a
majority of the outstanding shares of Woodhaven Common Stock represented at a
shareholders meeting at which a quorum is present. The Woodhaven Bylaws may
be amended by a majority of the Woodhaven Board at a meeting at which a
quorum is present.
Approval of Mergers and Asset Sales
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 (a) the agreement of merger
for the merger does not amend in any respect the Norwest Certificate, (b)
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
(c) 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.
Woodhaven. The National Bank Act requires mergers or consolidations to be
approved by holders of at least two-thirds of the outstanding shares of
Woodhaven Common Stock. The National Bank Act requires that a sale of all or
substantially all of the assets and dissolution of Woodhaven be approved by
the affirmative vote of holders of at least two-thirds of the shares of
Woodhaven Common Stock.
Appraisal 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 (a) 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 (b) held of
record by more than 2,000 stockholders, so long as stockholders receive
34
<PAGE>
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 New York Stock Exchange and the Chicago Stock
Exchange and currently held by more than 2,000 stockholders. As a result,
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.
Woodhaven. Under the National Bank Act, any shareholder of Woodhaven who
objects to a merger or consolidation and follows certain prescribed
procedures is entitled to receive cash equal to the fair value of the
shareholder's shares. For a description of the procedures for asserting such
appraisal rights and the manner in which fair value is determined, please
read the discussion under "THE CONSOLIDATION--Appraisal Rights."
Special 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.
Holders of Norwest Common Stock do not have the ability to call a special
meeting of stockholders.
Woodhaven. A special meeting of shareholders of Woodhaven may be called by
the board of directors, or by any three (3) or more shareholders owning not
less than twenty-five percent (25%) of the Woodhaven Common Stock.
Director Duties
Norwest. The DGCL does not specifically enumerate directors' duties. In
addition, the DGCL does not contain any provision specifying what factors a
director must and may consider in determining a corporation's best interests.
However, judicial decisions in Delaware have established that directors, in
performing their duties, are bound to use that amount of care which
ordinarily prudent men would use in similar circumstances.
Woodhaven. Federal law does not specifically enumerate the so-called
"fiduciary duties" of a director of a national bank. Judicial decisions have
established that directors must carry out their duties as a director with due
care and loyalty. Due care has been described by the United States Supreme
Court as that care which ordinarily prudent men would exercise under similar
circumstances. Directors of a national bank also have a duty of fairness to
minority shareholders.
Action Without a Meeting
Norwest. As permitted by Section 228 of the DGCL and the Norwest
Certificate, any action required or permitted to be taken at a stockholders'
meeting may be taken without a meeting pursuant to the written consent of the
holders of the number of shares that would have been required to effect the
action at an actual meeting of the stockholders.
Woodhaven. The Woodhaven Articles and Woodhaven Bylaws do not contain any
provision for shareholders to act without a meeting.
Limitation of Director Liability
Norwest. The Norwest Certificate provides that a director (including an
officer who is also a director) of Norwest shall not be liable personally to
Norwest or its stockholders for monetary damages for breach of fiduciary duty
as a director, except for liability arising out of (a) any breach of the
director's duty of loyalty to Norwest or its stockholders, (b) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) payment of a dividend or approval of a stock
repurchase in violation of Section 174 of the DGCL or (d) any transaction
from which the director derived an improper personal benefit. This provision
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<PAGE>
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.
Woodhaven. The Woodhaven Articles do not contain any provision limiting
the liability of its directors.
Indemnification of Officers and Directors
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.
Woodhaven. The Woodhaven Articles permit any person to be indemnified by
Woodhaven who incurs expenses in connection with a proceeding to which such
person has been made a party by reason of being an officer, director or
employee of Woodhaven or serving in any capacity in any entity at the request
of Woodhaven unless found liable for or guilty of gross negligence, willful
misconduct or criminal acts. Any such indemnification must be approved by a
court, a vote of shareholders or by a majority of directors not involved in
the proceeding. Woodhaven may acquire insurance to cover the cost of
indemnification permitted under the Woodhaven Articles.
Dividends
Norwest. Delaware corporations may pay dividends out of surplus or, if
there is no surplus, out of net profits for the fiscal year in which declared
and for the preceding fiscal year. Section 170 of the DGCL also provides that
dividends may not be paid out of net profits if, after the payment of the
dividend, capital is less than the capital represented by the outstanding
stock of all classes having a preference upon the distribution of assets.
Norwest is also subject to Federal Reserve Board policies regarding payment
of dividends, which generally limit dividends to operating earnings. See
"CERTAIN REGULATORY CONSIDERATIONS PERTAINING TO NORWEST."
Woodhaven. Holders of stock of a national bank are generally entitled to
receive dividends so long as the dividends would not reduce the capital of
the bank below the levels required by applicable regulatory requirements or
constitute an unsafe or unsound practice. See "CERTAIN REGULATORY AND OTHER
CONSIDERATIONS PERTAINING TO NORWEST - Dividend Restrictions" and "Regulatory
Capital Standards and Related Matters" for a discussion of such matters.
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<PAGE>
Corporate Governance Procedures, Nomination of Directors
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.
Woodhaven. The Woodhaven Articles and Woodhaven Bylaws require that
written notice of any person nominated as a director by someone other than
existing management of Woodhaven must be sent (a) to the OCC not less than
fourteen days nor more than fifty days prior to the shareholders meeting, or
(b) if less than twenty-one days' notice of the meeting is given to
shareholders, to the president of Woodhaven and to the OCC not less than the
close of business on the seventh day following the day on which notice of the
meeting was mailed to shareholders. The notice of nomination must include
(i) the name and address of the nominee, (ii) the principal occupation of the
nominee, (iii) the total number of shares of stock of the nominee, and (iv)
the stock of Woodhaven owned by the notifying shareholder.
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<PAGE>
INFORMATION ABOUT WOODHAVEN
General
Woodhaven is a national bank, incorporated in 1983. Woodhaven maintains its
principal office at 6750 Bridge Street, Fort Worth, Texas 76112. Its
telephone number is (817) 476-6700.
Woodhaven conducts a general commercial and consumer banking business,
which includes the acceptance of deposits from consumers and the origination
of commercial, real estate, installment and other loans. Deposit services
include certificates of deposit, individual retirement accounts and other
time deposits, checking and other demand deposit accounts, interest-bearing
checking accounts, savings accounts and money market accounts. Loans consist
of commercial loans directed to small and middle market businesses, loans to
individuals, loans to ranchers and farmers and commercial real estate loans,
residential mortgages and construction loans.
Woodhaven provides traditional commercial and consumer banking services to
its customers through a main office located at 6750 Bridge Street in Fort
Worth, Texas and branch facilities located at 5220 Boca Raton and 5100 Randol
Mill Road in Fort Worth, Texas.
Competition
Woodhaven encounters strong competition both in making loans and attracting
deposits. The state of Texas permits statewide branch banking and statewide
savings and loan branching. Moreover, Woodhaven competes with other
commercial and savings banks, savings and loan associations, credit unions,
finance companies, mutual funds, insurance companies, brokerage and
investment banking companies, and certain other nonfinancial institutions.
The continued liberalization of the banking and securities industries may
also increase competitive pressures on Woodhaven.
Management believes Woodhaven is well positioned to compete successfully in
its primary market area, although no assurances can be given in this regard.
Competition among financial institutions is based upon interest rates offered
on deposit accounts, interest rates charged on loans, other credit and
service charges, the quality and scope of the services rendered, the
convenience of banking facilities, and, in the case of loans to commercial
borrowers, relative lending limits. Management believes, however, that
Woodhaven's long-term presence, local expertise and ongoing commitment to the
community, as well as its commitment to quality and personalized banking
services, are factors that contribute to Woodhaven's competitiveness.
Regulation and Supervision
Regulation of Woodhaven. Woodhaven is a national banking association and is
therefore subject to regulation, supervision, and examination by the OCC.
Woodhaven is also a member of the FDIC. Requirements and restrictions under
the laws of the United States and regulations of the OCC and FDIC include the
requirement that reserves be maintained against deposits, restrictions on the
nature and the amount of loans which can be made, restrictions on the
business activities in which a bank may engage, restrictions on the payment
of dividends to stockholders and minimum capital requirements.
Quantitative measures established by regulation to ensure capital adequacy
require Woodhaven to maintain minimum ratios (set forth in the table below)
of Tier 1 capital (as defined in the regulations) to total average assets and
minimum ratios of Tier 1 and total capital to risk-adjusted assets as set
forth in the table below. Woodhaven's actual capital ratios are also
presented in the table.
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<TABLE>
<CAPTION>
1996 1995
---- ----
Capital Adequacy Capital Adequacy
---------------- ----------------
Required Actual Required Actual
Ratio Ratio Ratio Ratio
<S> <C> <C> <C> <C>
Tier 1 Capital (to Average
Assets) 4.0% 7.89% 4.0% 8.40%
Tier 1 Capital (to Risk
Adjusted Assets) 4.0% 10.06% 4.0% 10.20%
Total Capital (to Risk
Adjusted Assets) 8.0% 11.22% 8.0% 11.27%
</TABLE>
Management believes that as of December 31, 1996 and 1995, Woodhaven met
all capital requirements to which it is subject.
Effective January 1, 1993, the FDIC imposed deposit premiums based on a
risk-based assessment system, requiring the healthiest banks to pay $0.23 per
$100 of insured deposits. The rates increased incrementally to a top rate of
$0.31 per $100 of deposits for the weakest banks.
On November 14, 1995 the FDIC approved reduced assessment rates applicable
to Bank Insurance Fund insured institutions to a range of zero to 27 basis
points from the previous range of 4 to 31 points. Deposit insurance premiums
for Subgroup A institutions were reduced to zero beginning with the January
1, 1996 assessment period. Banks within the Subgroup A category will be
required to pay $1,000 per semiannual period as mandated by statute.
Woodhaven was within the Subgroup A category as of December 31, 1996. For a
general discussion concerning the criteria applied by the FDIC to determine
an institution's insurance premium assessment rate, see "CERTAIN REGULATORY
CONSIDERATIONS PERTAINING TO NORWEST -- FDIC Insurance."
Employees
Woodhaven had approximately 23 full-time equivalent employees as of June 1,
1997. None of the employees are represented by any collective bargaining
agreement and management believes its employee relations are good. Woodhaven
is an equal opportunity employer and provides equal employment opportunities
to individuals without regard to race, sex, age, national origin, religion,
veteran status handicap or familial status.
Properties
Woodhaven's main banking offices are located at 6750 Bridge St., Fort
Worth, Texas 76112. The current bank building was built in 1995 and is owned
by Woodhaven. The building has approximately 4,100 square fee. Woodhaven's
driven-through facility contains one commercial window and two drive-through
lanes. The ATM is located on the front of the facility and is open 24 hours
per day. A night depository is also available 24 hours per day.
Woodhaven has an operations center, mini bank and motor bank located at
5220 Boca Raton in Fort Worth. The operations center was opened in 1996 by
remodeling the interior of Woodhaven's former motor bank. The facility
houses bookkeeping and proof personnel. The mini bank includes a walk-up
facility for deposits and withdrawals and a two-lane motor bank. Woodhaven
also has a branch at Lakewood Village Retirement Center, 5100 Randol Mill
Road. No property is owned or leased at such branch. Woodhaven personnel
travel to the center once per week to facilitate deposits and withdrawals.
Legal Proceedings
Woodhaven periodically is involved in legal proceedings arising in the
normal course of business, such as claims to enforce liens, claims involving
the making and servicing of real property loans, and other issues incident to
Woodhaven's business. Management of Woodhaven does not believe there is any
proceeding, threatened or pending against Woodhaven which, if determined
adversely, would have a materially adverse effect on the financial position
or results of operations of Woodhaven.
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Description of Securities
Woodhaven authorized capital stock consists of 200,000 shares of Woodhaven
Common Stock. At _________, 1997, the record date for the Special Meeting,
there were 180,000 outstanding shares of Woodhaven Common Stock.
Holders of Woodhaven Common Stock are entitled to one vote for each share
owned of record on all matters to be voted upon by the shareholders. Holders
of Woodhaven Common Stock are entitled to share ratably in dividends and, in
the event of a liquidation, dissolution or winding up of Woodhaven, to share
pro rata, after payment of all debts and other liabilities, all of the
remaining assets of Woodhaven available for distribution to its shareholders.
The holders of shares of Woodhaven Common Stock have no preemptive or other
subscription rights, and there are no conversion rights or redemption or
sinking fund provisions applicable to such shares.
Dividends and Dividend Policy
Holders of Woodhaven Common Stock are entitled to receive dividends when,
as and if declared by the Woodhaven Board out of funds legally available
therefore. No dividends have ever been paid on the Woodhaven Common Stock
and none are presently contemplated. The Reorganization Agreement prohibits
Woodhaven from paying dividends without the consent of Norwest.
Holders and Market Information
At June 1, 1997, the 180,000 outstanding shares of Woodhaven Common Stock
were owned of record by 19 shareholders. There is no public market for the
Woodhaven Common Stock.
Security Ownership of Management and Principal Shareholders
The table below sets forth the shares of Woodhaven Common Stock
beneficially owned by (a) the directors of Woodhaven, (b) the executive
officers of Woodhaven who are not directors, (c) all directors and executive
officers as a group, and (d) each beneficial owner known by Woodhaven to own
5% or more of the outstanding Woodhaven Common Stock who is not a director or
executive officer.
<TABLE>
<CAPTION>
Amount of Beneficial Percent of Common
Name Ownership Stock(4)
<S> <C> <C>
Director:
Ron Casey, President and Director (1).............. 7,400 3.85%
Billy Blair, Director.............................. 3,000 1.56%
Arvil Lewis, Vice President and Director........... 5,550 2.88%
Frank Talley, Jr., Chairman and Director........... 19,000 9.88%
John Unsworth, Director............................ 500 0.26%
Executive Officers:
Stan Davis, Sr., Vice President (2) 7,100 3.69%
Debbie Koennecke, Sr. Vice President............... 0 0%
Debbie Payne, Vice President....................... 0 0%
All Directors and Executive Officers:
As a Group (8 individuals).................... 42.550 21.14%
Holders of 5% of Woodhaven Common Stock:
Leggit Partnership................................. 10,000 5.20%
Mike A. Myers (3)..................................111,850 58.19%
</TABLE>
- --------------------------------
(1) Includes 5,200 shares issuable upon exercise of a currently exercisable
option.
(2) Includes 7,000 shares issuable upon exercise of a currently exercisable
option.
(3) Includes 1,400 shares owned by Mike A. Myers Foundation.
(4) Assumes 192,200 shares are outstanding, as 12,200 shares are subject to
currently exercisable options.
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WOODHAVEN'S MANAGEMENT'S DISCUSSION AND
ANALYSIS OF WOODHAVEN'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Six Months Ended June 30, 1997 and 1996
Woodhaven generated net income through June 30, 1997 of $709,973, as
compared to $482,129 for the same period ended June 30, 1996, which
represents a 47.3% increase in net income. The net income per share for the
six months ended June 30, 1997 was $3.94 compared to $2.68 for the same
period ending June 30, 1996. Net income for June 30, 1997 represents an
annualized return on equity of 25.9% compared to 22.8% for the same period
in the preceding year. This net income also represents an annualized return
on assets of 2.07% for the period ending June 30, 1997 as compared to 1.69%
for the period ending June 30, 1996. The contributing factors for the
increase in 1997 was a 27.1% increase in net interest income, as well as a
10.0% increase in non interest income.
Woodhaven experienced a net loan increase of $1,962,000 for the first six
months of 1997. Loan to deposit ratio as of June 30, 1997 was 80.7%
compared to 77.9% as of December 31, 1996. Total deposits as of June 30,
1997 were $62,452,000 compared to deposits of $62,199,000 at December 31,
1996.
Years Ended December 31, 1996, 1995 AND 1994
Loan Analysis
Woodhaven has concentrated its efforts in lending in the area of middle
market businesses and individual relationships over the past three years. In
doing so, Woodhaven has had heavy concentration in SBA loans and interim
construction loans. Accordingly, Woodhaven has been able to maintain a loan
to deposit ratio in excess of 60% and as high as 78% over the course of the
past three years. The quality of the assets carried in the loan portfolio
have improved dramatically over the past three years.
Provision for Loan Losses
Provisions for loan losses are charged to earnings to bring the total of
the allowance for loan losses to a level deemed appropriate by management
based on such factors as historical experience, volume and type of lending
conducted by Woodhaven, the amount of non-performing assets, regulatory
policies, general economic conditions, and other factors related to the
collectibility of loans in Woodhaven's portfolio. On January 1, 1995,
Woodhaven adopted the provisions of Statement of Financial Accounting
Standards 114 (SFAS 114), "Accounting by Creditors for Impairment of a Loan,"
as amended by the Statement of Financial Accounting Standards 118 (SFAS 118),
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures." These statements require impairment of non-performing loans to
be measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, its observable market
value, or the fair value of the collateral if the loan is collateral
dependent. The provisions for loan losses for the years ended December 31,
1996 and 1995 were determined in accordance with the statements, the adoption
of which did not have a significant impact on Woodhaven's financial position
or its results of operations for the years then ended. The provision for
loan losses for the year ended December 31, 1996 was $238,300, an increase of
94.82% compared to the provision for loan losses for the year 1995. The
provision for loan losses of $122,300 in 1995 represented an increase of
46.13% compared with the provision for loan losses of $83,700 for 1994.
Loan and Asset Quality
Loans as of December 31, 1996 were $49,490,000, representing an increase of
$13,250,000 or 36.56% from $36,240,000 at the end of 1995. The increase was
evenly spread throughout the portfolio in the areas of commercial, real
estate, and installment loans. The volume of Woodhaven's loans has steadily
increased since 1992. The main growth in the commercial area has been in the
area of SBA lending due to the ability to sell the
41
<PAGE>
guaranteed portion of the SBA loans into the secondary market, creating
further liquidity for Woodhaven. Additionally, as those loans are generally
sold at a premium over book value, additional income over and above the
normal interest income is realized.
Real estate loans have continued to increase over the years with an
increase between 1994 and 1995 from $13,465,000 to $20,889,000 and a further
increase to $29,450,000 in 1996. The allowance for loan losses has increased
over the course of the past three years from $311,000 in 1994 to $588,000 in
1996.
Net charge offs for the year as a percentage of average loans have equated
to 2.25%, 0.042%, and 0.17% in 1994, 1995, and 1996 respectively. As the
allowance for loan losses has increased and as the loan portfolio has
improved, the coverage of the allowance as a percentage of non-performing
assets has improved from 41.80% in 1994 to 384.31% in 1996. The primary
reason for improvement is based on the improvement of the overall portfolio
and the economic conditions surrounding Woodhaven.
Loan concentration is defined as an amount loaned to a number of borrowers
engaged in similar activities or resident in the same geographic region which
would cause them to be similarly affected by economic and other conditions.
Woodhaven on a routine basis evaluates these kinds of concentrations for the
purpose of policing its concentrations and makes necessary adjustments in its
lending practices. Such adjustments help ensure that its lending practices
clearly reflect current economic conditions, loan to deposit ratios, and
industry trends. The following table sets forth the composition of
Woodhaven's loan portfolio by type of loan on the dates indicated.
<TABLE>
<CAPTION>
LOAN PORTFOLIO ANALYSIS
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(Dollars in thousands)
Aggregate Principal Amount
Type of loan:
<S> <C> <C> <C> <C> <C>
Commercial $ 16,604 $ 12,390 $ 7,854 $ 6,385 $ 3,970
Real estate 29,450 20,889 13,465 10,118 9,057
Installment 3,397 2,952 2,586 2,224 2,581
Overdrafts 39 9 15 3 2
-------- -------- -------- -------- --------
Total $ 49,490 $ 36,240 $ 23,920 $ 18,730 $ 15,610
======== ======== ======== ======== ========
Percentage of Loan Portfolio
Type of loan:
<S> <C> <C> <C> <C> <C>
Commercial 33.55% 34.19% 32.84% 34.09% 25.44%
Real estate 59.51 57.64 56.29 54.02 58.02
Installment 6.86 8.15 10.81 11.87 16.53
Overdrafts .08 .02 .06 .02 .01
-------- -------- -------- -------- --------
Total 100.00% 100.00% 100.00% 100.00% 100.00%
======== ======== ======== ======== ========
</TABLE>
The following table indicates the maturities of loans outstanding (based on
contractual dates) as of December 31, 1996.
MATURITIES AND RATE SENSITIVITY OF LOANS
(Dollars in thousands)
<TABLE>
<CAPTION>
Over 1 year
Less than 1 year through 5 years Over 5 years
----------------- --------------------- ----------------------
Fixed Floating Fixed Floating Fixed Floating
Rate Rate Rate Rate Rate Rate Total
------- -------- ----------- -------- ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Total loans $10,214 $ 19,857 $ 15,584 $ - $ 3,835 $ - $49,490
======= ======== =========== ======== ============ ======== =======
</TABLE>
42
<PAGE>
Nonperforming Assets
Generally, interest on loans is accrued and credited to income based upon
the principal balance outstanding. It is management's policy to discontinue
the accrual of interest income when principal or interest is past due 90 days
or more and the loan is not adequately collateralized, or when in the opinion
of management, principal or interest is not likely to be paid in accordance
with the terms of the obligation. Woodhaven will generally charge-off loans
after 120 days of delinquency unless the loans are adequately collateralized
and in process of collection. A loan is considered in the process of
collection if, based on a probable specific event, management believes that
the loan will be repaid or brought current. Loans will not be returned to
accrual status until future payments of principal and interest appear
certain. Interest accrued and unpaid at the time a loan is placed on non-
accrual status is charged against interest income. Subsequent payments
received are applied to the outstanding principal balance.
Real estate acquired by Woodhaven as a result of foreclosure or by deed in
lieu of foreclosure is classified as other real estate. Such loans are
reclassified to other real estate and recorded at the lower of cost or fair
market value less estimated selling costs, and the estimated loss, if any, is
charged to the allowance for loan losses at that time. Further losses are
recorded as charges to other expenses at the time management believes
additional deterioration in value has occurred.
The following table sets forth certain information with respect to
Woodhaven's nonperforming loans, accruing loans which are contractually past
due 90 days or more as to principal or interest, and other real estate.
NONPERFORMING ASSETS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Non-Accrual Loans $ 95 $ 148 $ 205
Accruing loans contractually past due
90 days or more 58 229 440
----- ----- -----
Total nonperforming loans 153 377 645
Other real estate - 109 99
----- ----- -----
Total nonperforming assets $ 153 $ 486 $ 744
===== ===== =====
Total nonperforming assets to total assets .23% .87% 1.95%
</TABLE>
Interest payments received on non-accrual loans are recorded as reductions
of principal. Interest income that would have been accrued on nonaccrual
loans during 1995 and 1994 was approximately $15,000 and $25,000,
respectively.
Management regularly reviews and monitors the loan portfolio in order to
identify borrowers experiencing financial difficulties. Management believes
that as of December 31, 1996, all such loans had been identified and included
in the non-accrual or 90 days past due loan totals reflected in the above
table. Management continues to emphasize maintaining a low level of
nonperforming assets and returning nonperforming assets to an earning status
as performance and conditions permit.
Woodhaven had no other real estate at December 31, 1996.
Allowance for Loan Losses
In originating loans, Woodhaven recognizes that credit losses will be
experienced and the risk of loss will vary with, among other things, general
economic conditions, the type of loan being made, the creditworthiness of the
borrower over the term of the loan and, in the case of a collateralized loan,
the quality of the collateral for such loan. Management maintains an
allowance for loan losses based upon, among other things, historical
experience, an evaluation of economic conditions, regular review of
delinquencies, and its evaluation of loan portfolio quality. In addition to
unallocated allowances, specific allowances are provided for individual loans
when ultimate collection is considered questionable by management after
reviewing the current status of loans which are contractually past due and
considering the net realizable value of the collateral for the loan. On
January 1, 1995,
43
<PAGE>
Woodhaven adopted the provisions of SFAS 114 and SFAS 118, and determined the
provisions for loan losses for 1995 and 1996 in accordance with the
requirements of these statements. See "Provision for Loan Losses."
Management continues to actively monitor Woodhaven's asset quality and to
charge off loans against the allowance for loan losses when appropriate or to
provide specific loss allowances when necessary. Although management
believes it uses the best information available to make determinations with
respect to the allowance for loan losses, future adjustments may be necessary
if economic conditions differ from the assumptions used in making the initial
determinations.
The following table sets forth an analysis of Woodhaven's allowance for
loan losses for the periods indicated.
ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Beginning balance $ 421 $ 311 $ 273
Loans charged off:
Commercial 73 10 11
Real estate - - 49
Installment 13 30 6
------- ------ ------
Total 86 40 66
Recoveries of loans previously charged-off:
Commercial 6 9 10
Real estate 6 3 5
Installment 3 16 5
------- ------ ------
Total 15 28 20
------- ------ ------
Net loans charged-off 71 12 46
Provision for loan losses (credit) 238 122 84
------- ------ ------
Balance at year-end 588 421 311
======= ====== ======
Net charge-offs during year to average loans 0.17% 0.042% 2.25%
Allowance as percentage of nonperforming assets 384.31% 86.63% 41.80%
</TABLE>
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated. Management believes that
the allowance can be allocated by category only on an approximate basis. The
allocation of an allowance to each category is not necessarily indicative of
future losses and does not restrict the use of the allowance to absorb losses
in any other category.
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>
Commercial $ 16,604 $ 157 $ 12,390 $ 118
Real estate 29,450 381 20,890 268
Installment 3,436 50 2,960 35
----------- --------- ----------- ---------
$ 49,490 $ 588 $ 36,240 $ 421
=========== ========= =========== =========
</TABLE>
44
<PAGE>
Investment Activities
Woodhaven's investments as of December 31, 1996 consist primarily of U. S.
federal agency obligations and mortgage-backed securities. The mortgage-backed
securities represent an interest in a pool of underlying mortgages, and are all
issued by United States government agencies. These securities may be more
sensitive to changes in interest rate and income derived from such securities
may be adversely affected by prepayments of principal on the underlying
mortgages. The total portfolio value at December 31, 1996 was $7,998,000 at
amortized cost and a fair value of $8,009,000 resulting in a net appreciation of
$11,000 on the total portfolio.
The following table sets forth the book value of Woodhaven's investment
portfolio as of the dates indicated. Investment securities held-to-maturity are
stated at cost, adjusted for amortization of premium and accretion of discount.
Investment securities available-for-sale are stated at fair value in accordance
with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities. See "Accounting Matters and Notes 1 and 2 of the Notes to Financial
Statements."
INVESTMENT PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1996 1995 1994
----------------- ------------------ -----------------
Amortized Amortized Amortized
Cost Market Cost Market Cost Market
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment securities:
Available-for-sale
U.S. government agencies
and corporations $ 7,917 $ 7,928 $ 11,005 $11,046 $ 1,590 $ 1,556
Other 81 81 1,433 1,435 2,107 2,086
--------- ------- --------- ------- --------- -------
Total available-for-sale 7,998 8,009 12,438 12,481 3,697 3,642
Held-to-maturity
U.S. government agencies
and corporations - - - - 6,151 5,817
--------- ------- --------- ------- --------- -------
Total held-to-maturity - - - - 6,151 5,817
--------- ------- --------- ------- --------- -------
Total investment securities $ 7,998 $ 8,009 $ 12,438 $12,481 $ 9,848 $ 9,459
========= ======= ========= ======= ========= =======
</TABLE>
Since the adoption of SFAS 115 Woodhaven has chosen to carry most or all of
its securities in the available for sale category to allow the portfolio to be
liquidated at any point in time. Due to the short maturities of most of the
obligations as well as relatively high dependence on variable rates securities
tied to various indices, the Woodhaven Board believes that maintaining high
liquidity in the portfolio outweighs the potential realizable loss that the
portfolio might have at any given time.
The following table sets forth the maturity distribution and weighted
average yield of the investment portfolio of Woodhaven as of December 31, 1996.
The calculation of the weighted average yields is based on yield, weighted by
the respective costs of the securities.
45
<PAGE>
INVESTMENT PORTFOLIO - MATURITY AND YIELDS
AVAILABLE-FOR-SALE
(Dollars in thousands)
<TABLE>
<CAPTION>
1 Year Yield 1 Year to Yield After 10 Yield
or Less % 5 Years % Years %
------- ----- --------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Maturity Distribution
U.S. Treasury and agency $ - - $ 2,486 6.78 $ - -
Other - - 1,179 6.05 4,333 6.41
------- ----- --------- ----- -------- -----
Total available-for-sale $ - - $ 3,665 6.54 $ 4,333 6.41
======= ===== ========= ===== ======== =====
</TABLE>
Deposit Activities
Deposits are attracted through the offering of a broad variety of deposit
instruments, including checking accounts, money market accounts, regular savings
accounts, term certificate accounts (including "jumbo" certificates in
denominations of $100,000 or more) and retirement savings plans.
Woodhaven's balance of total deposits was $62,199,000 at December 31, 1996,
up from $51,550,000 at year end 1995 and $34,490,000 as of December 31, 1994.
The following table sets forth the year-end balances and weighted average rates
for the Woodhaven categories of deposits for the periods indicated.
YEAR END DEPOSITS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------
1996 Yield 1995 Yield 1994 Yield)
------- ----- ------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $14,669 - $12,053 - $ 7,174 -
Now accounts 8,392 1.60 8,377 1.69 8,566 1.61
Money market 12,996 4.38 9,779 4.00 4,995 2.84
Savings account 2,083 2.61 2,283 2.73 2,254 2.44
Certificates of deposit 24,059 5.34 19,058 5.21 11,501 3.38
------- ------- -------
Total deposits $62,199 $51,550 $34,490
======= ======= =======
</TABLE>
As of December 31, 1996, time deposits over $100,000 represents $8,147,000
or 13.10% of total deposits compared with 11.75% at year end 1995 and 9.91% at
year end 1994. Woodhaven does not have nor does it solicit brokered deposits of
any type. The following table sets forth the amount of Woodhaven's certificates
of deposit of $100,000 or more by time remaining until maturity as of December
31, 1996.
TIME DEPOSITS OF $100,000 OR MORE
(Dollars in thousands)
<TABLE>
<CAPTION>
3 Months 3-12 Over 12
or less Months Months Total
-------- ------ ------- ------
<S> <C> <C> <C> <C>
Certificates and other time deposits $ 1,877 $4,137 $ 2,133 $8,147
======== ====== ======= ======
</TABLE>
46
<PAGE>
Return of Equity and Assets
The following table sets forth Woodhaven's ratios for the periods
indicated.
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Return on average assets 1.88% 1.47% 1.24%
Dividend payout ratio - - -
Return on average common equity 24.55% 19.27% 14.79%
Average common equity to average
total assets 7.64% 7.62% 8.36%
</TABLE>
Liquidity
Woodhaven's principal sources of funds are from deposits, interest and
principal payments on loans and investment securities, sales of investment
securities and borrowings. For the year ended December 31, 1996 Woodhaven
realized proceeds from sale and maturity of investments of $4,421,637, a net
increase in deposits of $10,649,299 and net cash provided by operating
activities of $1,377,793. Funds were used to fund the sale of federal funds of
$2,590,000 and fund a net increase in loans to customers of $13,259,496. For the
year ended December 31, 1995 Woodhaven realized proceeds from sale and maturity
of investment securities of $1,838,516, net cash provided by operating
activities of $780,692 and net increase in deposits of $17,059,490. These
proceeds were partially offset by a purchase of investment securities of
$4,481,719 and net increase in loans to customers of $12,343,326.
Asset liquidity is provided by cash and assets which are readily
marketable, which can be pledged, or which will mature in the near future. These
include cash, federal funds sold, and U. S. Government-backed securities.
Woodhaven's liquidity ratio, defined as cash, U. S. Government backed securities
and federal funds sold as a percentage of total deposits, was 77.96%, 68.80%,
and 67.58% as of December 31, 1996, 1995, 1994, respectively. Liability
liquidity is provided by access to core funding sources, principally various
customers' interest-bearing deposit accounts in Woodhaven's market areas.
Woodhaven does not have and does not solicit brokered deposits.
Securities sold under repurchase agreements, federal funds purchased and
short-term borrowings by Woodhaven are additional sources of liquidity. These
sources of liquidity are short-term in nature and are used by Woodhaven as
necessary to fund asset growth and meet short-term liquidity needs. At December
31, 1996 and 1995 Woodhaven had $433,845 and $91,013 in securities sold under
repurchase agreements. As of December 31, 1996 and 1995, Woodhaven had no
federal funds purchased and no borrowings from the Federal Reserve System.
Capital Resources
Woodhaven's total shareholders' equity as of December 31, 1996 was
$5,126,529, an increase of $1,090,359 or 27.02% compared with shareholders'
equity of $4,036,170 on December 31, 1995. The total increase was attributable
to earnings and a change in unrealized gain on debt securities available for
sale, net of tax.
Total shareholders' equity as of December 31, 1995 was $4,036,170, an
increase of $765,758 or 20.69% compared with shareholders' equity of $3,270,387
as of December 31, 1994. The total increase was attributable to earnings and
unrealized gain on debt securities available for sale, net of tax.
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-adjusted assets and off-balance sheet
obligations. Under the rules effective December 31, 1995, 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-adjusted assets, and a minimum
level of total capital of at least 8.0% of risk-adjusted assets. Tier 1 capital
consists principally of stockholders' equity
47
<PAGE>
less goodwill. Total capital is comprised of Tier 1 capital, certain debt
instruments and a portion of the allowance for loan losses.
Woodhaven's actual risk-based capital requirement and excess risk-based
capital at December 31, 1996 (dollars in thousands) are summarized as follows:
<TABLE>
<CAPTION>
Amount Percent (1)
------ -----------
<S> <C> <C>
Tier 1 Capital $5,119 10.06
Allowable portion of allowance for loan losses 588 11.16
Total risk-based capital 5,707 11.22
Risk-based capital requirement 4,069 8.00
Excess risk based capital 1,638 3.22
</TABLE>
(1) Percentage based on risk-weighted assets of $50,863,000 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 1 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 Woodhaven was 7.89%, at December 31, 1996.
Accounting Matters
Accounting for Loan Impairment. Effective January 1, 1995 Woodhaven
adopted SFAS 114 and SFAS 118. See "Provision for Loan Losses." The adoption of
these statements did not have a significant impact on Woodhaven's financial
position nor its results of operations for the years ended December 31, 1995 and
1996.
Accounting for Certain Investments in Debt and Equity Securities. In May
1993, the FASB issued Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No.
115"). SFAS No. 115 addresses the accounting and reporting for investments in
equity securities that have readily determinable fair values and for all
investments in debt securities. Those investments are to be classified in one of
three categories: (a) debt securities that the enterprise has the positive
intent and ability to hold to maturity are classified as "held-to-maturity", and
are reported at amortized cost; (b) debt and equity securities that are bought
and held principally for the purpose of selling them in the near term are
classified as "trading securities" and are reported at fair value, with
unrealized gains and losses included in earnings; and (c) debt and equity
securities not classified as either held-to-maturity securities or trading
securities are classified as "available-for-sale securities" and are reported at
fair value, with unrealized gains and losses excluded from earnings and reported
in a separate component of stockholders' equity. Woodhaven adopted SFAS No. 115
as of January 1, 1994.
Impact of Inflation, Changing Prices, and Monetary Policies.
The financial statements and related financial data concerning Woodhaven
presented in this Proxy Statement-Prospectus have been prepared in accordance
with generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money over time due to
inflation. The primary effect of inflation on the operation of Woodhaven is
reflected in increased operating costs. Unlike most industrial companies,
virtually all of the assets and liabilities of a financial institution are
monetary in nature. As a result, changes in interest rates have a more
significant effect on the performance of a financial institution than do the
effects of changes in the general rate of inflation and changes in prices.
Interest rates do not necessarily move in the same direction or in the same
magnitude as the prices of good and services. Interest rates are highly
sensitive to many factors which are beyond the control of Woodhaven, including
the influence of domestic and foreign economic conditions and the monetary and
fiscal policies of the United States government and federal agencies,
particularly the Federal Reserve Board. The Federal Reserve Board implements
national monetary policy such as seeking to curb inflation and
48
<PAGE>
combat recession by its open market operations in United States government
securities, control of the discount rate applicable to borrowing by banks and
establishment of reserve requirements against bank deposits. The actions of the
Federal Reserve Board in these areas influence the growth of bank loans,
investments and deposits, and affect the interest rates charged on loans and
paid on deposits. The nature, timing and impact of any future changes in federal
monetary and fiscal policies on Woodhaven and its results of operations are not
predictable.
49
<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 OCC.
Its state-chartered banking subsidiaries are regulated primarily by the FDIC and
applicable state banking agencies. Its savings and loan association subsidiary
is regulated primarily by the OTS. Norwest's federally insured banking
subsidiaries and its 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 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
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
50
<PAGE>
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 2001.
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 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 "Holding Company
Structure"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
covered transactions with affiliates in
51
<PAGE>
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 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"
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
June 30, 1997, Norwest's total capital and Tier 1 capital to risk-adjusted
assets ratios were 10.98% and 9.06%, 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
52
<PAGE>
5%. The Federal Reserve Board has not advised Norwest of any specific leverage
ratio applicable to it. As of June 30, 1997, Norwest's leverage ratio was 6.40%.
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 has historically not engaged
in significant trading activity.
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 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
June 30, 1997, all but one of Norwest's insured depository institutions met the
criteria for well capitalized institutions as set forth above. The one exception
met all of the criteria for a well capitalized institution, except that its
risk-adjusted total capital ratio was 9.92% as of June 30, 1997. This
subsidiary's deposits and risk-adjusted assets represented, respectively, less
than 4% of Norwest's total deposits and total risk-adjusted assets.
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
53
<PAGE>
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.
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.
54
<PAGE>
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, (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.
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 Woodhaven National Bank as of
December 31, 1996 and 1995 and for each of the years in the three-year period
ended December 31, 1996 included in this Proxy Statement-Prospectus are included
herein in reliance on the report of Stovall, Grandey & Whatley, LLP, independent
certified public accountants, upon the authority of said firm as experts in
accounting and auditing.
55
<PAGE>
LEGAL MATTERS
Laurel A. Holschuh, Senior Vice President and General Counsel of Norwest
has rendered a legal opinion 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. Ms. Holschuh beneficially owns
shares of Norwest Common Stock and options to purchase additional shares of
Norwest Common Stock. As of the date of this Proxy Statement-Prospectus, the
number of shares Ms. Holschuh owns or has the right to acquire upon exercise of
her options is, in the aggregate, less than 0.1% of the outstanding shares of
Norwest Common Stock.
The material U.S. Federal income tax consequences of the Consolidation to
Woodhaven's shareholders will be passed upon for Woodhaven by Brown McCarroll &
Oaks Hartline, Austin, Texas.
INFORMATION CONCERNING NORWEST MANAGEMENT
Information concerning executive compensation, the principal holders of
voting securities, 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. Norwest's
annual report is incorporated by reference into this Proxy Statement-Prospectus.
Woodhaven shareholders who want a copy of this annual report or any document
incorporated by reference into the report may contact Norwest at the address or
phone number indicated under "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
Norwest files annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information filed by Norwest at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. You can request
copies of these documents, upon payment of a duplicating fee, by writing to the
SEC. Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Norwest's SEC filings are also available to the public from
commercial document retrieval services and on the SEC Internet site
(http://www.sec.gov).
Norwest filed a registration statement on Form S-4 to register with the SEC
the Norwest Common Stock to be issued to Woodhaven shareholders in the
Consolidation. This Proxy Statement-Prospectus is part of that registration
statement. As allowed by SEC rules, this Proxy Statement-Prospectus does not
contain all of the information you can find in the registration statement or the
exhibits to the registration statement.
Some of the information you may want to consider in deciding how to vote on
the Consolidation is not physically included in this Proxy Statement-Prospectus.
Instead, the information is "incorporated by reference" to documents filed as
appendixes to this Proxy Statement-Prospectus or to documents that have been
filed by Norwest with the SEC under SEC File No. 1-2979. See "WHAT INCORPORATED
BY REFERENCE MEANS" at the beginning of this document.
The Norwest documents that have been incorporated by reference consist of:
. Norwest's annual report on Form 10-K for the year ended December 31,
1996;
. Norwest's quarterly report on Form 10-Q for the quarter ended March 31,
1997;
56
<PAGE>
. Norwest's current reports on Form 8-K dated January 16, 1997 (filed
January 23, 1997), April 14, 1997 (filed April 21, 1997), June 3, 1997
(filed June 10, 1997) and July 14, 1997 (filed July 21, 1997);
. Norwest's current report on Form 8-K dated October 10, 1997 (filed
October 14, 1997) containing a description of the Norwest Common Stock;
and
. Norwest's registration statement on Form 8-A dated December 6, 1988, as
amended pursuant to Form 8-A/A dated October 14, 1997, relating to
preferred stock purchase rights attached to shares of Norwest Common
Stock.
All reports and proxy statements filed by Norwest after the date of this
Proxy Statement-Prospectus and before the special meeting are automatically
incorporated by reference into this Proxy Statement-Prospectus.
This Proxy Statement-Prospectus may contain information that updates,
modifies or is contrary to information in one or more of the documents
incorporated by reference. Reports filed by Norwest with the SEC after the date
of this Proxy Statement-Prospectus may also contain information that updates,
modifies or is contrary to information in the documents incorporated by
reference. You should review these reports, as they may disclose a change in
the business prospects, financial condition or other affairs of Norwest since
the date of this Proxy Statement-Prospectus.
As explained above, you may read and copy all reports filed by Norwest with
the SEC at the SEC's public reference rooms. Norwest will provide, without
charge, copies of any report incorporated by reference into this Proxy
Statement-Prospectus, excluding exhibits other than those that are specifically
incorporated by reference to an exhibit in this Proxy Statement-Prospectus. You
may obtain a copy of any document incorporated by reference by writing or
calling Norwest as follows:
Norwest Corporation
Corporate Secretary
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-1026
To ensure delivery of the copies in time for the special meeting, your
request should be received by Norwest by __________.
- --------------------------------------------------------------------------------
In deciding how to vote on the Merger, you should rely only on the
information contained or incorporated by reference in this Proxy Statement-
Prospectus. Neither Norwest nor Woodhaven has authorized any person to provide
you with any information that is different from what is contained in this Proxy
Statement-Prospectus. This Proxy Statement-Prospectus is dated July __, 1997.
You should not assume that the information contained in this Proxy Statement-
Prospectus is accurate as of any date other than such date, and neither the
mailing to you of this Proxy Statement-Prospectus nor the issuance to you of
shares of Norwest common stock will create any implication to the contrary.
This Proxy Statement-Prospectus does not constitute an offer to sell or a
solicitation of any offer to buy any securities, or the solicitation of a proxy,
in any jurisdiction in which, or to any person to whom, it is unlawful to make
any such offer or solicitation.
- --------------------------------------------------------------------------------
57
<PAGE>
WOODHAVEN NATIONAL BANK
FORT WORTH, TEXAS
FINANCIAL STATEMENTS
<PAGE>
C O N T E N T S
---------------
<TABLE>
<CAPTION>
<S> <C>
PAGE
----
COMPILED FINANCIAL STATEMENTS:
For the Periods of Six Months Ended June 30, 1997
and 1996.................................................. F-2 - F-7
AUDITED FINANCIAL STATEMENTS:
Independent Auditor's Report............................... F-8
Balance Sheets............................................. F-9 - F-10
Statements of Income....................................... F-11
Statements of Changes in Shareholders' Equity.............. F-12
Statements of Cash Flows................................... F-13 - F-14
Notes to Financial Statements.............................. F-15 - F-21 Unaudited
OTHER FINANCIAL INFORMATION:
Non-Interest Expense....................................... F-22
</TABLE>
-F-1-
<PAGE>
I N D E X
---------
PAGE
----
COMPILED FINANCIAL STATEMENTS:
Accountant's Compilation Report................ F-3
Balance Sheet.................................. F-4 - F-5
Statements of Income........................... F-6
Statements of Changes in Shareholders' Equity.. F-7
-F-2-
<PAGE>
ACCOUNTANT'S COMPILATION REPORT
To the Board of Directors
Woodhaven National Bank
Fort Worth, Texas
We have compiled the accompanying balance sheets of Woodhaven National Bank as
of June 30, 1997 and 1996, and the related statements of income and retained
earnings for the periods of six months then ended, in accordance with Statements
on Standards for Accounting and Review Services issued by the American Institute
of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
and opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures and the
statements of cash flows required by generally accepted accounting principles.
If the omitted disclosures and statements of cash flows were included in the
financial statements, they might influence the user's conclusions about the
Bank's financial position, results of operations, and cash flows. Accordingly,
these financial statements are not designed for those who are not informed about
such matters.
/s/ Stovall, Grandey & Whatley
STOVALL, GRANDEY & WHATLEY
Fort Worth, Texas
August 25, 1997
-F-3-
<PAGE>
WOODHAVEN NATIONAL BANK
BALANCE SHEETS
JUNE 30, 1997 AND 1996
ASSETS
1997 1996
----------- -----------
CASH AND DUE FROM BANKS $ 4,381,827 $ 2,764,733
FEDERAL FUNDS SOLD 4,215,000 665,000
INVESTMENT SECURITIES
Available-for-sale 7,797,594 10,125,381
LOANS, Net of unearned discount and fees and
allowance for loan losses 50,411,303 41,467,570
BANK PREMISES AND EQUIPMENT, Net of
accumulated depreciation 1,496,286 1,518,266
OTHER REAL ESTATE 394,781 277,501
NET DEFERRED TAX ASSET 84,428 157,280
ACCRUED INTEREST RECEIVABLE AND
OTHER ASSETS 667,882 880,384
----------- -----------
TOTAL ASSETS $69,449,101 $57,856,115
=========== ===========
-F-4-
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
1997 1996
------------ ------------
DEPOSITS
Demand $12,161,177 $11,338,148
Interest bearing transaction accounts 23,161,342 19,520,639
Savings 1,824,473 1,862,330
Time 25,304,695 20,433,072
----------- -----------
TOTAL DEPOSITS 62,451,687 53,154,190
SECURITIES SOLD UNDER AGREEMENTS
TO REPURCHASE 868,533 112,807
OTHER LIABILITIES
Accrued interest payable 145,820 112,599
Accrued expenses and other liabilities 158,759 64,770
----------- -----------
TOTAL OTHER LIABILITIES 304,579 177,369
----------- -----------
TOTAL LIABILITIES 63,624,799 53,444,366
SHAREHOLDERS' EQUITY
Common stock - par value $5 a share:
Authorized - 200,000 shares
Issued and outstanding - 180,000 shares 900,000 900,000
Capital surplus 1,800,000 1,800,000
Retained earnings 3,129,251 1,789,796
Unrealized loss on available-for-sale
securities, net of tax benefit of $2,549
in 1997 and $40,206 in 1996 (4,949) (78,047)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 5,824,302 4,411,749
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $69,449,101 $57,856,115
=========== ===========
-F-5-
<PAGE>
WOODHAVEN NATIONAL BANK
STATEMENTS OF INCOME
FOR THE PERIODS OF SIX MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1995
---------- ----------
INTEREST INCOME
Interest and fees on loans $2,691,455 $1,986,382
Interest on investment securities - taxable 252,079 353,238
Interest on federal funds sold and interest
bearing deposits with financial institutions 129,477 77,798
---------- ----------
TOTAL INTEREST INCOME 3,073,011 2,417,418
INTEREST EXPENSE
On deposits 1,067,875 842,455
On borrowed funds 16,760 7,257
---------- ----------
TOTAL INTEREST EXPENSE 1,084,635 849,712
---------- ----------
NET INTEREST INCOME 1,988,376 1,567,706
PROVISION FOR LOAN LOSSES 45,484 159,341
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,942,892 1,408,365
NON-INTEREST INCOME
Service charges on deposit accounts 179,993 176,118
Other 78,835 59,048
---------- ----------
TOTAL NON-INTEREST INCOME 258,828 235,166
---------- ----------
2,201,720 1,643,531
NON-INTEREST EXPENSE
Salaries and employee benefits 559,204 483,175
Occupancy expense 119,726 113,514
Furniture and equipment expense 100,962 92,809
Other 341,508 217,654
---------- ----------
TOTAL NON-INTEREST EXPENSE 1,121,400 907,152
---------- ----------
INCOME BEFORE FEDERAL INCOME TAXES 1,080,320 736,379
FEDERAL INCOME TAXES 370,347 254,250
---------- ----------
NET INCOME $ 709,973 $ 482,129
========== ==========
-F-6-
<PAGE>
WOODHAVEN NATIONAL BANK
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIODS OF SIX MONTHS ENDED
JUNE 30, 1997 AND 1996 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
Common Stock Unrealized
--------------------- Gain/(Loss)
Shares Capital Retained on AFS
Outstanding Amount Surplus Earnings Securities Total
----------- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1996 180,000 $900,000 $1,800,000 $ 1,307,667 $ 28,503 $4,036,170
Net income for the period of six
months ended June 30, 1996 482,129 482,129
Unrealized loss on available-
for-sale securities, net of
tax benefit (106,550) (106,550)
----------- -------- ----------- ----------- ----------- -----------
BALANCE AT
JUNE 30, 1996
(DEFICIT) 180,000 900,000 1,800,000 1,789,796 (78,047) 4,411,749
Net income for the period of six
months ended December 31, 1996 629,482 629,482
Unrealized gain on available-
for-sale securities, net of tax 85,298 85,298
----------- -------- ----------- ----------- ----------- -----------
BALANCE AT
DECEMBER 31, 1996 180,000 900,000 1,800,000 2,,419,278 7,251 5,126,529
Net income for the period of six
months ended June 30, 1997 709,973 709,973
Unrealized loss on available-
for-sale securities, net of
tax benefit (12,200) (12,200)
----------- -------- ----------- ----------- ----------- -----------
BALANCE AT
JUNE 30, 1997
(DEFICIT) 180,000 $900,000 $1,800,000 $ 3,129,251 $ (4,949) $5,824,302
========== ======== ========== =========== ========== ==========
</TABLE>
-F-7-
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Woodhaven National Bank
Fort Worth, Texas
We have audited the accompanying balance sheets of Woodhaven National
Bank as of December 31, 1996 and 1995, and the related statements of income,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Woodhaven National
Bank as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The other financial information on page
17 is presented for the purposes of additional analysis and is not a required
part of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
/s/ Stovall, Grandey & Whatley
STOVALL, GRANDEY & WHATLEY
February 14, 1997
Fort Worth, Texas
-F-8-
<PAGE>
WOODHAVEN NATIONAL BANK
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH AND DUE FROM BANKS $ 3,356,607 $ 2,560,038
FEDERAL FUNDS SOLD 5,945,000 3,355,000
INVESTMENT SECURITIES - Note 2
Available-for-sale 8,008,988 12,480,832
LOANS, Net of unearned discount and fees
and allowance for loan losses - Note 3 48,449,056 35,430,118
BANK PREMISES AND EQUIPMENT, Net of
accumulated depreciation - Note 4 1,502,994 1,454,405
OTHER REAL ESTATE - 108,939
NET DEFERRED TAX ASSET - Note 5 72,574 53,763
ACCRUED INTEREST RECEIVABLE AND
OTHER ASSETS 601,379 568,097
----------- -----------
TOTAL ASSETS $67,936,598 $56,011,192
=========== ===========
</TABLE>
The accompanying Notes are an integral part of these financial statements.
-F-9-
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
DEPOSITS
Demand $14,668,853 $12,052,618
Interest bearing transaction accounts 21,387,927 18,155,782
Savings 2,082,777 2,283,434
Time 24,059,314 19,057,738
----------- -----------
TOTAL DEPOSITS 62,198,871 51,549,572
SECURITIES SOLD UNDER AGREEMENTS
TO REPURCHASE 433,845 91,013
OTHER LIABILITIES
Accrued interest payable 134,495 142,501
Accrued expenses and other liabilities 28,524 55,107
Federal income taxes payable - current - Note 5 14,334 136,829
----------- -----------
TOTAL OTHER LIABILITIES 177,353 334,437
----------- -----------
TOTAL LIABILITIES 62,810,069 51,975,022
COMMITMENTS AND CONTINGENCIES - Notes 8, 9, and 10
SHAREHOLDERS' EQUITY - Notes 11 and 12
Common stock - par value $5 a share:
Authorized - 200,000 shares
Issued and outstanding - 180,000 shares 900,000 900,000
Capital surplus 1,800,000 1,800,000
Retained earnings 2,419,278 1,307,667
Unrealized gain on available-for-sale
securities, net of tax of $3,735 in 1996 and
$14,683 in 1995 7,251 28,503
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 5,126,529 4,036,170
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $67,936,598 $56,011,192
=========== ===========
</TABLE>
-F-10-
<PAGE>
WOODHAVEN NATIONAL BANK
STATEMENTS OF INCOME
DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- ----------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $4,391,497 $2,935,715 $1,923,574
Interest on investment securities -
taxable 627,596 654,855 611,865
Interest on federal funds sold and
interest bearing deposits with financial
institutions 204,587 271,915 60,071
---------- ---------- ----------
TOTAL INTEREST INCOME 5,223,680 3,862,485 2,595,510
INTEREST EXPENSE
On deposits 1,800,783 1,358,748 683,871
On borrowed funds 20,160 877 -
---------- ---------- ----------
TOTAL INTEREST EXPENSE 1,820,943 1,359,625 683,871
---------- ---------- ----------
NET INTEREST INCOME 3,402,737 2,502,860 1,911,639
PROVISION FOR LOAN LOSSES - Note 3 238,300 122,318 83,706
---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,164,437 2,380,542 1,827,933
NON-INTEREST INCOME
Service charges on deposit accounts 365,203 285,257 303,231
Gain on securities 2,715 - -
Other 116,332 106,033 115,833
---------- ---------- ----------
TOTAL NON-INTEREST INCOME 484,250 391,290 419,064
---------- ---------- ----------
3,648,687 2,771,832 2,246,997
NON-INTEREST EXPENSE
Salaries and employee benefits 1,017,746 838,767 688,947
Occupancy expense 195,570 200,979 190,133
Furniture and equipment expense 166,890 143,162 170,455
Other 572,027 518,348 507,789
---------- ---------- ----------
TOTAL NON-INTEREST EXPENSE 1,952,233 1,701,256 1,557,324
---------- ---------- ----------
INCOME BEFORE FEDERAL INCOME TAXES 1,696,454 1,070,576 689,673
FEDERAL INCOME TAXES - Note 5 584,843 369,641 237,417
---------- ---------- ----------
NET INCOME $1,111,611 $ 700,935 $ 452,256
========== ========== ==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-F-11-
<PAGE>
WOODHAVEN NATIONAL BANK
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Unrealized
Common Stock Gain/(Loss)
---------------------
Shares Capital Retained on AFS
Outstanding Amount Surplus Earnings Securities Total
----------- -------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1994 180,000 $900,000 $1,800,000 $ 154,476 $ - $2,854,476
Unrealized gain on available-
for-sale securities, net of
tax, at date of adoption of
FAS 115 103,399 103,399
Net income for the year ended
December 31, 1994 452,256 452,256
Unrealized loss on available-
for-sale securities, net of
tax benefit (139,744) (139,744)
-------- -------- ---------- ---------- ---------- ----------
BALANCE AT
DECEMBER 31, 1994
(DEFICIT) 180,000 900,000 1,800,000 606,732 (36,345) 3,270,387
Net income for the year ended
December 31, 1995 700,935 700,935
Unrealized gain on available-
for-sale securities, net of tax 64,848 64,848
-------- -------- ---------- ---------- ---------- ----------
BALANCE AT
DECEMBER 31, 1995 180,000 900,000 1,800,000 1,307,667 28,503 4,036,170
Net income for the year ended
December 31, 1996 1,111,611 1,111,611
Unrealized loss on available-
for-sale securities, net of
tax benefit (21,252) (21,252)
-------- -------- ---------- ---------- ---------- ----------
BALANCE AT
DECEMBER 31, 1996 180,000 $900,000 $1,800,000 $2,419,278 $ 7,251 $5,126,529
======== ======== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
-F-12-
<PAGE>
WOODHAVEN NATIONAL BANK
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,111,611 $ 700,935 $ 452,256
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 94,426 81,867 63,995
Provision for loan losses 238,300 122,318 83,706
Deferred income taxes (benefit) (7,863) 2,925 (55,985)
Net premium amortization or (discount
accretion) on investment securities 20,722 53,216 98,769
Gain on sale of investment securities (2,715) - -
Valuation losses - other real estate - - 23,000
Gain on sale of equipment - (602) (100)
Net loss on sale of other real estate 9,148 - 7,132
(Increase ) decrease in accrued income and
other assets 71,248 (113,465) 15,804
Increase (decrease) in accrued expenses and other
liabilities (157,084) (66,502) 256,324
------------ ------------ -----------
Total adjustments 266,182 79,757 492,645
------------ ------------ -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,377,793 780,692 944,901
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in federal funds sold (2,590,000) (1,750,000) 230,000
Purchase of investment securities
Available-for-sale - (3,481,719) -
Held-to-maturity - (1,000,000) (491,875)
Proceeds from sales of investment securities
Available-for-sale 694,867 - -
Proceeds from maturities of investment securities
Available-for-sale 3,000,000 1,150,000 -
Held-to-maturity - - 2,250,000
Principal payments on mortgage backed securities
Available-for-sale 726,770 44,917 18,399
Held-to-maturity - 643,599 1,020,592
Net increase in loans (13,259,496) (12,343,326) (5,093,358)
Purchase of premises and equipment (139,747) (438,254) (534,437)
Proceeds from sale of equipment - 1,029 100
Proceeds from sale of other real estate 22,775 - 17,060
------------ ------------ -----------
NET CASH USED BY
INVESTING ACTIVITIES (11,544,831) (17,173,754) (2,583,519)
</TABLE>
The accompanying Notes are an integral
part of these financial statements.
-F-13-
<PAGE>
WOODHAVEN NATIONAL BANK
STATEMENTS OF CASH FLOWS (continued)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand deposits,
interest-bearing
transaction accounts and savings $ 5,647,723 $ 9,503,043 $ 1,325,767
Net increase (decrease) in certificates
of deposit 5,001,576 7,556,447 (32,940)
Increase in repurchase agreements 314,308 91,013 -
----------- ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 10,963,607 17,150,503 1,292,827
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
DUE FROM BANKS 796,569 757,441 (345,791)
CASH AND DUE FROM BANKS AT BEGINNING
OF YEAR 2,560,038 1,802,597 2,148,387
----------- ----------- -----------
CASH AND DUE FROM BANKS AT END OF YEAR $ 3,356,607 $ 2,560,038 $ 1,802,596
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL SCHEDULE OF OPERATING AND INVESTING ACTIVITIES:
<C> <S> <C> <C> <C>
(1) Interest paid $ 1,828,949 $ 1,271,478 $ 690,069
(2) Income taxes paid 715,201 486,211 26,835
(3) Income taxes refunded - - 29,028
(4) Other real estate acquired through
loan foreclosures 178,861 10,299 28,640
(5) Bank financed sales of other real
estate 255,877 - 122,000
</TABLE>
-F-14-
<PAGE>
WOODHAVEN NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies
- ------
The accounting and reporting policies of Woodhaven National Bank are in
accordance with generally accepted accounting principles. A summary of the more
significant policies follows:
Investment Securities
---------------------
Effective January 1, 1994, the Bank adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities (SFAS 115). Under the provisions of SFAS 115,
investment securities that are held for short-term resale are classified
as trading securities and carried at fair value. Debt securities that
management has the ability and intent to hold to maturity are classified
as held-to-maturity and carried at cost, adjusted for amortization of
premiums and accretion of discounts using methods approximating the
interest method. Other marketable securities are classified as available-
for-sale and are carried at fair value. Realized and unrealized gains and
losses on trading securities are included in net income. Unrealized gains
and losses on securities available-for-sale, net of the tax effect, are
recognized as direct increases or decreases in shareholders' equity.
Gains or losses on disposition are recognized using the specific
identification method.
Loans and Allowance For Loan Losses
-----------------------------------
Loans are stated at the principal amount outstanding less unearned
discount and the allowance for loan losses. Unearned discount on
installment loans is recognized in income over the terms of the loans by a
method approximating the interest method. Interest income on all other
loans is recognized based upon the principal amounts outstanding. The
accrual of interest on a loan is discontinued when, in the opinion of
management, there is doubt about the ability of the borrower to pay
interest or principal. Interest previously earned, but uncollected on such
loans, is recognized as income when collected, until such time as the loan
is returned to an accrual status.
The allowance for loan losses is comprised of amounts charged
against income in the form of the provision for loan losses, less charged-
off loans, net of recoveries. The amount of the provision for possible
loan losses charged against income in each period is determined by
management based on a number of factors, including the Bank's loss
experience in relation to outstanding loans and the existing level of the
allowance, prevailing and prospective economic conditions, and
management's continuing review of nonperforming loans and its evaluation
of the quality of the loan portfolio. Loans are placed in non-accrual
status when management believes that the borrower's financial condition,
after giving consideration to economic and business conditions and
collection efforts, is such that collection of interest is doubtful. Loans
are charged against the allowance for loan losses when management believes
that collection of the principal is unlikely.
-F-15-
<PAGE>
WOODHAVEN NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Summary of Significant Accounting Policies (continued)
- ------
Bank Premises and Equipment
---------------------------
Bank premises and equipment are stated at cost less accumulated
depreciation.
Depreciation expense is computed using the straight-line method
based upon the estimated useful lives of the assets.
Maintenance and repairs are charged to operating expenses. Renewals
and betterments are added to the asset accounts and depreciated over the
periods benefited. Depreciable assets sold or retired are removed from the
asset and related accumulated depreciation accounts and any gain or loss
is reflected in the income and expense accounts.
Other Real Estate
-----------------
Other real estate is foreclosed property held pending disposition
and is valued at the lower of its fair value or the recorded investment in
the related loan. At foreclosure, if the fair value of the real estate
acquired is less than the Bank's recorded investment in the related loan,
a writedown is recognized through a charge to the allowance for loan
losses. Any subsequent reduction in value is recognized by a charge to
income.
Federal Income Taxes
--------------------
Income taxes are provided for the tax effects of the transactions
reported in the financial statements and consist of taxes currently due
plus deferred taxes related primarily to differences between the tax and
financial reporting of the allowance for loan losses, non-accrual loans,
securities and accumulated depreciation. The deferred tax assets and
liabilities represent the future tax return consequences of those
differences which will either be taxable or deductible when the assets and
liabilities are recovered or settled.
Estimates
---------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Cash and Cash Equivalents
-------------------------
For the purpose of presentation in the Statements of Cash Flows,
cash and cash equivalents are defined as those amounts included in the
balance sheet caption "Cash and Due from Banks".
Reclassifications
-----------------
Certain accounts have been reclassified in the financial statements
of December 31, 1995 to conform to the 1996 presentation.
-F-16-
<PAGE>
WOODHAVEN NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - Investment Securities
- ------
The amortized cost and fair values of investment securities at
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Available-For-Sale Cost Gains Losses Value
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
U.S. government agencies and
corporations $ 2,486,029 $ 20,361 $ - $ 2,506,390
U.S. government agency
mortgage backed securities 5,430,973 31,361 (40,736) 5,421,598
Federal Reserve Bank stock 81,000 - - 81,000
------------ ---------- ---------- ------------
Total Securities $ 7,998,002 $ 51,722 $ (40,736) $ 8,008,988
============ ========== ========== ============
</TABLE>
The balance sheet as of December 31, 1996 reflects the fair value of
available-for-sale securities, $8,008,988. A net unrealized gain of $10,986 is
in the available-for-sale investment securities balance. The unrealized gain,
net of tax, is included in shareholders' equity.
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Available-For-Sale Cost Gains Losses Value
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
U.S. treasury securities $ 1,352,336 $ 2,509 $ - 1,354,845
U.S. government agencies
and corporations 4,135,577 54,909 (992) 4,189,494
U.S. government agency
mortgage backed
securities 6,868,733 23,009 (36,249) 6,855,493
Federal Reserve Bank stock 81,000 - - 81,000
------------ ---------- ---------- ------------
Total Securities $ 12,437,646 $ 80,427 $ (37,241) $ 12,480,832
============ ========== ========== ============
</TABLE>
The balance sheet as of December 31, 1995 reflects the fair value of
available-for-sale securities, $12,480,832. A net unrealized gain of $43,186 is
in the available-for-sale investment security balance. The unrealized gain, net
of tax, is included in shareholders' equity. In 1995, the Bank took the one-
time opportunity to reclassify all of their investments as available-for-sale
under FAS 115.
The amortized cost and fair value of debt securities at December 31, 1996,
by contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities Available-For-Sale
-----------------------------
Amortized
Amounts maturing in: Cost Fair Value
------------ ------------
<S> <C> <C>
After one year through five years $ 2,486,029 $ 2,506,390
Mortgage backed securities 5,430,973 5,421,598
Federal Reserve Bank Stock 81,000 81,000
------------ ------------
Totals $ 7,998,002 $ 8,008,988
============ ============
</TABLE>
Investment securities with an amortized cost of $3,435,598 and $652,754 and
a fair value of $3,442,115 and $653,264 at December 31, 1996 and 1995, were
pledged to secure public deposits and for other purposes as required or
permitted by law.
Proceeds from sales of investment securities in 1996 were $694,867 and
gross realized gains on such sales were $2,715. There were no sales of
investment securities in 1995 or 1994.
-F-17-
<PAGE>
WOODHAVEN NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - Loans and Allowance for Loan Losses
- ------
An analysis of loan categories at December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Commercial $16,604,315 $12,389,938
Real estate loans 29,449,544 20,889,534
Installment loans 3,397,442 2,951,736
Overdrafts 38,938 9,004
----------- -----------
49,490,239 36,240,212
Less: Unearned discount and fees (452,695) (388,998)
Allowance for loan losses (588,488) (421,096)
----------- -----------
Loans, Net $48,449,056 $35,430,118
=========== ===========
</TABLE>
Transactions in the allowance for loan losses for the years ended
December 31, 1996, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Balance, beginning of year $421,096 $311,231 $273,479
Provisions, charged to income 238,300 122,318 83,706
-------- -------- --------
659,396 433,549 357,185
Loans charged off (86,485) (40,865) (66,082)
Recoveries of loans previously charged off 15,577 28,412 20,128
-------- -------- --------
Net (70,908) (12,453) (45,954)
-------- -------- --------
Balance, end of year $588,488 $421,096 $311,231
======== ======== ========
</TABLE>
At December 31, 1996 and 1995, the Bank had loans in the amount of $11,113
and 21,040 that were specifically classified as impaired. The allowance for loan
losses related to impaired loans amounted to approximately $139 and $252 at
December 31, 1996 and 1995. In addition, at December 31, 1996 and 1995, the Bank
had other non-accrual loans of approximately $84,182 and $127,346, respectively,
for which impairment had not been recognized. If interest on these loans had
been recognized at the original interest rates, interest income would have
increased approximately $15,490 and $25,005 in 1996 and 1995, respectively.
Woodhaven National Bank grants commercial, and real estate loans to
customers within Tarrant County, Texas and the surrounding area. A substantial
portion of its debtors' ability to honor their contracts is dependent upon the
commercial and real estate economic sectors in that geographic area.
-F-18-
<PAGE>
WOODHAVEN NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - Bank Premises and Equipment
- ------
The investment in bank premises and equipment at December 31, 1996 and
1995, is as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Land $ 346,117 $ 346,117
Building 1,134,470 1,068,948
Furniture and equipment 842,953 759,119
---------- ----------
2,323,540 2,174,184
Less accumulated depreciation
and amortization 823,682 745,925
---------- ----------
1,499,858 1,428,259
Construction in progress 3,086 26,146
---------- ----------
Bank Premises and Equipment, Net $1,502,944 $1,454,405
========== ==========
</TABLE>
Depreciation and amortization on bank premises and equipment charged to
expense totaled $94,426, $81,867 and $63,995 for the years ended December 31,
1996, 1995 and 1994, respectively.
NOTE 5 - Federal Income Taxes
- ------
The components of the federal income tax provision were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current $592,706 366,716 $293,402
Deferred (7,863) 2,925 (55,985)
-------- -------- --------
Total $584,843 $369,641 $237,417
======== ======== ========
</TABLE>
At December 31, 1996 and 1995, the net deferred tax was comprised of the
following temporary difference and carryforward items:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1996 1995
-------- --------
<S> <C> <C>
Interest accrued for tax purposes on
loans not accruing for financial
purposes $ 21,918 $ 23,284
Loan loss provisions and allowances
for financial reporting purposes
greater than amounts deductible for
tax purposes 138,627 57,706
Fees deferred for financial but not for
tax purposes 799 2,505
Valuation allowance for other real
estate not deductible for tax
purposes - 57,890
------- -------
TOTAL DEFERRED TAX ASSET 161,344 141,385
Unrealized gain on available-for-sale
securities (3,735) (14,683)
Excess of depreciation taken for tax
purposes over the amount for
financial reporting purposes (72,663) (67,340)
Accretion on securities recognized for
financial purposes but not realized
for tax purposes (4,657) (3,189)
Other (7,715) (2,410)
------- -------
TOTAL DEFERRED TAX LIABILITY (88,770) (87,622)
------- -------
NET DEFERRED TAX ASSET $ 72,574 $ 53,763
======= =======
</TABLE>
-F-19-
<PAGE>
WOODHAVEN NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - Related Party Transactions
- ------
During 1996 and 1995, the Bank had transactions made in the ordinary course
of business with certain of its officers, directors and principal shareholders.
All loans included in such transactions were made on substantially the same
terms, including interest rate and collateral, as those prevailing at the time
for comparable transactions with other persons. The balances of these loans were
approximately $1,418,037 and $1,512,645 at December 31, 1996 and 1995,
respectively.
NOTE 7 - Pension Plan
- ------
Effective January 1, 1995, the Bank adopted a defined contribution plan
which covers substantially all employees. Under this 401(k) plan, the Bank will
match 1/2 of the first 6% of employee contributions. Employer matching
contributions were $15,374 in 1996 and $11,663 in 1995.
NOTE 8 - Other Commitments and Contingent Liabilities
- ------
In the normal course of business there are outstanding various commitments
and contingent liabilities, such as guarantees and commitments to extend credit,
which are not reflected in the financial statements. There were commitments on
letters of credit in the amount of $407,710 at December 31, 1996 and $236,349 at
December 31, 1995. There were unfunded loan commitments of approximately
$7,216,000 and $5,046,000 at December 31, 1996 and 1995, respectively. No
losses are anticipated as a result of these transactions.
NOTE 9 - Compensated Absences
- ------
Employees of the Bank are entitled to paid vacation, paid sick days and
personal days off, depending on job classification, length of service, and other
factors. It is impracticable to estimate the amount of compensation for future
absences, and accordingly, no liability has been recorded in the accompanying
financial statements. The Bank's policy is to recognize the costs of
compensated absences when actually paid to employees.
NOTE 10 - Litigation
- -------
The Bank is a party to certain legal actions arising in the ordinary course
of its business. It is the opinion of legal counsel that the settlement of
these matters will not materially affect the Bank's financial position.
-F-20-
<PAGE>
WOODHAVEN NATIONAL BANK
NOTES TO FINANCIAL STATEMENTS
NOTE 11 - Stock Option Plan
- -------
In 1995 the Bank established a Stock Option Plan. The plan provides for
the granting to key employees of the Bank options to purchase the common stock
of the Bank at $19 a share.
The following is a summary of transactions for the years presented:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995
----------- ----------
<S> <C> <C>
Outstanding, beginning of year 20,000 -
Options granted during the year - 20,000
Exercised during the year - -
Canceled during the year - -
----------- ----------
Outstanding, end of year 20,000 20,000
=========== ==========
</TABLE>
NOTE 12 - Regulatory Matters
- -------
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory (and possibly additional discretionary) actions
by regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. The regulations require the Bank to meet specific
capital adequacy guidelines that involve quantitative measures of the Bank's
assets, liabilities, and certain off-balance sheet items as calculated under
regulatory accounting practices. The Bank's capital classification is also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum ratios (set forth in the table below) of
Tier I capital (as defined in the regulations) to total average assets and
minimum ratios of Tier I and total capital to risk-weighted assets as set forth
in the table below. The Bank's actual capital ratios are also presented in the
table.
<TABLE>
<CAPTION>
1996 1995
-------- --------
Capital Adequacy Capital Adequacy
------------------ ------------------
Required Actual Required Actual
Ratio Ratio Ratio Ratio
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Tier I Capital (to Average Assets) 4.0% 7.89% 4.0% 8.40%
Tier I Capital (to risk Weighted Assets) 4.0% 10.06% 4.0% 10.20%
Total Capital (to Risk Weighted Assets) 8.0% 11.22% 8.0% 11.27%
</TABLE>
Management believes, as of December 31, 1996 and 1995, that the Bank meets
all capital requirements to which it is subject.
-F-21-
<PAGE>
OTHER FINANCIAL IMFORMATION
WOODHAVEN NATIONAL BANK
NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
SALARIES AND EMPLOYEE BENEFITS
Salaries $ 854,846 $ 698,256 $ 587,972
Payroll taxes 69,075 58,292 47,252
Insurance 48,343 44,257 27,755
401(k) plan contributions 15,374 11,663 -
Other 30,108 26,299 25,968
---------- ---------- ----------
Totals 1,017,746 838,767 688,947
OCCUPANCY EXPENSE
Depreciation - buildings 38,867 32,373 15,911
Lease expense 2,214 13,176 45,183
Utilities 22,901 23,850 23,410
Janitorial service 8,657 8,533 5,922
Building maintenance and repairs 28,614 21,906 14,588
Security 30,840 32,404 26,801
Insurance 42,462 44,082 38,531
Ad valorem taxes 21,015 19,397 9,150
Amortization - leasehold improvements - 5,258 10,637
---------- ---------- ----------
Totals 195,570 200,979 190,133
FURNITURE AND EQUIPMENT EXPENSE
Depreciation - furniture and equipment 55,559 44,236 37,447
Maintenance and repairs 22,709 19,150 16,543
Rentals and leases 6,947 8,491 12,348
Data processing expense 81,675 71,285 104,117
---------- ---------- ----------
Totals 166,890 143,162 170,455
OTHER EXPENSE
Advertising and public relations 60,520 60,479 23,222
Professional services 62,560 65,281 73,018
Office supplies 55,525 49,744 32,375
Directors and committee fees 32,269 32,700 30,600
Regulatory assessments 27,092 61,718 92,828
ATM fees and expenses 38,275 40,642 41,589
Postage 38,915 36,252 28,945
Other losses 21,014 14,289 10,619
Auto and travel 35,767 33,157 21,739
Franchise taxes 9,435 7,891 6,824
Telephone 27,570 18,846 14,767
Courier and armored motor service 11,530 11,502 11,019
Other real estate 1,564 6,146 35,225
Credit card expense 24,504 15,908 14,206
SBA loan expense 67,486 29,189 5,818
Miscellaneous 58,001 34,604 64,995
---------- ---------- ----------
Totals 572,027 518,348 507,789
---------- ---------- ----------
TOTAL NON-INTEREST EXPENSE $1,952,233 $1,701,256 $1,557,324
========== ========== ==========
</TABLE>
See Independent Auditor's Report.
-F-22-
<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 22 day of April, 1997, by and between WOODHAVEN NATIONAL BANK ("WNB"), a
national banking association , and NORWEST CORPORATION ("Norwest"), a Delaware
corporation.
WHEREAS, the parties hereto desire to effect a reorganization whereby
a wholly-owned subsidiary of Norwest will consolidate with and into WNB (the
"Consolidation") pursuant to a plan of consolidation (the "Consolidation
Agreement") in substantially the form attached hereto as Exhibit A, which
provides, among other things, for the conversion and exchange of the shares of
Common Stock of WNB of the par value of $5.00 per share ("WNB Common Stock")
outstanding immediately prior to the time the Consolidation becomes effective in
accordance with the provisions of the Consolidation Agreement into shares of
voting Common Stock of Norwest of the par value of $1-2/3 per share ("Norwest
Common Stock"),
NOW, THEREFORE, to effect such reorganization and in consideration of
the premises and the mutual covenants and agreements contained herein, the
parties hereto do hereby represent, warrant, covenant and agree as follows:
1. Basic Plan of Reorganization
(a) Consolidation. Subject to the terms and conditions contained
-------------
herein, a wholly-owned subsidiary of Norwest ("Consolidation Co.") will be
consolidated by statutory consolidation with and into WNB, under the charter of
WNB, pursuant to the provisions of (S)215 of the National Bank Act ("National
Bank Act") and pursuant to the Consolidation Agreement, in which consolidation
each share of WNB Common Stock outstanding immediately prior to the Effective
Time of the Consolidation (as defined below) (other than shares as to which
statutory dissenters' appraisal rights have been exercised) will be converted
into and exchanged for the number of shares of Norwest Common Stock determined
by dividing the Adjusted Norwest Shares (as defined below) by the sum of (i) the
number of shares of WNB Common Stock outstanding immediately prior to the
Effective Time of the Consolidation, and (ii) the number of shares of WNB Common
Stock issuable pursuant to the exercise of vested and exercisable WNB Options
(as defined below) outstanding immediately prior to the Effective Time of the
Consolidation. The "Adjusted Norwest Shares" shall mean the number equal to
$10,000,000 divided by the Norwest Measurement Price. The "Norwest Measurement
Price" is defined as the average of the closing prices of a share of Norwest
Common Stock as reported on the consolidated tape of the New York Stock Exchange
during the period of 20 trading days ending on the day immediately preceding the
meeting of the shareholders of WNB held to vote on this Agreement and the
Consolidation Agreement.
(b) Norwest Common Stock Adjustments. If, between the date hereof
--------------------------------
and the Effective Time of the Consolidation (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
shares of Norwest Common Stock into which a share of WNB Common Stock shall be
converted pursuant to subparagraph (a) above and/or the price of such shares for
the purposes of calculating the Norwest
A-1
<PAGE>
Measurement Price will be appropriately and proportionately adjusted so that the
number of such shares of Norwest Common Stock into which a share of WNB Common
Stock shall be converted will equal the number of shares of Norwest Common Stock
which the holder of a share of WNB 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 Consolidation
(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 Consolidation (as defined in subparagraph (d) below).
(d) Mechanics of Closing Consolidation. Subject to the terms and
----------------------------------
conditions set forth herein, the Consolidation Agreement shall be executed and
it shall be filed with the Office of the Comptroller of the Currency (the
"Comptroller"). The closing of the Consolidation will occur on a mutually
agreeable date, which date shall be no later than ten (10) business days
following the satisfaction or waiver of all conditions precedent set forth in
paragraphs 6, 7 and 8 of this Agreement (excluding any conditions that cannot be
satisfied until the closing date) or on such other date as may be agreed to by
the parties (the "Closing Date"). Each of the parties agrees to use its best
efforts to cause the Consolidation to be completed as soon as practicable after
the receipt of approval by the WNB shareholders of this Agreement and the
Consolidation Agreement, the receipt of final regulatory approval of the
Consolidation, 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 Consolidation shall become
effective (the "Effective Date of the Consolidation") on the date specified in
the Certificate of Approval of Consolidation to be issued by the Comptroller.
The "Effective Time of the Consolidation" shall be 11:59 p.m. Fort Worth, Texas
time on the Effective Date of the Consolidation. At the Effective Time of the
Consolidation, the separate existence of Consolidation Co. shall cease and
Consolidation Co. will be consolidated with and into WNB pursuant to the
Consolidation Agreement.
The closing of the transactions contemplated by this Agreement and the
Consolidation Agreement (the "Closing") shall take place on the Closing Date at
the offices of Norwest, Norwest Center, Sixth and Marquette, Minneapolis,
Minnesota, or at such other place as the parties shall mutually agree.
2. Representations and Warranties of WNB. WNB represents and warrants
to Norwest as follows:
(a) Organization and Authority. WNB is a national banking
--------------------------
association duly organized, validly existing and in good standing under the laws
of the United States, is duly qualified to do business and is in good standing
in all jurisdictions where its ownership or leasing of property or the conduct
of its business requires it to be so qualified and failure to be so qualified
would have a material adverse effect on WNB and has corporate power and
authority to own its properties and assets and to carry on its
A-2
<PAGE>
business as it is now being conducted. WNB has furnished Norwest true and
correct copies of its articles of association and bylaws, as amended.
(b) WNB's Subsidiaries. WNB does not now have, and has never had,
------------------
any subsidiaries. Except as set forth on Schedule 2(b), WNB 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 WNB consists of
---------------
200,000 shares of common stock, $5.00 par value, of which as of the close of
business on December 31, 1996, 180,000 shares were outstanding and no shares
were held in the treasury. As of the date hereof, there are outstanding options
(each a "WNB Option") to purchase an aggregate of 20,000 shares of WNB Common
Stock under two separate stock option agreements (the "WNB Option Agreements"),
each entered into and effective as of January 1, 1995. The maximum number of
shares of WNB Common Stock (assuming for this purpose that phantom shares and
other share-equivalents, constitute WNB Common Stock) that would be outstanding
as of the Effective Date of the Consolidation if all options, warrants,
conversion rights and other rights with respect thereto were exercised is
200,000. All of the outstanding shares of capital stock of WNB 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 WNB to issue, sell or otherwise dispose of, or to purchase, redeem or
otherwise acquire, any shares of capital stock of WNB. Since December 31, 1996,
no shares of WNB capital stock have been issued, purchased, redeemed or
otherwise acquired, directly or indirectly, by WNB, 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 WNB.
(d) Authorization. WNB has the corporate power and authority to
-------------
enter into this Agreement and the Consolidation 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 Consolidation Agreement by WNB and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of WNB. Subject to such approvals of shareholders and of government
agencies and other governing boards having regulatory authority over WNB as may
be required by statute or regulation, this Agreement and the Consolidation
Agreement are valid and binding obligations of WNB enforceable against WNB in
accordance with their respective terms.
Except as set forth on Schedule 2(d), neither the execution, delivery
and performance by WNB of this Agreement or the Consolidation Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor compliance
by WNB with any of the provisions hereof or thereof, will (i) violate, conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance required
by, or result in a right of termination or acceleration of, or result in the
creation of, any lien, security interest, charge or encumbrance upon any of the
properties or assets of WNB under any of the terms, conditions or provisions of
(x) its articles of association or by-laws or (y) any material note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which WNB is a party or by which it may be bound, or
to which WNB or any of its properties or assets may be subject, or (ii) subject
to
A-3
<PAGE>
compliance with the statutes and regulations referred to in the next paragraph,
to the best knowledge of WNB, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to WNB or any of its
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 Consolidation under
the National Bank Act, including the approval of any proxy materials by the
Comptroller pursuant to the Comptroller's rules and regulations, 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 WNB of the
transactions contemplated by this Agreement and the Consolidation Agreement.
(e) WNB Financial Statements. The balance sheets of WNB as of
------------------------
December 31, 1996 and 1995 and related statements of operations, changes in
stockholders' equity and cash flows for the two years ended December 31, 1996,
together with the notes thereto, audited by Stovall, Grandey & Whatley, Fort
Worth, Texas (collectively, the "WNB Financial Statements"), have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis and present fairly the financial position of WNB at the dates
and the results of operations and cash flows of WNB for the periods stated
therein.
(f) Reports. Since December 31, 1990, WNB 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 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 "WNB Reports". As of their respective dates, the WNB
Reports complied in all material respects with all the rules and regulations
promulgated by the Comptroller, Federal Reserve Board, the FDIC, and applicable
state securities and banking authorities, as the case may be, and did not
contain any untrue statement of a material fact. Copies of all the WNB Reports
have been made available to Norwest by WNB. WNB 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 WNB
---------------------
Financial Statements, and except for any lien for current taxes not yet
delinquent, WNB 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 WNB's balance sheet as of December 31, 1996, and
to all real and personal property acquired since such date, except such real and
personal property as has been disposed of in the ordinary course of business.
All leases of real property pursuant to which WNB, 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 WNB or any event which, with notice or
lapse of time or both, would constitute such a material default. Substantially
all WNB's buildings and equipment in regular use have been well maintained and
are in good and serviceable condition, reasonable wear and tear excepted.
A-4
<PAGE>
(h) Taxes. WNB 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 WNB for the fiscal year ended December 31, 1993, 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) WNB is not a party to any pending action or
proceeding, nor to the best knowledge of WNB 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 WNB which has not been settled, resolved and fully satisfied. WNB
has paid all taxes owed or which it is required to withhold from amounts owing
to employees, creditors or other third parties. The balance sheet as of
December 31, 1996, referred to in paragraph 2(e) hereof, includes adequate
provision for all accrued but unpaid federal, state, county, local and foreign
taxes, interest, penalties, assessments or deficiencies of WNB with respect to
all periods through the date thereof.
(i) Absence of Certain Changes. Since December 31, 1996, there has
--------------------------
been no change in the business, financial condition or results of operations of
WNB which has had, or would reasonably be expected to have, a material adverse
effect on the business, financial condition or results of operations of WNB
(other than changes in banking laws or regulations, or interpretations thereof,
that affect the banking industry generally or changes in the general level of
interest rates).
(j) Commitments and Contracts. Except as set forth on Schedule 2(j),
-------------------------
WNB is not a party or subject to any of the following (whether written or oral,
express or implied):
(i) any employment contract or understanding (including
any understandings or obligations with respect to severance pay,
termination pay or fringe benefits) with any present or former
officer, director, employee or consultant pursuant to which WNB has
any current or future obligation or liability, other than solely an
obligation of confidentiality (other than those which are terminable
at will by WNB);
(ii) any plan, contract or understanding providing for any
bonus, pension, option, deferred compensation, retirement payment,
profit sharing or similar arrangement with respect to any present or
former officer, director, employee or consultant;
(iii) any labor contract or agreement with any labor union;
(iv) any contract containing covenants which (a) limit the
ability of WNB 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, WNB may carry on its business (other than as may be
required by law or applicable regulatory authorities), or (c) require
WNB to deal exclusively with any vendor, service provider or other
third party;
A-5
<PAGE>
(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 $10,000 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. WNB has furnished Norwest
--------------------------------
copies of (i) all attorney responses to the request of the independent auditors
for WNB with respect to loss contingencies as of December 31, 1996, and (ii) a
written list of all legal and regulatory proceedings filed against WNB since
said date. WNB is not a party to any pending or, to the best knowledge of WNB,
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 would not reasonably be expected to have, a material adverse effect
on the business, financial condition or results of operations of WNB.
(l) Insurance. WNB is presently insured, and during each of the
---------
past five calendar years has been insured, for reasonable amounts with insurance
companies that, to the best knowledge of WNB, 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. WNB has
delivered to Norwest correct and complete copies of all material policies of
insurance of WNB currently in effect.
(m) Compliance with Laws. WNB 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 WNB; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect
and, to the best knowledge of WNB, no suspension or cancellation of any of them
is threatened; and all such filings, applications and registrations are current.
The conduct by WNB of its business and the condition and use of its properties
do 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. WNB is not 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 would be expected to have a material adverse effect
on the business or properties of WNB. 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 WNB which reasonably would be
expected to have a material adverse effect on the business or properties of WNB.
A-6
<PAGE>
(n) Labor. No work stoppage involving WNB is pending or, to the best
-----
knowledge of WNB, threatened. WNB is not involved in, or to the best knowledge
of WNB threatened with or affected by, any labor dispute, arbitration, lawsuit
or administrative proceeding which could materially and adversely affect the
business of WNB.
(o) Material Interests of Certain Persons. Except as set forth on
-------------------------------------
Schedule 2(o), to the best knowledge of WNB, no beneficial owner of 5% or more
of the outstanding capital stock of WNB, or any officer or director of WNB, or
any "associate" (as such term is defined in Rule l4a-1 under the Exchange Act)
of any such 5% shareholder, 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 WNB.
Schedule 2(o) also sets forth a correct and complete list of any loan
or other extension of credit from WNB to any present officer, director, employee
or "principal shareholder" (as such term is defined under Regulation O of the
Federal Reserve Board) of WNB or to any associate or related interest of any
such person including those required to be approved by or reported to WNB's
Board of Directors pursuant to Regulation O.
(p) WNB 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 WNB 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 WNB,
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), WNB has
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. WNB 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 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 WNB, no Plan or any trust created thereunder or any
trustee, fiduciary or
A-7
<PAGE>
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 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 WNB.
(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
Consolidation Agreement.
(vi) No Plan or any trust created thereunder has incurred
any "accumulated funding deficiency", as such term is defined in
Section 412 of the Code (whether or not waived), during the 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 Consolidation
Agreement nor the consummation of the transactions contemplated hereby
and thereby will (i) result in any material payment (including,
without limitation, severance, unemployment compensation, golden
parachute or otherwise) becoming due to any director or employee or
former employee of WNB 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 WNB
--------------------
supplied or to be supplied by WNB 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 WNB Common
Stock pursuant to the provisions of the Consolidation Agreement (the
"Registration Statement"), (ii) the proxy statement to be mailed to WNB's
shareholders in connection with the meeting to be called to consider the
Consolidation (the "Proxy Statement") and (iii) any other documents to be filed
with the SEC or any regulatory authority in connection with the transactions
contemplated hereby or by the Consolidation Agreement will, at the respective
times such documents are filed with the SEC or any regulatory authority and, in
the case of the Registration Statement, when it becomes effective and, with
respect to the Proxy Statement, when mailed, 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 WNB is responsible for filing with any regulatory
authority in connection with the Consolidation will comply as to form in all
material respects with the provisions of applicable law.
(r) Registration Obligations. Except as set forth on Schedule 2(r),
------------------------
WNB is not under any obligation, contingent or otherwise, which will survive the
Consolidation, by reason of any agreement to register any of its securities
under the Securities Act.
(s) Brokers and Finders. Except as set forth on Schedule 2(s),
-------------------
neither WNB nor any of its officers, directors or employees has employed any
broker or finder or incurred
A-8
<PAGE>
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 WNB
in connection with this Agreement, the Consolidation Agreement and/or the
transactions contemplated hereby and thereby.
(t) Fiduciary Activities. Except as set forth in Schedule 2(t), WNB
--------------------
does not have and has never had any accounts for which it has acted as a
fiduciary, including but not limited to accounts for which it has served as
trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor.
(u) No Defaults. WNB is not in default, and no event has 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
would reasonably be expected to have a material adverse effect upon WNB. To the
best of WNB's knowledge, all parties with whom WNB has material leases,
agreements or contracts or who owe to WNB material obligations, other than with
respect to those arising in the ordinary course of the banking business of WNB,
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 WNB 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 WNB's knowledge, threatened against WNB the result of which has had
or would reasonably be expected to have a material adverse effect upon WNB; to
the best of WNB's knowledge, there is no reasonable basis for any such
proceeding, claim or action; and to the best of WNB's knowledge, WNB is not
subject to any agreement, order, judgment, or decree by or with any court,
governmental authority or third party imposing any such environmental liability.
WNB has provided Norwest with copies of all environmental assessments, reports,
studies and other documents in its possession which 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.
(w) Regulatory Impediments. As of the date hereof, WNB is not aware
----------------------
of the existence of any factor that would materially delay or materially hinder
the issuance of any regulatory approval necessary to consummate the
Consolidation.
3. Representations and Warranties of Norwest. Norwest represents and
warrants to WNB as follows:
(a) Organization and Authority. Norwest is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and failure to be so qualified would
have a material adverse effect on Norwest and its subsidiaries taken as a whole
and has corporate power and authority to own its properties and assets and to
carry on its business as it is now being conducted. Norwest is registered as a
bank holding company with the Federal Reserve Board under the BHC Act.
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<PAGE>
(b) Norwest Subsidiaries. Schedule 3(b) sets forth a complete and
--------------------
correct list as of December 31, 1996, 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 (including
25,000 shares held by a subsidiary) 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, 370,342,549 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
Consolidation Agreement and the consummation of the transactions contemplated
hereby and thereby. Subject to such approvals of government agencies and other
governing boards having regulatory authority over Norwest as may be required by
statute or regulation, this Agreement is a valid and binding obligation of
Norwest enforceable against Norwest in accordance with its terms.
Neither the execution, delivery and performance by Norwest of this
Agreement or the Consolidation Agreement, nor the consummation of the
transactions contemplated hereby and thereby, nor compliance by Norwest with any
of the provisions hereof or thereof will (i) violate, conflict with, or result
in a breach of any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the creation
of, any lien, security interest, charge or encumbrance upon any of the
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<PAGE>
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 Consolidation under the National Bank Act, including the approval
of any proxy materials by the Comptroller pursuant to the Comptroller's rules
and regulations, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or authority is necessary
for the consummation by Norwest of the transactions contemplated by this
Agreement and the Consolidation Agreement.
(e) Norwest Financial Statements. The consolidated balance sheets of
----------------------------
Norwest and Norwest's subsidiaries as of December 31, 1996 and 1995 and related
consolidated statements of income, stockholders' equity and cash flows for the
three years ended December 31, 1996, 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, 1996 (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.
(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
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<PAGE>
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
December 31, 1996 included in Norwest's Annual Report on Form 10-K 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 December 31, 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 December 31, 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
A-12
<PAGE>
which, Norwest or any Norwest Subsidiary may carry on its business
(other than as may be required by law or applicable regulatory
authorities); or
(iii) any other contract or agreement which is a "material
contract" within the meaning of Item 601(b)(10) of Regulation S-K.
(k) Litigation and Other Proceedings. 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
A-13
<PAGE>
Plans"). No Norwest Plan is a "multi-employer plan" within the meaning
of Section 3(37) of ERISA.
(ii) Each Norwest Plan is and has been in all material
respects operated and administered in accordance with its provisions
and applicable law. Except as set forth on Schedule 3(o)(ii), Norwest
or the Norwest Subsidiaries have 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 Consolidation
Agreement.
(vi) No Norwest Plan or any trust created thereunder has
incurred any "accumulated funding deficiency", as such term is defined
in Section 412 of the Code (whether or not waived), during the last
five Norwest Plan years which would result in a material liability.
(vii) Neither the execution and delivery of this Agreement
and the Consolidation Agreement nor the consummation of the
transactions contemplated hereby and thereby will (i) result in any
material payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due
to any director or employee or former employee of Norwest under any
Norwest Plan or otherwise, (ii) materially increase any benefits
otherwise payable under any Norwest Plan or (iii) result in the
acceleration of the time of payment or vesting of any such benefits to
any material extent.
A-14
<PAGE>
(p) Registration Statement, etc. None of the information regarding
---------------------------
Norwest and its subsidiaries supplied or to be supplied by Norwest for inclusion
in (i) the Registration Statement, (ii) the Proxy Statement, or (iii) any other
documents to be filed with the SEC or any regulatory authority in connection
with the transactions contemplated hereby or by the Consolidation Agreement
will, at the respective times such documents are filed with the SEC or any
regulatory authority and, in the case of the Registration Statement, when it
becomes effective and, with respect to the Proxy Statement, when mailed, 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 Norwest and the Norwest
Subsidiaries are responsible for filing with the SEC and with any other
regulatory authority in connection with the Consolidation will comply as to form
in all material respects with the provisions of applicable law.
(q) Brokers and Finders. Neither Norwest nor any Norwest Subsidiary nor
-------------------
any of their respective officers, directors or employees has employed any broker
or finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted directly
or indirectly for Norwest or any Norwest Subsidiary in connection with this
Agreement and the Consolidation Agreement or the transactions contemplated
hereby and thereby.
(r) No Defaults. Neither Norwest nor any Norwest Subsidiary is in
-----------
default, nor has any event occurred which, with the passage of time or the
giving of notice or both, would constitute a default under any material
agreement, indenture, loan agreement or other instrument to which it is a party
or by which it or any of its assets is bound or to which any of its assets is
subject, the result of which has had or could reasonably be expected to have a
material adverse effect upon Norwest and its subsidiaries taken as a whole. To
the best of Norwest's knowledge, all parties with whom Norwest or any Norwest
Subsidiary has material leases, agreements or contracts or who owe to Norwest or
any Norwest Subsidiary material obligations other than with respect to those
arising in 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) Consolidation Co. As of the Closing Date, Consolidation Co. will be
----------------
an interim national banking association duly organized, validly existing, duly
qualified to do business and in good standing under the laws of the United
States, and will have corporate power and authority to own or lease its
properties and assets and to carry on
A-15
<PAGE>
its business. As of the Closing Date, Consolidation Co. will not have conducted
any business or own any significant assets or owe any significant liabilities.
(w) Regulatory Impediments. As of the date hereof, Norwest is not aware of
----------------------
the existence of any factor that would materially delay or materially hinder the
issuance of any regulatory approval necessary to consummate the Consolidation.
4. Covenants of WNB. WNB 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 Consolidation,
WNB 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;
(ii) extend credit in accordance with existing lending policies,
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 WNB within five business days of any request for such approval), (A)
renew any existing loan to its established customers for an amount in
excess of $200,000, 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 accounting 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, 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 Consolidation;
(viii) comply in all material respects with all laws, regulations,
ordinances, codes, orders, licenses and permits applicable to the
properties and operations of WNB, the non-compliance with which reasonably
could be expected to have a material adverse effect on WNB; and
(ix) permit Norwest and its representatives (including KPMG Peat
Marwick) to examine its books, records and properties and to interview its
officers, employees and agents at all reasonable times when it is open for
business. No such examination by Norwest or its representatives either
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<PAGE>
before or after the date of this Agreement shall in any way affect,
diminish or terminate any of the representations, warranties or covenants
of WNB herein expressed.
(b) Negative Covenants. Except as otherwise contemplated by this
------------------
Agreement, from the date hereof until the Effective Time of the Consolidation,
WNB will not (without the prior written consent of Norwest):
(i) amend or otherwise change its articles of 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;
(iv) enter into any material agreement, contract or commitment in
excess of $10,000, except banking transactions in the ordinary course of
business and in accordance with policies and procedures in effect on the
date hereof;
(v) make any investments except investments made 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;
(viii) redeem, purchase or otherwise acquire, directly or indirectly,
any of the capital stock of WNB;
(ix) increase the compensation of any officers, directors or
employees, except pursuant to existing compensation plans and practices; or
(x) 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 WNB will duly call,
-------------------
and will cause to be held a meeting of its shareholders and will direct that
this Agreement and the Consolidation Agreement be submitted to a vote at such
meeting. The Board of Directors of WNB will (i) cause proper notice of such
meeting to be given to its shareholders in compliance with the National Bank Act
and other applicable laws and regulations, (ii) except to the extent that the
Board of Directors of WNB shall conclude in good faith, after taking into
account the advice of its outside counsel, that to do so would violate its
fiduciary obligations under applicable law, (A) recommend by the affirmative
vote of the Board of Directors a vote in favor of approval of this Agreement
A-17
<PAGE>
and the Consolidation Agreement, and (B) use its best efforts to solicit from
its shareholders proxies in favor thereof.
(d) Information Supplied by WNB. WNB will furnish or cause to be
---------------------------
furnished to Norwest all the information concerning WNB 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. Any financial statement
for any fiscal year furnished pursuant to this paragraph must include the audit
opinion of Stovall, Grandey & Whatley and such independent auditor's consent to
use such opinion in the Registration Statement. Any interim quarterly financial
information provided under this paragraph must have been reviewed by Stovall,
Grandey & Whatley in accordance with generally accepted auditing standards, and
WNB must provide Norwest with a copy of such review report.
(e) Regulatory Approvals. WNB 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 WNB 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. WNB 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. WNB will hold in confidence all nonpublic
------------------------
documents and information concerning Norwest and its subsidiaries furnished to
WNB 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 WNB's outside professional
advisers in connection with this Agreement, with the same undertaking from such
professional advisers. In the event that WNB or its representatives receive a
request pursuant to judicial or regulatory process to disclose such confidential
information, WNB 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 WNB, in the public domain, or later acquired by WNB 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 WNB nor any director, officer,
-----------------------
representative or agent thereof will, directly or indirectly, solicit, authorize
the solicitation of or, except to the extent the Board of Directors of WNB shall
conclude in good faith, after taking into account the written advice of its
outside counsel, that to fail to do so could reasonably be determined to violate
its fiduciary obligations under applicable law, enter into any discussions with,
or provide any information to, 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 WNB, (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 WNB except in the
A-18
<PAGE>
ordinary course of business, or (iv) to merge, consolidate or otherwise combine
with WNB. If any corporation, partnership, person or other entity or group
makes an offer or inquiry to WNB concerning any of the foregoing, WNB will
promptly disclose such offer or inquiry, including the terms thereof, to
Norwest.
(i) Public Disclosure. WNB 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 Consolidation, WNB
-------------
will take all action necessary, required or requested by Norwest (i) to comply
with the provisions of paragraph 9 hereof relating to the qualified retirement
and welfare benefit plans and all non-qualified benefit plans and compensation
arrangements as of the Effective Date of the Consolidation, (ii) to amend the
Plans to comply with the provisions of the 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 WNB will not be required to submit such application to the
Internal Revenue Service if the Internal Revenue Service does not accept such
application prior to the Effective Date of the Consolidation.
(k) Affiliate Letters. WNB shall use its best efforts to obtain and
------------------
deliver to Norwest at least 32 days prior to the Effective Date of the
Consolidation signed representations, substantially in the form attached hereto
as Exhibit B, by each executive officer, director or shareholder of WNB who may
reasonably be deemed an "affiliate" of WNB 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
--------------------
Consolidation, WNB shall establish such additional accruals and reserves as may
be necessary (i) to conform WNB's accounting and credit loss reserve practices
and methods to those of Norwest, consistent with Norwest's plans with respect to
the conduct of WNB's business following the Consolidation, and (ii) to the
extent permitted by generally accepted accounting principles, to provide for the
costs and expenses relating to the consummation by WNB of the Consolidation and
the other transactions contemplated by this Agreement; provided, however, that
WNB's compliance with this paragraph 4(l) shall in no case constitute a breach
of any other representation, warranty or covenant contained in this Agreement.
(m) Environmental Reports. WNB 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 May 23, 1997, and written reports shall be delivered to
Norwest no later than June 20, 1997. WNB 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. WNB 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. WNB shall obtain from a company
-----------------------------
reasonably acceptable to Norwest, at WNB's sole expense, commitments for title
insurance and boundary surveys for each owned bank facility, which commitments
and surveys shall be delivered to Norwest no later than May 23, 1997.
A-19
<PAGE>
(o) Favorable Accounting Treatment. WNB shall not knowingly take any
------------------------------
action which, with respect to WNB, would disqualify the Consolidation as a
"pooling of interests" for accounting purposes.
(p) Data Processing Review. Prior to the Closing Date, WNB shall use its
----------------------
best efforts to obtain the consent of Overton Bank and Trust Company
("Overton"), WNB's current data processing services provider, to an audit of
Overton's data processing activities by an independent third party reasonably
acceptable to Norwest, Overton and WNB, which audit shall be performed at WNB's
sole expense, and a copy of the report from which audit shall be delivered to
Norwest.
(q) Conversion of WNB Options. At the Effective Time of the
-------------------------
Consolidation, each WNB Option granted by WNB to purchase shares of WNB Common
Stock under the WNB Option Agreements which is outstanding and unexercised
immediately prior thereto shall be converted automatically into an option to
purchase shares of Norwest Common Stock in an amount and at an exercise price
determined as provided below (and otherwise subject to the terms of the
applicable WNB Option Agreement).
(i) The number of shares of Norwest Common Stock to be subject to the
new option shall be the product of the number of shares of WNB Common Stock
subject to the original WNB Option and the "Exchange Ratio", which for
purposes of this Agreement shall mean the Adjusted Norwest Shares divided
by the number of shares of WNB Common Stock outstanding immediately prior
to the Effective Time of the Consolidation; provided that any fractional
shares of Norwest Common Stock resulting from such multiplication shall be
rounded down to the nearest share; and
(ii) The exercise price per share of Norwest Common Stock under the
new option shall be equal to the exercise price per share of WNB Common
Stock under the original WNB Option divided by the Exchange Ratio, provided
that such exercise price shall be rounded to the nearest cent.
The shares of Norwest Common Stock that will be issued pursuant to this
Agreement pursuant to a conversion of a share of WNB Common Stock with
forfeiture restrictions under the applicable WNB Option Agreement immediately
prior to the Effective Time of the Consolidation shall be subject to such
restrictions under the terms of such WNB Option Agreement as if such shares of
Norwest Common Stock had remained shares of WNB Common Stock. Subject to the
specific terms and conditions of the WNB Option Agreements, Norwest shall
administer the WNB Option Agreements in the same manner and in accordance with
the same procedures as it administers Norwest's stock option plans.
5. Covenants of Norwest. Norwest covenants and agrees with WNB as
follows:
(a) Affirmative Covenants. From the date hereof until the Effective Time
---------------------
of the Consolidation, Norwest will maintain its corporate existence in good
standing; conduct, and cause the Norwest Subsidiaries to conduct, their
respective businesses in compliance with all material obligations and duties
imposed on them by all laws, governmental regulations, rules and ordinances, and
judicial orders, judgments and decrees applicable to Norwest or the Norwest
Subsidiaries, their businesses or their properties; maintain all books and
records of it and the Norwest Subsidiaries, including all financial statements,
in accordance with the accounting principles and practices
A-20
<PAGE>
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 WNB all the
-------------------------------
information concerning Norwest required for inclusion in a proxy statement or
statements to be sent to the shareholders of WNB, or in any statement or
application made by WNB 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 WNB pursuant to the Consolidation
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 WNB
shareholders, at the time of the WNB shareholders' meeting referred to in
paragraph 4(c) hereof and at the Effective Time of the Consolidation, the
prospectus included as part of the Registration Statement, as amended or
supplemented by any amendment or supplement filed by Norwest (hereinafter the
"Prospectus"), will not contain any untrue statement of a material fact or omit
to state any material fact necessary 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
WNB 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
Consolidation 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 WNB pursuant to this Agreement and the
Consolidation Agreement will, upon such issuance and delivery to said
shareholders pursuant to the Consolidation Agreement, be duly authorized,
validly issued, fully paid and nonassessable. The shares of Norwest Common
Stock to be delivered to the shareholders of WNB pursuant to the Consolidation
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 Consolidation all necessary Blue Sky
permits and approvals, if any, required to carry out the transactions
contemplated by this Agreement, will pay all expenses incident thereto and will
use its best efforts to obtain such permits and approvals. Norwest will
endeavor to furnish WNB with copies of all such filings contemporaneously with
their submission to the applicable authorities, and will furnish WNB with copies
of all documents evidencing such consents and approvals, and all correspondence
received from such authorities with respect thereto, promptly upon receipt
thereof.
A-21
<PAGE>
(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 WNB to obtain all such approvals and consents
required by WNB. Norwest will endeavor to furnish WNB with copies of all such
filings contemporaneously with their submission to the applicable authorities,
and will furnish WNB 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 WNB 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 WNB of such
request and will cooperate with WNB, at WNB'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 WNB
(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 WNB.
(i) Corporate Consolidation Filings. Norwest will file any documents or
-------------------------------
agreements required to be filed in connection with the Consolidation under the
National Bank 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 WNB 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 WNB and its representatives to
examine Norwest's 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 WNB 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 Consolidation as a "pooling of interests" for accounting
purposes. Norwest shall use its best efforts to obtain and deliver to WNB,
prior to the Effective Date of the Consolidation, signed representations from
the directors and executive officers of Norwest to the effect that, except for
de minimus dispositions which will not disqualify
A-22
<PAGE>
the Consolidation as a pooling of interests, they will not dispose of shares of
Norwest or WNB during the period commencing 30 days prior to the Effective Date
of the Consolidation and ending upon publication by Norwest of financial results
including at least 30 days of combined operations of WNB and Norwest.
(n) Indemnification Rights. From and after the Effective Time of the
----------------------
Consolidation: (i) Norwest shall indemnify, defend (including the advancement
of defense costs and expenses as reasonably determined by Norwest) and hold
harmless the officers, directors and employees of WNB (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 WNB's Articles of Association and By-laws as in
effect as of the Effective Time of the Consolidation; and (ii) Norwest shall
ensure that all rights to indemnification and all limitations of liability
existing in favor of an Indemnified Party in WNB's Articles of Association or
By-laws, 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 Consolidation, survive the Consolidation 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 WNB, 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 WNB to indemnify any person who was a director, officer or
employee of WNB to a greater extent than WNB is, as of the date of this
Agreement, required to indemnify any such person.
(o) Exchange of Shares. At or prior to the Effective Time of the
------------------
Consolidation, 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 WNB Common Stock (the "Certificates"), for
exchange in accordance herewith and the Consolidation 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
Consolidation Agreement in exchange for outstanding shares of WNB Common Stock.
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
(but in no event in an amount in excess of 110% of the then market value of the
underlying shares of such Norwest Common Stock) 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 Consolidation Agreement.
As soon as practicable after the Effective Time of the Consolidation, 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 Consolidation Agreement.
A-23
<PAGE>
6. Conditions Precedent to Each Party's Obligation. The respective
obligations of each party to effect the Consolidation 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 Consolidation Agreement
--------------------
shall have been approved by the affirmative vote of the holders of the
percentage of the outstanding shares of WNB required for approval of a plan of
consolidation in accordance with the provisions of WNB's Articles of
Association, Bylaws and the National Bank 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 Consolidation
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 WNB pursuant to this Agreement and the
Consolidation Agreement shall have been authorized for listing on the New York
Stock Exchange and the Chicago Stock Exchange.
(e) Tax Opinion. WNB shall have received an opinion, dated as of the
-----------
Closing Date, of counsel to WNB substantially to the effect that, for federal
income tax purposes: (i) the Consolidation will constitute a reorganization
within the meaning of Sections 368(a)(1(A) and 368(a)(2)(E) of the Code; (ii) no
gain or loss will be recognized by the holders of WNB Common Stock upon receipt
of Norwest Common Stock except for cash received in lieu of fractional
shares;(iii) the basis of the Norwest Common Stock received by the shareholders
of WNB will be the same as the basis of WNB Common Stock exchanged therefor; and
(iv) the holding period of the shares of Norwest Common Stock received by the
shareholders of WNB will include the holding period of the WNB Common Stock,
provided such shares of WNB Common Stock were held as a capital asset as of the
Effective Time of the Consolidation.
(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. WNB shall have obtained any and all
-------------------------
material consents or waivers from other parties to loan agreements, leases or
other contracts material to WNB's business required for the consummation of the
Consolidation, and WNB shall have obtained any and all material permits,
authorizations, consents, waivers and approvals required for the lawful
consummation by it of the Consolidation.
A-24
<PAGE>
7. Conditions Precedent to the Obligation of WNB. The obligation of WNB
to effect the Consolidation 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 WNB:
(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 Consolidation Co. at or before the Time of Filing.
(c) Norwest Compliance Certificate. WNB shall have received a favorable
------------------------------
certificate, dated as of the Effective Date of the Consolidation, signed by the
Chairman, the President or any Executive Vice President or Senior Vice President
and by the Secretary or Assistant Secretary of Norwest, as to the matters set
forth in subparagraphs (a) and (b) of this paragraph 7.
(d) No Material Adverse Change. Since December 31, 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 Consolidation 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 Norwest:
(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 WNB as if made at
the Time of Filing.
(b) Performance of WNB's Obligations. WNB 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) WNB Compliance Certificate. Norwest shall have received a favorable
--------------------------
certificate, dated as of the Effective Date of the Consolidation, signed by the
Chairman or President and by the Secretary or Assistant Secretary of WNB, as to
the matters set forth in subparagraphs (a) and (b) of this paragraph 8.
A-25
<PAGE>
(d) Absence of Burdensome Conditions. No approvals, licenses or consents
--------------------------------
granted by any regulatory authority shall contain any condition or requirement
relating to WNB that, in the good faith judgment of Norwest, is unreasonably
burdensome to Norwest.
(e) WNB Shares. At any time since the date hereof, the total number of
-----------
shares of WNB Common Stock outstanding and subject to issuance upon exercise
(assuming for this purpose that phantom shares and other share-equivalents
constitute WNB Common Stock) of all warrants, options, conversion rights,
phantom shares or other share-equivalents shall not have exceeded 200,000.
(f) Accounting Treatment. The Consolidation shall qualify as a "pooling
--------------------
of interests" for accounting purposes.
(g) CEO/CFO Letter. Norwest shall have received from the Chief Executive
--------------
Officer and Chief Financial Officer of WNB 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 WNB 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 WNB;
(ii) the amounts reported in the interim quarterly financial
statements of WNB agree with the general ledger of WNB;
(iii) the annual and quarterly financial statements of WNB 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 financial statements
of WNB as may be included in the Registration Statement to a date 5 days
prior to the effective date of the Registration Statement or 5 days prior
to the Closing, there are no increases in long-term debt, changes in the
capital stock or decreases in stockholders' equity of WNB, except in each
case for changes, increases or decreases that 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 net interest
income, net interest income after provision for credit losses, income
before income taxes, or net income and net income per share amounts of WNB,
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 WNB, 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 WNB and have found them to be in agreement with
financial records and analyses prepared by WNB included in the annual and
quarterly financial statements, except as disclosed in such letters.
A-26
<PAGE>
(h) Casualty Losses, etc. WNB shall not have sustained since December 31,
--------------------
1996 any material loss or interference with its business from any civil
disturbance or any fire, explosion, flood or other calamity, whether or not
covered by insurance.
(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 WNB 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 WNB.
(j) No Material Adverse Change. Except for the effects of compliance by
--------------------------
WNB with the provisions of paragraphs 4(a)(ii), 4(b)(v) and 4(l) hereof, since
December 31, 1996, no change shall have occurred and no circumstances shall
exist which have had or would reasonably be expected to have a material adverse
effect on the financial condition, results of operations or business of WNB
(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).
9. Employee Benefit Plans. Each person who is an employee of WNB as of
the Effective Date of the Consolidation ("WNB 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 WNB 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 WNB and not subject to any pre-existing condition
exclusions, except (i) in the case of the Long Term Care Plan, WNB Employees'
eligibility will be subject to pre-existing conditions, and (ii) in the case of
Norwest retiree medical benefits, WNB Employees will not receive credit for
years of service to WNB. Each WNB 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 Consolidation (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 intends
to continue for the benefit of the WNB Employees the comparable WNB welfare
benefit plans listed in Schedule 2(p)(i).
A-27
<PAGE>
For the purpose of determining each WNB Employee's benefit for the year in which
the Consolidation occurs under the Norwest Vacation Program, vacation taken by
an WNB Employee prior to the Consolidation in the year in which the
Consolidation occurs will be deducted from the total Norwest benefit for that
year.
(b) Employee Retirement Benefit Plans.
---------------------------------
(i) Each WNB Employee shall be eligible for participation in the Norwest
Savings-Investment Plan (the "SIP"), subject to any eligibility requirements
applicable to the SIP (with full credit for years of past service to WNB for the
purpose of satisfying any eligibility and vesting periods applicable to the SIP
to the extent credited under the retirement plans of WNB), and shall enter the
SIP not later than the first day of the calendar quarter that begins at least 32
days after the Effective Date of the Consolidation.
(ii) Each WNB Employee shall be eligible for participation in the Norwest
Pension Plan, as a new employee, under the terms thereof.
10. Termination and Amendment.
(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 Consolidation shall not have been consummated by
November 15, 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;
(iii) by WNB 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;
(iv) by either Norwest or WNB upon written notice to the other party
if the Board of Directors of WNB shall in good faith determine that a
Takeover Proposal constitutes a Superior Proposal; provided, however, that
WNB shall not be permitted to terminate this Agreement pursuant to this
paragraph 10(a)(iv) unless (A) it has not breached any covenant contained
in paragraph 4 and (B) it delivers to Norwest simultaneously with such
notice of termination a termination fee in the amount of $300,000. As used
in this Agreement, "Takeover Proposal" means a bona fide proposal or offer
by a person to make a tender or exchange offer, or to engage in a merger,
consolidation or other business combination involving WNB or to acquire in
any manner a substantial equity interest in, or all or substantially all of
the assets of, WNB, and"Superior Proposal" means a bona fide proposal or
offer made by a person to acquire WNB pursuant to a tender or exchange
offer, a merger, consolidation or other business combination or an
acquisition of all or substantially all of the assets of WNB on terms which
the Board of Directors of WNB shall determine in good faith, after taking
into account the advice of counsel, to be more favorable to WNB and its
shareholders than the transactions contemplated hereby; or
A-28
<PAGE>
(v) by Norwest upon written notice to WNB if (A) the Board of
Directors of WNB fails to recommend, withdraws, or modifies in a manner
materially adverse to Norwest, its approval or recommendation of this
Agreement, or the transactions contemplated hereby, (B) after an agreement
to engage in or the occurrence of an Acquisition Event (as defined below)
or after a third party shall have made a proposal to WNB or WNB 's
shareholders to engage in an Acquisition Event, the transactions
contemplated hereby are not approved at the meeting of WNB shareholders
required under paragraph 4(c) (the "Shareholder Meeting"), or (C) the
Shareholder Meeting is not held prior to September 30, 1997, and WNB has
failed to comply with its obligations under paragraph 4(c). For purposes
of this Agreement, "Acquisition Event" means any of the following: (i) a
merger, consolidation or similar transaction involving WNB or any successor
to WNB, (ii) a purchase, lease or other acquisition in one or a series of
related transactions of assets of WNB representing 25% or more of the
assets of WNB, or (iii) a purchase or other acquisition (including by way
of merger, consolidation, share exchange or any similar transaction) in one
or a series of related transactions of beneficial ownership of securities
representing 25% or more of the voting power of WNB with or by a person or
entity other than Norwest or an affiliate of Norwest.
(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 WNB shall be made which changes in a manner adverse to such shareholders the
consideration to be provided to said shareholders pursuant to this Agreement and
the Consolidation Agreement.
(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.
(f) Termination Fee. If this Agreement is terminated by Norwest pursuant
---------------
to paragraphs 10(a)(iv) or 10(a)(v), and if terminated pursuant to paragraph
10(a)(v) and prior thereto or within 12 months after such termination:
(i) WNB or any successor to WNB shall have entered into an
agreement to engage in an Acquisition Event (as defined above) or an
Acquisition Event shall have occurred; or
(ii) the Board of Directors of WNB shall have authorized or approved
an Acquisition Event or shall have publicly announced an intention to
authorize or
A-29
<PAGE>
approve or shall have recommended that the shareholders of WNB approve or
accept any Acquisition Event,
then WNB shall promptly, but in no event later than five business days after the
first of such events shall have occurred, pay Norwest a fee equal to $300,000.
Norwest acknowledges and agrees that if this Agreement is terminated pursuant to
paragraphs 10(a)(iv) or 10(a)(v), its exclusive remedy shall be collection of
the $300,000 termination fee.
11. Expenses. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by WNB shall be borne by WNB, 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:
If to Norwest:
Norwest Corporation
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Attention: Secretary
If to WNB:
Woodhaven National Bank
6750 Bridge Street
Fort Worth, Texas 76112
Attention: Ronald Casey, President
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 Consolidation Agreement
contain the complete agreement between the parties hereto with respect to the
Consolidation and other transactions contemplated hereby and supersede all prior
agreements and understandings between the parties hereto with respect thereto.
16. Captions. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
A-30
<PAGE>
17. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
18. Non-Survival of Representations and Warranties. No representation or
warranty contained in the Agreement or the Consolidation Agreement, or contained
in a certificate delivered pursuant to the Agreement or the Consolidation
Agreement, shall survive the Consolidation of Consolidation Co. with and into
WNB or, except as set forth in paragraph 10(b), the termination of this
Agreement. The agreements contained in paragraphs 5(n) and 11 shall survive
the Consolidation.
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 WOODHAVEN NATIONAL BANK
By: /s/ John E. Ganoe By: Ron Casey
---------------------------- ------------------------
Its: Executive Vice President Its: President
-------------------------- -----------------------
A-31
<PAGE>
APPENDIX B
UNITED STATES CODE TITLE 12, SECTION 215
<PAGE>
(b) Liability of consolidated association; capital stock; dissenting
shareholders
The consolidated association shall be liable for all liabilities of the
respective consolidating banks or associations. The capital stock of such
consolidated association shall not be less than that required under existing law
for the organization of a national bank in the place in which it is located:
Provided, That if such consolidation shall be voted for at such meetings by the
- --------
necessary majorities of the shareholders of each association and State bank
proposing to consolidate, and thereafter the consolidation shall be approved by
the Comptroller, any shareholder of any of the associations or State banks so
consolidated who has voted against such consolidation at the meeting of the
association or bank of which he is a stockholder or who has given notice in
writing at or prior to such meeting to the presiding officer that he dissents
from the plan of consolidation, shall be entitled to receive the value of the
shares so held by him when such consolidation is approved by the Comptroller
upon written request made to the consolidated association at any time before
thirty days after the date of consummation of the consolidation, accompanied by
the surrender of his stock certificates.
(c) Valuation of shares
The value of the shares of any dissenting shareholder shall be ascertained,
as of the effective date of the consolidation, by an appraisal made by a
committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the consolidated banking
association; and (3) one selected by the two so selected. The valuation agreed
upon by any two of the three appraisers shall govern. If the value so fixed
shall not be satisfactory to any dissenting shareholder who has requested
payment, that shareholder may, within five days after being notified of the
appraised value of his shares, appeal to the Comptroller, who shall cause a
reappraisal to be made which shall be final and binding as to the value of the
shares of the appellant.
(d) Appraisal by the Comptroller; expenses of consolidated association; sale
and resale of shares; State appraisal and consolidation law
If, within ninety days from the date of consummation of the consolidation,
for any reason one or more of the appraisers is not selected as herein provided,
or the appraisers fail to determine the value of such shares, the Comptroller
shall upon written request of any interested party cause an appraisal to be made
which shall be final and binding on all parties. The expenses of the
Comptroller in making the reappraisal or the appraisal, as the case may be,
shall be paid by the consolidated banking association. The value of the shares
ascertained shall be promptly paid to the dissenting shareholders by the
consolidated banking association. Within thirty days after payment has been
made to all dissenting shareholders as provided for in this section the shares
of stock of the consolidated banking association which would have been delivered
to such dissenting shareholders had they not requested payment shall be sold by
the consolidated banking association at an advertised public auction, unless
some other method of sale is approved by the Comptroller, and the consolidated
B-1
<PAGE>
banking association shall have the rights to purchase any of such shares at such
public auction, if it is the highest bidder therefor, for the purpose of
reselling such shares within thirty days thereafter to such person or persons
and at such price not less than par as its board of directors by resolution may
determine. If the shares are sold at public auction at a price greater than the
amount paid to the dissenting shareholder the excess in such sale price shall be
paid to such shareholders. The appraisal of such shares of stock in any State
bank shall be determined in the manner prescribed by the law of the State in
such cases, rather than as provided in this section, if such provision is made
in the State law; and no such consolidation shall be in contravention of the law
of the State under which such bank is incorporated.
B-2
<PAGE>
APPENDIX C
BANKING CIRCULAR 259
<PAGE>
BC-259
BANKING ISSUANCE
- --------------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- --------------------------------------------------------------------------------
Type: Banking Circular Subject: Stock Appraisals
- --------------------------------------------------------------------------------
To: Chief Executive Officers of National Banks, Deputy
Comptrollers (District), Department and Division Heads, and
Examining Personnel
PURPOSE
- -------
This banking circular informs all national banks of the valuation methods used
by the Office of the Comptroller of the Currency (OCC) to estimate the value of
a bank's shares when requested to do so by a shareholder dissenting to the
conversion, merger, or consolidation of its bank. The results of appraisals
performed by the OCC between January 1, 1985 and September 30, 1991 are also
summarized.
References: 12 U.S.C. 214a, 215 and 215a; 12 CFR 11.590 (Item 2)
BACKGROUND
- ----------
Under 12 U.S.C. Sections 214a, a shareholder dissenting from a conversion,
consolidation, or merger involving a national bank is entitled to receive the
value of his or her shares from the resulting bank. A valuation of the shares
shall be made by a committee of three appraisers (a representative of the
dissenting shareholder, a representative of the resulting bank, and a third
appraiser selected by the other two). If the committee is formed and renders an
appraisal that is acceptable to the dissenting shareholder, the process is
complete and the appraised value of the shares is paid to the dissenting
shareholder by the resulting bank. If, for any reason, the committee is not
formed or if it renders an appraisal that is not acceptable to the dissenting
shareholder, an interested party may request an appraisal by the Office of the
Comptroller of the Currency (OCC). 12 U.S.C. Section 215 provides these
appraisal rights to any shareholder dissenting to a consolidation. Any
dissenting shareholder of a target bank in a merger is also entitled to these
appraisal rights pursuant to 12 U.S.C. Section 215a.
- --------------------------------------------------------------------------------
Date: March 5, 1992
The above provides only a general overview of the appraisal process. The
specific requirements of the process are set forth in the statutes themselves.
C-1
<PAGE>
METHODS OF VALUATION USED
- -------------------------
Through its appraisal process, the OCC attempts to arrive at a fair estimate of
the value of a bank's shares. After reviewing the particular facts in each case
and the available information on a bank's shares, the OCC selects an appropriate
valuation method, or combination of methods, to determine a reasonable estimate
of the shares' value.
Market Value
- ------------
The OCC uses various methods to establish the market value of shares being
appraised. If sufficient trading in the shares exists and the prices are
available from direct quotes from the Wall Street Journal or a market-maker,
---- ------ -------
those quotes are considered in determining the market value. If no market value
is readily available, or if the market value is not well established, other
methods of estimating market value can be used, such as the investment value and
adjusted book value methods.
Investment Value
- ----------------
Investment value requires an assessment of the value to investors of a share in
the future earnings of the target bank. Investment value is estimated by
applying an average price/earnings ratio of banks with similar earnings
potential to the earnings capacity of the target bank.
The peer group selection is based on location, size, and earnings patterns. If
the state in which the subject bank is located provides a sufficient number of
comparable banks using location, size and earnings patterns as the criteria for
selection, the price/earnings ratios assigned to the banks are applied to the
earnings per share estimated for the subject bank. In order to select a
reasonable peer group when there are too few comparable independent banks in a
location that is comparable to that of the subject bank, the pool of banks from
which a peer group is selected is broadened by including one-bank holding
company banks in a comparable location, and/or by selecting banks in less
comparable locations, including adjacent states, that have earnings patterns
similar to the subject bank.
Adjusted Book Value
- -------------------
The OCC also uses an "adjusted book value" method for estimating value.
Historically, the OCC has not placed any weight on the bank's "unadjusted book
value", since the value is based on historical acquisition costs of the bank's
assets, and does not reflect investors' perceptions of the value of the bank as
an ongoing concern. Adjusted book value is calculated by multiplying the book
value of the target bank's assets per share times the average market price to
book value ratio of comparable banking organizations. The average market price
to book value ratio measures the premium or discount to book value which
investors attribute to shares of similarly situated banking organizations.
Both the investment value method and the adjusted book value method present
appraised values which are based on the target bank's value as a going concern.
These techniques provide estimates of the market value of the shares of the
subject bank.
C-2
<PAGE>
OVERALL VALUATION
- -----------------
The OCC may use more than one of the above-described methods in deriving the
value of shares of stock. If more than one method is used, varying weights may
be applied in reaching an overall valuation. The weight given to the value by a
particular valuation method is based on how accurately the given method is
believed to represent market value. For example, the OCC may give more weight
to a market value representing infrequent trading by shareholders than to the
value derived from the investment value method when the subject bank's earnings
trend is so irregular that it is considered to be a poor predictor of future
earnings.
PURCHASE PREMIUMS
- -----------------
For mergers and consolidations, the OCC recognizes that purchase premiums do
exist and may, in some instances, be paid in the purchase of small blocks of
shares. However, the payment of purchase premiums depends entirely on the
acquisition or control plans of the purchasers, and such payment are not regular
or predictable elements of market value. Consequently, the OCC's valuation
methods do not include consideration of purchase premiums in arriving at the
value of shares.
STATISTICAL DATA
- ----------------
The chart below lists the results of appraisals the OCC performed between
January 1, 1985 and September 30, 1991. The OCC provides statistical data on
book value and price/earnings ratios for comparative purposes, but does not
necessarily rely on such data in determining the value of the banks' shares.
Dissenting shareholders should not view these statistics as determinative for
future appraisals.
In connection with disclosures given to shareholders under 12 CFR 11.590 (Item
2), banks may provide shareholders a copy of this banking circular or disclose
the information contained herein, including the past results of OCC appraisals.
If the bank discloses the past results of the OCC appraisals, it should advise
shareholders that: (1) the OCC did not rely on all the information set forth in
the chart in performing each appraisal; and (2) the OCC's past appraisals are
not necessarily determinative of its future appraisals of a particular bank's
shares.
C-3
<PAGE>
APPRAISAL RESULTS
- -----------------
<TABLE>
<CAPTION>
OCC Average Price/
Appraisal Appraisal Price Book Earnings Ratio
Date* Value Offered Value of Peer Group
<S> <C> <C> <C> <C>
1/1/85 107.25 110.00 178.29 5.3
1/2/85 73.16 NA 66.35 6.8
1/15/85 53.41 60.00 83.95 4.8
1/31/85 22.72 20.00 38.49 5.4
2/1/85 30.63 24.00 34.08 5.7
2/25/85 27.74 27.55 41.62 5.9
4/30/85 25.98 35.00 42.21 4.5
7/30/85 3,153.10 2,640.00 6,063.66 NC
9/1/85 17.23 21.00 21.84 4.7
11/22/85 316.74 338.75 519.89 5.0
11/22/85 30.28 NA 34.42 5.9
12/16/85 66.29 77.00 89.64 5.6
12/27/85 60.85 57.00 119.36 5.3
12/31/85 61.77 NA 73.56 5.9
12/31/85 75.79 40.00 58.74 12.1
1/12/86 19.93 NA 26.37 7.0
3/14/86 59.02 200.00 132.20 3.1
4/21/86 40.44 35.00 43.54 6.4
5/2/86 15.50 16.50 23.69 5.0
7/3/86 405.74 NA 612.82 3.9
7/31/86 297.34 600.00 650.63 4.4
8/22/86 103.53 NA 136.23 NC
12/26/86 16.66 95.58 43.57 4.0
12/31/86 53.39 NA 69.66 7.1
5/1/87 186.42 70.00 360.05 5.1
6/11/87 50.46 55.00 92.35 4.5
6/11/87 38.53 NA 77.75 4.5
7/31/87 13.10 57.52 20.04 6.7
8/26/87 55.92 23.75 70.88 NC
8/31/87 19.55 NA 30.64 5.0
8/31/87 10.98 60.00 17.01 4.2
10/6/87 56.48 NA 73.11 5.6
3/15/88 297.63 NA 414.95 6.1
6/2/88 27.26 NA 28.45 5.4
6/30/88 137.78 677.00 215.36 6.0
8/30/88 768.62 NA 1,090.55 10.7
3/31/89 773.62 180.00 557.30 7.9
5/26/89 136.47 NA 250.42 4.5
5/29/90 9.87 11.04 9.9
- --------------------------------------------------------------------------
</TABLE>
* The "Appraisal Date" is the consummation date for the conversion,
consolidation, or merger.
NA - Not Available
NC - Not Computed
- --------------------------------------------------------------------------
C-4
<PAGE>
For more information regarding the OCC's stock appraisal process, contact the
Office of the Comptroller of the Currency, 490 L'Enfant Plaza East, S.W.,
Washington, D.C. 20219, Director for Corporate Activity, Bank Organization and
Structure.
/s/ Frank McGuire
- --------------------------------------------
Frank McGuire
Acting Corporate Policy and Economic Analysis
C-5
<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
<TABLE>
<S> <C>
Exhibits: Parenthetical references to exhibits in the description of Exhibits
- -------- 3.1, 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5, 3.2, 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 April 22, 1997 between
Woodhaven National Bank and Norwest Corporation (included in Proxy
Statement-Prospectus as Appendix A).
3.1 -- Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3(b) to Norwest's Current Report on Form 8-K dated June 28,
1993, Exhibit 3 to Norwest's Current Report on Form 8-K dated July
3, 1995 and Exhibit 3 to Norwest's Current Report on Form 8-K dated
June 3, 1997 (filed June 10, 1997)).
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).
3.1.5 Certificate of Designations with respect to the 1997 ESOP
Cumulative Convertible Preferred Stock (incorporated by reference
to Exhibit 3 to Norwest's Current Report on Form 8-K dated April
14, 1997).
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
3.2 -- By-Laws (incorporated by reference to Exhibit 3 to Norwest's
Current Report on Form 8-K dated October 10, 1997).
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).
4.3 -- Certificate of Adjustment, dated October 10, 1997, to Rights
Agreement (incorporated by reference to Exhibit 5 to Norwest's
Form 8-A/A dated October 14, 1997).
5 -- Opinion of Laurel A. Holschuh counsel to Norwest.(1)
8 -- Opinion of Brown McCarroll & Oaks Hartline(2)
23.1 -- Consent of Laurel A. Holschuh (included as part of Exhibit 5 filed
herewith).
23.2 -- Consent of KPMG Peat Marwick LLP.(1)
23.3 -- Consent of Stovall, Grandey & Whatley.(1)
23.4 -- Consent of Brown McCarroll & Oaks Hartline (included as a part of
Exhibit 8).
24 -- Powers of Attorney.(1)
99 -- Form of proxy for Special Meeting of Shareholders of Woodhaven
National Bank(1)
</TABLE>
- ----------------------------
(1) Previously filed.
(2) 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
II-2
<PAGE>
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) ((S)230.424(b) of this chapter)
if, in the aggregate, 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
II-3
<PAGE>
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 this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Minneapolis, State of Minnesota, on October 10, 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, this Amendment
No. 1 to Registration Statement has been signed on October 10, 1997 by the
following persons in the capacities indicated:
<TABLE>
<S> <C>
/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
</TABLE>
LES S. BILLER )
J.A. BLANCHARD III )
DAVID A. CHRISTENSEN )
PIERSON M. GRIEVE )
CHARLES M. HARPER )
WILLIAM A. HODDER )
REATHA CLARK KING ) A majority of the
RICHARD M. KOVACEVICH ) Board of Directors*
RICHARD S LEVITT )
RICHARD D. McCORMICK )
CYNTHIA H. MILLIGAN )
BENJAMIN F. MONTOYA )
IAN M. ROLLAND )
MICHAEL W. WRIGHT )
- --------------------
*Richard M. Kovacevich, by signing his name hereto, does hereby sign this
document on behalf of each of the directors named above pursuant to powers of
attorney duly executed by such persons.
/s/ Richard M. Kovacevich
-------------------------
Richard M. Kovacevich
Attorney-in-Fact
II-5
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit Form of
Number Description* Filing
- ------ ------------ ----------
<S> <C> <C>
2.1 Agreement and Plan of Reorganization dated April 22, 1997 between
Woodhaven National Bank and Norwest Corporation (included in Proxy
Statement-Prospectus as Appendix A).
3.1 Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3(b) to Norwest's Current Report on Form 8-K dated June 28, 1993,
Exhibit 3 to Norwest's Current Report on Form 8-K dated July 3, 1995 and
Exhibit 3 to Norwest's Current Report on Form 8-K dated June 3, 1997 (filed
June 10, 1997)).
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).
3.1.5 Certificate of Designations with respect to the 1997 ESOP Cumulative
Convertible Preferred Stock (incorporated by reference to Exhibit 3 to
Norwest's Current Report on Form 8-K dated April 14, 1997).
3.2 By-Laws (incorporated by reference to Exhibit 3 to Norwest's
Current Report on Form 8-K dated October 10, 1997).
4 Rights Agreement, dated as of November 22, 1988, between Norwest
Corporation and Citibank, N.A. (incorporated by reference to Exhibit 1 to
Norwest's Form 8-A dated December 6, 1988).
4.1 Certificate of Adjustment, dated July 21, 1989, to Rights Agreement
(incorporated by reference to Exhibit 3 to Norwest's Form 8 dated
July 21, 1989).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Form of
Number Description* Filing
- ------ ------------ ----------
<S> <C> <C>
4.2 Certificate of Adjustment, dated June 28, 1993, to Rights Agreement
(incorporated by reference to Exhibit 4 to Norwest's Form 8-A/A dated
June 29, 1993).
4.3 Certificate of Adjustment, dated October 10, 1997, to Rights
Agreement (incorporated by reference to Exhibit 5 to Norwest's
Form 8-A/A dated October 14, 1997).
5 Opinion of Laurel A. Holschuh, counsel to Norwest**
8 Opinion of Brown McCarroll & Oaks Hartline***
23.1 Consent of Laurel A. Holschuh (included as part of Exhibit 5
filed herewith).
23.2 Consent of KPMG Peat Marwick LLP.**
23.3 Consent of Stovall, Grandey & Whatley.**
23.4 Consent of Brown McCarroll & Oaks Hartline (included as part of
Exhibit 8)
24 Powers of Attorney.**
99 Form of proxy for Special Meeting of Shareholders of Woodhaven
National Bank.**
- ------------------------
</TABLE>
* Parenthetical references to exhibits in the description of Exhibits 3.1,
3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5, 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.
** Previously filed.
*** To be filed by amendment.
