<PAGE>
As filed with the Securities and Exchange Commission on April 6, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-------------------------
NORWEST CORPORATION
(Exact name of registrant as specified in its charter)
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 Annette L. Tripp
Norwest Corporation Michael T. Peters
Norwest Center Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
Sixth and Marquette 3400 Chase Tower
Minneapolis, Minnesota 55479-1026 600 Travis
Houston, TX 77002-3095
------------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of the Registration
Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================
Title of Securities Amount Proposed Maximum Proposed Maximum Amount of
to Be To Be Offering Price Aggregate Registration
Registered Registered Per Share Offering Price Fee
- -------------------------------- --------------- ------------------- -------------------- ------------
<S> <C> <C> <C>
Common Stock 2,250,000 N/A $30,268,000(2) $9,172.11
(par value $1-2/3 per share) (1)
======================================================================================================
</TABLE>
(1) Each share of the registrant's common stock includes one preferred
stock purchase right.
(2) Estimated solely for the purpose of computing the registration fee, in
accordance with Rule 457(f), based upon the book value as of December
31, 1997 of all shares of common stock to be acquired by the
registrant in the transaction described herein.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
[First Bank symbol]
- --------------------------------------------------------------------------------
First Bank's board of directors has approved the acquisition of First
Bank by Norwest Corporation. If the acquisition is completed, Norwest will
exchange a total of 2,000,000 shares of its common stock for all of the
outstanding shares of First Bank common stock.
The exchange ratio, or the number of shares of Norwest common stock
that Norwest will exchange for each share of First Bank common stock, will be
determined by dividing 2,000,000 by the sum of (1) the number of shares of First
Bank common stock outstanding, plus (2) the number of shares of First Bank
common stock that may be issued on exercise of outstanding options. There are
currently outstanding 1,757,505 shares of First Bank common stock and options to
purchase an additional 25,000 shares. The sum of these numbers should not change
before the acquisition is completed. AS A RESULT, YOU SHOULD ASSUME THAT YOU
WILL RECEIVE APPROXIMATELY 1.122 SHARES OF NORWEST COMMON STOCK FOR EACH SHARE
OF FIRST BANK COMMON STOCK YOU OWN.
Norwest's acquisition of First Bank will involve two steps. First Bank
will first convert to a national banking association from a Texas banking
association. Immediately after its conversion to a national bank, First Bank
will consolidate with a wholly-owned subsidiary of Norwest. As a result of the
consolidation, First Bank will become a wholly-owned subsidiary of Norwest.
First Bank's conversion to a national banking association and its
subsequent consolidation with a Norwest subsidiary bank both require the
approval of First Bank's shareholders. Neither the conversion nor the
consolidation will occur unless both are approved. First Bank's board of
directors has called a special meeting of shareholders to vote on both matters.
Whether or not you plan to attend the meeting, please complete and
mail the enclosed proxy card. If you sign, date and mail your proxy card without
indicating how you want to vote, your proxy will be voted in favor of the
conversion and the consolidation. If you fail to return your card, the effect
will be a vote against the conversion and the consolidation.
The date, time and place of the special meeting are as follows:
[DAY], [DATE OF SPECIAL MEETING]
[TIME OF MEETING]
[LOCATION OF MEETING]
This Proxy Statement-Prospectus provides detailed information about
the proposed acquisition. Please read this entire document carefully.
Dana H. Cook
Chairman of the Board
- --------------------------------------------------------------------------------
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."
NEITHER THE SECURITIES AND EXCHANGE COMMISSION 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.
- --------------------------------------------------------------------------------
Proxy Statement-Prospectus dated April ___, 1998, and first mailed to
shareholders on April __, 1998.
<PAGE>
TABLE OF CONTENTS
GLOSSARY OF IMPORTANT TERMS........................... 1
QUESTIONS AND ANSWERS
ABOUT THE CONSOLIDATION............................... 3
QUESTIONS AND ANSWERS
THE PROXY STATEMENT-PROSPECTUS........................ 5
SUMMARY............................................... 6
Parties to the Consolidation....................... 6
Reason for the Conversion.......................... 6
Reasons for the Consolidation...................... 7
Required Vote...................................... 7
Recommendation of First Bank's
Board of Directors.............................. 7
Fairness Opinion of First Bank's
Financial Advisor............................... 8
The Consolidation.................................. 8
Comparative Per Common Share Data.................. 12
Selected Historical Financial Information.......... 13
Share Prices and Dividends for
Norwest Common Stock............................ 15
SPECIAL MEETING OF SHAREHOLDERS....................... 16
Date, Time and Place of Special Meeting............ 16
Record Date........................................ 16
Voting Rights; Votes Required for Approval......... 16
Voting Agreements.................................. 16
Voting and Revocation of Proxies................... 17
Solicitation of Proxies............................ 17
Other Matters...................................... 17
THE CONVERSION........................................ 19
General............................................ 19
Reason for the Conversion.......................... 19
Appraisal Rights................................... 19
Regulatory Approvals............................... 21
THE CONSOLIDATION..................................... 22
Purpose and Effect of the Consolidation............ 22
Background of and Reasons for the
Consolidation................................... 22
Opinion of First Bank's Financial Advisor.......... 23
Additional Interests of First Bank's
Management in the Consolidation................. 28
Appraisal Rights................................... 30
Exchange of Certificates........................... 32
Regulatory Approvals............................... 32
Effect on First Bank's Employee
Benefit Plans................................... 32
Certain U.S. Federal Income Tax
Consequences of the Consolidation to
First Bank Shareholders 32
Resale of Norwest Common Stock..................... 33
Stock Exchange Listing............................. 34
Accounting Treatment............................... 34
THE REORGANIZATION AGREEMENT.......................... 35
Basic Plan of Reorganization....................... 35
Representations and Warranties..................... 36
Certain Covenants.................................. 36
Conditions to the Completion of the
Consolidation................................... 37
Employee Benefit Plans............................. 37
Termination of the Reorganization
Agreement....................................... 38
Effect of Termination.............................. 38
Waiver and Amendment............................... 38
Expenses........................................... 38
COMPARISON OF RIGHTS OF HOLDERS
OF FIRST BANK COMMON STOCK AND
NORWEST COMMON STOCK.................................. 39
Capital Stock...................................... 39
Rights Plan........................................ 39
Directors.......................................... 40
Amendment of Charter Document
and Bylaws...................................... 40
Approval of Mergers and Asset Sales................ 41
Appraisal Rights................................... 41
Special Meetings................................... 42
Directors Duties................................... 42
Action Without a Meeting........................... 42
Limitation of Director Liability................... 43
Indemnification of Officers and Directors.......... 43
Dividends.......................................... 44
Corporate Governance Procedures;
Nomination of Directors......................... 44
INFORMATION ABOUT FIRST BANK.......................... 46
Services, Employees and Properties................. 46
Legal Proceedings.................................. 47
(i)
<PAGE>
Market Price and Dividends......................... 47
Beneficial Ownership of First Bank
Common Stock by First Bank
Management and Principal Shareholders........... 47
FIRST BANK'S MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FIRST BANK'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................. 49
Results of Operations for the Years Ended
December 31, 1997 and 1996...................... 50
Results of Operations for the Years Ended
December 31, 1996, 1995 and 1994................ 53
Financial Condition................................ 57
Provision for Loan Losses and
and Allowance for Loan Losses................... 59
Investments........................................ 60
Deposits........................................... 61
Return on Equity and Assets........................ 62
Liquidity.......................................... 62
Capital............................................ 62
Impact of Inflation, Changing Prices
and Monetary Policies........................... 63
CERTAIN REGULATORY AND
OTHER CONSIDERATIONS PERTAINING
TO NORWEST............................................ 64
Bank Regulatory Agencies........................... 64
Bank Holding Company Activities;
Interstate Banking.............................. 64
Dividend Restrictions.............................. 65
Holding Company Structure.......................... 66
Regulatory Capital Standards and
Related Matters................................. 66
FDIC Insurance..................................... 69
Fiscal and Monetary Policies....................... 69
Competition........................................ 70
EXPERTS............................................... 70
LEGAL MATTERS......................................... 70
INFORMATION CONCERNING NORWEST MANAGEMENT............. 71
WHERE YOU CAN FIND MORE
INFORMATION........................................... 71
FIRST BANK FINANCIAL STATEMENTS.......................F-1
APPENDIX A AGREEMENT AND PLAN
OF REORGANIZATION
APPENDIX B FAIRNESS OPINION OF
NATIONSBANC
MONGOMERY
SECURITIES, INC.
APPENDIX C ARTICLES 5.11,
5.12 AND 5.13 OF THE
TEXAS BUSINESS
CORPORATION ACT
APPENDIX D TITLE 12, SECTION 15 OF
THE UNITED STATES
CODE
APPENDIX E BANKING CIRCULAR 259
(ii)
<PAGE>
GLOSSARY OF IMPORTANT TERMS
Following are the definitions, in alphabetical order, of some important
terms used in this Proxy Statement-Prospectus. Each term should be considered in
the context in which it is used.
BANK HOLDING COMPANY ACT ............. Bank Holding Company Act of 1956.
CONSOLIDATION ........................ The consolidation of First Bank with
Norwest Interim Bank Katy, National
Association, pursuant to the terms of
the Reorganization Agreement. The
Consolidation is the means by which
Norwest will acquire First Bank.
CONVERSION............................ The conversion of First Bank to a
national banking association from a
Texas banking association. The
Conversion will occur immediately before
the Consolidation.
DGCL ................................. Delaware General Corporation Law.
EFFECTIVE DATE OF THE CONSOLIDATION... The date specified in the certificate of
approval to be issued by the OCC
approving the Consolidation.
EFFECTIVE TIME OF THE CONSOLIDATION... 12:01 a.m., Minneapolis, Minnesota time
on the Effective Date of the
Consolidation
EXCHANGE ACT ......................... Securities Exchange Act of 1934.
EXCHANGE RATIO........................ The number of shares of Norwest common
stock that Norwest will exchange in the
Consolidation for each share of First
Bank common stock, as determined in
accordance with the formula in the
Reorganization Agreement. The
Reorganization Agreement defines this
number as the "Norwest Share Amount."
FEDERAL RESERVE BOARD ................ Board of Governors of the Federal
Reserve System.
FDI ACT .............................. Federal Deposit Insurance Act.
FDIC ................................. Federal Deposit Insurance Corporation.
FIRST BANK ........................... Before the Conversion, First Bank, a
Texas banking association. After the
Conversion, First Bank Katy, National
Association, a national banking
association.
FIRST BANK COMMON STOCK............... First Bank's common stock, par value
$1.00 per share.
1
<PAGE>
INTERSTATE BANKING ACT ............... Reigle-Neal Interstate Banking and
Branching Act.
NATIONAL BANK ACT .................... National Bank Act.
NORWEST .............................. Norwest Corporation and its consolidated
subsidiaries.
NORWEST COMMON STOCK ................. Norwest's common stock, par value $1-2/3
per share.
NORWEST SHARE AMOUNT.................. See "Exchange Ratio" above.
OCC................................... Office of the Comptroller of the
Currency.
REORGANIZATION AGREEMENT ............. The Agreement and Plan of Reorganization
dated as of December 24, 1997 between
First Bank and Norwest.
SEC .................................. Securities and Exchange Commission.
SECURITIES ACT ....................... Securities Act of 1933.
SPECIAL MEETING....................... The meeting at which the Conversion and
the Consolidation will be submitted to a
vote of the shareholders of First Bank.
TBCA .............................. The Texas Business Corporation Act.
2
<PAGE>
QUESTIONS AND ANSWERS
ABOUT THE CONSOLIDATION
Q: WHY HAS FIRST BANK AGREED TO BE ACQUIRED BY NORWEST?
A: In evaluating Norwest's offer to acquire First Bank, First Bank's
management considered numerous factors including the current market
conditions and trends in the banking industry, the changing market for
financial services, as well as the opportunities provided by a
consolidation with Norwest and determined that First Bank's
competitive position and the value of its stock could best be enhanced
through an affiliation with Norwest.
Q: HOW WILL I BENEFIT?
A: First Bank's board of directors believes that First Bank shareholders
will benefit by becoming owners of a company that has more resources
to compete in the financial services industry than First Bank
independently. The Consolidation will also provide First Bank
shareholders with increased liquidity, as there is no established
market for First Bank common stock.
Q: WHAT DO I NEED TO DO NOW?
A: Just sign the enclosed proxy card and mail it to First Bank in the
enclosed return envelope as soon as possible. This way, your shares
will be represented at the special meeting on [DATE OF MEETING]. First
Bank's board of directors recommends that you vote FOR the Conversion
and FOR the Consolidation.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the Consolidation is completed, Norwest will send you
written instructions for exchanging your stock certificates.
Q: WHAT IS THE EXCHANGE RATIO?
A: The Exchange Ratio is the number of shares of Norwest common stock
that Norwest will exchange in the Consolidation for each share of
First Bank common stock.
Q: HOW WILL THE EXCHANGE RATIO BE DETERMINED?
A: Norwest will issue a total of 2,000,000 shares of its common stock in
the Consolidation. The Exchange Ratio will be determined by dividing
2,000,000 by the sum of (1) the number of shares of First Bank common
stock outstanding immediately before the Effective Time of the
Consolidation, plus (2) the number of shares of First Bank common
stock that may be issued on exercise of options outstanding
immediately before the Effective Time of the Consolidation.
Q: HOW WILL I KNOW THE EXCHANGE RATIO BEFORE I VOTE?
A: There are currently outstanding 1,757,505 shares of First Bank common
stock and options to purchase an additional 25,000 shares. The
Reorganization Agreement prohibits First Bank from issuing additional
shares of First Bank common stock or additional options to purchase
First Bank common stock without Norwest's consent. It also prohibits
First Bank from repurchasing shares of First Bank common stock without
Norwest's consent. As a result, you should assume that the Exchange
Ratio will equal approximately 1.122, determined by dividing 2,000,000
by the sum of 1,757,505 and 25,000.
As an example, if you own 10,000 shares of First Bank common stock,
you will receive 11,220 shares of Norwest common stock.
3
<PAGE>
Q: WHY IS FIRST BANK CONVERTING TO A NATIONAL BANK BEFORE THE
CONSOLIDATION?
A: Norwest intends to operate First Bank as a stand-alone, separately
chartered bank for a period of time after the Consolidation. The
majority of Norwest's subsidiary banks are national banks regulated by
the OCC. As a result, Norwest prefers that First Bank operate as a
national bank rather than as a state bank.
First Bank will convert to a national bank only if the Consolidation
is approved.
Q: WHAT ARE THE TAX CONSEQUENCES TO SHAREHOLDERS OF THE CONSOLIDATION?
A: First Bank and Norwest have structured the Consolidation so that, for
U.S. federal income tax purposes, the exchange of Norwest common stock
for shares of First Bank common stock will be tax free to First Bank
shareholders, except for cash received in lieu of fractional shares.
To review the tax consequences to First Bank shareholders in greater
detail, see page 22.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR TO DETERMINE THE PARTICULAR
TAX CONSEQUENCES TO YOU OF THE CONSOLIDATION.
Q: WHEN WILL THE CONSOLIDATION BE COMPLETED?
A: First Bank and Norwest expect to complete the Consolidation within a
few days after the special meeting, assuming the required regulatory
approvals have been received by then.
Q: WHAT RIGHTS DO I HAVE IF I OBJECT TO THE CONVERSION OR THE
CONSOLIDATION?
A: You have a right to an appraisal of the value of your First Bank
common stock in connection with the Conversion and the Consolidation.
You may exercise this right in connection with either the Conversion
or the Consolidation, but not both. See pages 19 and 30 for
information on your appraisal rights and how to exercise them.
4
<PAGE>
QUESTIONS AND ANSWERS
ABOUT THE PROXY STATEMENT-PROSPECTUS
Q: WHAT IS THE PURPOSE OF THIS DOCUMENT?
A: This document serves as both a proxy statement of First Bank and a
prospectus of Norwest. As a proxy statement, it is being provided to
you because First Bank's board of directors is soliciting your proxy
for use at the special meeting. As a prospectus, it is being provided
to you because Norwest will exchange shares of Norwest common stock
for your shares of First Bank common stock.
Q: DO I NEED TO READ THE ENTIRE DOCUMENT, INCLUDING THE APPENDICES?
A: Absolutely. Much of this Proxy Statement-Prospectus summarizes
information that is set forth in greater detail elsewhere in this
document or in the appendices to this document. Each summary is
qualified in its entirety by reference to the information being
summarized. For example, the summary of the terms of the
Reorganization Agreement is qualified in its entirety by reference to
the full text of the Reorganization Agreement, a copy of which is
included as Appendix A. If there is any inconsistency between the
summary and the actual terms of the Reorganization Agreement, the
actual terms will control. As a result, to fully understand the
Consolidation and your rights as a First Bank shareholder, you will
need to read carefully this entire document including appendices.
Q: IS THERE OTHER INFORMATION I SHOULD CONSIDER?
A: This document does not physically include all of the information that
may be important to you. Under SEC rules, Norwest is permitted to
"incorporate by reference" into this Proxy Statement-Prospectus
information about Norwest that is contained in other documents filed
with the SEC. For example, Norwest's consolidated financial statements
for the year ended December 31, 1997 are not included in this
document. Instead, the financial statements are incorporated by
reference to Norwest's annual report on Form 10-K for 1997. Norwest's
1997 Form 10-K also contains a description of Norwest's business and a
financial review of its operations. This information may be important
to your voting decision but is not physically included in this Proxy
Statement-Prospectus.
INFORMATION THAT IS INCORPORATED BY REFERENCE TO ANOTHER DOCUMENT IS
CONSIDERED PART OF THIS PROXY STATEMENT-PROSPECTUS. IT IS CONSIDERED
TO HAVE BEEN DISCLOSED TO YOU WHETHER OR NOT YOU ACTUALLY REVIEW THE
INFORMATION.
Q: WHERE CAN I FIND INFORMATION THAT HAS BEEN INCORPORATED BY REFERENCE?
A: On page 71, under "WHERE YOU CAN FIND MORE INFORMATION," there is a
list of the documents that Norwest has incorporated by reference into
this Proxy Statement-Prospectus. There is also information on how to
obtain copies of these documents from the SEC and Norwest.
Q: WHAT ABOUT REPORTS FILED BY NORWEST AFTER THE DATE OF THIS PROXY
STATEMENT-PROSPECTUS?
A: Reports filed by Norwest with the SEC after the date of this Proxy
Statement-Prospectus may update, modify or correct information in the
documents incorporated by reference. You should review these reports,
as they could disclose a change in the business prospects, financial
condition or other affairs of Norwest since the date of this Proxy
Statement-Prospectus.
5
<PAGE>
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."
PARTIES TO THE CONSOLIDATION
NORWEST CORPORATION.................. Norwest is a diversified financial
Sixth and Marquette services company organized under the
Minneapolis, Minnesota 55479 laws of Delaware and registered under
(612) 667-1234 the Bank Holding Company Act.
Through its subsidiariesand affiliates,
Norwest provides retail, commercial and
corporate banking services, as well as a
variety of other financial services,
including mortgage banking, consumer
finance, equipment leasing, agricultural
finance, commercial finance, securities
brokerage and investment banking,
insurance agency services, computer and
data processing services, trust
services, mortgage-backed securities
servicing, and venture capital
investment.
At December 31, 1997, Norwest had
consolidated total assets of $88.5
billion, total deposits of $55.5 billion
and total stockholders' equity of $7.0
billion. Based on total assets at
December 31, 1997, Norwest was the 11th
largest commercial banking organization
in the United States.
FIRST BANK........................... First Bank is a Texas banking
5622 Third Street association which provides traditional
P. O. Box 635 banking services in primarily rural
Katy, Texas 77492 communities. First Bank is supervised,
(281) 391-2369 regulated and examined by the Texas
Department of Banking as a state bank,
and its deposits are insured by the FDIC
to the fullest extent permitted by law.
Through its branches, First Bank offers
individual and commercial interest and
non-interest bearing transaction
accounts, savings products and personal
and business loans.
At December 31, 1997, First Bank had
total assets of $318.5 million, total
deposits of $287.5 million and total
stockholders' equity of $30.3 million.
REASON FOR THE CONVERSION............ Norwest intends to operate First Bank as
a stand-alone, separately-chartered bank
for some period of time after the
Consolidation. The majority of Norwest's
subsidiary banks are national banks,
6
<PAGE>
regulated by the same government agency
(the OCC). As a result, Norwest prefers
that First Bank operate as a national
bank rather than a state bank.
First Bank has agreed to convert to a
national bank to facilitate the
Consolidation. First Bank will convert
to a national bank only if the
Consolidation is approved.
REASONS FOR THE CONSOLIDATION
(SEE PAGE 22)........................ In evaluating Norwest's offer to acquire
First Bank, First Bank's management
considered numerous factors including
the current market conditions and trends
in the banking industry, the changing
market for financial services, as well
as the opportunities provided by a
consolidation with Norwest and
determined that First Bank's competitive
position and the value of its stock
could best be enhanced through an
affiliation with Norwest.
REQUIRED VOTE (SEE PAGE 16).......... The holders of at least two-thirds of
the outstanding shares of First Bank
common stock must approve the
Conversion. The Consolidation also
requires the approval of the holders of
at least two-thirds of the outstanding
First Bank common stock.
Certain First Bank directors and
shareholders of First Bank have agreed
to vote all shares of First Bank common
stock beneficially owned by them at the
record date in favor of the Conversion
and the Consolidation. At the record
date for the special meeting, these
directors and shareholders beneficially
owned an aggregate of 568,062 shares of
First Bank common stock, representing
approximately 32.3% of the shares of
First Bank common stock outstanding at
the record date.
Because the Conversion and the
Consolidation require approval of a
specified percentage of the outstanding
shares, not voting will have the same
effect as voting against the Conversion
and the Consolidation.
RECOMMENDATION OF FIRST BANK'S
BOARD OF DIRECTORS................. First Bank's board of directors has
approved both the Conversion and the
Consolidation as being in the best
interests of First Bank shareholders and
recommends that First Bank shareholders
approve the Conversion and the
Consolidation at the special meeting.
7
<PAGE>
FAIRNESS OPINION OF FIRST BANK'S
FINANCIAL ADVISOR (SEE PAGE 23).... NationsBanc Montgomery Securities LLC,
First Bank's financial advisor for the
Consolidation, has rendered an opinion
to First Bank and First Bank's board of
directors that the Exchange Ratio is
fair, from a financial point of view, to
the holders of First Bank common stock.
A copy of the opinion, which sets forth
the assumptions made, matters considered
and limits on the review undertaken, is
included in this Proxy
Statement-Prospectus as Appendix B.
THE CONSOLIDATION.................... In the Consolidation, First Bank will
consolidate with a newly-formed,
wholly-owned subsidiary bank of Norwest.
First Bank will be the surviving entity
in the Consolidation.
WHAT FIRST BANK SHAREHOLDERS
WILL RECEIVE (SEE PAGE 35)...... Norwest will issue a total of 2,000,000
shares of its common stock in the
Consolidation. The number of shares of
Norwest common stock that each First
Bank shareholder will receive will be
determined by multiplying the number of
shares of First Bank common stock owned
by the shareholder by the Exchange
Ratio.
The Exchange Ratio will be determined by
dividing 2,000,000 by the sum of (1) the
number of shares of First Bank common
stock outstanding immediately before the
Effective Time of the Consolidation,
plus (2) the number of shares of First
Bank common stock that may be issued on
exercise of options outstanding
immediately before the Effective Time of
the Consolidation.
There are currently outstanding
1,757,505 shares of First Bank common
stock and options to purchase an
additional 25,000 shares. The
Reorganization Agreement prohibits First
Bank from issuing additional shares of
First Bank common stock or additional
options to purchase First Bank common
stock without the consent of Norwest. It
also prohibits First Bank from
repurchasing First Bank common stock
without the consent of Norwest. As a
result, you should assume that the
Exchange Ratio will equal approximately
1.122, determined by dividing 2,000,000
by the sum of 1,757,505 and 25,000.
8
<PAGE>
Norwest will not issue fractional shares
in the Consolidation. If the total
number of shares of Norwest common stock
you are entitled to receive in the
Consolidation does not equal a whole
number, Norwest will pay you cash in
lieu of the fractional share.
MANAGEMENT OF FIRST BANK AFTER
THE CONSOLIDATION............... When the Consolidation is complete,
Norwest will own all of the outstanding
shares of First Bank common stock. As a
result, Norwest will be able to elect or
appoint all of the directors and
officers of First Bank.
ADDITIONAL INTERESTS OF FIRST
BANK'S MANAGEMENT
(SEE PAGE 28)................... Some members of First Bank's management
have interests in the Consolidation that
are different from or in addition to the
interests of First Bank shareholders
generally. These interests include the
following:
- Norwest will employ Dana Cook,
First Bank's chairman, for a
period of 60 days after the
Consolidation, at a salary of
$5,000 per month. Norwest will
also pay Mr. Cook two annual
installments of $25,000 each
in exchange for Mr. Cook
observing certain
noncompetition restrictions
after his employment ends.
- Within 30 days after the
Consolidation, First Bank will
pay Don Birkelbach, First
Bank's president, a change of
control payment of $100,000
unless Mr. Birkelbach
voluntarily leaves First Bank
or is terminated for cause.
- Options held by Mr. Birkelbach
and Wayne Crawford, First
Bank's executive vice
president and chief operating
officer, to purchase 5,000
shares and 20,000 shares,
respectively, of First Bank
common stock at a price of
$22.50 per share will become
exercisable in full
immediately before the
Conversion. Each share of
First Bank common stock
purchased upon exercise of the
options will be exchanged in
the Consolidation for 1.122
shares of Norwest common
stock.
- Norwest will pay Kent Anderson
a total of $80,000 in exchange
for the termination of Mr.
9
<PAGE>
Anderson's consulting
agreement with First Bank and
for Mr. Anderson's agreement
to observe certain
noncompetition restrictions.
CONDITIONS TO THE CONSOLIDATION
(SEE PAGE__).................... 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
September 30, 1997 that has had, or
might reasonably be expected to have, a
material adverse effect on First Bank.
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
condition.
REGULATORY APPROVALS (SEE The Conversion is subject to the prior
PAGES 21 AND 32)............... approval of the OCC, as the primary
regulator of national banks. The
Conversion is also subject to the
satisfaction of conditions under the
Texas Finance Code, including
notification of the Texas Banking
Commissioner.
The Consolidation is subject to the
prior approval of the Federal Reserve
Board, as the regulator of bank holding
companies. Because the Consolidation
will be between two national banks, the
OCC must also approve the Consolidation.
Applications for approval of the
Conversion and the Consolidation have
been submitted and are pending as of the
date of this Proxy Statement-Prospectus.
TERMINATION OF THE
REORGANIZATION AGREEMENT
(SEE PAGE 38)................... Norwest and First Bank can mutually
agree to terminate the Reorganization
Agreement without completing the
Consolidation. Also, either party can
terminate the Reorganization Agreement
under the following circumstances:
- if a court or other
governmental authority
prohibits the Consolidation;
or
- the Consolidation is not
completed by June 30, 1998,
unless the failure to complete
the Consolidation on or before
that date is the fault of the
party seeking to terminate.
10
<PAGE>
ACCOUNTING TREATMENT
(SEE PAGE 34)................... Norwest will account for the
Consolidation as a pooling of interests,
assuming all of the criteria for a
pooling transaction are satisfied. Under
the pooling of interests accounting
method, Norwest will carry forward the
assets and liabilities of First Bank 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 First Bank
with Norwest.
APPRAISAL RIGHTS (SEE PAGES 19
AND 30 AND APPENDICES C AND D).. First Bank shareholders have a right to
an appraisal of the value of their First
Bank common stock in connection with the
Conversion and the Consolidation. A
shareholder may exercise this right in
connection with either the Conversion or
the Consolidation, but not both. To
exercise your right of appraisal in
connection with the Conversion, you must
follow the procedures set forth in
Appendix C. To exercise your right in
connection with the Consolidation, you
must follow the procedures set forth in
Appendix D. Failure to comply strictly
with these procedures will result in the
forfeiture of your appraisal rights.
U.S. FEDERAL INCOME TAX
CONSEQUENCES (SEE PAGE 32)...... The Consolidation has been structured so
that First Bank 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 of
Norwest common stock). The Consolidation
is conditioned on the receipt by First
Bank of a legal opinion from Liddell,
Sapp, Zivley, Hill & LaBoon, L.L.P. to
this effect.
MARKET INFORMATION
(SEE PAGE 15)................... Norwest common stock is listed on the
New York Stock Exchange and the Chicago
Stock Exchange under the symbol NOB. On
December 23, 1997, the last full trading
day before First Bank and Norwest signed
the Reorganization Agreement, Norwest
common stock closed at $35.750 per
share. On ____________, 1998, Norwest
common stock closed at $___ per share.
There is no public market for First Bank
common stock.
11
<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 First
Bank common stock on a historical and pro forma equivalent basis. The historical
information should be read with (a) the selected financial data (and related
notes) for Norwest and First Bank appearing elsewhere in this Proxy
Statement-Prospectus, (b) the complete financial statements of First Bank
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
"SUMMARY--Selected Historical Financial Information" and "WHERE YOU CAN FIND
MORE INFORMATION."
The pro forma information in the table assumes that Norwest will exchange
1.122 shares of its common stock for each share of First Bank common stock. The
pro forma information also assumes the Consolidation is accounted for using the
pooling of interests method of accounting. See "The CONSOLIDATION--Accounting
Treatment."
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 FIRST BANK COMMON STOCK
----------------------- ------------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL EQUIVALENT
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
BOOK VALUE (1):
December 31, 1997 $9.01 9.02 17.22 10.12
DIVIDENDS DECLARED (2):
Year Ended December 31, 1997 0.615 0.615 0.600 0.690
Year Ended December 31, 1996 0.525 0.525 0.600 0.589
Year Ended December 31, 1995 0.450 0.450 0.600 0.505
NET INCOME (3):
Year Ended December 31, 1997 1.75 1.76 2.65 1.97
Year Ended December 31, 1996 1.54 1.54 2.44 1.73
Year Ended December 31, 1995 1.36 1.36 2.15 1.53
</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 First Bank divided by total pro forma common shares of the
combined entities. The pro forma equivalent book value per share of First
Bank common stock represents the pro forma combined book value per share of
Norwest common stock multiplied by the assumed Exchange Ratio of 1.122.
(2) Assumes no changes in cash dividends per share by Norwest. The pro forma
equivalent dividends per share of First Bank common stock represent cash
dividends declared per share of Norwest common stock multiplied by the
assumed Exchange Ratio of 1.122.
(3) The pro forma combined net income per share of Norwest common stock (based
on diluted net income and weighted average number of common and common
equivalent shares) is based upon the combined historical net income for
Norwest and First Bank divided by the average pro forma common and common
equivalent shares of the combined entities. The pro forma equivalent net
income per share of First Bank common stock represents the pro forma
combined net income per share multiplied by the assumed Exchange Ratio of
1.122.
12
<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 consolidated financial statements (and
related notes) contained in its annual 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 "Where You Can Find More Information." The information for First Bank is
derived from its historical financial statements (and related notes) contained
elsewhere in this Proxy Statement-Prospectus. See "First Bank Financial
Statements."
NORWEST CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1997 1996 1995 1994 1993(1)
---- ---- ---- ---- -------
(In millions, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income........................ $ 6,697.4 6,318.3 5,717.3 4,393.7 3,946.3
Interest expense....................... 2,664.0 2,617.0 2,448.0 1,590.1 1,442.9
---------- --------- --------- --------- ---------
Net interest income.................. 4,033.4 3,701.3 3,269.3 2,803.6 2,503.4
Provision for credit losses............ 524.7 394.7 312.4 164.9 158.2
Non-interest income.................... 2,962.3 2,564.6 1,848.2 1,638.3 1,585.0
Non-interest expenses.................. 4,421.3 4,089.7 3,382.3 3,096.4 3,050.4
---------- --------- --------- --------- ---------
Income before income taxes........... 2,049.7 1,781.5 1,422.8 1,180.6 879.8
Income tax expense..................... 698.7 627.6 466.8 380.2 266.7
---------- --------- --------- --------- ---------
Net income............................. $1,351.0 1,153.9 956.0 800.4 613.1
========== ========= ========= ========= =========
PER COMMON SHARE DATA
Net income:
Basic............................... $ 1.78 1.55 1.39 1.23 0.95
Diluted.............................. 1.75 1.54 1.36 1.20 0.93
Dividends declared..................... 0.6150 0.5250 0.4500 0.3825 0.3200
BALANCE SHEET DATA At period end:
Total assets......................... $88,540.2 80,175.4 72,134.4 59,315.9 54,665.0
Long-term debt....................... 12,766.7 13,082.2 13,676.8 9,186.3 6,850.9
Total stockholders' equity........... 7,022.2 6,064.2 5,312.1 3,846.4 3,760.9
</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.
13
<PAGE>
FIRST BANK
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income........................ $ 20,872 20,317 17,614 12,890 13,455
Interest expense....................... 7,944 7,826 7,115 4,795 4,755
---------- --------- --------- --------- ---------
Net interest income.................. 12,928 12,491 10,499 8,095 8,700
Provision for credit losses............ - 50 - - -
Non-interest income.................... 2,684 2,914 2,338 2,370 1,675
Non-interest expenses.................. 8,558 8,755 7,485 6,146 6,136
---------- --------- --------- --------- ---------
Income before income taxes........... 7,054 6,600 5,352 4,319 4,239
Income tax expense..................... 2,333 2,243 1,750 1,426 1,395
---------- --------- --------- --------- ---------
Net income............................. $ 4,721 4,357 3,602 2,893 2,844
========== ========= ========= ========= =========
PER COMMON SHARE DATA
Net Income:
Basic $ 2.67 2.44 2.15 1.74 1.61
Diluted 2.65 2.44 2.15 1.74 1.61
Dividends declared 0.60 0.60 0.60 1.00 1.00
BALANCE SHEET DATA At period end:
Total assets......................... $ 318,491 309,151 277,292 228,708 223,865
Total shareholders' equity........... 30,268 29,019 23,883 19,738 19,430
</TABLE>
14
<PAGE>
SHARE PRICES AND DIVIDENDS FOR NORWEST COMMON STOCK
The following table sets forth the high and low sales prices per share of
the Norwest common stock, and the cash dividends paid on Norwest common
stock, for the quarterly periods indicated. The prices for Norwest common
stock are as reported on the New York Stock Exchange. There is no public
market for First Bank common stock.
NORWEST COMMON STOCK
----------------------------------
HIGH LOW DIVIDENDS
---- --- ---------
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 32.1563 28.1250 0.150
Fourth Quarter 39.5000 29.7500 0.165
1998
First Quarter 43.8750 34.7500 0.165
Second Quarter
(through April __, 1998)
15
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS
First Bank is sending you this Proxy Statement-Prospectus to provide you
with information concerning the Conversion and the Consolidation and to solicit
your proxy for use at the special meeting of shareholders. At the special
meeting, shareholders of First Bank will be asked to approve the Conversion and
to approve the Consolidation.
DATE, TIME AND PLACE OF SPECIAL MEETING
The date, time and place of the special meeting are as follows:
[DAY],[DATE OF SPECIAL MEETING]
[TIME OF MEETING]
[LOCATION OF MEETING]
RECORD DATE
First Bank has established ____________, 1998 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 1,757,505 shares of First Bank common stock
outstanding and entitled to vote at the special meeting. The holders of First
Bank 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 Conversion and the
Consolidation each requires the affirmative vote, in person or by proxy, of the
holders of at least two-thirds of the outstanding shares of First Bank common
stock on the record date.
VOTING AGREEMENTS
Certain First Bank directors and other shareholders have entered into
voting agreements with Norwest pursuant to which the directors and other
shareholders have agreed to vote all shares of First Bank common stock
beneficially owned by them at the record date in favor of the Conversion and the
Consolidation. The names of these directors and other shareholders, and the
number of shares beneficially owned by them at the record date for the special
meeting, are set forth in the table below.
SHARES BENEFICIALLY % OF FIRST BANK COMMON
DIRECTORS OWNED AT RECORD DATE STOCK OUTSTANDING
- --------- --------------------- ----------------------
Don A. Birkelbach 1,440 *
Dana H. Cook 73,553 4.2%
R. Wayne Crawford 33,440 1.9
Ray W. Kent 11,112 *
OTHER SHAREHOLDERS
- ------------------
D. Kent Anderson 342,521 19.5
Clarke Kent Anderson 1995 Trust 35,332 2.0
16
<PAGE>
Huntley C. Anderson 1995 Trust 35,332 2.0
Whitney P. Anderson 1995 Trust 35,332 2.0
Total 568,062 32.3
*Less than 1%
VOTING AND REVOCATION OF PROXIES
All shares of First Bank 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 THE CONVERSION AND FOR 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 First Bank 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 proposals to approve the Conversion and the Consolidation must each be
approved by the holders of at least two-thirds of the outstanding shares of
First Bank common stock. Because each 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.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
First Bank may solicit proxies from First Bank 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.
First Bank 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 either the Conversion or for the
Consolidation is received before the scheduled meeting date, Norwest and First
Bank may decide to postpone or adjourn the special meeting. If this happens,
proxies that have been received that either have been voted for the Conversion
and the Consolidation or contain no instructions will be voted for adjournment.
17
<PAGE>
First Bank's board of directors is not aware of any business to be brought
before the special meeting other than the proposals to approve the Conversion
and 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 First Bank.
18
<PAGE>
THE CONVERSION
GENERAL
Immediately before the Consolidation, First Bank will convert from a Texas
banking association to a national bank under the name "First Bank Katy, National
Association." First Bank Katy, National Association will be the surviving bank
in the Consolidation.
The Conversion will occur only if the Consolidation is also approved. If
the Consolidation is not approved, First Bank will remain a Texas banking
association.
REASON FOR THE CONVERSION
Norwest intends to operate First Bank as a stand-alone, separately
chartered bank for some period of time after the Consolidation. The majority of
Norwest's subsidiary banks are national banks, regulated by the same government
agency (the OCC). As a result, Norwest prefers that First Bank operate as a
national bank rather than a state bank. First Bank has agreed to convert to a
national bank to facilitate the Consolidation.
APPRAISAL RIGHTS
As a First Bank shareholder, you will have appraisal rights in connection
with the Conversion as well as in connection with the Consolidation (see "THE
CONSOLIDATION--Appraisal Rights"). The appraisal rights with respect to the
Conversion are based on the provisions of Articles 5.11, 5.12 and 5.13 of the
TBCA, copies of which are attached to this Proxy Statement-Prospectus as
Appendix C. To understand these appraisal rights fully, you should read these
provisions carefully.
What "Dissenters' Rights of Appraisal" Are. Dissenters' rights of appraisal
(or simply "rights of appraisal") refer to the right of shareholders who
disagree with a particular corporate action to receive the cash value of their
shares in lieu of whatever payment is called for by that corporate action. Under
the TBCA, you have this right in connection with the Conversion. As a result,
instead of receiving shares of Norwest common stock, you may elect to receive
the cash value of your shares of First Bank common stock. The value of your
shares will be measured as of the day immediately before the Conversion,
excluding any increase or decrease in value in anticipation of the Conversion or
the Consolidation--that is, the value will not reflect the expected effects of
the Conversion or the Consolidation on the value of First Bank.
YOU MUST TAKE A NUMBER OF STEPS TO EXERCISE YOUR APPRAISAL RIGHTS. FAILURE
TO TAKE THESE STEPS STRICTLY IN THE MANNER REQUIRED WILL RESULT IN YOUR LOSING
YOUR APPRAISAL RIGHTS. IF YOU LOSE YOUR APPRAISAL RIGHTS AND THE FIRST BANK
SHAREHOLDERS APPROVE THE CONVERSION AND THE CONSOLIDATION, YOU WILL BE BOUND BY
THE CONVERSION AND, UNLESS YOU EXERCISE YOUR APPRAISAL RIGHTS IN CONNECTION WITH
THE CONSOLIDATION, WILL RECEIVE SHARES OF NORWEST COMMON STOCK FOR YOUR SHARES
OF FIRST BANK COMMON STOCK.
STEPS YOU NEED TO TAKE TO EXERCISE YOUR RIGHTS OF APPRAISAL.
Before the Special Meeting--Notify First Bank of your intent to dissent
from the Conversion and refrain from voting for the Conversion. Before the
special meeting, you must deliver or mail written notice to First Bank of your
intent to exercise your right to dissent if the Conversion is
19
<PAGE>
completed. Your notice must give an address where First Bank can notify you if
the Conversion is completed. Also, you must not vote any of your shares in favor
of the Conversion.
SIMPLY VOTING AGAINST THE CONVERSION IS NOT SUFFICIENT TO EXERCISE YOUR
APPRAISAL RIGHTS. YOU MUST NOTIFY FIRST BANK AS MENTIONED ABOVE AND TAKE THE
OTHER STEPS DESCRIBED BELOW.
After the Special Meeting--Demand payment for your shares and submit
your share certificates. If First Bank shareholders approve the Conversion and
you have taken the required steps before the special meeting, First Bank will
deliver or mail written notice to you of completion of the Conversion within 10
days after the Conversion becomes effective. You will have 10 days after
delivery or mailing of this notice to you to make a written demand on First
Bank, as the surviving company in the Conversion, for payment of the fair value
of your shares. You must state in your demand the number of shares of First Bank
common stock you own and your estimate of the fair value of your shares. Within
20 days after demanding payment for your shares, you must submit all of your
share certificates to First Bank so that First Bank can note your demand on the
certificates.
YOU WILL LOSE YOUR APPRAISAL RIGHTS IF YOU FAIL TO DEMAND PAYMENT FOR
YOUR SHARES WITHIN THE REQUIRED 10-DAY PERIOD. ALSO, IF YOU FAIL TO SUBMIT YOUR
SHARE CERTIFICATES WITHIN THE REQUIRED 20-DAY PERIOD, FIRST BANK HAS THE OPTION
TO TERMINATE YOUR APPRAISAL RIGHTS, UNLESS A COURT OF COMPETENT JURISDICTION FOR
GOOD AND SUFFICIENT CAUSE OTHERWISE DIRECTS.
HOW THE FAIR VALUE OF YOUR SHARES WILL BE DETERMINED.
If You and First Bank Agree on an Estimated Fair Value. Within 20 days
after First Bank receives your demand for payment, it will deliver or mail
notice to you indicating whether it accepts your estimate of the fair value of
your shares. If First Bank accepts your estimate, it will pay this amount within
90 days after the date the Conversion is completed, upon surrender of your duly
endorsed share certificates. If First Bank does not accept your estimate, it
will state in the notice its estimated fair value of your shares. You will have
60 days after completion of the Conversion to accept First Bank's estimated
value. If you do, First Bank will pay this amount to you within 90 days after
the Effective Date of the Conversion, upon surrender of your duly endorsed share
certificates. Upon payment to you of the agreed value, whether based on your
estimate or First Bank's estimate, you will cease to have any interest in your
shares or in First Bank.
No Agreement is Reached on the Fair Value of Your Shares--Court Ordered
Appraisal. If you do not agree with First Bank's estimate of the fair value of
your shares, then either you or First Bank may file a petition in any court of
competent jurisdiction in Harris County, Texas, asking the court to determine
the fair value of your shares. The petition must be filed within 120 days after
the Effective Date of the Conversion. The court will notify by registered mail
all shareholders who have demanded payment for their shares and who have been
unable to reach an agreement with First Bank as to the fair value of their
shares. The court's notice will state the time and place of the hearing at which
the court will consider the petition.
The court will appoint one or more appraisers to determine the value of
First Bank common stock. The appraisers may examine the books and records of
First Bank and conduct such other investigation as they deem proper. The
appraisers must afford a reasonable opportunity to the interested parties to
submit pertinent evidence as to the value of the shares. The appraisers will
then determine the fair value of the shares and report this value to the office
of the clerk of the court. The clerk of the court will notify all parties of
this value. After hearing any legal or factual exceptions to
20
<PAGE>
the report, the court will then determine the fair value of the shares and
direct First Bank to pay that value, together with interest for the period
beginning 91 days after the Effective Date of the Conversion and ending on the
date of the court's decision, to the shareholders entitled to payment, upon
surrender of their duly endorsed share certificates. The court's determination
of the value of First Bank common stock will be binding on First Bank and all
shareholders who have been so notified. Upon payment of this amount, dissenting
shareholders will cease to have any interest in their shares or in First Bank.
The court allows the appraisers a reasonable fee as court costs, and all court
costs are allotted between the parties in a manner that the court determines is
fair and equitable.
Withdrawing Your Demand for Payment. You may withdraw your demand for
payment at any time before payment for your shares and before any petition is
filed seeking a determination of the fair value of the shares. With First Bank's
consent, you may withdraw your demand after the petition is filed.
When You Will be Presumed to Have Approved the Conversion. You will be
presumed to have approved the Conversion if (a) you withdraw your demand for
payment within the time allowed, (b) First Bank has terminated your appraisal
rights because you did not, within the time allowed, submit your certificates to
First Bank for notation of your demand for payment, (c) no petition for a court
hearing was filed within the time allowed or (d) a petition is filed but the
court determines that you are not entitled to exercise dissenters' appraisal
rights. If you are presumed to have approved the Conversion, you will be bound
by the Conversion and will cease to have any rights in the shares or in First
Bank. Upon surrender of your duly endorsed certificates for your shares of First
Bank common stock, you will receive shares of Norwest common stock and will be
entitled to receive any dividends and other distributions made to stockholders
of Norwest since completion of the Consolidation.
Right of Appraisal is Your Only Remedy if You Object to the Conversion. In
the absence of fraud, the remedy provided by Article 5.12 of the TBCA is the
exclusive remedy for the recovery of the value of your shares if you object to
the Conversion. If First Bank complies with the requirements of Article 5.12 but
you do not, you will not be entitled to bring suit for the recovery of the value
of your shares or money damages with respect to the Conversion.
If you object to the Consolidation, but not the Conversion, you must follow
the procedures set forth in Appendix D and summarized on pages 30 and 31.
REGULATORY APPROVALS
The Conversion is subject to the prior approval of the OCC, as the primary
regulator of national banks. The Conversion is also subject to the satisfaction
of certain conditions under the Texas Finance Code, including notification of
the Texas Banking Commissioner.
First Bank has submitted an application to the OCC for approval of the
Conversion and has notified the Texas Banking Commissioner. The application to
the OCC is pending as of the date of this Proxy Statement-Prospectus.
21
<PAGE>
THE CONSOLIDATION
PURPOSE AND EFFECT OF THE CONSOLIDATION
Norwest is using the Consolidation to acquire First Bank. As a result of
the Consolidation, First Bank will become a wholly-owned subsidiary of Norwest
and shareholders of First Bank will receive shares of Norwest common stock for
their shares of First Bank common stock. Norwest will own all of the outstanding
shares of First Bank common stock. Shareholders of First Bank will become
stockholders of Norwest, and their rights will be governed by Norwest's restated
certificate of incorporation and bylaws rather than First Bank's articles of
association and bylaws. See "COMPARISON OF RIGHTS OF HOLDERS OF FIRST BANK
COMMON STOCK AND NORWEST COMMON STOCK."
BACKGROUND OF AND REASONS FOR THE CONSOLIDATION
In 1996, First Bank initiated efforts to convert to a Subchapter S
corporation, a corporate structure whereby the corporation would no longer pay
corporate income taxes. At that time, in order for the bank to obtain Subchapter
S status all shareholders would have to be individuals or qualifying trusts.
During 1997 management had a series discussions with the bank's only significant
nonqualifying shareholder to negotiate for the repurchase of its stock. In the
fall of 1997 it became evident mutually agreeable terms could not be reached. In
addition, such shareholder had the right to require First Bank to acquire all of
such shareholder's First Bank common stock in April of 1998, which would require
First Bank to arrange financing. The First Bank board of directors, in
considering ways to maximize shareholder value, determined that it was an
opportune time to consider a merger or consolidation.
On previous occasions First Bank's largest shareholder and consultant, D.
Kent Anderson, had been contacted by Norwest and other financial institutions
that indicated they might have interest in acquiring First Bank.
In November, 1997 Mr. Anderson contacted Norwest and several other
institutions and indicated First Bank would consider offers. Although informal
discussions were held with at least two other financial institutions, Norwest
was the only financial institution to make a formal offer to First Bank's board
of directors. The board of directors reviewed Norwest's offer, current industry
and market conditions, trends in the banking industry, the changing markets for
financial services, the financial analyses and opinion of NationsBanc
Montgomery, the greater liquidity provided by Norwest common stock, the ability
of First Bank to attract superior proposals, the feasibility and cost of
continuing efforts to convert to Subchapter S status, and other strategic
alternatives to maximize shareholder value. The board of directors considered a
consolidation with Norwest to be in the best interests not only for all of the
shareholders but also for the customers and employees of First Bank. The board
of directors approved the letter of intent subject to a review by NationsBanc
Montgomery Securities as to the fairness of the transaction.
Financial Terms of the Consolidation. First Bank's board of directors
considered the consideration to be received by First Bank's shareholders
pursuant to the Consolidation in relation to the book value, assets and earnings
projections for First Bank, information concerning the financial condition,
results of operations and prospects of First Bank, including the projected
return on assets and return on equity, the financial terms of other recent
business combinations in the banking industry, and the opinion of NationsBanc
Montgomery Securities as to the fairness of the consideration to be received by
First
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Bank's shareholders pursuant to the Consolidation. First Bank's board of
directors believes the shareholders of First Bank will benefit from the
Consolidation through the ability to obtain, in a tax-free exchange, ownership
of shares in a larger enterprise with greater financial resources and broader
and more diversified classes of products, while allowing those shareholders who
wish to dispose of their interest for cash the opportunity to do so in the
public market (although certain shareholders would be subject to transfer
restrictions on the shares of Norwest common stock received in the
Consolidation). First Bank's board of directors reviewed and considered a
compilation of financial terms and trends of other recent business combinations
in the banking industry and determined the financial terms of the Consolidation
compared favorably with other recent transactions.
Financial and Other Information Concerning Norwest. First Bank's board of
directors considered the financial and other information concerning Norwest.
Such information included, but was not limited to, the financial condition,
asset quality, historical and projected earnings, growth prospects, the market
price and book value of Norwest Common Stock.
FIRST BANK'S BOARD OF DIRECTORS BELIEVES THE TERMS OF THE CONSOLIDATION ARE
FAIR AND IN THE BEST INTERESTS OF FIRST BANK'S SHAREHOLDERS. THE BOARD OF
DIRECTORS HAS UNANIMOUSLY APPROVED THE REORGANIZATION AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT FIRST BANK'S SHAREHOLDERS
APPROVE AND ADOPT THE REORGANIZATION AGREEMENT.
OPINION OF FIRST BANK'S FINANCIAL ADVISOR
Any forecast, prediction or other forward looking statement concerning the
future earnings or other measure of future performance of Norwest or First Bank
contained in this section is made solely by NationsBanc Montgomery Securities,
Inc. for the purpose of rendering its fairness opinion to First Bank and First
Bank's board of directors. Any such forecast, prediction or other forward
looking statement should not be considered or otherwise relied upon as having
been made, adopted or endorsed by Norwest or First Bank.
General. Pursuant to an engagement letter dated October 1, 1997, First Bank
engaged NationsBanc Montgomery Securities LLC ("NationsBanc Montgomery") to
assist First Bank in analyzing strategic alternatives for the purpose of
maximizing shareholder value, including a sale, merger or acquisition of First
Bank. First Bank selected NationsBanc Montgomery to provide the foregoing
services on the basis of its experience and expertise in transactions similar to
the Consolidation and its reputation in the banking and investment communities.
At a meeting of First Bank's board of directors on February 17, 1998,
NationsBanc Montgomery delivered its oral opinion subsequently confirmed in
writing as of the same date that the consideration to be received by the holders
of First Bank common stock pursuant to the Consolidation was fair to such
shareholders from a financial point of view, as of that date. The amount of such
consideration was determined pursuant to negotiations between First Bank and
Norwest and not pursuant to recommendations of NationsBanc Montgomery.
THE FULL TEXT OF NATIONSBANC MONTGOMERY'S WRITTEN OPINION TO FIRST BANK'S
BOARD OF DIRECTORS, DATED FEBRUARY 17, 1998, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED, AND LIMITATIONS OF THE REVIEW BY NATIONSBANC
MONTGOMERY, IS ATTACHED HERETO AS APPENDIX B AND IS INCORPORATED HEREIN BY
REFERENCE. THE FOLLOWING SUMMARY OF NATIONSBANC MONTGOMERY'S OPINION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION. HOLDERS
OF SHARES OF FIRST BANK COMMON STOCK ARE URGED TO AND SHOULD READ SUCH
23
<PAGE>
OPINION CAREFULLY AND IN ITS ENTIRETY. IN FURNISHING ITS OPINION, NATIONSBANC
MONTGOMERY DOES NOT ADMIT THAT IT IS AN EXPERT WITH RESPECT TO THE REGISTRATION
STATEMENT OF WHICH THIS PROXY STATEMENT-PROSPECTUS IS PART WITHIN THE MEANING OF
THE TERM "EXPERTS" AS USED IN THE SECURITIES ACT OF 1933, AS AMENDED AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "SECURITIES ACT"), OR THAT ITS
OPINIONS ARE REPORTS OR VALUATIONS WITHIN THE MEANING OF SECTION 11 OF THE
SECURITIES ACT, AND STATEMENTS TO SUCH EFFECT ARE INCLUDED IN NATIONSBANC
MONTGOMERY'S OPINION. NATIONSBANC MONTGOMERY HAS NOT ASSUMED RESPONSIBILITY FOR
PERFORMING THE LEVEL OF DILIGENCE OR INDEPENDENT VERIFICATION THAT WOULD BE
REQUIRED FOR IT TO RENDER A REPORT OR VALUATION FOR PURPOSES OF THE SECURITIES
ACT. ACCORDINGLY, NATIONSBANC MONTGOMERY BELIEVES THAT ITS OPINION SHOULD NOT BE
ACCORDED THE DEGREE OF RELIANCE PLACED ON SUCH REPORTS AND VALUATIONS.
NATIONSBANC MONTGOMERY'S OPINION IS ADDRESSED TO FIRST BANK'S BOARD OF
DIRECTORS, COVERS ONLY THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY
HOLDERS OF FIRST BANK COMMON STOCK FROM A FINANCIAL POINT OF VIEW AS OF THE DATE
OF THE OPINION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF FIRST
BANK COMMON STOCK AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE SPECIAL MEETING.
FURTHER, THE OPINION DOES NOT ADDRESS THE RELATIVE MERITS OF THE CONSOLIDATION
OR ANY ALTERNATIVES TO THE CONSOLIDATION, THE UNDERLYING DECISION OF FIRST
BANK'S BOARD OF DIRECTORS TO PROCEED WITH OR EFFECT THE CONSOLIDATION OR ANY
OTHER ASPECT OF THE CONSOLIDATION.
In connection with its opinion, NationsBanc Montgomery has, among other
things: (i) reviewed certain financial statements provided by First Bank,
publicly available financial and other data with respect to First Bank and
Norwest, including the consolidated financial statements for recent years to
December 31, 1997, and certain other relevant financial and operating data
relating to First Bank and Norwest made available to NationsBanc Montgomery from
published sources and, in the case of First Bank, from the internal records of
First Bank; (ii) reviewed the Reorganization Agreement; (iii) reviewed certain
publicly available information concerning the trading of, and the trading market
for, Norwest common stock; (iv) compared First Bank and Norwest from a financial
point of view with certain other companies in the banking industry which
NationsBanc Montgomery deemed to be relevant; (v) considered the financial
terms, to the extent publicly available, of selected recent business
combinations of companies in the banking industry which NationsBanc Montgomery
deemed to be comparable, in whole or in part, to the Consolidation; (vi)
reviewed and discussed with representatives of the management of First Bank
certain information of a business and financial nature regarding First Bank,
furnished to NationsBanc Montgomery by First Bank, including financial forecasts
and related assumptions of First Bank; (vii) reviewed estimates of earnings
regarding First Bank prepared by the management of First Bank and estimates of
earnings regarding Norwest prepared by third party analysts; and (viii)
performed such other analyses and examinations as NationsBanc Montgomery has
deemed appropriate.
In connection with the review, NationsBanc Montgomery has not assumed any
obligation independently to verify the foregoing information and has relied on
its being accurate and complete in all material respects. With respect to the
financial forecasts for First Bank provided to NationsBanc Montgomery by First
Bank's management, NationsBanc Montgomery has assumed for purposes of the
opinion that the forecasts have been reasonably prepared on bases reflecting the
best available estimates and judgments of First Bank's management at the time of
preparation as to the future financial performance of First Bank and that they
provide a reasonable basis upon which NationsBanc Montgomery can form its
opinion. NationsBanc Montgomery has also assumed that the third party analysts'
estimates as to the future financial performance of Norwest have been reasonably
prepared on bases reflecting the best available estimates and judgments of such
third party analysts at the time of preparation and provide a reasonable basis
upon which NationsBanc Montgomery can form its opinion. NationsBanc Montgomery
has assumed that there have been no material changes in First Bank's or
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<PAGE>
Norwest's assets, financial condition, results of operations, business or
prospects since the respective dates of their last financial statements made
available to NationsBanc Montgomery. NationsBanc Montgomery has assumed that the
Consolidation will be consummated in a manner that complies in all respects with
the applicable provisions of the Securities Act, the Securities Exchange Act of
1934 and all other applicable federal and state statutes, rules and regulations.
NationsBanc Montgomery is not an expert in the evaluation of loan portfolios for
purposes of assessing the adequacy of the allowances for losses with respect
thereto and has assumed that such allowances for each of First Bank and Norwest
are in the aggregate adequate to cover such losses. In addition, NationsBanc
Montgomery has not assumed responsibility for reviewing any individual credit
files, or making an independent evaluation, appraisal or physical inspection of
any of the assets or liabilities (contingent or otherwise) of First Bank or
Norwest, nor has NationsBanc Montgomery been furnished with any such appraisals.
NationsBanc Montgomery has assumed, that the Consolidation will be recorded as a
pooling of interests transaction under generally accepted accounting principles.
Finally, the opinion is based on economic, monetary, market and other conditions
as in effect on, and the information made available to NationsBanc Montgomery as
of, the date hereof. Accordingly, although subsequent developments may affect
the opinion, NationsBanc Montgomery has not assumed any obligation to update,
revise or reaffirm its opinion.
NationsBanc Montgomery further assumed that the Consolidation will be
consummated in accordance with the terms described in the Reorganization
Agreement, without any further amendments thereto, and without waiver by First
Bank of any of the conditions to its obligations thereunder.
Set forth below is a brief summary of the report presented by NationsBanc
Montgomery to First Bank's board of directors on February 17, 1998 in connection
with its opinion of that date.
Analysis of Selected Transactions. NationsBanc Montgomery reviewed the
consideration paid in selected categories of banking transactions. Specifically,
NationsBanc Montgomery reviewed banking transactions from January 1, 1992 to
February 13, 1998 involving (i) mergers where the seller was headquartered in
the Southwest (Colorado, Louisiana, New Mexico, Oklahoma, Texas and Utah) valued
at between $50 and $150 million; and (ii) banking transactions involving Texas
corporations as sellers valued at greater than $10 million. Several transactions
appeared on both of these lists. For each transaction, NationsBanc Montgomery
analyzed data illustrating, among other things, the ratios of announced purchase
price to book value, announced purchase price to tangible book value, announced
purchase price to last twelve months' ("LTM") earnings per share ("EPS"),
announced purchase price as a percentage of deposits and the premium (i.e.,
announced purchase price in excess of tangible book value) as a percentage of
core deposits.
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A summary of the median multiples in the analysis is as follows:
<TABLE>
<CAPTION>
PREMIUM
AS A
PRICE PRICE TO TO PERCENT- AGE OF
TO TANGIBLE LTM AGE OF CORE
TRANSACTION PARAMETERS BOOK BOOK EPS DEPOSITS DEPOSITS
- ---------------------------------------- ------ -------- ------ ------- --------
<S> <C> <C> <C> <C> <C>
SOUTHWEST MERGERS ($50-$150 MILLION)
1992-1998 (42 transactions) 2.3x 2.4x 16.4x 23.9% 15.2%
1996-1998 (19 transactions) 2.4x 2.6x 17.8x 24.4% 18.0%
TEXAS MERGERS (GREATER THAN $10 MILLION)
1992-1998 (94 transactions) 1.9x 2.0x 12.2x 18.0% 9.3%
1996-1998 (32 transactions) 2.2x 2.3x 15.3x 21.6% 13.7%
</TABLE>
A summary of the results of NationsBanc Montgomery's analysis concerning the
Consolidation is as follows:
<TABLE>
<CAPTION>
PREMIUM
AS A
PRICE PRICE TO TO PERCENT- AGE OF
TO TANGIBLE LTM AGE OF CORE
TRANSACTION PARAMETERS BOOK BOOK EPS DEPOSITS DEPOSITS
- ---------------------------------------- ------ -------- ------ ------- --------
<S> <C> <C> <C> <C> <C>
NORWEST OFFER 2.6x 2.9x 16.8x 27.4% 19.6%
</TABLE>
Contribution Analysis. Based on an exchange ratio of 1.122 shares of
Norwest common stock for each share of First Bank common stock and assuming a
100% stock transaction, holders of First Bank common stock would own
approximately 0.26% of the combined company based on the number of shares of
First Bank common stock and Norwest common stock outstanding at December 31,
1997. To compare the ownership percentage of the combined company to the
relative contribution made to the combined company, NationsBanc Montgomery
analyzed the contribution of each of First Bank and Norwest to, among other
things, total assets, common equity, total equity, tangible equity, total loans,
total deposits, 1997 net income as of December 31, 1997 and 1998 estimated
earnings. This analysis showed, among other things, that based on pro forma
combined balance sheets for First Bank and Norwest at December 31, 1997, First
Bank would have contributed 0.36% of the total assets, 0.44% of the common
equity, 0.43% of the total equity, 0.46% of the tangible equity, 0.29% of the
total loans and 0.52% of the total deposits. Based on pro forma combined income
statements for First Bank and Norwest for the year ending December 31, 1997,
First Bank would have contributed 0.34% of the net income. The pro forma
projected income statement prepared by the management of First Bank for the
period ending December 31, 1998 showed that First Bank would contribute 0.32% of
estimated net income.
Dilution Analysis. Using earnings estimates for both First Bank (provided
by First Bank management) and for Norwest (using third party analysts'
estimates), NationsBanc Montgomery
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compared estimated reported EPS ("Reported EPS") of Norwest common stock on a
stand-alone basis to the Reported EPS of the Norwest common stock for the pro
forma combined companies for the calendar year 1998. NationsBanc Montgomery
noted that, (i) the Consolidation would be accretive (21.57%) to Norwest's
Reported EPS on an absolute basis, and (ii) the Consolidation would be accretive
(0.26%) to Norwest's EPS on a marginal basis. These estimates were used for
purposes of this analysis only and are not necessarily indicative of expected
results or plans of Norwest, First Bank, or the combined company.
Discounted Dividend Analysis: NationsBanc Montgomery analyzed First Bank on
a stand-alone basis to determine the present value of First Bank's future growth
assuming that earnings grow in accordance with management's estimates and
forecasts for the next five years and absolute dollar dividends stay at current
levels. Assuming a market discount rate along with terminal multiples of
12x-16x, Norwest's offer represents a premium of 29.8% to 69.9% over the present
value ($26.05 to $34.09) of First Bank's expected earnings and dividend stream
on a per share basis.
Pick Up-Analysis: NationsBanc Montgomery analyzed the effect of the
Consolidation on First Bank's dividends, earnings and equity in the pro forma
entity. The Consolidation was accretive to dividends (17.7%), and dilutive to
both earnings (25.5%) and equity (40.5%).
The summary set forth above does not purport to be a complete description
of the presentation by NationsBanc Montgomery to First Bank's board of directors
or of the analyses performed by NationsBanc Montgomery. The preparation of a
fairness opinion is not susceptible to partial analysis or summary description.
NationsBanc Montgomery believes that its analyses and the summary set forth
above must be considered as a whole and that selecting a portion of its analyses
and factors, without considering all analyses and factors, would create an
incomplete view of the process underlying the analyses set forth in its
presentation to First Bank's board of directors and performed by NationsBanc
Montgomery in connection with rendering its opinion. In addition, NationsBanc
Montgomery may have given various analyses more or less weight than other
analyses and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be NationsBanc
Montgomery's view of the actual value of First Bank or the combined companies.
The fact that any specific analysis has been referred to in the summary above is
not meant to indicate that such analysis was given greater weight than any other
analysis.
IN PERFORMING ITS ANALYSES, NATIONSBANC MONTGOMERY MADE NUMEROUS
ASSUMPTIONS WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS AND ECONOMIC
CONDITIONS AND OTHER MATTERS, MANY OF WHICH ARE BEYOND THE CONTROL OF FIRST BANK
OR NORWEST. THE ANALYSES PERFORMED BY NATIONSBANC MONTGOMERY ARE NOT NECESSARILY
INDICATIVE OF ACTUAL VALUES OR ACTUAL FUTURE RESULTS, WHICH MAY BE SIGNIFICANTLY
MORE OR LESS FAVORABLE THAN SUGGESTED BY SUCH ANALYSES. SUCH ANALYSES WERE
PREPARED SOLELY AS PART OF NATIONSBANC MONTGOMERY'S ANALYSIS OF THE FAIRNESS OF
THE CONSIDERATION, FROM A FINANCIAL POINT OF VIEW, TO BE RECEIVED BY THE HOLDERS
OF FIRST BANK'S COMMON STOCK IN THE CONSOLIDATION AND WERE PROVIDED TO FIRST
BANK'S BOARD OF DIRECTORS IN CONNECTION WITH THE DELIVERY OF NATIONSBANC
MONTGOMERY'S FEBRUARY 17, 1998 OPINION. THE ANALYSES DO NOT PURPORT TO BE
APPRAISALS OR TO REFLECT THE PRICES AT WHICH A COMPANY MIGHT BE ACTUALLY SOLD OR
THE PRICES AT WHICH ANY SECURITIES MAY TRADE AT THE PRESENT TIME OR ANY TIME IN
THE FUTURE. THE PROJECTIONS USED IN NATIONSBANC MONTGOMERY'S ANALYSES ARE BASED
ON NUMEROUS VARIABLES AND ASSUMPTIONS WHICH ARE INHERENTLY UNPREDICTABLE AND
MUST BE CONSIDERED NOT CERTAIN OF OCCURRENCE AS PROJECTED. ACCORDINGLY, ACTUAL
RESULTS COULD VARY SIGNIFICANTLY FROM THOSE SET FORTH IN SUCH PROJECTIONS.
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<PAGE>
Pursuant to the engagement letter, First Bank will pay NationsBanc
Montgomery a fee of 1.25% of the total consideration received by the
shareholders of First Bank in connection with the Consolidation upon closing.
First Bank has also agreed to reimburse NationsBanc Montgomery for its
reasonable out-of-pocket expenses, including any fees and disbursements for
NationsBanc Montgomery's legal counsel and other experts retained by NationsBanc
Montgomery. First Bank has also agreed to indemnify NationsBanc Montgomery, its
affiliates, and their respective partners, directors, officers, agents,
consultants, employees and controlling persons against certain liabilities,
including liabilities under the federal securities laws.
In the ordinary course of its business, NationsBanc Montgomery actively
trades equity securities of Norwest for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. Employees and consultants of NationsBanc Montgomery own in the
aggregate 36,856 shares of First Bank common stock.
ADDITIONAL INTERESTS OF FIRST BANK'S MANAGEMENT IN THE CONSOLIDATION
Certain members of First Bank's management have interests in the
Consolidation that are different from or in addition to the interests of First
Bank shareholders generally. These interests are discussed below.
Employment of Dana Cook. Norwest has entered into an employment agreement
with Dana Cook, currently First Bank's chairman. Under the terms of the
agreement, First Bank will employ Mr. Cook for a period of 60 days beginning
immediately after completion of the Consolidation, at a salary of $5,000 per
month.
After leaving Norwest, Mr. Cook will be subject to restrictions against
engaging in the business of banking in certain Texas counties for a period of
two years. He will also be prohibited from soliciting customers and employees of
First Bank during that same period. In return, Norwest will pay Mr. Cook $50,000
in two installments of $25,000 each. The first installment is due one year after
his employment ends. The second installment is due one year later.
Change in Control Payment to Don Birkelbach. As a result of the change of
control of First Bank that will occur in connection with the Consolidation,
pursuant to a change of control agreement, First Bank is required to pay Don
Birkelbach $100,000 unless Mr. Birkelbach voluntarily leaves First Bank or is
terminated for cause. The payment is due within 30 days after the Effective Date
of the Consolidation. Mr. Birkelbach currently is First Bank's president and
chief executive officer.
Accelerated Vesting of Stock Options Held by Mr. Birkelbach and Wayne
Crawford. On October 15, 1996, First Bank granted Mr. Birkelbach and Wayne
Crawford options to purchase 5,000 shares and 20,000 shares, respectively, of
First Bank common stock at an exercise price of $22.50 per share. The options
expire October 15, 2006. Mr. Crawford is an executive vice president of First
Bank and its chief operating officer.
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<PAGE>
The options would ordinarily vest (that is, become exercisable) in yearly
increments of 20% beginning on the fifth anniversary of the date of grant. The
table below shows the vesting schedule for the options:
NUMBER OF SHARES
EARLIEST DATE WHEN ----------------------------------- EXERCISE
SHARES MAY BE PURCHASED MR. BIRKELBACH MR. CRAWFORD PRICE/SHARE
- ----------------------- -------------- ------------ -----------
October 15, 2001 1,000 4,000 $22.50
October 15, 2002 1,000 4,000 22.50
October 15, 2003 1,000 4,000 22.50
October 15, 2004 1,000 4,000 22.50
October 15, 2005 1,000 4,000 22.50
The options will become exercisable in full, however, immediately prior to
the Conversion and Consolidation. Mr. Birkelbach will be entitled to purchase
5,000 shares of First Bank common stock, and Mr. Crawford will be entitled to
purchase 20,000 shares of First Bank common stock. The exercise price will
remain $22.50 per share. As a result, by exercising their options, Mr.
Birkelbach and Mr. Crawford can effectively purchase 5,610 shares (5,000 times
the Exchange Ratio of 1.122) and 22,440 shares (20,000 times 1.122),
respectively, of Norwest common stock at a cost to them of $22.50 a share.
Exchange of Restricted First Bank Common Stock Held by Mr. Crawford. On
October 15, 1996, under the terms of a restricted stock award agreement, First
Bank issued to Wayne Crawford 27,000 shares of First Bank common stock. Mr.
Crawford will forfeit the shares if, before October 15, 2006, he voluntarily
leaves First Bank or is terminated for cause. If First Bank terminates his
employment without cause, Mr. Crawford is entitled to keep the shares.
Under the terms of the Reorganization Agreement, Norwest has agreed to
exchange a total of 30,240 shares of its common stock for all 27,000 shares of
Mr. Crawford's restricted First Bank common stock. The shares of Norwest common
stock will be subject to forfeiture if, before October 15, 2006, Mr. Crawford
voluntarily leaves First Bank or is terminated for cause.
Noncompetition Agreement with Kent Anderson. Norwest has entered into a
noncompetition agreement with Kent Anderson, a significant shareholder of First
Bank. See "INFORMATION ABOUT FIRST BANK--Beneficial Ownership of First Bank
Common Stock by First Bank Management and Principal Shareholders." Under the
terms of the agreement, once the Consolidation is completed, Mr. Anderson is
prohibited from (a) attempting to influence customers of First Bank or Norwest
to withdraw or cancel their business with First Bank or Norwest and (b)
soliciting any person who is an employee of First Bank on the day the
Consolidation is completed to terminate employment with First Bank or Norwest.
Mr. Anderson may engage in general solicitation or advertising that is not
specifically addressed to or targeted at First Bank customers or employees. In
exchange for abiding by these restrictions, Mr. Anderson will receive two
installments of $40,000 each, payable on the first and second anniversary of the
Consolidation.
The noncompetition agreement also provides for the termination of a
consulting agreement between Mr. Anderson and First Bank effective on completion
of the Consolidation. Under the terms of the consulting agreement, Mr. Anderson
currently renders consulting services to First Bank for a fee
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<PAGE>
of $10,000 a month. If the Consolidation is not completed, the consulting
agreement will remain in effect until November 28, 1998.
Continuation of Indemnification Rights and Directors' and Officers'
Liability Insurance. Under the Reorganization Agreement, Norwest has agreed to
ensure that all rights to indemnification and all limitations of liability
existing under First Bank's articles of incorporation and 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.
Norwest has also agreed to use its best efforts to maintain, subject to
certain limitations, for a period of three years after the Consolidation, First
Bank's current directors' and officers' liability insurance policies for claims
arising from facts or events occurring before the Consolidation.
APPRAISAL RIGHTS
After the Effective Date of the Conversion, the shareholders of First Bank
will be shareholders of a national banking association and as such will have
appraisal rights under federal law in connection with the Consolidation.
Under federal law, any shareholder of First Bank 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. 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
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C. Any shareholder of First Bank 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 D 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.
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 First Bank 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.
FIRST BANK 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 First Bank 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 First Bank 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 First Bank. If, after completion of the Consolidation, certificates
for First Bank common stock are presented for transfer to the exchange agent,
they will be canceled and exchanged for certificates representing Norwest common
stock.
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None of Norwest, First Bank, the exchange agent or any other person will be
liable to any former holder of First Bank 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, as the regulatory of bank holding companies. The approval of the OCC is
also required because First Bank will convert to a national bank in connection
with the Consolidation, and the OCC is the primary regulator of national banks.
Norwest has filed applications with the Federal Reserve Board and the OCC
requesting approval of the Consolidation. The applications are pending as of the
date of this Proxy Statement-Prospectus.
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 First Bank
shareholders is fair. Regulatory approval does not constitute an endorsement or
recommendation of the Consolidation.
Norwest and First Bank 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
First Bank 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 FIRST BANK'S EMPLOYEE BENEFIT PLANS
The Reorganization Agreement provides that, subject to any eligibility
requirements applicable to such plans, employees of First Bank will be entitled
to participate in those Norwest employee benefit and welfare plans specified in
the Reorganization Agreement. Eligible employees of First Bank 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 FIRST BANK
SHAREHOLDERS
The following is a summary of the anticipated U.S. federal income tax
consequences of the Consolidation to First Bank 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 address the state,
local or foreign tax consequences of the Consolidation. 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. For purposes of this
discussion, it is assumed that shares of First Bank common stock are held as
"capital assets" within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended (the
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"Code"). Future legislation, regulations, administrative rulings and court
decisions may alter the tax consequences summarized below, possibly with
retroactive effect.
The Consolidation is intended to qualify as a reorganization under Section
368(a) of the Code. It is a condition to the obligation of First Bank to
complete the Consolidation that it shall have received an opinion of its
counsel, Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., to the effect that, for
federal income tax purposes, (i) the Consolidation will constitute a
reorganization within the meaning of Section 368(a) of the Code and (ii) the
Consolidation will have the federal income tax consequences to First Bank
shareholders as set forth below. This opinion will be rendered in reliance on
certain assumptions and representations made by officers and shareholders of
First Bank and officers of Norwest. It will represent counsel's best legal
judgment as to the tax consequences 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 any assurance that the IRS would not prevail in the event the tax
consequences of the Consolidation were litigated. Neither First Bank nor Norwest
has requested or will receive a ruling from the IRS as to the tax consequences
of the Consolidation.
The anticipated U.S. federal income tax consequences to First Bank
shareholders of the Consolidation are as follows:
(a) A shareholder who receives shares of Norwest common stock in
exchange for shares of First Bank 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.
(b) 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 First Bank common stock exchanged in the Consolidation, less
the amount of any tax basis allocable to a fractional share for which
cash is received.
(c) 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 First Bank common stock exchanged in the
Consolidation, but only if the shares of First Bank common stock were
held as a capital asset at the time the Consolidation is completed.
THE FOREGOING IS A SUMMARY DISCUSSION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE CONSOLIDATION. THE DISCUSSION IS INCLUDED FOR GENERAL
INFORMATION PURPOSES ONLY AND MAY NOT APPLY TO A PARTICULAR FIRST BANK
SHAREHOLDER IN LIGHT OF SUCH SHAREHOLDER'S PARTICULAR CIRCUMSTANCES. FIRST BANK
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS AS TO THE PARTICULAR TAX
CONSEQUENCES TO THEM OF THE CONSOLIDATION, INCLUDING THE APPLICATION OF STATE,
LOCAL AND FOREIGN TAX LAWS AND POSSIBLE FUTURE CHANGES IN FEDERAL INCOME TAX
LAWS AND THE INTERPRETATION THEREOF, WHICH MAY HAVE RETROACTIVE EFFECTS.
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 First Bank
shareholders who are considered to be "affiliates" of First Bank or Norwest
under Rule 145 under the Securities Act or of Norwest under Rule 144 under
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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 First Bank 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.
First Bank 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 First
Bank 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 First Bank have been published.
Norwest has agreed to use its best efforts to deliver to First Bank signed
representations of each director and each executive officer of Norwest that such
person will not sell any Norwest common stock or First Bank 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 First Bank have been published.
This Proxy Statement-Prospectus does not cover any resales of Norwest
common stock received by affiliates of First Bank.
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.
ACCOUNTING TREATMENT
Norwest will account for the Consolidation as a pooling of interests.
Norwest will carry forward to its balance sheet the assets and liabilities of
First Bank 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 First Bank with Norwest. Norwest will include in its
results of operations the results of First Bank'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.
This summary is qualified in its entirety by reference to the full text of
the Reorganization Agreement. First Bank shareholders are encouraged to read the
Reorganization Agreement carefully and in its entirety. Parenthetical references
are to the relevant paragraph or paragraphs of the Reorganization Agreement.
BASIC PLAN OF REORGANIZATION
Structure. Norwest's acquisition of First Bank will be accomplished through
a two-step process. First, First Bank will convert to a national banking
association from a Texas banking association. Second, immediately after its
conversion to a national bank, First Bank will consolidate with a newly-formed,
wholly-owned subsidiary of Norwest. First Bank will be the surviving bank in the
Consolidation. (paragraph 1(a))
In the Consolidation, Norwest will exchange shares of Norwest common stock
for shares of First Bank common stock. Norwest will own all of the outstanding
shares of First Bank after the Consolidation is completed. 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 First
Bank common stock outstanding immediately before the Consolidation will be
converted into and exchanged for the number of shares of Norwest common stock
determined by dividing 2,000,000 by the sum of (i) the number of shares of First
Bank common stock outstanding immediately before the Consolidation, plus (ii)
the number of shares of First Bank common stock issuable pursuant to the
exercise of options, or other rights to acquire shares of First Bank common
stock, outstanding immediately before the Consolidation. (paragraph 1(a))
As of the date of this Proxy Statement-Prospectus, there were 1,757,505
shares of First Bank common stock outstanding, plus outstanding options to
purchase 25,000 shares of First Bank common stock. Because the Reorganization
Agreement prohibits First Bank from issuing additional shares of First Bank
common stock or additional options to purchase First Bank common stock without
Norwest's consent, you should assume that the sum of (i) and (ii) above will
remain constant at 1,782,505 shares. As a result, each share of First Bank
common stock will be converted into the right to receive approximately 1.122
shares of Norwest common stock
THE PRICE OF NORWEST COMMON STOCK ON THE EFFECTIVE DATE OF THE
CONSOLIDATION MAY BE HIGHER OR LOWER THAN THE PRICE OF NORWEST COMMON STOCK ON
THE DAY OF THE SPECIAL MEETING. 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 OCCURRING BEFORE OR AFTER THE SPECIAL MEETING.
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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 of Norwest
common stock. The cash payment will be equal to the product of the fractional
part of the share of Norwest common stock multiplied by the average of the
closing prices of a share of Norwest common stock as reported by the composite
tape of the New York Stock Exchange for each of the five trading days
immediately before the special meeting. (paragraph 1(c))
Completion of the Consolidation. Norwest and First Bank expect the
Consolidation to be completed promptly after approval of the Consolidation by
First Bank 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 First Bank 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 must 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 First Bank and Norwest pending completion of the
Consolidation. Some of the more important covenants are summarized below.
Conduct of Business.
First Bank. First Bank 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, First Bank is required
to obtain the consent of Norwest before it makes any new loan or modifies,
restructures or renews any existing loan if the amount of the resulting loan,
when combined with all other loans to the customer, would exceed $200,000. The
Reorganization Agreement places restrictions on the ability of First Bank to
take certain actions without Norwest's consent, including, among others, (a)
incurring indebtedness, (b) granting rights to acquire shares of its capital
stock, (c) issuing shares of its capital stock except upon exercise of
outstanding options, (d) declaring dividends or purchasing its capital stock,
(e) selling its assets and (f) raising the compensation of its officers and
directors. (paragraphs 4(a) and (b)) Some of these restrictions apply only if
the amount in question exceeds a threshold dollar value. First Bank is also
prohibited from taking any action that, with respect to First Bank, would
disqualify the Consolidation as a pooling of interests for accounting purposes.
(paragraph 4(k))
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
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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. First Bank has agreed not to directly or indirectly
solicit, authorize the solicitation of, or 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 First Bank (b) make a tender or exchange offer for any shares of its
common stock or other equity security of First Bank, (c) purchase, lease or
otherwise acquire the assets of First Bank except in the ordinary course of
business or (d) merge, consolidate or otherwise combine with First Bank. First
Bank 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, First Bank has
agreed to (a) establish such additional accruals and reserves as are 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 First Bank's
business after the Consolidation and (b) use its best efforts to deliver to
Norwest prior to the Effective Date 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 First Bank who may
reasonably be deemed an "affiliate" of First Bank within the meaning of such
term used in Rule 145 of the Securities Act. (paragraphs 4(l) and 4(m)) 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. These
conditions include such items as the receipt of shareholder, regulatory and
listing approval, the qualification of the Consolidation for pooling of
interests accounting treatment, and the receipt by First Bank of favorable tax
and fairness opinions. (paragraphs 6 and 7) See "THE CONSOLIDATION--Certain U.S.
Federal Income Tax Consequences of the Consolidation to First Bank
Shareholders."
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 a material adverse effect on First Bank. Some of the
conditions to the Consolidation are subject to exceptions and/or a "materiality"
standard. Certain conditions to the Consolidation may be waived by the party
seeking to assert the condition. (paragraphs 6 and 7)
EMPLOYEE BENEFIT PLANS
Each person who is an employee of First Bank or any First Bank Subsidiary
as of the Effective Date of the Consolidation will be eligible for participation
in the employee welfare and retirement plans of Norwest as set forth in the
Reorganization Agreement.
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TERMINATION OF THE REORGANIZATION AGREEMENT
Termination by Mutual Consent. Norwest and First Bank can agree to
terminate the Reorganization Agreement at any time before the Effective Time of
the Consolidation. (paragraph 9(a)(i))
Termination by Either Norwest or First Bank. Either Norwest or First Bank
can terminate the Reorganization Agreement if any of the following occurs:
- The Consolidation has not been consummated by June 30, 1998 (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 9(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
9(a)(iii))
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 9(b))
Upon termination of the Reorganization Agreement as set forth above,
Norwest will immediately pay First Bank an amount equal to First Bank's actual
expenses in connection with obtaining certain assessments and surveys as
required by the Reorganization Agreement.
WAIVER AND AMENDMENT
Either Norwest or First Bank 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 16)
Norwest and First Bank can amend the Reorganization Agreement at any time
before the Effective Time of the Consolidation; however, the Reorganization
Agreement prohibits them from amending the Reorganization Agreement after First
Bank shareholders approve the Consolidation if the amendment would change in a
manner adverse to First Bank shareholders the consideration to be received by
First Bank shareholders in the Consolidation. (paragraph 17)
EXPENSES
Norwest and First Bank will each pay their own expenses in connection with
the Consolidation, including fees and expenses of their respective independent
auditors and counsel.
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COMPARISON OF RIGHTS OF HOLDERS OF FIRST BANK
COMMON STOCK AND NORWEST COMMON STOCK
First Bank currently is a Texas banking association. The rights of First
Bank shareholders are governed by the Texas Finance Code and First Bank's
articles of association and bylaws. Norwest is incorporated under the laws the
state of Delaware. The rights of Norwest stockholders are governed by the DGCL
and Norwest's restated certificate of incorporation and bylaws. Upon completion
of the Consolidation, First Bank shareholders will become stockholders of
Norwest. As a result, their rights will be governed by the DGCL and Norwest's
governing documents.
The following compares certain rights of the holders of First Bank common
stock to the rights of the holders of Norwest common stock. You can find
additional information concerning the rights of Norwest stockholders in
Norwest's restated certificate of incorporation and bylaws and in Norwest's
current report on Form 8-K dated October 10, 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.
To the extent that any information in the current report is inconsistent
with the information below, you should rely on the information below, as it is
as of a more recent date.
Norwest's restated certificate of incorporation and its bylaws, as well as
the current report on Form 8-K, are incorporated into this Proxy
Statement-Prospectus by reference. See "WHERE YOU CAN FIND MORE INFORMATION."
CAPITAL STOCK
Norwest. Norwest's restated certificate of incorporation currently
authorizes the issuance of 1,000,000,000 shares of Norwest common stock, par
value $1-2/3 per share, 5,000,000 shares of preferred stock, without par value,
and 4,000,000 shares of preference stock, without par value. At December 31,
1997, there were 758,619,464 shares of Norwest common stock outstanding,
1,031,405 shares of Norwest preferred stock outstanding, and no shares of
Norwest preference stock outstanding.
First Bank. First Bank's restated articles of association authorize the
issuance of 3,000,000 shares of common stock, par value $1.00 per share, and
3,000,000 shares of preferred stock, $1.00 per share. As of the record date for
the Special Meeting, there were 1,757,505 shares of First Bank common stock
outstanding. In addition, there were options outstanding to acquire 25,000
shares of First Bank common stock.
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
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to negotiate on behalf of all stockholders the terms of any proposed takeover.
Although not their purpose, the rights may deter takeover proposals.
First Bank. First Bank common stock does not have any such rights attached
to it.
DIRECTORS
Norwest. Norwest's 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 the affirmative vote of the holders of a majority of the shares
of Norwest capital stock entitled to vote thereon. Vacancies on Norwest's board
of directors 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. Norwest's restated
certificate of incorporation does not currently permit cumulative voting in the
election of directors.
First Bank. First Bank's bylaws provide for a board of directors consisting
of not less than five nor more than 25 directors. At each annual meeting of the
shareholders, the shareholders of First Bank elect directors to hold office
until the next succeeding annual meeting. Each director shall hold office for
the term for which he is elected and until his successor shall be elected and
qualified unless sooner removed by action of the shareholders of First Bank.
Directors of First Bank may be removed with or without cause by the affirmative
vote of the holders of a majority of the shares then entitled to vote in the
election of directors at any duly called shareholders' meeting. Vacancies on
First Bank's board of directors may be filled by the affirmative vote of a
majority of the remaining directors though less than a quorum of the board of
directors. Directors are elected by a plurality of the votes cast by the holders
of shares entitled to vote in the election of directors at a meeting of
shareholders at which a quorum is present. First Bank's restated articles of
association do not permit cumulative voting in the election of directors.
AMENDMENT OF CHARTER DOCUMENT AND BYLAWS
Norwest. Norwest's restated certificate of incorporation may be amended
only if the proposed amendment is approved by Norwest's board of directors 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. Norwest's bylaws may be amended by a majority of
Norwest's board of directors or by a majority of the outstanding stock entitled
to vote thereon. Shares of Norwest preferred stock and Norwest preference stock
currently authorized in Norwest's restated certificate of incorporation may be
issued by Norwest's board of directors without amending Norwest's restated
certificate of incorporation or otherwise obtaining the approval of Norwest's
Stockholders.
First Bank. First Bank's restated articles of association may be amended
only if the proposed amendment is approved by the affirmative vote of the
holders of at least two-thirds of the outstanding shares entitled to vote
thereon, unless any class or series of shares is entitled to vote thereon as a
class, in which event the proposed amendment shall be adopted upon receiving the
affirmative vote of the holders of two-thirds of the shares within each class or
series of outstanding shares entitled to vote thereon as a class and of at least
two-thirds of the total outstanding shares entitled to vote thereon. First
Bank's bylaws may be amended by the board of directors, unless the shareholders
expressly provide
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that the board of directors may not amend or repeal that bylaw, or by the
shareholders of First Bank, unless a bylaw adopted by the shareholders provides
otherwise as to all or some portion of the bylaws. Shares of First Bank
preferred stock currently authorized in First Bank's restated articles of
association may be issued by First Bank's board of directors without amending
First Bank's restated articles of incorporation or otherwise obtaining the
approval of First Bank's shareholders.
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 Norwest's restated certificate of
incorporation, (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.
First Bank. Under state and federal law, a state banking association may
generally only enter into certain business combinations (e.g., mergers,
consolidations, and sales of substantially all of an association's assets) with
the approval of the Texas Banking Department and the applicable federal
regulatory agency, a majority vote of its board of directors, and the
affirmative vote of the holders of two-thirds of its outstanding capital stock.
Under the Texas Finance Code and the TBCA, unless the articles of incorporation
or association require a less-than-two-thirds vote, a merger or consolidation of
a Texas bank must be approved by the affirmative vote of two-thirds of the
shares of each class of shares entitled to vote thereon as a class and a
two-thirds of the total shares entitled to vote thereon. First Bank's restated
articles of association do not require a less-than-two-thirds vote. No
shareholder vote is required to authorize a merger if (a) the bank is the sole
survivor of the merger; (b) the plan of merger does not amend the bank's
articles of incorporation; (c) each share of stock of the bank outstanding
immediately prior to the merger remains outstanding immediately after the merger
as an identical share of the surviving bank; and (d) the voting power and number
of shares outstanding of the shares of common stock issuable upon conversion of
any other securities issued pursuant to the merger, do not exceed 20% of the
shares of voting power and number of shares outstanding of such bank outstanding
immediately prior to the merger.
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 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
41
<PAGE>
described above are satisfied, holders of Norwest common stock will not have
appraisal rights in connection with mergers and consolidations involving
Norwest.
First Bank. First Bank shareholders will have appraisal rights based on the
provisions of Articles 5.11, 5.12 and 5.13 of the TBCA with respect to the
Conversion and, after the Conversion, based on the provisions of Title 12,
Section 215 of the United States Code with respect to the Consolidation.
Generally, any shareholder of First Bank who objects to either the Conversion or
the Consolidation has the right to receive the cash value of their stock in lieu
of the payment called for by either the Conversion or Consolidation. The
appraisal rights of First Bank shareholders are set forth completely in "THE
CONVERSION-- Appraisal Rights," "THE CONSOLIDATION--Appraisal Rights," Appendix
C and Appendix D.
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. Norwest's 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 Norwest's board of directors. Holders
of Norwest common stock do not have the ability to call a special meeting of
stockholders.
First Bank. The First Bank bylaws provide that special meetings of the
shareholders may be called by the president or any vice president, by the board
of directors or by the holders of not less than ten percent of all the shares
entitled to vote at the meeting. Business transacted at all special meetings
shall be confined to the purposes stated in the call.
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.
First Bank. Neither the TBCA nor the Texas Finance Code specifically
enumerates directors' duties. In addition, neither the TBCA nor the Texas
Finance Code contains any provisions specifying what factors a director must and
may consider in determining a bank's best interests. Judicial decisions in Texas
have established standards for directors' duties.
ACTION WITHOUT A MEETING
Norwest. As permitted by Section 228 of the DGCL and Norwest's restated
certificate of incorporation, 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.
First Bank. First Bank's bylaws provide that all actions of the
shareholders, directors or any committee of the board of directors may be taken
by unanimous consent without a meeting to the full extent permitted by the Texas
Finance Code and the TBCA.
42
<PAGE>
LIMITATION OF DIRECTOR LIABILITY
Norwest. Norwest's restated certificate of incorporation provides that a
director (including an officer who is also a director) of Norwest shall not be
liable personally to Norwest or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability arising out of (a) any
breach of the director's duty of loyalty to Norwest or its stockholders, (b)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) payment of a dividend or approval of a stock
repurchase in violation of Section 174 of the DGCL or (d) any transaction from
which the director derived an improper personal benefit. This provision protects
Norwest'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.
First Bank. First Bank's restated articles of association provide that, to
the fullest extent not prohibited by law, a director of First Bank shall not be
liable to First Bank or its shareholders for monetary damages for an act or
omission in the director's capacity as a director, except that a director's
liability shall not be eliminated or limited for (i) a breach of a director's
duty of loyalty to First Bank or its shareholders, (ii) an act or omission not
in good faith or that involves intentional misconduct or a knowing violation of
the law, (iii) a transaction from which a director received an improper benefit,
whether or not the benefit resulted from an action taken within the scope of the
director's office, or (iv) an act or omission for which the liability of a
director is expressly provided for by statute.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Norwest. Norwest's restated certificate of incorporation 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 Norwest's board of directors. Norwest's restated certificate of
incorporation 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. Norwest's restated certificate of
incorporation authorizes Norwest to provide similar indemnification to employees
or agents of Norwest.
Pursuant to Norwest's restated certificate of incorporation, 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 Norwest's restated
certificate of incorporation or Norwest's bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.
43
<PAGE>
First Bank. First Bank's bylaws provide that First Bank shall indemnify and
advance expenses to all directors, advisory directors, officers, employees and
agents of the bank, and to all persons who are or were serving at the request of
First Bank as a director, advisory director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another bank,
partnership, joint venture, sole proprietorship, trust, employee benefit plan or
other enterprise, to the maximum extent allowed by the Texas Finance Code, the
TBCA, the Texas Miscellaneous Corporation Laws Act, and other applicable law. If
the Texas Finance Code, the TBCA, the Texas Miscellaneous Corporation Laws Act,
or other applicable law is amended after adoption of First Bank's bylaws to
authorize corporate action further expanding First Bank's power to indemnify,
then First Bank is authorized to indemnify the persons named above to the
fullest extent permitted by the Texas Finance Code, TBCA, the Texas
Miscellaneous Corporation Laws Act, or other applicable law, as so amended.
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."
First Bank. First Bank's bylaws provide that distributions and share
dividends, subject to the provisions of First Bank's restated articles of
association and applicable law, may be authorized and made by the board of
directors of First Bank at any regular or special meeting. Distributions may be
paid in cash or property. The board of directors may by resolution create a
reserve or reserves out of its surplus or allocate any part of all of surplus in
any manner for any proper purpose or purposes, and may increase, decrease or
abolish any such reserve, designation or allocation in the same manner. The
Texas Finance Code restricts the payment of dividends to undivided profits of a
bank, which is that part of equity capital of a state bank equal to the balance
of its net profits, income, gains and losses since the date of its formation,
less subsequent distributions to shareholders and transfers to surplus or
capital.
CORPORATE GOVERNANCE PROCEDURES, NOMINATION OF DIRECTORS
Norwest. Norwest's 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. Norwest's 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, Norwest's 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.
First Bank. First Bank's bylaws do not set forth procedures which must be
complied with in order for a stockholder to nominate a person to serve as a
director or to propose an item of business for consideration at a meeting of
First Bank shareholders.
Although certain of the specific differences between the rights of
Norwest's shareholders and First Bank's shareholders are discussed above, the
foregoing summary is not intended to be a complete statement of the comparative
rights of such shareholders under the DGCL, the TBCA and the Texas Finance Code,
or the rights of such persons under the respective charters and bylaws. Nor is
the
44
<PAGE>
identification of certain specific differences meant to indicate that other
differences do not exist. The foregoing summary is qualified in its entirety by
reference to the particular requirements of the DGCL, the TBCA and the Texas
Finance Code, and the specific provisions of the Norwest's restated certificate
of incorporation and bylaws, and First Bank's restated articles of association
and bylaws.
45
<PAGE>
INFORMATION ABOUT FIRST BANK
SERVICES, EMPLOYEES AND PROPERTIES
First Bank is a Texas banking association which provides traditional
banking services in its primarily rural communities offering individual and
commercial interest and non-interest bearing transaction accounts, savings
products and personal and business loans.
First Bank was chartered in May, 1912 under the name Fairfield State Bank.
Fairfield changed its name to First Bank and merged with Centerville State Bank
in February, 1990. In August, 1990, First Bank merged with First Bank, Navasota
and with Guaranty Bond State Bank in Waller and changed its main office to Katy,
Texas. In March 1995, Champions Bank, N.A. merged into First Bank, and in April
1996, Security State Bank merged into First Bank.
First Bank is supervised, regulated and examined by the Texas Department of
Banking as a state bank and its deposits are insured by the FDIC to the fullest
extent permitted by law.
As of December 31, 1997, First Bank had 118 full-time employees. First Bank
has seven directors who are compensated for their services.
All offices of First Bank, other than the Champions office, are located in
buildings owned by First Bank.
First Bank's main location is at 5622 Third Street in Katy, Texas. Its
branches are located as follows:
First Bank, Champions 5500 FM 1960 West Houston, Texas
First Bank, Louetta 5000 Louetta Spring, Texas
First Bank, Navasota 305 East Washington Navasota, Texas
First Bank, Fairfield 517 East Commerce Fairfield, Texas
First Bank, Centerville 205 East St. Mary Centerville, Texas
First Bank, Madisonville 207 East Main Madisonville, Texas
First Bank, Schulenburg 707 Lyons Ave. Schulenburg, Texas
First Bank, Waller 2313 Main Street Waller, Texas
First Bank, Brookshire 923 Cooper Street Brookshire, Texas
All ten locations of First Bank offer all the bank's services including
checking accounts, savings accounts, certificates of deposit, individual
retirement accounts and personal and commercial loans.
46
<PAGE>
LEGAL PROCEEDINGS
In the normal course of its business and in connection with its
acquisitions of failed banks, First Bank is from time to time involved in legal
proceedings. First Bank's management is not aware of any pending or threatened
legal proceeding which, upon resolution, would have a material adverse affect on
its financial condition or results of operations.
MARKET PRICE AND DIVIDENDS
There is no active trading market for the First Bank common stock. As of
the record date for the special meeting, there were 1,757,505 shares of First
Bank common stock outstanding held by 48 persons or entities.
First Bank paid dividends of $.60 per share in each of 1997, 1996 and 1995.
BENEFICIAL OWNERSHIP OF FIRST BANK COMMON STOCK BY FIRST BANK MANAGEMENT AND
PRINCIPAL SHAREHOLDERS
The following table shows as of the record date for the special meeting,
the number of shares of First Bank common stock beneficially owned by each
director and officer of First Bank and by each person known by First Bank to be
the beneficial owner of more than 5% of the outstanding shares of First Bank
common stock.
NUMBER OF
SHARES OF STOCK PERCENT OF TOTAL
NAME OF DIRECTORS, EXECUTIVE BENEFICIALLY OUTSTANDING
OFFICERS AND SHAREHOLDERS OWNED SHARES
- ----------------------------- ---------------- -----------------
Don A. Birkelbach (1)(2) 6,440 *
R. Wayne Crawford (1)(3) 53,440 3.0%
Dana H. Cook (1) 73,553 4.2
Norman Henley (1) 0 --
Donald J. Herman (1) 0 --
Ray Kent (1) 11,112 *
Richard Prestridge (1)(4) 105,996 6.0
35219 Stenzel Road
Brookshire, Texas 77923
D. Kent Anderson 342,521 19.5
No. 12 East Rivercrest Dr
Houston, Texas 77402
Linda C. Anderson 192,500 11.0
No. 12 East Rivercrest Dr
Houston, Texas 77402
Gordon Getty 206,277 11.7
One Embarcadero Center
Suite 1050
San Francisco, Californa 94111
47
<PAGE>
Gerald Smith 88,698 5.0
P.O. Box 131405
Houston, Texas 77219
Hellman & Friedman Capital Partners 417,618 23.0
One Maritime Plaza
Twelfth Floor
San Francisco, California 94111
- ----------------------------
* Less than 1%
(1) Directors
(2) Includes options to acquire 5,000 shares of First Bank common stock. The
options will become exercisable immediately before the Conversion.
(3) Includes options to acquire 20,000 shares of First Bank common stock. The
options will become exercisable immediately before the Conversion.
(4) Includes 105,996 shares over which Mr. Prestridge exercises sole voting
power as trustee for the benefit of the children of D. Kent and Linda C.
Anderson.
48
<PAGE>
FIRST BANK'S MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FIRST BANK'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This section presents an analysis of the financial condition of First Bank
at December 31, 1997, 1996 and 1995 and the results of operations for the years
ended December 31, 1997, 1996 and 1995. This analysis should be read in
conjunction with the consolidated financial statements and notes thereto and
financial data presented elsewhere in this Proxy Statement-Prospectus.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
Net income for the year ended December 31, 1997 was $4,721,000 compared to
$4,357,000 for the year ended December 31, 1996. The largest contributions to
the increased earnings were generated by a 13% increase in average loans and
reductions in salaries and benefits and data processing costs. Compensation
expense related to the bank's Employee Stock Ownership Plan was $424,000 in 1997
compared to $796,000 in 1996.
A discussion of changes in the major components of net income for the years
ended December 31, 1997 and 1996 are as follows.
Net Interest Income. Net interest income is the principal source of First
Bank's net income and represents the difference between interest income and
interest expense. Net interest income increased approximately $437,000 in 1997
over 1996 due to increases in average balances and net interest margin.
49
<PAGE>
The following schedules provide a summary of net interest income, average
earning asset balances and the related interest rates/yields for the periods
indicated. Nonaccruing loans are included in the interest-earning assets;
interest income on such loans is recorded when received.
<TABLE>
<CAPTION>
1997
---------------------------------------------
Percent of Interest
Average Total Income/ Yield/
Balance Assets Expense Rate
------- ------ --------- -------
<S> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Loans $ 117,918 38.1% $ 10,963 9.30%
Investment securities-taxable 146,736 47.4 9,055 6.17
Investment securities-nontaxable 4,230 1.4 238 5.63
Interest-earning deposits 2,424 0.8 161 6.64
Federal funds sold 8,375 2.7 455 5.43
--------------------------------------------------
Total interest earning assets $ 279,683 90.4% $ 20,872 7.46%
Cash and due from banks 20,277 6.5
Other assets 11,091 3.6
Allowance for loan losses (1,477) -0.5
-------------------------
Total assets $ 309,574 100.0%
=========================
LIABILITIES
Interest bearing:
NOW, MMA and savings $ 119,860 38.7% $ 2,979 2.49%
Time deposits 99,746 32.2 4,961 4.97
Other borrowed funds 68 0.1 4 5.88
-------------------------------------
Total interest bearing liabilities $ 219,674 71.0% $ 7,944 3.62%
Noninterest-bearing 60,443 19.5
Other liabilities 1,341 0.4
-------------------------
Total liabilities $ 281,458 90.9%
SHAREHOLDERS' EQUITY $ 28,116 9.1%
-------------------------
Total liabilities and
stockholders' equity $ 309,574 100.0%
=========================
Net interest income $ 12,928
============
Net yield 4.18%
=============
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
1996
--------------------------------------------------
Percent of Interest
Average Total Income/ Yield/
Balance Assets Expense Rate
------- ---------- --------- -------
<S> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Loans $ 104,636 34.1% $ 9,800 9.37%
Investment securities-taxable 162,522 52.9 9,844 6.06
Investment securities-nontaxable 3,117 1.0 197 6.32
Interest-earning deposits 1,659 0.6 104 6.27
Federal funds sold 6,863 2.2 372 5.42
--------------------------------------------------
Total interest earning assets $ 278,797 90.8% 20,317 7.29%
Cash and due from banks 18,534 6.0
Other assets 11,459 3.7
Allowance for loan losses (1,461) (0.5)
-------------------------
Total assets $ 307,329 100.0%
=========================
LIABILITIES
Interest bearing:
NOW, MMA and savings $ 120,339 39.2% $ 2,987 2.48%
Time deposits 98,329 32.0 4,726 4.81
Other borrowed funds 1,658 0.5 113 6.82
--------------------------------------------------
Total interest bearing liabilities $ 220,326 71.7% $ 7,826 3.55%
Non-interest-bearing 58,409 19.0
Other liabilities 1,762 0.6
-------------------------
Total liabilities $ 280,497 91.3%
SHAREHOLDERS' EQUITY $ 26,832 8.7
-------------------------
Total liabilities and
stockholders' equity $ 307,329 100.0%
=========================
Net interest income $ 12,491
============
Net yield 4.06%
=============
</TABLE>
51
<PAGE>
Net interest income is affected both by the interest rate earned and paid
and by changes in volume, principally in loans, investment securities, deposits
and borrowed funds. The following tables depict the dollar effect and rate
changes for interest-earning assets and interest-bearing liabilities and the
resulting change in interest income and interest expense:
1997 COMPARED TO 1996
--------------------------------
Interest earning assets: VOLUME RATE (1) NET
------ -------- ---
Loans $ 1,235 (72) 1,163
Investment Securities-Taxable (974) 185 (789)
Investment Securities-Nontaxable 63 (22) 41
Interest-bearing deposits 51 6 57
Federal funds sold 82 1 83
--------------------------------
Total 457 98 555
Interest bearing liabilities:
NOW, MMA and Savings (12) 4 (8)
Time deposits 70 165 235
Other borrowed funds (94) (15) (109)
--------------------------------
Total (36) 154 118
Change in Net Interest Income $ 437
=======
(1) Changes in interest income and expense due to both rate and volume are
included in rate variances
Non-Interest Income
Non-interest income decreased from $2,914,000 in 1996 to $2,684,000 in
1997. Substantially all of this change resulted from $187,000 from the sale of
other assets in 1996 and losses and write-downs of $64,000 in 1997. There was no
significant change in service charge income. Service charge income as a percent
of assets was .88% in 1997 and .89% in 1996.
Non-Interest Expense
Non-interest expense decreased from $8,755,000 in 1996 to $8,558,000 in
1997. The $372,000 decrease in compensation expense related to a decrease in
expenses relating to the bank's Employee Stock Ownership Plan. Operating
expenses other than salary and benefits increased 2.0% from $3,881,000 to
$3,958,000. Operating expenses as a percent of average assets was 2.76% in 1997
and 2.85% in 1996.
First Bank's efficiency ratio, i.e. operating expenses as a percent of
total revenue (sum net-interest income and non-interest income) was 55% in 1997
and 57% in 1996.
52
<PAGE>
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Net income was $4,357,0000, $3,602,000 and $2,893,000 for the years ended
December 31, 1996, 1995 and 1994, respectively.
Net income increases during these years were largely attributable to
acquisitions of Champions Bank N. A. ("Champions") in March, 1995 and
Securshares, the parent company of Security State Bank ("Security") of Navasota,
Texas, in April, 1996. The Champions acquisition was accounted for by the
purchase method of accounting and resulted in First Bank's loans increasing 71%
and deposits increasing 22% in 1995 compared to 1994. The Securshares
acquisition was accounted for as a pooling transaction; however, 1995 and 1994
have not been restated because the effect of the merger on previous periods was
not material. The Security operations were merged with an existing First Bank
branch in Navasota providing First Bank with significant consolidation benefits.
A discussion of changes in the major components of net income for the years
ended December 31, 1996, 1995 and 1994 is as follows:
Net Interest Income
Net interest income increased $1,992,000 in 1996 over 1995 and $2,404,000
in 1995 over 1994. Net interest increased due to increases in net interest
margin and increases in average balances, primarily as a result of acquisitions.
53
<PAGE>
The following schedules, along with the schedule for 1996 presented
previously, provide a summary of net interest income, average earning asset
balances and the related interest rates/yields for the years ended December 31,
1996, 1995 and 1994. Nonaccruing loans are included in the interest-earning
assets; interest income on such loans is recorded when received.
<TABLE>
<CAPTION>
1995
----------------------------------------------
Percent Interest
Average Of Total Income/ Yield/
Balance Assets Expense Rate
------- -------- -------- -------
<S> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Loans $ 83,074 31.3% $ 8,115 9.77%
Investment securities-taxable 150,727 56.7 8,936 5.93
Investment securities-nontaxable 2,430 0.9 171 7.04
Interest-earning deposits 1,254 0.5 77 6.14
Federal funds sold 5,256 2.0 315 5.99
--------------------------------------------------
Total interest earning assets $ 242,741 91.4% 17,614 7.26%
Cash and due from banks 14,784 5.6
Other assets 9,150 3.4
Allowance for loan losses (1,036) -0.4
-------------------------
Total assets $ 265,639 100.0%
=========================
LIABILITIES
Interest bearing:
NOW, MMA and savings $ 106,513 40.1% $ 2,824 2.65%
Time deposits 85,908 32.3 4,212 4.90
Other borrowed funds 1,037 0.4 79 7.62
--------------------------------------------------
Total interest bearing liabilities $ 193,458 72.8% $ 7,115 3.68%
Non-interest-bearing 48,858 18.4
Other liabilities 1,732 0.7
-------------------------
Total liabilities $ 244,048 91.9%
SHAREHOLDERS' EQUITY $ 21,591 8.1%
-------------------------
Total liabilities and
Stockholders' equity $ 265,639 100.0%
=========================
Net interest income $ 10,499
============
Net yield 3.95%
=============
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
1994
---------------------------------------------
Percent Interest
Average Of Total Income/ Yield/
Balance Assets Expense Rate
------- --------- --------- -------
<S> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Loans $ 52,274 23.4% $ 4,715 9.02%
Investment securities-taxable 146,101 65.5 7,827 5.36
Investment securities-nontaxable 2,666 1.2 196 7.35
Interest-earning deposits 840 0.4 42 5.00
Federal funds sold 2,667 1.2 110 4.12
--------------------------------------------------
Total interest earning assets $ 204,548 91.7% $ 12,890 6.30%
Cash and due from banks $ 13,406 6.0
Other assets 5,899 2.7
Allowance for loan losses (849) -0.4
-------------------------
Total assets $ 223,004 100.0%
=========================
LIABILITIES
Interest bearing:
NOW, MMA and savings $ 96,155 43.1% $ 2,258 2.35%
Time deposits 68,681 30.8 2,537 3.69
--------------------------------------------------
Total interest bearing liabilities $164,836 73.9 $4,795 2.91
Non-interest-bearing 37,746 16.9
Other liabilities 1,563 0.7
-------------------------
Total liabilities $ 204,145 91.5%
SHAREHOLDERS' EQUITY $ 18,863 8.5%
-------------------------
Total liabilities and
Stockholders equity $ 223,008 100.0%
=========================
Net interest income $ 8,095
============
Net yield 3.63%
=============
</TABLE>
55
<PAGE>
Net interest income is affected both by the interest rate earned and paid
and by changes in volume, principally in loans, investment securities, deposits
and borrowed funds. The following tables depict the dollar effect and rate
changes for interest-earning assets and interest-bearing liabilities and the
resulting change in interest income and interest expense:
1996 COMPARED TO 1995
-----------------------------
Interest earning assets: Volume Rate (1) Net
Loans 2,019 (334) 1,685
Investment Securities-Taxable 714 194 908
Investment Securities-Nontaxable 43 (17) 26
Interest-bearing deposits 25 2 27
Federal funds sold 87 (30) 57
-----------------------------
Total 2,888 (185) 2,703
Interest bearing liabilities:
NOW, MMA and Savings 343 (180) 163
Time deposits 597 (83) 514
Other borrowed funds 42 (8) 34
-----------------------------
Total 982 (271) 711
Change in Net Interest Income $ 1,992
==========
1995 COMPARED TO 1994
-----------------------------
Interest earning assets: Volume Rate (1) Net
Loans 3,009 391 3,400
Investment Securities-Taxable 274 835 1,109
Investment Securities-Nontaxable (17) (8) (25)
Interest-bearing deposits 25 10 35
Federal funds sold 155 50 205
Total 3,446 1,278 4,724
-----------------------------
Interest bearing liabilities:
NOW, MMA and Savings 275 291 566
Time deposits 845 830 1,675
Other borrowed funds 79 - 79
-----------------------------
Total 1,199 1,121 2,320
Change in Net Interest Income $ 2,404
=========
(1) Changes in interest income and expense due to both rate and volume are
included in rate variances
56
<PAGE>
Non-Interest Income
Non-interest income was $2,370,000 in 1994, $2,338,000 in 1995 and
$2,914,000 in 1996. 1994 non-interest income included $351,000 in gains on the
sale of securities. In both 1994 and 1995, other assets were written down by
$75,000 and, in 1996, $187,000 in gains were realized on the sale of other
assets.
Service charge income increased 12% and 17% in 1996 and 1995, respectively.
Acquisitions discussed above were the primary sources of the increases. Service
charge income as a percent of average assets was .89% in 1996, .92% in 1995 and
.94% in 1994.
Non-Interest Expense
Non-interest expense was $6,146,000 in 1994 and increased by 22% in 1995 to
$7,485,000 and by 17% in 1996 to $8,755,000. Non-interest expenses as a percent
of average assets were 2.85% in 1996, 2.82% in 1995 and 2.76% in 1994.
1996 operating expenses included $796,000 in compensation expense related
to the bank's Employee Stock Ownership Plan whereas 1995 and 1994 had similar
expenses of only $144,000 and $128,000, respectively. Deposit insurance was only
$2,000 in 1996 whereas 1995 and 1994 insurance expenses were $267,000 and
$444,000, respectively.
First Bank's efficiency ratio, i.e. operating expenses as a percent of
total revenue (sum net-interest income and non-interest income) was 57% in 1996,
58% in 1995 and 59% in 1994.
FINANCIAL CONDITION
The following table sets forth the composition of the loan portfolio for
the periods presented. The most significant changes were the results of the
acquisitions discussed above. In addition, increases in the portfolio of 1-4
family loans were largely the result of purchases of loans from Houston area
savings and loans. Loan purchases were $15,753,000, $12,188,000, $8,383,000 and
$2,491,000 in 1997, 1996, 1995 and 1994, respectively.
57
<PAGE>
<TABLE>
<CAPTION>
December 31
1997 1996 1995 1994
----------------------------------------------------
<S> <C> <C> <C> <C>
Commercial $ 7,109 $ 5,681 $ 3,737 $ 3,921
Real Estate - mortgages 69,049 54,874 41,544 19,998
Real Estate 23,433 23,259 24,139 15,263
Consumer 22,003 23,008 22,227 13,768
Agriculture 3,840 4,441 2,168 1,900
less unearned income (896) (898) (769) (471)
----------------------------------------------------
Total Loans $ 124,538 $ 110,365 $ 93,046 $ 54,379
====================================================
</TABLE>
<TABLE>
<CAPTION>
% of Loans
<S> <C> <C> <C> <C>
Commercial 5.71% 5.15% 4.02% 7.21%
Real Estate - mortgages 55.44% 49.72% 44.65% 36.78%
Real Estate 18.82% 21.07% 25.94% 28.07%
Consumer 17.67% 20.85% 23.89% 25.32%
Agriculture 3.08% 4.02% 2.33% 3.49%
less unearned income -0.72% -0.81% -0.83% -0.87%
----------------------------------------------------
Total Loans 100.00% 100.00% 100.00% 100.00%
====================================================
</TABLE>
The following table sets forth the maturity composition and interest
sensitivity of total loans at December 31, 1997 (dollars in thousands):
INTEREST SENSITIVITY
Amount Percentage 1-4 Family All Other
Residential Loans
In one year or less 96,518 76.9% 47,335 49,183
After one through five years 10,093 8.0% 5,815 4,278
After five years 18,823 15.0% 15,899 2,924
-------------------------------------------------
Total Loans 125,434 100.0% 69,049 56,385
58
<PAGE>
PROVISION FOR LOAN LOSSES AND ALLOWANCE FOR LOAN LOSSES
Following is a table of activity for loan losses for the periods presented:
1997 1996 1995 1994
---- ---- ---- ----
Balance at beginning of year $ 1,487 $ 1,067 $ 856 $ 827
Charges-offs:
Commercial 73 223 68 --
Real Estate 47 31 109 --
Consumer 217 187 76 27
------- ------- ------ --------
337 441 253 27
Recoveries:
Commercial 23 36 118 9
Real Estate 33 18 8 20
Consumer 97 65 26 27
------- ------- ------ --------
153 119 153 56
------- ------- ------ --------
Net Charge-offs 184 322 100 (29)
Additions charged to operations -- 50 -- --
Reserve acquired in acquisitions -- 692 311 --
------- ------- ------ --------
Balance at end of year $ 1,303 $ 1,487 $ 1,067 $ 856
=======================================
Ratio of net charge-offs during
the year to average loans
outstanding during the year 0.16% 0.31% 0.12%
============================
The allowance for loan losses is not allocated to specific categories of
loans. The provision and allowance for loan losses represents a determination by
First Bank's management of the amounts necessary to charge to operating income
and transfer to the allowance for loan losses to maintain a level which it
considers adequate in relation to the risk of future losses inherent in the loan
portfolio. It is First Bank's policy to provide for exposure to losses of
specifically identified credits as well as for risks of future losses which
cannot be precisely quantified. First Bank also charges off in the current
period those loans in which a loss is deemed to exist.
In assessing the adequacy of its allowance for loan losses, management
relies predominantly on its ongoing review of the loan portfolio, which is
undertaken both to ascertain whether there are probable losses which must be
charged off and to assess the risk characteristics of individual loans and of
the portfolio in the aggregate. This review takes into consideration the
judgments of the responsible lending officers, the loan review officer and the
Board of Directors, and also those of Bank regulatory agencies that review the
loan portfolio as part of their regular examination of the bank.
Non-Performing Assets
Non-performing assets are defined as loans delinquent 90 or more days,
nonaccrual loans, restructured loans and foreclosed assets. Such assets do not
necessarily represent future losses since the underlying collateral can be sold
and the financial condition of the borrowers may improve. The
59
<PAGE>
following table sets forth the detail of non-performing loans. First Bank had no
restructured loans at any of the dates listed herein.
December 31,
1997 1996 1995 1994
----------------------------------------
Non-accrual loans 451 348 221 440
Loans past due 90 days or more 281 481 394 172
----------------------------------------
Total non-performing loans 732 829 615 612
========================================
Ratio of non-performing loans to
loans outstanding 0.59% 0.75% 0.66% 1.13%
========================================
First Bank's policy is to discontinue accruing interest on loans when
principal or interest is due and remains unpaid for 90 days or more, unless the
loan is well secured and in the process of collection. At December 31, 1997
there were significant commitments to lend additional funds to borrowers whose
loans were considered non-performing.
INVESTMENTS
First Bank accounts for investments in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS 115"). Under SFAS 115 each security is
classified as either trading, available for sale or held to maturity. First Bank
has no securities classified as trading. Investments classified as held to
maturity are recorded at amortized cost and securities classified as available
for sale at their fair value. The after-tax difference between amortized cost
and fair value of securities available for sale is recorded as "net unrealized
gain (loss) on securities available for sale" in the equity section of the
balance sheet. The tax impact is recorded as an adjustment to the deferred tax
liability.
The following table presents the composition of investment securities for
the periods presented:
<TABLE>
<CAPTION>
December 31,
1997 1996 1995 1994
----------------------------------------------------
<S> <C> <C> <C> <C>
Held to Maturity:
U.S. Treasuries and agencies $ 18,269 19,679 15,083 17,700
Obligations of states and political
subdivisions 4,449 5,123 3,895 2,842
Mortgage backed securities 18,888 30,861 46,064 65,591
----------------------------------------------------
Total Held to Maturity 41,606 55,663 65,042 86,133
Available for Sale:
U.S. Treasuries and agencies 52,966 41,169 29,220 17,193
Other 2,549 3,211 4,825 4,433
Federal Home Loan Bank stock 1,170 951 685 666
Mortgage backed securities 44,005 55,941 52,016 40,301
----------------------------------------------------
Total Available for Sale 100,690 101,272 86,746 62,593
Total Investment Securities 142,296 156,935 151,788 148,726
====================================================
</TABLE>
60
<PAGE>
The following tables show the maturities and yields for the various forms
of investment securities at December 31, 1997:
<TABLE>
<CAPTION>
Mortgage-
Treas and Backed Other
Maturing in: Agency Securities* Securities Total
----------------------------------------------------
<S> <C> <C> <C> <C>
One year or less 27,360 866 1,411 29,637
6.11% 6.86% 7.01% 6.17%
----------------------------------------------------
Over one year less than five years 42,844 9,709 2,344 54,897
6.11% 6.40% 5.07% 6.12%
----------------------------------------------------
Over five years less than ten years 1,031 7,584 690 9,305
6.08% 6.59% 5.32% 6.44%
----------------------------------------------------
Over ten years - 44,734 3,723 48,457
- 6.69% 6.66% 6.68%
----------------------------------------------------
Total 71,235 62,893 8,168 142,296
6.11% 6.63% 6.15% 6.34%
</TABLE>
* Mortgage-backed securities classified based on contractual maturity
DEPOSITS
The deposit base provides the major funding source for First Bank's
interest earning assets. Major changes in deposits during the period December
31, 1994 to December 31, 1997 are primarily due to the impact of mergers with
Champions and Security. Champions and Security had approximately $45 and $27
million in deposits, respectively, at acquisition. The following table reflects
the average balances and average interest paid on deposits for the periods
presented.
1997 1996
------------------- -------------------
Average Average
Balance Rate Balance Rate
---------- ----- --------- ------
Demand deposits $ 60,443 $ 58,409
Now accounts 60,693 1.73% 56,867 1.76%
Savings accounts 22,837 2.50 23,601 2.50
Money market accounts 36,330 3.73 39,871 3.49
Time deposits and individual
retirement accounts 99,746 4.98 98,319 4.81
--------------------------------------------
$280,049 2.84% $277,067 2.78%
============================================
1995 1994
------------------- --------------------
Average Average
Balance Rate Balance Rate
----------- ------ ---------- -------
Demand deposits $ 48,924 $ 37,746
Now accounts 49,954 1.98% 46,490 1.75%
Savings accounts 22,562 2.61 24,330 2.88
Money market accounts 34,066 3.67 25,335 2.69
Time deposits and individual
retirement accounts 85,711 4.90 68,681 3.36
--------------------------------------------
$241,217 2.91% $202,582 2.27%
============================================
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<PAGE>
The following table reflect the maturities of certificates and other time
deposits as of December 1, 1997:
3 Months or less $ 35,408
Over 3 months less than one year 55,030
Over 1 year less than 2 years 6,467
Over 2 years 3,638
-------------
Total time deposits $100,543
RETURN ON EQUITY AND ASSETS
The following table sets forth key ratios for First Bank for the periods
presented:
1997 1996 1995 1994
---- ---- ---- ----
Return on average assets 1.52% 1.42% 1.36% 1.30%
Return on average equity 16.8% 16.2% 16.7% 15.3%
Dividend payout ratio on common
shares 22.9% 24.6% 28.3% 57.2%
Total capital to risk weighted assets 22.14% 24.31% 21.36% 24.36%
Tier 1 Equity to risk weighted assets 21.13% 21.95% 20.32% 23.35%
Tier 1 Equity to average assets 8.83% 8.07% 7.56% 8.69%
LIQUIDITY
First Bank's asset and liability management policy is intended to maintain
adequate liquidity and thereby enhance its ability to raise funds to support
asset growth, meet deposit withdrawals and lending needs, maintain reserve
requirements, and otherwise sustain operations. Liquidity is monitored daily and
overall interest rate risk is assessed through reports showing both sensitivity
ratios and existing dollar "gap" data. Liquidity is maintained in the form of
readily marketable investment securities, demand deposits with commercial banks,
vault cash and federal funds sold.
CAPITAL
Quantitative measures established by regulation to ensure capital adequacy
require First Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital to risk-weighted assets and average
total assets.
As of December 31, 1997, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized the Bank must
maintain minimum total risk-based, Tier I leverage ratios as set forth the
table:
Minimum Capital Standards: For Capital To Be Considered
Adequacy Well-Capitalized
Total capital to risk weighted assets 8.00% 10.00%
Tier 1 Equity to risk weighted assets 4.00% 6.00%
Tier 1 Equity to total assets 4.00% 5.00%
62
<PAGE>
There are no conditions or events since that notification that management
believes have changed First Bank's category.
IMPACT OF INFLATION, CHANGING PRICES AND MONETARY POLICIES
The financial statements and related financial data concerning First Bank
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 relative purchasing power of money over time due to
inflation. The primary effect of inflation on the operation of First Bank is
reflected in increased operating costs. Unlike most industrial companies,
virtually all of the asset 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 can be highly sensitive to many factors which are beyond the
control of First Bank including the influence of domestic and foreign economic
conditions and the monetary and fiscal policies of the United States government
and more particularly the Federal Reserve Board. Actions of the Federal Reserve
Board can 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 First Bank and their results of operations are not predictable.
63
<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 by the OCC. Its
state-chartered banking subsidiaries are regulated primarily by the FDIC or the
Federal Reserve Board and applicable state banking agencies. Norwest's federally
insured banking subsidiaries 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 SEC, 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,
64
<PAGE>
more than 10% of the total amount of deposits of insured depository institutions
nationwide or, unless the acquisition is the bank holding company's initial
entry into the state, more than 30% of such deposits in the state (or such
lesser or greater amount set by the state).
The Interstate Banking Act also authorizes banks to merge across state
lines (thereby creating interstate branches) effective June 1, 1997. States may
opt out of the Interstate Banking Act (thereby prohibiting interstate mergers in
the state) or opt in early (thereby allowing interstate mergers prior to June 1,
1997). Norwest will be unable to consolidate its banking operations in one state
with those of another state if either state in question has opted out of the
Interstate Banking Act. The state of Texas has opted out of the Interstate
Banking Act. The state of Montana has opted out until at least the year 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.
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.
65
<PAGE>
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 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 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.
66
<PAGE>
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%. At
December 31, 1997, Norwest's total capital and Tier 1 capital to risk-adjusted
assets ratios were 11.01% and 9.09%, respectively.
The Federal Reserve Board also requires bank holding companies to comply
with minimum leverage ratio guidelines. The leverage ratio is the ratio of a
bank holding company's Tier 1 capital to its total consolidated quarterly
average assets, less goodwill and certain other intangible assets. The
guidelines require a minimum leverage ratio of 3% for bank holding companies
that meet certain specified criteria, including having the highest supervisory
rating. All other bank holding companies are required to maintain a minimum
leverage ratio of 4% to 5%. The Federal Reserve Board has not advised Norwest of
any specific leverage ratio applicable to it. At December 31, 1997, Norwest's
leverage ratio was 6.63%.
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.
Federal bank regulatory agencies require banking organizations that engage
in significant trading activity to calculate a charge for market risk.
Significant trading activity 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 as 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.
67
<PAGE>
The market risk charge will be included in the calculation of an organization's
risk-based capital ratios. Norwest has not historically 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. At
December 31, 1997, all of Norwest's insured depository institutions met the
criteria for well capitalized institutions as set forth above.
A depository institution's primary federal bank regulator is authorized to
downgrade the institution's capital category to the next lower category upon a
determination that the institution is engaged in an unsafe or unsound condition
or is engaged in an unsafe or unsound practice. An unsafe or unsound practice
can include receipt by the institution of a less than satisfactory rating on its
most recent examination with respect to its asset quality, management, earnings
or liquidity.
The FDI Act generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would as a result be
undercapitalized. Undercapitalized depository institutions are subject to a wide
range of limitations on operations and activities (including asset growth) and
are required to submit a capital restoration plan. The federal banking agencies
may not accept a capital plan without determining, among other things, that the
plan is based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital. In addition, for a capital restoration plan to
be acceptable, the depository institution's parent holding company must
guarantee that the institution will comply with the plan. The aggregate
liability of the parent holding company is limited to the lesser of (a) 5% of
the depository institution's total assets at the time it became undercapitalized
or (b) the amount which is necessary (or would have been necessary) to bring the
institution into compliance with all capital standards applicable with respect
to the institution as of the time it fails to
68
<PAGE>
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
Through the Bank Insurance Fund (BIF), the FDIC insures the deposits of
Norwest's depository institution subsidiaries up to prescribed per depositor
limits. 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
BIF assessment rate 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.
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.
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
69
<PAGE>
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 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, 1997 and 1996, and for each of the years in the three-year period
ended December 31, 1997, 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 First Bank as of December 31, 1997
and 1996 and for each of the years in the three-year period ended December 31,
1997 included in this Proxy Statement-Prospectus are included herein in reliance
on the report of KPMG Peat Marwick LLP, independent certified public
accountants, upon the authority of said firm as experts in accounting and
auditing.
LEGAL MATTERS
Stanley S. Stroup, Executive 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. Mr. Stroup 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 Mr. Stroup owns or has the right to acquire upon exercise of
his 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
First Bank's shareholders will be passed upon for First Bank by Liddell, Sapp,
Zivley, Hill & LaBoon, L.L.P., Houston, Texas.
70
<PAGE>
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, 1997. Norwest's
annual report is incorporated by reference into this Proxy Statement-Prospectus.
First Bank 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 First Bank 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,
1997;
- Norwest's current report on Form 8-K dated January 22, 1998 and April
6, 1998;
- Norwest's current report on Form 8-K dated October 10, 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.
71
<PAGE>
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 CONVERSION AND CONSOLIDATION, YOU SHOULD
RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT-PROSPECTUS. NEITHER NORWEST NOR FIRST BANK 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 APRIL __, 1998. 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.
- --------------------------------------------------------------------------------
72
<PAGE>
FIRST BANK
FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996
AND 1995
(WITH INDEPENDENT AUDITORS'
REPORT THEREON)
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
First Bank:
We have audited the accompanying balance sheets of First Bank (the Bank) as of
December 31, 1997 and 1996, and the related statements of income, changes in
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1997. 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 First Bank as of December 31,
1997 and 1996, and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 1997, in conformity with
generally accepted accounting principles.
Houston, Texas
February 24, 1998
1
<PAGE>
FIRST BANK
Balance Sheets
December 31, 1997 and 1996
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Assets 1997 1996
--------- ---------
<S> <C> <C>
Cash and due from banks (note 2) $ 25,588 21,704
Federal funds sold 12,400 9,000
--------- ---------
Total cash and cash equivalents 37,988 30,704
--------- ---------
Interest-bearing time deposits in other financial institutions 3,473 1,787
Investment securities, partially pledged (note 3):
Held to maturity, at cost (fair value of $41,622 and $55,399) 41,606 55,663
Available for sale, at fair value 100,690 101,272
--------- ---------
Total investment securities, net 142,296 156,935
--------- ---------
Loans (note 4):
Loans, net of unearned discount 124,538 110,365
Less allowance for loan losses (1,303) (1,487)
--------- ---------
Net loans 123,235 108,878
Bank premises and equipment, net (note 5) 5,199 5,042
Accrued interest receivable 2,698 2,416
Costs in excess of net tangible assets acquired, net 2,633 2,831
Other assets (note 6) 969 558
--------- ---------
Total assets $ 318,491 309,151
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 61,467 61,675
Interest-bearing (note 7) 225,995 217,216
--------- ---------
Total deposits 287,462 278,891
--------- ---------
Accrued interest payable 506 496
Other liabilities (note 8) 255 745
--------- ---------
Total liabilities 288,223 280,132
--------- ---------
Stockholders' equity (note 9):
10% cumulative preferred stock, $1 par value;
1,245,000 shares authorized; no issued
and outstanding shares for 1997 and
1,245,000 for 1996 -- 1,245
Common stock, $1 par value; 1,837,229 shares authorized;
issued and outstanding 1,757,505 shares for 1997 and
1,837,229 for 1996 1,757 1,837
Additional paid-in capital 10,000 9,092
Retained earnings 18,758 17,769
Deferred compensation (note 9) (537) (597)
Guaranteed ESOP loan obligation (note 13) -- (424)
Net unrealized gain on securities available for sale (note 3) 290 97
--------- ---------
Total stockholders' equity 30,268 29,019
Commitments and contingencies (notes 4, 9, 10 and 13)
--------- ---------
Total liabilities and stockholders' equity $ 318,491 309,151
========= =========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
FIRST BANK
Statements of Income
Years ended December 31, 1997, 1996 and 1995
(in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Interest income:
Loans (note 4) $ 10,963 9,800 8,115
Investment securities (note 3) 9,293 10,041 9,107
Federal funds sold 455 372 315
Interest-bearing time deposits in
other financial institutions 161 104 77
-------- -------- --------
Total interest income 20,872 20,317 17,614
-------- -------- --------
Interest expense:
Savings, NOW and money market accounts 2,979 2,987 2,824
Time deposits 4,961 4,726 4,212
Other 4 113 79
-------- -------- --------
Total interest expense 7,944 7,826 7,115
-------- -------- --------
Net interest income 12,928 12,491 10,499
-------- -------- --------
Provision for loan losses (note 4) -- 50 --
-------- -------- --------
Net interest income after provision for
loan losses 12,928 12,441 10,499
-------- -------- --------
Operating income:
Service charges 2,731 2,733 2,444
Net gain (loss) on sales of investment securities (notes 3) 17 (6) (31)
Net gain (loss) on sale (write-down) of other assets (note 6) (64) 187 (75)
-------- -------- --------
Total operating income 2,684 2,914 2,338
-------- -------- --------
Operating expenses:
Salaries and employee benefits 4,600 4,874 3,924
Net occupancy and equipment 1,235 1,197 978
Data processing 565 652 641
Deposit insurance 34 2 267
Other 2,124 2,030 1,675
-------- -------- --------
Total operating expenses 8,558 8,755 7,485
-------- -------- --------
Income before income tax expense 7,054 6,600 5,352
-------- -------- --------
Income tax expense (benefit) (note 8):
Current 2,274 2,178 1,763
Deferred 59 65 (13)
-------- -------- --------
Total income tax expense 2,333 2,243 1,750
-------- -------- --------
Net income $ 4,721 4,357 3,602
======== ======== ========
</TABLE>
3
<PAGE>
FIRST BANK
Statements of Income, continued
Years ended December 31, 1997, 1996 and 1995
(in thousands, except per share data)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Basic earnings per common share (note 15) $ 2.67 2.44 2.15
Weighted average number of common
shares outstanding 1,757 1,760 1,674
Diluted earnings per common share (note 15) $ 2.65 2.44 2.15
Weighted average number of common shares outstanding 1,765 1,760 1,674
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
FIRST BANK
Statements of Changes in Stockholders' Equity
Years ended December 31, 1997, 1996 and 1995
(in thousands)
<TABLE>
<CAPTION>
10%
cumulative Additional Guaranteed
preferred Common paid-in Retained Deferred ESOP loan
stock stock capital earnings compensation obligation
------- ------ ------ ------- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ -- 1,738 8,512 11,744 -- (1,152)
Cash dividends declared on common stock -- -- -- (1,019) -- --
Repayment of ESOP loan obligation -- -- -- -- -- 144
Change in net unrealized gain (loss)
on securities available for sale -- -- -- -- -- --
Net income for 1995 -- -- -- 3,602 -- --
------- ------ ------ ------- ---- ------
Balance at December 31, 1995 -- 1,738 8,512 14,327 -- (1,008)
Stock issued in merger 1,245 72 -- (7) -- --
Restricted stock issuance -- 27 580 -- (607) --
Amortization of deferred compensation (note 9) -- -- -- -- 10 --
Cash dividends declared on common stock -- -- -- (1,056) -- --
Cash dividends declared on preferred stock -- -- -- (64) -- --
Repayment of ESOP loan obligation -- -- -- 212 -- 584
Change in net unrealized gain (loss)
on securities available for sale -- -- -- -- -- --
Net income for 1996 -- -- -- 4,357 -- --
------- ------ ------ ------- ---- ------
Balance at December 31, 1996 1,245 1,837 9,092 17,769 (597) (424)
Stock redemptions (1,245) (80) -- (1,714) -- --
Amortization of deferred
compensation (note 9) -- -- -- -- 60 --
Cash dividends declared on common stock -- -- -- (1,074) -- --
Cash dividends declared on preferred stock -- -- -- (36) -- --
Repayment of ESOP loan obligation -- -- -- -- -- 424
Change in net unrealized gain (loss)
on securities available for sale -- -- -- -- -- --
Transfer to additional paid-in capital -- -- 908 (908) -- --
Net income for 1997 -- -- -- 4,721 -- --
------- ------ ------ ------- ---- ------
Balance at December 31, 1997 $ -- 1,757 10,000 18,758 (537) --
======= ====== ====== ======= ==== ======
<CAPTION>
Net unrealized
gain (loss) on
securities Total
available stockholders'
for sale equity
------ -------
<S> <C> <C>
Balance at December 31, 1994 (1,104) 19,738
Cash dividends declared on common stock -- (1,019)
Repayment of ESOP loan obligation -- 144
Change in net unrealized gain (loss)
on securities available for sale 1,418 1,418
Net income for 1995 -- 3,602
------ -------
Balance at December 31, 1995 314 23,883
Stock issued in merger -- 1,310
Restricted stock issuance -- --
Amortization of deferred compensation (note 9) -- 10
Cash dividends declared on common stock -- (1,056)
Cash dividends declared on preferred stock -- (64)
Repayment of ESOP loan obligation -- 796
Change in net unrealized gain (loss)
on securities available for sale (217) (217)
Net income for 1996 -- 4,357
------ -------
Balance at December 31, 1996 97 29,019
Stock redemptions -- (3,039)
Amortization of deferred
compensation (note 9) -- 60
Cash dividends declared on common stock -- (1,074)
Cash dividends declared on preferred stock -- (36)
Repayment of ESOP loan obligation -- 424
Change in net unrealized gain (loss)
on securities available for sale 193 193
Transfer to additional paid-in capital -- --
Net income for 1997 -- 4,721
------ -------
Balance at December 31, 1997 290 30,268
====== =======
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
FIRST BANK
Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
(in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Net income $ 4,721 4,357 3,602
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 736 732 574
Loss (gain) on sale of other assets 60 (187) --
Provision for loan losses -- 50 --
Net premium amortization on investment securities 8 9 (138)
Deferred income tax expense (benefit) 59 65 (13)
Net (gain) loss on sales of investment securities (17) 6 31
Write-down of other assets 4 -- 75
Write-down of other real estate 30 26 --
Change in other assets and liabilities, net (562) 921 (872)
---------- --------- ---------
Total adjustments 318 1,622 (343)
---------- --------- ---------
Net cash provided by operating activities 5,039 5,979 3,259
---------- --------- ---------
Cash flows from investing activities:
Cash and cash equivalents acquired in business combination -- -- 1,956
Net assets acquired in business combination -- 2,630 --
Net (increase) decrease in interest-bearing time
deposits in other financial institutions (1,686) (894) 297
Proceeds from sales of available for sale securities 9,359 8,094 4,920
Proceeds from maturing investment securities and principal paydowns 48,573 58,756 39,804
Purchases of held to maturity securities (6,992) (22,852) (12,147)
Purchases of available for sale securities (35,992) (36,905) (28,508)
Purchases of loans (15,753) (12,188) (8,383)
Net decrease in loans 1,733 5,056 5,030
Recoveries on charged-off loans 153 119 153
Purchases of bank premises and equipment (1,261) (707) (403)
Proceeds from sale of other assets 112 249 --
Proceeds from sales of bank premises and equipment 1 15 501
---------- --------- ---------
Net cash (used in) provided by investing activities (1,753) 1,373 3,220
---------- --------- ---------
Cash flows from financing activities:
Stock redemptions (3,039) -- --
Repayment of ESOP loan obligation (424) (796) (144)
Net increase (decrease) in deposits 8,571 3,265 (203)
Repayment of notes payable -- (1,329) --
Dividends paid (1,110) (1,120) (1,019)
---------- --------- ---------
Net cash provided by (used in) financing activities 3,998 20 (1,366)
---------- --------- ---------
Net increase in cash and cash equivalents 7,284 7,372 5,113
Cash and cash equivalents at beginning of year 30,704 23,332 18,219
---------- --------- ---------
Cash and cash equivalents at end of year $ 37,988 30,704 23,332
========== ========= =========
Supplemental disclosure of cash flow information:
Interest paid 7,813 6,974
Income taxes paid 2,400 2,162 1,894
========== ========= =========
Supplemental schedule of noncash investing and financing activities:
Foreclosure of assets in settlement of loans $ 261 86 383
========== ========= =========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
FIRST BANK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
ORGANIZATION AND BASIS OF PRESENTATION
First Bank (the Bank) is a State chartered bank which offers a full range
of banking services to customers through its main office in Katy, Texas and
nine branches in Houston, Texas and the surrounding areas. The Bank is
principally engaged in obtaining funds in the form of deposits and
investing such funds in mortgage loans on residential and commercial real
estate, various types of consumer loans and investment and mortgage-backed
securities. Generally, the loans are made to borrowers located in the
greater Houston, Texas area and are secured by real estate, personal and
commercial property, and deposits. Adverse changes in the economic
conditions of the area could have a direct impact on the timing and amount
of payments by borrowers.
On April 25, 1996, the Bank consummated its acquisition of Security State
Bank (Security) and its holding company, Securshares, Inc. To effect the
transaction immediately following Security's merger with Securshares, Inc.
Security was merged with the Bank. The transaction was accounted for as a
pooling-of-interests, however the financial statements for 1995 were not
restated because the effect of the merger was not material. The results of
operations of Security are included in the statements of income from
January 1, 1996. In connection with the merger the Bank issued 72,010
shares of common stock and 1,245,000 shares of newly issued preferred
stock. Security had total assets of approximately $24,000,000 and
stockholdersi equity of $1,309,000 as of December 31, 1995.
On March 31, 1995, the Bank consummated its acquisition of Champions Bank,
N.A. (Champions) by purchasing 100% of its outstanding stock. Champions'
two branch locations were merged into the Bank following the transaction
which was accounted for as a purchase. Accordingly, the purchase price and
related acquisition costs were allocated to the estimated fair value of the
net assets of Champions and the resultant costs in excess of net tangible
assets acquired of approximately $1,800,000 were capitalized and are being
amortized over a period of 20 years. The results of operations of Champions
are included in the statements of income from the date of acquisition. On
the acquisition date, Champions had total assets of approximately
$49,000,000 and stockholders' equity of approximately $3,000,000.
The following significant accounting policies are followed by the Bank in
preparing and presenting its financial statements. These policies conform
to generally accepted accounting principles and to prevailing practices
within the banking industry.
(Continued)
7
<PAGE>
USE OF 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 income and expenses during
the reporting period. Actual results could differ from these estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 and 1995 financial
statements to conform to 1997 presentation. Such reclassifications had no
effect on net income or stockholders' equity for 1996 or 1995.
INVESTMENT SECURITIES
The Bank classifies debt securities upon acquisition into one of three
categories: held to maturity, trading or available for sale. At each
reporting date, the appropriateness of the classification is reassessed.
Investments in debt securities are classified as held to maturity and
measured at amortized cost in the balance sheet only if management has the
positive intent and ability to hold those securities to maturity.
Securities that are bought and held principally for the purpose of selling
them in the near term are classified as trading and measured at fair value
in the balance sheet with unrealized holding gains and losses included in
earnings. Investments not classified as held to maturity nor trading are
classified as available for sale and measured at fair value in the balance
sheet with unrealized holding gains and losses, net of applicable tax
effect, reported as a separate component of stockholdersi equity until
realized.
Premiums and discounts on securities are amortized or accreted over the
securities' estimated lives using the interest method. Amortization or
accretion is adjusted monthly as actual prepayments are received. Gains and
losses on the sale of available for sale securities are recognized at the
time of sale based on the specific identification method. Security sales
and purchases are accounted for on a trade date basis.
LOANS
Unearned interest on consumer loans is recognized as income over the terms
of the loans using the interest method. Consumer loans are stated at the
principal amount outstanding, net of any unearned discount. Interest on all
other loans, except overdrafts, is calculated using the simple interest
method on daily balances of the principal amount outstanding.
Fees for the origination of loans are recognized as income when received.
Direct origination costs are recognized as incurred. The difference in
recognizing fees and costs in this manner and in accordance with FASB
Statement of Financial Accounting Standards No. 91, Accounting for
Non-refundable Fees and Costs Associated with Originating or Acquiring
Loans and Initial Direct Costs of Leases, which generally requires the
deferral of net direct origination fees and costs and subsequent
amortization, is not material to the financial position or the results of
operations of the Bank.
(Continued)
8
<PAGE>
Nonaccrual loans are loans for which the accrual of interest ceases when
the collection of principal or interest payments is determined by
management to be doubtful. It is the policy of the Bank to discontinue the
accrual of interest when principal or interest payments are delinquent for
90 days (or at an earlier date if deemed appropriate by management) unless
the loan principal and interest are determined by management to be fully
collectible and are in the process of collection. Any unpaid interest
previously accrued is reversed from income at the time the loan is put on
nonaccrual status, and thereafter interest is recognized to the extent
payments are received and only if the principal balance is considered fully
collectible.
A loan is considered impaired when, based upon current information and
events, it is probable that the Bank will be unable to collect all amounts
due according to the contractual terms of the loan agreement. Impaired
loans are valued utilizing (i) the present value of expected future cash
flows discounted at the effective interest rate of the loan, (ii) the fair
value of the underlying collateral or (iii) the observable market price of
the loan. At December 31, 1997, 1996 and 1995 the Bank held no such
impaired loans.
OTHER REAL ESTATE
Other real estate consists of properties acquired by foreclosure or by deed
taken in lieu of foreclosure and is recorded at the lower of the unpaid
principal loan balance or fair value less estimated selling costs at the
date of foreclosure and is included in other assets in the accompanying
balance sheets. Losses on the foreclosure date are charged to the allowance
for loan losses and are credited directly to the carrying value of the
related property. Subsequently, other real estate is carried at lower of
cost, as established at foreclosure, or fair value less estimated selling
costs. Costs of holding properties including operating expenses, net of
rental income, are charged to operating expenses. Gains on the sales of
such properties are recognized when certain criteria relating to the nature
of the property sold and the terms of sale are met and are included in
operating income. Losses are recognized immediately.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses represents amounts charged to operations,
less loans charged off, net of recoveries, and is an amount which, in the
judgment of management, is adequate to absorb known and estimated risks of
loss in the loan portfolio. While management uses available information to
recognize losses on loans, future additions to the allowances may be
necessary based on changes in economic conditions. In addition, various
regulatory agencies periodically review the Bank's allowance for losses on
loans as an integral part of their examination process. Such agencies may
require the Bank to recognize additions to the allowance based on
information available to them at the time of their examination.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are carried at cost less accumulated
depreciation. Depreciation is calculated on the straight-line method over
the estimated useful lives of the assets.
(Continued)
9
<PAGE>
COSTS IN EXCESS OF NET TANGIBLE ASSETS ACQUIRED
Net assets of companies acquired in purchase transactions are recorded at
fair value on the date of acquisition. The results of operations of these
companies are included in the financial statements for the periods
subsequent to the effective dates of purchase. Purchase accounting
adjustments, including identified intangibles such as premiums on deposits
and discounts applied to loans, are amortized or accreted on a
straight-line basis over the period benefited. The purchase price in excess
of net tangible and intangible assets acquired is amortized on a
straight-line basis over periods up to 20 years.
LONG-LIVED ASSETS
Impairment losses are recorded on long-lived assets, including cost in
excess of net tangible assets acquired, when indications of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Long-lived assets held
for disposal are required to be valued at the lower of the assetsi carrying
amount or fair value less cost to sell. The Bank continuously reviews the
carrying value of its bank premises and equipment, costs in excess of net
tangible assets acquired and other long-lived assets for possible
impairment.
INCOME TAXES
The Bank accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. To the extent that current available evidence about the future
raises doubt about the realization of a deferred tax asset, a valuation
allowance must be established. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that the tax rates change.
The State of Texas franchise tax is a designated percentage of capital and
a designated percentage of adjusted taxable income, payable annually.
Although the franchise tax is paid subsequent to each year end, the portion
of the franchise tax attributable to the Bank's income earnings is accrued
in the fiscal year the income is recorded.
STATEMENTS OF CASH FLOWS
For the purpose of reporting cash flows, cash and cash equivalents include
cash, due from banks and federal funds sold. Federal funds sold are
unsecured short-term investments entered into with other financial
institutions and generally have one-day maturities.
(Continued)
10
<PAGE>
EARNINGS PER COMMON SHARE COMPUTATIONS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (Statement 128), Earnings per
Share. Statement 128 specifies the computation, presentation, and
disclosure requirements for earnings per share (EPS). Basic EPS is
calculated by dividing net income available to common shareholders, by the
weighted average number of common shares outstanding. The computation of
diluted EPS assumes the issuance of common shares for all dilutive
potential common shares outstanding during the reporting period. The
dilutive effect of stock options are considered in earnings per share
calculations, if dilutive, using the treasury stock method. The Bank
adopted Statement 128 in 1997, accordingly, all prior-period earnings per
share data presented in the accompanying consolidated financial statements
have been restated to conform to the requirements of Statement 128.
Adoption of Statement 128 did not have a material effect on the Bank's
consolidated financial statements.
(2) RESERVE REQUIREMENTS
Cash and due from banks of approximately $7,779,000 and $6,522,000 at
December 31, 1997 and 1996, respectively, were maintained to satisfy
regulatory reserve requirements.
(Continued)
11
<PAGE>
(3) INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities held
to maturity at December 31, 1997 and 1996 are as follows:
1997
----------------------------------------------
(in thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------- ---- ------- ------
U.S. Treasury $ 1,506 10 (2) 1,514
U.S. Government agencies 16,763 48 (51) 16,760
Other 4,449 48 (4) 4,493
------- ---- ------- ------
22,718 106 (57) 22,767
Mortgage-backed securities 18,888 33 (66) 18,855
------- ---- ------- ------
$41,606 139 (123) 41,622
======= ==== ======= ======
1996
----------------------------------------------
(in thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------- ---- ------- ------
U.S. Treasury $ 1,509 10 (7) 1,512
U.S. Government agencies 18,170 92 (120) 18,142
Other 5,123 22 (19) 5,126
------- ---- ------- ------
24,802 124 (146) 24,780
Mortgage-backed securities 30,861 21 (263) 30,619
------- ---- ------- ------
$55,663 145 (409) 55,399
======= ==== ======= ======
(Continued)
12
<PAGE>
The net unrealized gain (loss) on securities available for sale, net of
related federal income taxes, is included separately in stockholders'
equity. The amortized cost and estimated fair value on investment
securities available for sale at December 31, 1997 and 1996 are as follows:
1997
------------------------------------------------
(in thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- ---- -------- -------
U.S. Treasury $ 28,505 103 (2) 28,606
U.S. Government agencies 24,299 85 (24) 24,360
Other 2,481 68 -- 2,549
FHLB Stock 1,170 -- -- 1,170
-------- ---- -------- -------
56,455 256 (26) 56,685
Mortgage-backed securities 43,795 439 (229) 44,005
-------- ---- -------- -------
$100,250 695 (255) 100,690
======== ==== ======== =======
1996
------------------------------------------------
(in thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------- ---- -------- -------
U.S. Treasury $ 30,245 89 (29) 30,305
U.S. Government agencies 10,767 109 (12) 10,864
Other 3,241 -- (30) 3,211
FHLB Stock 951 -- -- 951
-------- ---- -------- -------
45,204 198 (71) 45,331
Mortgage-backed securities 55,921 475 (455) 55,941
-------- ---- -------- -------
$101,125 673 (526) 101,272
======== ==== ======== =======
Proceeds from sales of available for sale securities during the years ended
December 31, 1997, 1996, and 1995 were approximately $9,359,000, $8,094,000
and $4,920,000, respectively. Gross losses of approximately $57,000 and
gross gains of approximately $74,000 were realized on sales of available
for sale securities for the year ended December 31, 1997. Gross losses of
approximately $12,000 and gross gains of approximately $6,000 were realized
on sales of available for sale securities for the year ended December 31,
1996. Gross losses of approximately $91,000 and gross gains of
approximately $60,000 were realized on sales of available for sale
securities for the year ended December 31, 1995.
(Continued)
13
<PAGE>
The amortized cost and estimated fair value of investment securities at
December 31, 1997, 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>
Held To Maturity Available For Sale
-------------------- --------------------
Estimated Estimated
Amortized Fair Amortized Fair
Cost Value Cost Value
------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C>
Due in one year or less $ 9,289 9,287 19,437 19,481
Due one year through 5 years 12,221 12,251 32,843 32,968
Due after five years through ten years 1,113 1,128 613 608
Due after ten years 95 101 3,562 3,628
------- ------- ------- -------
22,718 22,767 56,455 56,685
Mortgage-backed securities 18,888 18,855 43,795 44,005
------- ------- ------- -------
$41,606 41,622 100,250 100,690
======= ======= ======= =======
</TABLE>
Investment securities with a carrying amount of approximately $57,391,000
and $54,893,000 at December 31, 1997 and 1996, respectively, were pledged
to secure public funds on deposit and for other purposes as required or
permitted by law.
(4) LOANS
A summary of loans at December 31, 1997 and 1996 follows:
1997 1996
--------- --------
Commercial $ 7,109 5,681
Real estate 92,482 78,133
Consumer 22,003 23,008
Agricultural 3,840 4,441
--------- --------
125,434 111,263
Less unearned discount (896) (898)
--------- --------
Total, net $ 124,538 110,365
========= ========
Nonaccrual and renegotiated loans approximated $451,000 at December 31,
1997 and $348,000 at December 31, 1996. Interest recorded in the
accompanying financial statements was less than the amount that would have
been recorded using the original contract rates on such loans by
approximately $30,000, $25,000 and $32,000 for the years ended December 31,
1997, 1996 and 1995, respectively. At December 31, 1997 and 1996 there were
no loans classified as impaired.
All loans to directors of the Bank, stockholders of the Bank and associates
of such persons are, in the opinion of management, made in the ordinary
course of business on substantially the same terms, including interest
rates and collateral as those prevailing at the time for comparable loans
of like quality and risk of collectibility. The outstanding balance of
direct and indirect personal borrowings of such persons and their
associates as of December 31, 1997 and 1996 was approximately $729,000 and
$623,000, respectively.
(Continued)
14
<PAGE>
Activity in the allowance for loan losses during the years ended December
31, 1997, 1996 and 1995 follows:
1997 1996 1995
------- ------ ------
(in thousands)
Balance at beginning of year $ 1,487 1,067 856
Provision charged to operations -- 50 --
Acquired in acquisition -- 692 311
Losses charged to allowance (337) (441) (253)
Recoveries credited to allowance 153 119 153
------- ------ ------
Balance at end of year $ 1,303 1,487 1,067
======= ====== ======
(5) BANK PREMISES AND EQUIPMENT
A summary of bank premises and equipment at December 31, 1997 and 1996
follows:
Estimated 1997 1996
Useful Life ------- -----
----------- (in thousands)
Land -- $ 1,219 1,219
Buildings and improvements 40 years 5,005 4,911
Furniture, fixtures, equipment
and vehicles 3 to 10 years 3,049 2,647
------- -----
9,273 8,777
Less accumulated depreciation (4,074) (3,735)
------- -----
Bank premises and equipment, net $ 5,199 5,042
======= =====
Depreciation and amortization expense for the years ended December 31,
1997, 1996 and 1995 was approximately $538,000, $520,000 and $409,000,
respectively.
(6) OTHER ASSETS
On December 31, 1992, a partnership in which the Bank owned 100% of the
general partner was dissolved and its assets were distributed to the
partners. The partnership had recorded its assets based on estimated
current fair value, and the Bank had used the equity method of accounting
for its investment. In 1997 and 1995 these assets were written down by
$15,000 and $75,000, respectively, leaving a balance of $1,000 in 1997
which was transferred to "Investments." During 1997 and 1996, certain
assets were sold for $148,000 and $249,000, respectively, and the Bank
recorded a loss of approximately $17,000 and a gain of $187,000,
respectively.
(Continued)
15
<PAGE>
(7) INTEREST-BEARING DEPOSITS
A summary of interest-bearing deposits at December 31, 1997 and 1996
follows:
1997 1996
-------- -------
(in thousands)
Savings deposits and NOW accounts $ 89,648 83,436
Money market accounts 35,804 34,629
Certificates of deposit in denominations
of less than $100,000 75,097 74,974
Certificates of deposit in denominations
of $100,000 or more 25,446 24,177
-------- -------
$225,995 217,216
======== =======
Interest expense on certificates of deposit in denominations of $100,000 or
more was approximately $1,215,000, $1,042,000 and $782,000 for the years
ended December 31, 1997, 1996 and 1995, respectively.
At December 31, 1997, the scheduled maturities of certificates of deposit
are as follows (in thousands):
1998 $ 90,438
1999 6,467
2000 3,311
2001 145
2002 and thereafter 182
----------
$ 100,543
==========
(8) INCOME TAX EXPENSE
A reconciliation between income tax expense recorded in the accompanying
statements of income and the amount computed by multiplying income before
income tax expense by the statutory federal income tax rate of 34% in 1997,
1996 and 1995 follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
(in thousands)
<S> <C> <C> <C>
Computed "expected" tax expense $ 2,398 2,244 1,820
Increase (reduction) due to:
Tax-exempt interest income, net (83) (75) (77)
Amortization of costs in excess of net
tangible assets acquired 29 31 21
Stock released to Employee Stock Ownership
Plan -- 63 --
Other, net (11) (20) (14)
------- ------ ------
Income tax expense $ 2,333 2,243 1,750
======= ====== ======
</TABLE>
(Continued)
16
<PAGE>
Significant temporary differences that give rise to deferred tax asset and
liabilities as of December 31, 1997 and 1996 are as follows:
1997 1996
----- ----
(in thousands)
Deferred tax assets:
Loans, due to allowance for loan losses $ 170 232
----- ----
Deferred tax liabilities:
Bank premises and equipment, due to depreciation (132) (145)
Unrealized gain on securities available for sale (149) (50)
Other (22) (54)
----- ----
(303) (249)
----- ----
Net deferred tax liability $(133) (17)
===== ====
Management believes it is more likely than not that the results of future
operations will generate sufficient taxable income to realize the deferred
tax assets. The net deferred tax liability at December 31, 1997 and 1996 is
included in other liabilities on the accompanying balance sheets.
(9) STOCKHOLDERS' EQUITY AND CAPITAL REQUIREMENTS
During 1996, the Bank entered into a restricted stock agreement with an
officer that provided for the issuance of 27,000 shares of common stock to
the officer with a fair market value on the date of issuance of $607,500.
The shares will remain restricted until 2006 and are subject to forfeiture
should the officer voluntarily resign. The value of such shares on the
issuance date, as determined by the Board of Directors, will be charged to
compensation expense on a prorata basis over the term of the agreement.
Approximately $60,770 and $10,000 in compensation expense was recognized
for 1997 and 1996, respectively.
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative and qualitative
measures of the Bank's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined) to risk weighted
assets (as defined), and of Tier I capital (as defined) to average assets
(as defined). Management believes, as of December 31, 1997, that the Bank
meets all capital adequacy requirements to which it is subject.
(Continued)
17
<PAGE>
As of December 31, 1997, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Bank must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in
the table. There are no conditions or events since that notification that
management believes have changed the Bank's category.
The Bank's actual capital amounts and ratios are also presented in the
table.
<TABLE>
<CAPTION>
To Be
Well Capitalized
For Under Prompt
Capital Corrective
Adequacy Action
Actual Purposes Provisions
-------------------- ------------------- -------------------
Amount Ratio Amount Ratio Amount Ratio
------- ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997
Total capital (to risk
weighted assets) $28,648 22.1% $10,353 8.0% $12,941 10.0%
Tier 1 Capital (to risk
weighted assets) 27,345 21.1 5,176 4.0 7,765 6.0
Tier 1 Capital (to
average assets) 27,345 8.8 12,391 4.0 15,489 5.0
As of December 31, 1996
Total capital (to risk
weighted assets) 27,379 24.3% 9,011 8.0 11,264 10.0
Tier 1 Capital (to risk
weighted assets) 24,725 22.0 4,505 4.0 6,758 6.0
Tier 1 Capital (to
average assets) 24,725 8.1 12,252 4.0 15,315 5.0
</TABLE>
(10) COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Bank enters into various transactions
which, in accordance with generally accepted accounting principles, are not
included on the balance sheets. These transactions are referred to as
ioff-balance sheet commitments.i The Bank enters into these transactions to
meet the financing needs of its customers. These transactions include
commitments to extend credit and letters of credit which involve elements
of credit risk in excess of the amounts recognized in the balance sheets.
The Bank minimizes its exposure to loss under these commitments by
subjecting them to credit approval and monitoring procedures.
(Continued)
18
<PAGE>
The Bank enters into contractual commitments to extend credit, normally
with fixed expiration dates or termination clauses, at specified rates and
for specific purposes. Customers use credit commitments to ensure that
funds will be available for working capital purposes, for capital
expenditures and to ensure access to funds under specified terms and
conditions. Substantially all of the Bankis commitments to extend credit
are contingent upon customers maintaining specific credit standards at the
time of loan funding. Management assesses the credit risk associated with
certain commitments to extend credit in determining the level of the
allowance for loan losses.
Letters of credit are written and conditional commitments are issued by the
Bank to guarantee the performance of a customer to a third party. The
Bankis policies generally require that letters of credit arrangements
contain security and debt covenants similar to those contained in loan
agreements.
Outstanding commitments to extend credit and letters of credit at December
31, 1997 and 1996 are approximately as follows:
1997 1996
----------- ----------
Commitments to extend credit $ 5,225,000 3,264,000
Letters of credit 433,000 460,000
=========== ==========
The Bank currently occupies space at one branch under a long-term lease
agreement. The future minimum payments under this operating lease are not
material.
(11) RELATED PARTY TRANSACTIONS
The Bank's officers, directors, stockholders and their associates,
including corporations and firms of which they are officers or in which
they or their families have an ownership interest, are also customers of
the Bank. These persons, corporations and firms have had transactions in
the ordinary course of business with the Bank (see note 4). In addition, in
November, 1996 the Bank entered into an agreement which provides the Bank
will pay a principal shareholder $10,000 a month for his consulting
services. The agreement has a term of one (1) year but will likely be
extended by the Board of Directors. During the years ended December 31,
1997, 1996 and 1995, the Bank paid approximately $120,000, $20,000 and
$70,000, respectively, to certain other stockholders as compensation for
services provided.
(12) DISCLOSURES ABOUT THE FAIR VALUES OF FINANCIAL INSTRUMENTS
The Bank discloses estimated fair values for its financial instruments at a
specific point in time, based on relevant market information and
information about the financial instrument. These estimates do not reflect
any premium or discount that could result from offering for sale at one
time the Bankis entire holdings of a particular instrument. Because no
market exists for a significant portion of the Bank's financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics
of various financial instruments, and other factors. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
(Continued)
19
<PAGE>
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that
are not considered financial instruments. For example, other assets and
liabilities that are not considered financial instruments include cost in
excess of net tangible assets acquired, deferred taxes, and bank premises
and equipment. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant
effect on fair value estimates and are not considered in the following
calculations.
Fair value estimates, methods and assumptions are set forth below for the
Bank's financial instruments.
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
---------------------- ---------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 37,988 37,988 30,704 30,704
Interest-bearing time
deposits in other financial
institutions 3,473 3,480 1,787 1,784
Investment securities:
Held to maturity 41,606 41,622 55,663 55,399
Available for sale 100,690 100,690 101,272 101,272
Loans, net 123,235 136,298 108,878 108,432
Other assets -- -- 182 182
======== ======= ======= =======
Financial liabilities:
Deposits:
Noninterest-bearing
demand deposits $ 61,467 61,467 61,675 61,675
Interest-bearing
transaction accounts 125,452 125,452 118,065 118,065
Certificates of deposit 100,543 100,735 99,151 99,355
======== ======= ======= =======
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it was practicable to
estimate that value.
CASH AND CASH EQUIVALENTS
For cash and cash equivalents, the carrying amount is a reasonable estimate
of fair value.
INTEREST-BEARING TIME DEPOSITS IN OTHER
FINANCIAL INSTITUTIONS
These consist primarily of certificates of deposits with remaining
maturities ranging up to six months. Carrying value approximates fair value
because of the short maturity of these instruments and there are no
anticipated credit concerns.
(Continued)
20
<PAGE>
INVESTMENT SECURITIES
For investment and mortgage-backed securities, fair values are based on
quoted market prices or dealer quotes. If a quoted market price is not
available, fair value is estimated using quoted market prices for similar
securities.
OTHER ASSETS
Financial instruments included in other assets in 1996 consisted of the
equity investments discussed in note 6. The Bank carried these investments
at the lower of cost or market as determined by third-party appraisals or
analysis of the underlying net assets. At December 31, 1997 and 1996,
management estimates that the carrying value approximates fair value.
LOANS
The fair value of loans is estimated for segregated groupings of loans with
similar financial characteristics. Loans are segregated by type such as
commercial, commercial real estate, residential mortgage and consumer
loans. Each of these categories is further subdivided into fixed and
adjustable rate loans.
The fair value of loans is then calculated by discounting scheduled cash
flows through the estimated maturity using estimated market discount rates
that reflect the credit and interest rate risk inherent in the loans.
DEPOSIT LIABILITIES
The fair value of NOW accounts, savings accounts, and certain money market
accounts is the amount payable on demand at the reporting date. The fair
value of fixed-maturity certificates of deposit is estimated using the
rates currently offered for deposits of similar remaining maturities.
The fair value estimates do not include the benefit that results from the
low-cost funding provided by the deposit liabilities compared to the cost
of borrowing funds in the market.
COMMITMENTS TO EXTEND CREDIT AND
STANDBY LETTERS OF CREDIT
The fair value of commitments to extend credit and standby letters of
credit is estimated by taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparts. For fixed
rate loan commitments, fair value also considers the difference between
current levels of interest rates and the committed rates. The fair value of
commitments to extend credit is considered to be the same as their carrying
value because rates on commitments to extend credit are generally the same
as current market rates. There are no accruals or deferred income in the
balance sheets arising from these unrecognized financial instruments;
therefore, they are not included in the table above.
(Continued)
21
<PAGE>
(13) EMPLOYEE STOCK OWNERSHIP PLAN
The Bank has sponsored a leveraged employee stock ownership plan (ESOP)
that covers all employees over the age of 20-1/2 with at least six months
service. The ESOP borrowed $1,280,000 from a bank and used the proceeds to
purchase 80,000 shares of First Bank common stock from a related party. In
January 1997 the Bank repurchased 79,724 undistributed shares for
$1,793,790. In addition, during 1997, 1996 and 1995 the Bank contributed
$424,000, $796,000 and $144,000, respectively, to fully liquidate the
ESOP's indebtedness. As of December 31, 1997 all ESOP assets consist solely
of investment securities and have been fully allocated to active plan
participants. First Bank plans to terminate the ESOP in 1998 whereby all
participants will fully vest and receive a full distribution of their
accounts.
Prior to the repurchase of the shares the Bank reported compensation
expense equal to the market value of the shares released. Dividends on
allocated ESOP shares were recorded as a reduction in retained earnings;
dividends on unallocated ESOP shares of $37,800 in 1996 were recorded in
connection with the ESOP as a reduction in debt and accrued interest.
Compensation expense related to the ESOP was approximately $424,000,
$796,000 and $144,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
(14) STOCK OPTIONS
In October 1996, the Board adopted a fixed stock option plan covering
certain officers. The plan grants the participants options allowing them to
purchase one share of common stock for each unit granted. The options are
exercisable after five years from date of grant, subject to a vesting
schedule of 20% per year beginning with the fifth year from date of grant,
or in the event that there is a change of control. Accordingly, none of the
options are currently exercisable. No options were forfeited during 1997 or
1996. The following tables summarize information concerning options granted
and outstanding for the years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ----
<S> <C> <C> <C>
Number of options:
Options outstanding, beginning of year 25,000 -- --
Options granted during the year -- 25,000 --
------- ------ ----
Options outstanding, end of year 25,000 25,000 --
======= ====== ====
Weighted average exercise prices of options:
Options outstanding, beginning of year $ 22.50 -- --
Options granted during the year -- 22.50 --
------- ------ ----
Options outstanding, end of year 22.50 22.50 --
Weighted average grant date fair value of
options granted during the year $ -- 8.90 --
</TABLE>
(Continued)
22
<PAGE>
The fair value of the options was determined at grant date using the
Minimum Value method. The Bank assumed a risk-free interest rate of 6.50%
in 1996. If the Bank had implemented FASB Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation, net income
would have been reduced by approximately $28,000 and $28,000 in 1997 and
1996, respectively.
(15) EARNINGS PER COMMON SHARE COMPUTATIONS
Basic earnings per share was computed by dividing net income available to
common shareholders by the weighted average number of common stock
outstanding during the year. Diluted earnings per share was computed by
dividing net income by the weighted average number of common stock and
common stock equivalents outstanding during the year. The diluted earnings
per share computations include the effects of common stock equivalents
applicable to stock option contracts.
The table below presents a reconciliation of basic and diluted earnings per
share computations for the years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
(Dollars in thousands, except
per share data) 1997 1996 1995
----------- ---------- ---------
<S> <C> <C> <C>
Net income $ 4,721 4,357 3,602
Less: Preferred stock dividends (36) (64) --
----------- ---------- ---------
Net income available to common shareholders $ 4,685 4,293 3,602
=========== ========== =========
Weighted average number of common shares
outstanding used in basic EPS calculation 1,757,505 1,760,208 1,673,719
Add assumed exercise of
outstanding stock options
as adjustments for dilutive securities 7,558 -- --
----------- ---------- ---------
Weighted average number of common
shares outstanding used in
diluted EPS calculations 1,765,063 1,760,208 1,673,719
=========== ========== =========
Basic EPS $ 2.67 $ 2.44 $ 2.15
Diluted EPS 2.65 2.44 2.15
=========== ========== =========
</TABLE>
(Continued)
23
<PAGE>
(16) SUBSEQUENT EVENTS
On December 24, 1997, First Bank entered into an Agreement and Plan of
Reorganization whereby First Bank will convert to a national banking
association and immediately thereafter become a wholly-owned subsidiary of
Norwest Corporation (Norwest), a Delaware corporation. First Bank shares,
including options shares, will be converted and exchanged for 2,000,000
shares of Norwest. The consummation of the transaction is subject to the
approval of various regulatory authorities and approval by at least
two-thirds of First Bank shareholders.
On January 20, 1998 the Board of Directors of the Bank declared a $.15
common stock dividend payable on January 23, 1998.
24
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
DATED DECEMBER 24, 1997 BETWEEN
FIRST BANK
AND
NORWEST CORPORATION
<PAGE>
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as
of the 24th day of December, 1997, by and between FIRST BANK ("First Bank"), a
Texas banking association, and NORWEST CORPORATION ("Norwest"), a Delaware
corporation.
WHEREAS, the parties hereto desire to effect a reorganization whereby
First Bank will convert (the "Conversion") to a national banking association
and, immediately following the Conversion, a wholly-owned subsidiary of Norwest
will consolidate with First Bank (the "Consolidation") pursuant to an agreement
and plan of consolidation (the "Consolidation Agreement") in substantially the
form attached hereto as Exhibit A, which provides, among other things, for the
conversion and exchange of the shares of Common Stock of First Bank of the par
value of $1.00 per share ("First Bank 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) CONVERSION AND CONSOLIDATION. Subject to the terms and conditions
contained herein, First Bank will convert to a national banking association and,
immediately following the Conversion, a wholly-owned subsidiary of Norwest will
be consolidated with First Bank pursuant to the Consolidation Agreement, with
First Bank as the surviving corporation, in which consolidation each share of
First Bank 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 (the "Norwest Share
Amount") determined by dividing (A) 2,000,000, by (B) the sum of (i) the number
of shares of First Bank Common Stock outstanding immediately prior to the
Effective Time of the Consolidation, plus (ii) the number of shares of First
Bank Common Stock issuable pursuant to the exercise of First Bank Options (as
defined below) or other rights to acquire First Bank Common Stock, outstanding
immediately prior to the Effective Time of the Consolidation.
<PAGE>
(b) NORWEST COMMON STOCK ADJUSTMENTS. If, between the date hereof and
the Effective Time of the Consolidation, shares of Norwest Common Stock shall be
changed into a different number of shares or a different class of shares by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or if a stock dividend thereon shall be
declared with a record date within such period (a "Common Stock Adjustment"),
then the number of shares of Norwest Common Stock into which a share of First
Bank Common Stock shall be converted pursuant to subparagraph (a), above, will
be appropriately and proportionately adjusted so that the number of such shares
of Norwest Common Stock into which a share of First Bank Common Stock shall be
converted will equal the number of shares of Norwest Common Stock which holders
of shares of First Bank Common Stock would have received pursuant to such Common
Stock Adjustment had the record date therefor been immediately following the
Effective Time of the Consolidation.
(c) FRACTIONAL SHARES. No fractional shares of Norwest Common Stock and
no certificates or scrip certificates therefor shall be issued to represent any
such fractional interest, and any holder thereof shall be paid an amount of cash
equal to the product obtained by multiplying the fractional share interest to
which such holder is entitled by the average of the closing prices of a share of
Norwest Common Stock as reported by the consolidated tape of the New York Stock
Exchange for each of the five (5) trading days ending on the day immediately
preceding the meeting of shareholders required by paragraph 4(c) of this
Agreement.
(d) MECHANICS OF CLOSING CONSOLIDATION. Subject to the terms and
conditions set forth herein, the closing of the Consolidation will occur within
ten (10) business days following the satisfaction or waiver of all conditions
precedent set forth in Sections 6 and 7 of this Agreement or on such other date
as may be agreed to by the parties (the "Closing Date"). Each of the parties
agrees to use its best efforts to cause the Consolidation to be completed as
soon as practicable after the receipt of final regulatory approval of the
Consolidation and the expiration of all required waiting periods. The
Consolidation shall be effective at 12:01 a.m., Minneapolis, Minnesota time (the
"Effective Time of the Consolidation") on the date specified in the certificate
of approval to be issued by the Comptroller of the Currency of the United
States, under the seal of his office, approving the Consolidation (the
"Effective Date of the Consolidation").
The closing of the transactions contemplated by this Agreement and the
Consolidation Agreement (the "Closing") shall take place on the Closing Date at
the offices of Norwest, Norwest Center, Sixth and Marquette, Minneapolis,
Minnesota.
2. REPRESENTATIONS AND WARRANTIES OF FIRST BANK. First Bank represents
and warrants to Norwest as follows:
(a) ORGANIZATION AND AUTHORITY. First Bank is a banking association
duly organized, validly existing and in good standing under the laws of the
State of Texas, is
A-2
<PAGE>
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 First Bank and the First Bank Subsidiaries (as defined below) taken as
a whole and has corporate power and authority to own its properties and assets
and to carry on its business as it is now being conducted. First Bank has
furnished Norwest true and correct copies of its articles of incorporation and
by-laws, as amended.
(b) FIRST BANK'S SUBSIDIARIES. Schedule 2(b) sets forth a complete and
correct list of all of First Bank's subsidiaries as of the date hereof
(individually a "First Bank Subsidiary" and collectively the "First Bank
Subsidiaries"), all shares of the outstanding capital stock of each of which,
except as set forth on Schedule 2(b), are owned directly or indirectly by First
Bank. No equity security of any First Bank Subsidiary is or may be required to
be issued by reason of any option, warrant, scrip, preemptive right, right to
subscribe to, call or commitment of any character whatsoever relating to, or
security or right convertible into, shares of any capital stock of such
subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any First Bank Subsidiary is bound to issue additional
shares of its capital stock, or any option, warrant or right to purchase or
acquire any additional shares of its capital stock. All of such shares so owned
by First Bank 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 First Bank Subsidiary is a corporation or national banking
association duly organized, validly existing, duly qualified to do business and
in good standing under the laws of its jurisdiction of incorporation, and has
corporate power and authority to own or lease its properties and assets and to
carry on its business as it is now being conducted. Except as set forth on
Schedule 2(b), First Bank 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 First Bank consists
of 3,000,000 shares of preferred stock, $1.00 par value, of which as of the
close of business on September 30, 1997, no shares were outstanding and no
shares were held in the treasury, and 3,000,000 shares of common stock, $1.00
par value, of which as of the close of business on September 30, 1997, 1,757,505
shares were outstanding and no shares were held in the treasury. As of the date
hereof, there are outstanding options (each, a "First Bank Option") to purchase
an aggregate of 25,000 shares of First Bank Stock under Stock Option Agreements
dated October 15, 1996 with Don Birkelbach and R. Wayne Crawford. In addition,
as of the date hereof, First Bank has issued an aggregate of 27,000 shares of
restricted stock (the "Restricted Stock") to R. Wayne Crawford pursuant to and
subject to the terms of a Restricted Stock Award Agreement dated October 15,
1996. The maximum number of shares of First Bank Common Stock (assuming for this
purpose that phantom shares and other share-equivalents constitute First Bank
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
A-3
<PAGE>
1,782,505. All of the outstanding shares of capital stock of First Bank have
been duly and validly authorized and issued and are fully paid and
nonassessable. Except as set forth in this paragraph or in Schedule 2(c), there
are no outstanding subscriptions, contracts, conversion privileges, options,
warrants, calls, preemptive rights or other rights obligating First Bank or any
First Bank Subsidiary to issue, sell or otherwise dispose of, or to purchase,
redeem or otherwise acquire, any shares of capital stock of First Bank or any
First Bank Subsidiary. Except as set forth in Schedule 2(c), since September 30,
1997, no shares of First Bank capital stock have been purchased, redeemed or
otherwise acquired, directly or indirectly, by First Bank or any First Bank
Subsidiary and no dividends or other distributions have been declared, set
aside, made or paid to the shareholders of First Bank.
(d) AUTHORIZATION. First Bank 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 First Bank and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
Board of Directors of First Bank. Subject to such approvals of shareholders and
of government agencies and other governing boards having regulatory authority
over First Bank as may be required by statute or regulation, this Agreement and
the Consolidation Agreement are valid and binding obligations of First Bank
enforceable against First Bank in accordance with their respective terms.
Except as set forth on Schedule 2(d), neither the execution, delivery
and performance by First Bank of this Agreement or the Consolidation Agreement,
nor the consummation of the transactions contemplated hereby and thereby, nor
compliance by First Bank 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 First Bank or any First Bank Subsidiary
under any of the terms, conditions or provisions of (x) its articles of
incorporation or by-laws or (y) any material note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which First Bank or any First Bank Subsidiary is a party or by which it may be
bound, or to which First Bank or any First Bank Subsidiary or any of the
properties or assets of First Bank or any First Bank 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 First Bank, violate any judgment,
ruling, order, writ, injunction, decree, statute, rule or regulation applicable
to First Bank or any First Bank Subsidiary or any of their respective properties
or assets.
Other than in connection or in compliance with the provisions of the
Securities Act of 1933 and the rules and regulations thereunder (the "Securities
Act"), the Securities Exchange Act of 1934 and the rules and regulations
thereunder (the "Exchange Act"), the
A-4
<PAGE>
securities or blue sky laws of the various states or filings, consents, reviews,
authorizations, approvals or exemptions required under the Bank Holding Company
Act of 1956, as amended (the "BHC Act") or the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 ("HSR Act"), and filings required to effect the
Conversion and the Consolidation under the National Bank Act or Texas law, no
notice to, filing with, exemption or review by, or authorization, consent or
approval of, any public body or authority is necessary for the consummation by
First Bank of the transactions contemplated by this Agreement and the
Consolidation Agreement.
(e) FIRST BANK FINANCIAL STATEMENTS. The consolidated balance sheets of
First Bank and First Bank's Subsidiaries as of December 31, 1996 and December
31, 1995 and related consolidated statements of income, shareholders' equity and
cash flows for the three years ended December 31, 1996, together with the notes
thereto, certified by KPMG Peat Marwick LLP, and the unaudited consolidated
statements of financial condition of First Bank and First Bank's Subsidiaries as
of September 30, 1997 and the related unaudited consolidated statements of
income, shareholders' equity and cash flows for the nine (9) months then ended
(collectively, the "First Bank 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 First Bank and First Bank's Subsidiaries at the dates and the
consolidated results of operations and cash flows of First Bank and First Bank's
Subsidiaries for the periods stated therein.
(f) REPORTS. Since December 31, 1991, First Bank and each First Bank
Subsidiary has filed all reports, registrations and statements, if any, together
with any required amendments thereto, that it was required to file with (i) the
Securities and Exchange Commission (the "SEC"), including, but not limited to,
Forms 10-K, Forms 10-Q and proxy statements, (ii) the Federal Reserve Board,
(iii) the Federal Deposit Insurance Corporation (the "FDIC"), (iv) the United
States Comptroller of the Currency (the "Comptroller") and (v) any applicable
state securities or banking authorities. All such reports and statements filed
with any such regulatory body or authority are collectively referred to herein
as the "First Bank Reports". As of their respective dates, the First Bank
Reports complied in all material respects with all applicable rules and
regulations promulgated by the SEC, the Federal Reserve Board, the FDIC, the
Comptroller and applicable state securities or banking authorities, as the case
may be, and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Copies of all the First Bank Reports have been made
available to Norwest by First Bank.
(g) PROPERTIES AND LEASES. Except as may be reflected in the First Bank
Financial Statements and except for any lien for current taxes not yet
delinquent, First Bank and each First Bank Subsidiary have good title free and
clear of any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property
A-5
<PAGE>
reflected in First Bank's consolidated balance sheet as of September 30, 1997,
and all real and personal property acquired since such date, except such real
and personal property as has been disposed of in the ordinary course of
business. All leases of real property and all other leases material to First
Bank or any First Bank Subsidiary pursuant to which First Bank or such First
Bank Subsidiary, as lessee, leases real or personal property, which leases are
described on Schedule 2(g), are valid and effective in accordance with their
respective terms, and there is not, under any such lease, any material existing
default by First Bank or such First Bank Subsidiary or any event which, with
notice or lapse of time or both, would constitute such a material default.
Substantially all First Bank's and each First Bank 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 First Bank and the First Bank Subsidiaries has filed
all federal, state, county, local and foreign tax returns, including information
returns, required to be filed by it on or before the Closing Date, and paid all
taxes owed by it, including those with respect to income, withholding, social
security, unemployment, workers compensation, franchise, ad valorem, premium,
excise and sales taxes, and no taxes shown on such returns to be owed by it or
assessments received by it are delinquent. The federal income tax returns of
First Bank and the First Bank Subsidiaries 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 only as set forth on Schedule 2(h), (i) neither First Bank nor
any First Bank Subsidiary is a party to any pending action or proceeding, nor,
to the best knowledge of management of First Bank, 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)
to the best knowledge of management of First Bank, 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 First Bank or
any First Bank Subsidiary which has not been settled, resolved and fully
satisfied. Each of First Bank and the First Bank Subsidiaries has paid all taxes
owed or which it is required to withhold from amounts owing to employees,
creditors or other third parties. The consolidated balance sheet as of September
30, 1997, 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 First Bank and the First
Bank Subsidiaries with respect to all periods through the date thereof.
(i) ABSENCE OF CERTAIN CHANGES. Since December 31, 1996 through the
date of this Agreement, there has been no change in the business, financial
condition or results of operations of First Bank or any First Bank 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 First Bank and
the First Bank Subsidiaries taken as a whole.
A-6
<PAGE>
(j) COMMITMENTS AND CONTRACTS. Except as set forth on Schedule 2(j),
neither First Bank nor any First Bank Subsidiary is a party or subject to any of
the following (whether written or oral, express or implied):
(i) any employment contract or understanding (including any
understandings or obligations with respect to severance or termination
pay liabilities or fringe benefits) with any present or former officer,
director, employee or consultant (other than those which are terminable
at will by First Bank or such First Bank Subsidiary);
(ii) any plan, contract or understanding providing for any
bonus, pension, option, deferred compensation, retirement payment,
profit sharing or similar arrangement with respect to any present or
former officer, director, employee or consultant;
(iii) any labor contract or agreement with any labor union;
(iv) any contract not made in the ordinary course of business
containing covenants which limit the ability of First Bank or any First
Bank Subsidiary to compete in any line of business or with any person
or which involve any restriction of the geographical area in which, or
method by which, First Bank or any First Bank Subsidiary may carry on
its business (other than as may be required by law or applicable
regulatory authorities);
(v) any other contract or agreement which is a "material
contract" within the meaning of Item 601(b)(10) of Regulation S-K; or
(vi) any lease with annual rental payments aggregating $10,000
or more; or
(vii) any agreement or commitment with respect to the
Community Reinvestment Act with any state or federal bank regulatory
authority or any other party; or
(viii) any current or past agreement, contract or
understanding with any current or former director, officer, employee,
consultant, financial adviser, broker, dealer, or agent providing for
any rights of indemnification in favor of such person or entity.
(k) LITIGATION AND OTHER PROCEEDINGS. First Bank has furnished Norwest
copies of (i) all attorney responses to the request of the independent auditors
for First Bank with respect to loss contingencies as of December 31, 1996 in
connection with the First Bank financial statements, and (ii) a written list of
legal and regulatory proceedings filed against First Bank or any First Bank
Subsidiary since said date. Neither First Bank nor any First Bank Subsidiary is
a party to any pending or, to the best knowledge of First
A-7
<PAGE>
Bank, 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
First Bank and the First Bank Subsidiaries taken as a whole.
(l) INSURANCE. First Bank and each First Bank Subsidiary is presently
insured, and during each of the past five calendar years (or during such lesser
period of time as First Bank has owned such First Bank Subsidiary) has been
insured, for reasonable amounts with financially sound and reputable insurance
companies against such risks as companies engaged in a similar business would,
in accordance with good business practice, customarily be insured and has
maintained all insurance required by applicable law and regulation.
(m) COMPLIANCE WITH LAWS. First Bank and each First Bank Subsidiary has
all permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties and assets and to carry on its business as presently
conducted and that are material to the business of First Bank or such First Bank
Subsidiary; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the best knowledge of First Bank,
no suspension or cancellation of any of them is threatened; and all such
filings, applications and registrations are current. The conduct by First Bank
and each First Bank 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 First Bank nor any First Bank
Subsidiary is in default under any order, license, regulation or demand of any
federal, state, municipal or other governmental agency or with respect to any
order, writ, injunction or decree of any court. Except for statutory or
regulatory restrictions of general application and except as set forth on
Schedule 2(m), no federal, state, municipal or other governmental authority has
placed any restriction on the business or properties of First Bank or any First
Bank Subsidiary which reasonably could be expected to have a material adverse
effect on the business or properties of First Bank and the First Bank
Subsidiaries taken as a whole.
(n) LABOR. No work stoppage involving First Bank or any First Bank
Subsidiary is pending or, to the best knowledge of First Bank, threatened.
Neither First Bank nor any First Bank 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 First
Bank or such First Bank Subsidiary. Employees of First Bank and the First Bank
Subsidiaries are not represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees.
(o) MATERIAL INTERESTS OF CERTAIN PERSONS. Except as set forth on
Schedule 2(o), to the best knowledge of First Bank no officer or director of
First Bank or any First Bank
A-8
<PAGE>
Subsidiary, or any "associate" (as such term is defined in Rule l4a-1 under the
Securities Exchange Act of 1934) of any such officer or director, has any
interest in any material contract or property (real or personal), tangible or
intangible, used in or pertaining to the business of First Bank or any First
Bank Subsidiary.
Schedule 2(o) sets forth a correct and complete list of any loan from
First Bank or any First Bank Subsidiary to any present officer, director,
employee or any associate or related interest of any such person which was
required under Regulation O of the Federal Reserve Board to be approved by or
reported to First Bank's or such First Bank Subsidiary's Board of Directors.
(p) FIRST BANK 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 First Bank or any First Bank Subsidiary
acts as the plan sponsor as defined in ERISA Section 3(16)(B), and with
respect to which any liability under ERISA or otherwise exists or may
be incurred by First Bank or any First Bank Subsidiary are those set
forth on Schedule 2(p) (the "Plans"). No Plan is a "multi-employer
plan" within the meaning of Section 3(37) of ERISA.
(ii) Each Plan is and has been in all material respects
operated and administered in accordance with its provisions and
applicable law. Except as set forth on Schedule 2(p), First Bank or the
First Bank subsidiaries have received favorable determination letters
from the Internal Revenue Service under the provisions of the Tax
Reform Act of 1986 ("TRA `86") for each of the Plans to which the
qualification requirements of Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), apply. First Bank knows of no
reason that any Plan which is subject to the qualification provisions
of Section 401(a) of the Code is not "qualified" within the meaning of
Section 401(a) of the Code and that each related trust is not exempt
from taxation under Section 501(a) of the Code.
(iii) The present value of all benefits vested and all
benefits accrued under each Plan which is subject to Title IV of ERISA
did not, in each case, as determined for purposes of reporting on
Schedule B to the Annual Report on Form 5500 of each such Plan as of
the end of the most recent Plan year exceed the value of the assets of
the Plan allocable to such vested or accrued benefits.
(iv) Except as disclosed in Schedule 2(p), and to the best
knowledge of First Bank, no Plan or any trust created thereunder, nor
any trustee, fiduciary or administrator thereof, has engaged in a
"prohibited transaction", as such term is defined in Section 4975 of
the Code or Section 406 of ERISA or violated any of the fiduciary
standards under Part 4 of Title I of ERISA which could subject, to
A-9
<PAGE>
the best knowledge of First Bank, 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 First
Bank and the First Bank Subsidiaries taken as a whole.
(v) No Plan which is subject to Title IV of ERISA or any trust
created thereunder has been terminated, nor have there been any
"reportable events" as that term is defined in Section 4043 of ERISA,
with respect to any Plan, other than those events which may result from
the transactions contemplated by this Agreement and the Consolidation
Agreement.
(vi) No Plan or any trust created thereunder has incurred any
"accumulated funding deficiency", as such term is defined in Section
412 of the Code (whether or not waived), since the effective date of
ERISA.
(vii) Except as disclosed in Schedule 2(p), 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 First Bank or any First Bank Subsidiary under any Plan or otherwise,
(ii) materially increase any benefits otherwise payable under any Plan
or (iii) result in the acceleration of the time of payment or vesting
of any such benefits to any material extent.
(q) PROXY STATEMENT, ETC. None of the information regarding First Bank
and the First Bank Subsidiaries supplied or to be supplied by First Bank 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 First Bank Common Stock pursuant to the provisions of
the Consolidation Agreement (the "Registration Statement"), (ii) the proxy
statement to be mailed to First Bank's shareholders in connection with the
meeting to be called to consider the Consolidation (the "Proxy Statement") and
(iii) any other documents to be filed with the SEC or any regulatory authority
in connection with the transactions contemplated hereby or by the Consolidation
Agreement will, at the respective times such documents are filed with the SEC or
any regulatory authority and, in the case of the Registration Statement, when it
becomes effective and, with respect to the Proxy Statement, when mailed, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading
or, in the case of the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the meeting of shareholders referred to in paragraph
4(c), be false or misleading with respect to any material fact, or omit to state
any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for such meeting.
All documents which First Bank and the First Bank Subsidiaries are responsible
for filing
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<PAGE>
with the SEC and any other regulatory authority in connection with the
Consolidation will comply as to form in all material respects with the
provisions of applicable law.
(r) REGISTRATION OBLIGATIONS. Except as set forth on Schedule 2(r),
neither First Bank nor any First Bank Subsidiary is 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 of 1933 and
the rules and regulations thereunder.
(s) BROKERS AND FINDERS. Except for NationsBanc Montgomery Securities,
Inc., neither First Bank nor any First Bank 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 First Bank or any First Bank Subsidiary in connection with this
Agreement and the Consolidation Agreement or the transactions contemplated
hereby and thereby.
(t) FIDUCIARY ACTIVITIES. Neither First Bank nor any First Bank
subsidiary has 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; provided,
however, that First Bank has acted in a fiduciary capacity with respect to
individual retirement accounts and Keogh accounts.
(u) NO DEFAULTS. Neither First Bank nor any First Bank 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 First Bank and the First Bank Subsidiaries, taken
as a whole. To the best of First Bank's knowledge, all parties with whom First
Bank or any First Bank Subsidiary has material leases, agreements or contracts
or who owe to First Bank or any First Bank Subsidiary material obligations other
than with respect to those arising in the ordinary course of the banking
business of the First Bank Subsidiaries are in compliance therewith in all
material respects.
(v) ENVIRONMENTAL LIABILITY. There is no legal, administrative, or
other proceeding, claim, or action of any nature seeking to impose, or that
could result in the imposition of, on First Bank or any First Bank Subsidiary,
any liability relating to the release of hazardous substances as defined under
any local, state or federal environmental statute, regulation or ordinance
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), pending or to the
best of First Bank's knowledge, threatened against First Bank or any First Bank
Subsidiary the result of which has had or could reasonably be expected to have a
material adverse effect upon First Bank and First Bank's Subsidiaries taken as a
whole; to the best of First Bank's knowledge there is no reasonable basis for
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any such proceeding, claim or action; and to the best of First Bank's knowledge
neither First Bank nor any First Bank 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. First Bank has provided Norwest
with copies of all environmental assessments, reports, studies and other related
information in its possession with respect to each bank facility and each
non-residential OREO property.
3. REPRESENTATIONS AND WARRANTIES OF NORWEST. Norwest represents and
warrants to First Bank 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.
(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. ss. 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, 1997, 980,000 shares of Cumulative
Tracking Preferred Stock, at $200 stated value, and 10,438 shares of ESOP
Cumulative Convertible Preferred Stock, at $1,000 stated value, 21,177 shares of
1995 ESOP Cumulative Convertible Preferred Stock, at $1,000 stated value, 23,260
shares of 1996 ESOP Cumulative
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Convertible Preferred Stock, at $1,000 stated value, and 28,032 shares of 1997
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, 1997, no shares were
outstanding; and (iii) 1,000,000,000 shares of Common Stock, $1-2/3 par value,
of which as of the close of business on October 31, 1997, 755,315,646 shares
were outstanding and 10,506,201 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
properties or assets of Norwest or any Norwest Subsidiary under any of the
terms, conditions or provisions of (x) its certificate of incorporation or
by-laws or (y) any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Norwest or
any Norwest Subsidiary is a party or by which it may be bound, or to which
Norwest or any Norwest Subsidiary or any of the properties or assets of Norwest
or any Norwest Subsidiary may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in the next paragraph, to the best
knowledge of Norwest, violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to Norwest or any Norwest
Subsidiary or any of their respective properties or assets.
Other than in connection with or in compliance with the provisions of
the Securities Act, the Exchange Act, the securities or blue sky laws of the
various states or filings, consents, reviews, authorizations, approvals or
exemptions required under the BHC Act or the HSR Act, and filings required to
effect the Consolidation under the National Bank Act or Texas law, no notice to,
filing with, exemption or review by, or
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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, 1997 and the related unaudited consolidated
statements of income and cash flows for the nine (9) months then ended included
in Norwest's Quarterly Report on Form 10-Q, 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, 1991, Norwest and each Norwest
Subsidiary has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with (i) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q and proxy statements, (ii)
the Federal Reserve Board, (iii) the FDIC, (iv) the Comptroller and (v) any
applicable state securities or banking authorities. All such reports and
statements filed with any such regulatory body or authority are collectively
referred to herein as the "Norwest Reports". As of their respective dates, the
Norwest Reports complied in all material respects with all the rules and
regulations promulgated by the SEC, the Federal Reserve Board, the FDIC, the
Comptroller and any applicable state securities or banking authorities, as the
case may be, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(g) PROPERTIES AND LEASES. Except as may be reflected in the Norwest
Financial Statements and except for any lien for current taxes not yet
delinquent, Norwest and each Norwest Subsidiary has good title free and clear of
any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Norwest's
consolidated balance sheet as of September 30, 1997 included in Norwest's
Quarterly Report on Form 10-Q, and all real and personal property acquired since
such date, except such real and personal property has been disposed of in the
ordinary course of business. All leases of real property and all other leases
material to Norwest or any Norwest Subsidiary pursuant to which Norwest or such
Norwest Subsidiary, as lessee, leases real or personal property, are valid and
effective in accordance with their respective terms, and there is not, under any
such lease, any
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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 which,
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Norwest or any Norwest Subsidiary may carry on its business (other than
as may be required by law or applicable regulatory authorities);
(iii) any other contract or agreement which is a "material
contract" within the meaning of Item 601(b)(10) of Regulation S-K.
(k) LITIGATION AND OTHER PROCEEDINGS. Neither Norwest nor any Norwest
Subsidiary is a party to any pending or, to the best knowledge of Norwest,
threatened, claim, action, suit, investigation or proceeding, or is subject to
any order, judgment or decree, except for matters which, in the aggregate, will
not have, or cannot reasonably be expected to have, a material adverse effect on
the business, financial condition or results of operations of Norwest and its
subsidiaries taken as a whole.
(l) INSURANCE. Norwest and each Norwest Subsidiary is presently insured
or self insured, and during each of the past five calendar years (or during such
lesser period of time as Norwest has owned such Norwest Subsidiary) has been
insured or self-insured, for reasonable amounts with financially sound and
reputable insurance companies against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured and has maintained all insurance required by applicable law and
regulation.
(m) COMPLIANCE WITH LAWS. Norwest and each Norwest Subsidiary has all
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties or assets and to carry on its business as presently
conducted and that are material to the business of Norwest or such Subsidiary;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect, and to the best knowledge of Norwest, no suspension or
cancellation of any of them is threatened; and all such filings, applications
and registrations are current. The conduct by Norwest and each Norwest
Subsidiary of its 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
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affect the business of Norwest or such Norwest Subsidiary. Except as set forth
on Schedule 3(j), employees of Norwest and the Norwest Subsidiaries are not
represented by any labor union nor are any collective bargaining agreements
otherwise in effect with respect to such employees.
(o) NORWEST BENEFIT PLANS.
(i) As of May 1, 1996, the only "employee benefit plans"
within the meaning of Section 3(3) of ERISA for which Norwest or any
Norwest Subsidiary acts as plan sponsor as defined in ERISA Section
3(16)(B) with respect to which any liability under ERISA or otherwise
exists or may be incurred by Norwest or any Norwest Subsidiary are
those set forth on Schedule 3(o) (the "Norwest Plans"). No Norwest Plan
is a "multi-employer plan" within the meaning of Section 3(37) of
ERISA.
(ii) Each Norwest Plan is and has been in all material
respects operated and administered in accordance with its provisions
and applicable law. Except as set forth on Schedule 3(o), Norwest or
the Norwest Subsidiaries have received favorable determination letters
from the Internal Revenue Service under the provisions of TRA `86 for
each of the Norwest Plans to which the qualification requirements of
Section 401(a) of the Code apply. Norwest knows of no reason that any
Norwest Plan which is subject to the qualification provisions of
Section 401(a) of the Code is not "qualified" within the meaning of
Section 401(a) of the Code and that each related trust is not exempt
from taxation under Section 501(a) of the Code.
(iii) The present value of all benefits vested and all
benefits accrued under each Norwest Plan which is subject to Title IV
of ERISA did not, in each case, as determined for purposes of reporting
on Schedule B to the Annual Report on Form 5500 of each such Norwest
Plan as of the end of the most recent Plan year, exceed the value of
the assets of the Norwest Plans allocable to such vested or accrued
benefits.
(iv) Except as set forth on Schedule 3(o), and to the best
knowledge of Norwest, no Norwest Plan or any trust created thereunder,
nor any trustee, fiduciary or administrator thereof, has engaged in a
"prohibited transaction", as such term is defined in Section 4975 of
the Code or Section 406 of ERISA or violated fiduciary standards under
Part 4 of Title I of ERISA, which could subject, to the best knowledge
of Norwest, such Norwest Plan or trust, or any trustee, fiduciary or
administrator thereof, or any party dealing with any such Norwest Plan
or trust, to the tax or penalty on prohibited transactions imposed by
said Section 4975 or would result in material liability to Norwest and
its subsidiaries taken as a whole.
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(v) Except as set forth on Schedule 3(o), no Norwest Plan
which is subject to Title IV of ERISA or any trust created thereunder
has been terminated, nor have there been any "reportable events" as
that term is defined in Section 4043 of ERISA with respect to any
Norwest Plan, other than those events which may result from the
transactions contemplated by this Agreement and the Consolidation
Agreement.
(vi) No Norwest Plan or any trust created thereunder has
incurred any "accumulated funding deficiency", as such term is defined
in Section 412 of the Code (whether or not waived), during the last
five Norwest Plan years which would result in a material liability.
(vii) Neither the execution and delivery of this Agreement and
the Consolidation Agreement nor the consummation of the transactions
contemplated hereby and thereby will (i) result in any material payment
(including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or employee
or former employee of Norwest under any Norwest Plan or otherwise, (ii)
materially increase any benefits otherwise payable under any Norwest
Plan or (iii) result in the acceleration of the time of payment or
vesting of any such benefits to any material extent.
(p) REGISTRATION STATEMENT, ETC. None of the information regarding
Norwest and its subsidiaries supplied or to be supplied by Norwest for inclusion
in (i) the Registration Statement, (ii) the Proxy Statement, or (iii) any other
documents to be filed with the SEC or any regulatory authority in connection
with the transactions contemplated hereby or by the Consolidation Agreement
will, at the respective times such documents are filed with the SEC or any
regulatory authority and, in the case of the Registration Statement, when it
becomes effective and, with respect to the Proxy Statement, when mailed, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading
or, in the case of the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the meeting of shareholders referred to in paragraph
4(c), be false or misleading with respect to any material fact, or omit to state
any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for such meeting.
All documents which Norwest and the Norwest Subsidiaries are responsible for
filing with the SEC and any other regulatory authority in connection with the
Consolidation will comply as to form in all material respects with the
provisions of applicable law.
(q) BROKERS AND FINDERS. Neither Norwest nor any Norwest Subsidiary nor
any of their respective officers, directors or employees has employed any broker
or finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted directly
or indirectly for Norwest or any Norwest Subsidiary in connection with this
Agreement and the Consolidation Agreement or the transactions contemplated
hereby and thereby.
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(r) NO DEFAULTS. Neither Norwest nor any Norwest Subsidiary is in
default, nor has any event occurred which, with the passage of time or the
giving of notice, or both, would constitute a default under any material
agreement, indenture, loan agreement or other instrument to which it is a party
or by which it or any of its assets is bound or to which any of its assets is
subject, the result of which has had or could reasonably be expected to have a
material adverse effect upon Norwest and its subsidiaries taken as a whole. To
the best of Norwest's knowledge, all parties with whom Norwest or any Norwest
Subsidiary has material leases, agreements or contracts or who owe to Norwest or
any Norwest Subsidiary material obligations other than with respect to those
arising in the ordinary course of the banking business of the Norwest
Subsidiaries are in compliance therewith in all material respects.
(s) ENVIRONMENTAL LIABILITY. There is no legal, administrative, or
other proceeding, claim, or action of any nature seeking to impose, or that
could result in the imposition, on Norwest or any Norwest Subsidiary of any
liability relating to the release of hazardous substances as defined under any
local, state or federal environmental statute, regulation or ordinance
including, without limitation, 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.
4. COVENANTS OF FIRST BANK. First Bank covenants and agrees with
Norwest as follows:
(a) Except as otherwise permitted or required by this Agreement, from
the date hereof until the Effective Time of the Consolidation, First Bank, and
each First Bank Subsidiary will: maintain its corporate existence in good
standing; maintain the general character of its business and conduct its
business in its ordinary and usual manner; extend credit in accordance with
existing lending policies, except that it shall not, without the prior written
consent of Norwest, make any new loan or modify, restructure or renew any
existing loan (except pursuant to commitments made prior to the date of this
Agreement) to any borrower if the amount of the resulting loan, when aggregated
with all other loans or extensions of credit to such person, would be in excess
of $200,000; maintain proper business and accounting records in accordance with
generally accepted principles; maintain its properties in good repair and
condition, ordinary wear and tear excepted; maintain in all material respects
presently existing insurance coverage; use its best efforts to preserve its
business organization intact, to keep the services of its present principal
employees and to preserve its good will and the good will of its suppliers,
customers and others having business relationships with it; use its best efforts
to obtain any approvals or consents required to maintain existing leases and
other contracts in effect following the
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Consolidation; comply in all material respects with all laws, regulations,
ordinances, codes, orders, licenses and permits applicable to the properties and
operations of First Bank and each First Bank Subsidiary the non-compliance with
which reasonably could be expected to have a material adverse effect on First
Bank and the First Bank Subsidiaries taken as a whole; and permit Norwest and
its representatives (including KPMG Peat Marwick LLP) to examine its and its
subsidiaries books, records and properties and to interview officers, employees
and agents at all reasonable times when it is open for business. No such
examination by Norwest or its representatives either before or after the date of
this Agreement shall in any way affect, diminish or terminate any of the
representations, warranties or covenants of First Bank herein expressed.
(b) Except as otherwise contemplated or required by this Agreement,
from the date hereof until the Effective Time of the Consolidation, First Bank
and each First Bank subsidiary will not (without the prior written consent of
Norwest): amend or otherwise change its articles of incorporation or association
or by-laws; issue or sell or authorize for issuance or sale, or grant any
options or make other agreements with respect to the issuance or sale or
conversion of, any shares of its capital stock, phantom shares or other
share-equivalents, or any other of its securities, except that First Bank may
issue shares of First Bank Common Stock upon the exercise of outstanding First
Bank Options described in paragraph 2(c) hereof; authorize or incur any
long-term debt (other than deposit liabilities); mortgage, pledge or subject to
lien or other encumbrance any of its properties, except in the ordinary course
of business; enter into any material agreement, contract or commitment in excess
of $10,000 except banking transactions in the ordinary course of business and in
accordance with policies and procedures in effect on the date hereof; make any
investments except investments in the ordinary course of business for terms of
up to one (1) year and in amounts of $100,000 or less; amend or terminate any
Plan except as required by law; make any contributions to any Plan except as
required by the terms of such Plan in effect as of the date hereof; declare, set
aside, make or pay any dividend or other distribution with respect to its
capital stock except any dividend declared by a subsidiary's Board of Directors
in accordance with applicable law and regulation provided, however, that First
Bank may declare and pay regular quarterly dividends, in accordance with past
practice, between the date of this Agreement and the Effective Time of the
Consolidation; redeem, purchase or otherwise acquire, directly or indirectly,
any of the capital stock of First Bank, except as may be required by the
Restricted Stock Award Agreement with respect to the Restricted Stock; increase
the compensation of any officers, directors or executive employees, except
pursuant to existing compensation plans and practices; sell or otherwise dispose
of any shares of the capital stock of any First Bank Subsidiary; or sell or
otherwise dispose of any of its assets or properties other than in the ordinary
course of business.
(c) The Board of Directors of First Bank will duly call, and will cause
to be held not later than twenty-five (25) business days following the effective
date of the Registration Statement referred to in paragraph 5(c) hereof, a
meeting of its shareholders and will direct that this Agreement, the Conversion
and the Consolidation Agreement be submitted to a vote at such meeting. The
Board of Directors of First Bank will (i) cause
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proper notice of such meeting to be given to its shareholders in compliance with
all applicable law and regulation, (ii) recommend by the affirmative vote of the
Board of Directors a vote in favor of approval of this Agreement, the Conversion
and the Consolidation Agreement, and (iii) use its best efforts to solicit from
its shareholders proxies in favor thereof.
(d) First Bank will furnish or cause to be furnished to Norwest all the
information concerning First Bank and its subsidiaries required for inclusion in
the Registration Statement referred to in paragraph 5(c) hereof, or any
statement or application made by Norwest to any governmental body in connection
with the transactions contemplated by this Agreement. Any financial statement
for any fiscal year provided under this paragraph must include the audit opinion
and the consent of KPMG Peat Marwick LLP to use such opinion in such
Registration Statement.
(e) First Bank 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 First Bank to carry out the transactions
contemplated by this Agreement and will cooperate with Norwest to obtain all
such approvals and consents required of Norwest.
(f) First Bank will use its best efforts to deliver to the Closing all
opinions, certificates and other documents required to be delivered by it at the
Closing.
(g) First Bank will hold in confidence all documents and information
concerning Norwest and its subsidiaries furnished to First Bank 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 First Bank's outside professional
advisers in connection with this Agreement, with the same undertaking from such
professional advisers. If the transactions contemplated by this Agreement shall
not be consummated, such confidence shall be maintained and such information
shall not be used in competition with Norwest (except to the extent that such
information can be shown to be previously known to First Bank, in the public
domain, or later acquired by First Bank from other legitimate sources) and, upon
request, all such documents, any copies thereof and extracts therefrom shall
immediately thereafter be returned to Norwest.
(h) Neither First Bank, nor any First Bank Subsidiary, nor any
director, officer, representative or agent thereof, will, directly or
indirectly, solicit, authorize the solicitation of or enter into any discussions
with any corporation, partnership, person or other entity or group (other than
Norwest) concerning any offer or possible offer (i) to purchase any shares of
common stock, any option or warrant to purchase any shares of common stock, any
securities convertible into any shares of such common stock, or any other equity
security of First Bank or any First Bank Subsidiary, (ii) to make a tender or
exchange offer for any shares of such common stock or other equity security,
(iii) to purchase, lease or otherwise acquire the assets of First Bank or any
First Bank Subsidiary
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except in the ordinary course of business, or (iv) to merge, consolidate or
otherwise combine with First Bank or any First Bank Subsidiary. If any
corporation, partnership, person or other entity or group makes an offer or
inquiry to First Bank or any First Bank Subsidiary concerning any of the
foregoing, First Bank or such First Bank Subsidiary will promptly disclose such
offer or inquiry, including the terms thereof, to Norwest.
(i) First Bank shall consult with Norwest as to the form and substance
of any proposed press release or other proposed public disclosure of matters
related to this Agreement or any of the transactions contemplated hereby.
(j) First Bank and each First Bank Subsidiary will take all action
necessary or required (i) prior to the Effective Date of the Consolidation, to
terminate the First Bank Employee Stock Ownership Plan and file any
documentation required for approval of the distribution of the plan's assets,
(ii) to terminate or amend, if requested by Norwest, all qualified pension and
welfare benefit plans and all non-qualified benefit plans and compensation
arrangements as of the Effective Date of the Consolidation to facilitate the
merger of such plans with Norwest plans without gaps in coverage for
participants in the plans and without duplication of costs caused by the
continuation of such plans after coverage is available under Norwest plans, and
(iii) to submit application to the Internal Revenue Service for a favorable
determination letter for each of the Plans which is subject to the qualification
requirements of Section 401(a) of the Code prior to the Effective Date of the
Consolidation.
(k) Neither First Bank nor any First Bank Subsidiary shall take any
action which with respect to First Bank would disqualify the Consolidation as a
"pooling of interests" for accounting purposes.
(l) First Bank shall use its best efforts to obtain and deliver at
least 32 days prior to the Effective Date of the Consolidation signed
representations substantially in the form attached hereto as Exhibit B to
Norwest by each executive officer, director or shareholder of First Bank who may
reasonably be deemed an "affiliate" of First Bank within the meaning of such
term as used in Rule 145 under the Securities Act.
(m) First Bank shall establish such additional accruals and reserves as
may be necessary to conform First Bank's accounting and credit loss reserve
practices and methods to those of Norwest and Norwest's plans with respect to
the conduct of First Bank's business following the Consolidation and to provide
for the costs and expenses relating to the consummation by First Bank of the
Consolidation and the other transactions contemplated by this Agreement.
(n) First Bank 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 four (4) weeks and written reports shall be delivered to Norwest no later
than eight (8) weeks from the date
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<PAGE>
of this Agreement. First Bank 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. First Bank 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 eight (8) weeks of execution of the
definitive agreement.
(o) First Bank shall obtain, at its sole expense, commitments for title
insurance and boundary surveys for each owned bank facility which shall be
delivered to Norwest no later than four (4) weeks from the date of this
Agreement.
5. COVENANTS OF NORWEST. Norwest covenants and agrees with First Bank
as follows:
(a) From the date hereof until the Effective Time of the Consolidation,
Norwest will maintain its corporate existence in good standing; conduct, and
cause the Norwest Subsidiaries to conduct, their respective businesses in
compliance with all material obligations and duties imposed on them by all laws,
governmental regulations, rules and ordinances, and judicial orders, judgments
and decrees applicable to Norwest or the Norwest Subsidiaries, their businesses
or their properties; maintain all books and records of it and the Norwest
Subsidiaries, including all financial statements, in accordance with the
accounting principles and practices consistent with those used for the Norwest
Financial Statements, except for changes in such principles and practices
required under generally accepted accounting principles.
(b) Norwest will furnish to First Bank all the information concerning
Norwest required for inclusion in a proxy statement or statements to be sent to
the shareholders of First Bank, or in any statement or application made by First
Bank to any governmental body in connection with the transactions contemplated
by this Agreement.
(c) 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 First Bank 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 First Bank shareholders,
at the time of the First Bank 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
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<PAGE>
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 First Bank or any First Bank subsidiary
for use in the Registration Statement or the Prospectus.
(d) Norwest will file all documents required to be filed to list the
Norwest Common Stock to be issued pursuant to the Consolidation Agreement on the
New York Stock Exchange and the Chicago Stock Exchange and use its best efforts
to effect said listings.
(e) The shares of Norwest Common Stock to be issued by Norwest to the
shareholders of First Bank 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 First Bank pursuant to the Consolidation Agreement are and will
be free of any preemptive rights of the stockholders of Norwest.
(f) Norwest will file all documents required to obtain, prior to the
Effective Time of the Consolidation, all necessary Blue Sky permits and
approvals, if any, required to carry out the transactions contemplated by this
Agreement, will pay all expenses incident thereto and will use its best efforts
to obtain such permits and approvals.
(g) Norwest will take all necessary corporate and other action and file
all documents required to obtain and will use its best efforts to obtain all
approvals of regulatory authorities, consents and approvals required of it to
carry out the transactions contemplated by this Agreement and will cooperate
with First Bank to obtain all such approvals and consents required by First
Bank.
(h) Norwest will hold in confidence all documents and information
concerning First Bank and First Bank's Subsidiaries furnished to it and its
representatives in connection with the transactions contemplated by this
Agreement and will not release or disclose such information to any other person,
except as required by law and except to its outside professional advisers in
connection with this Agreement, with the same undertaking from such professional
advisers. If the transactions contemplated by this Agreement shall not be
consummated, such confidence shall be maintained and such information shall not
be used in competition with First Bank (except to the extent that such
information can be shown to be previously known to Norwest, in the public
domain, or later acquired by Norwest from other legitimate sources) and, upon
request, all such documents, copies thereof or extracts therefrom shall
immediately thereafter be returned to First Bank.
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<PAGE>
(i) Norwest will file any documents or agreements required to be filed
in connection with the Consolidation under applicable law.
(j) Norwest will use its best efforts to deliver to the Closing all
opinions, certificates and other documents required to be delivered by it at the
Closing.
(k) Norwest shall consult with First Bank as to the form and substance
of any proposed press release or other proposed public disclosure of matters
related to this Agreement or any of the transactions contemplated hereby.
(l) Norwest shall give First Bank notice of receipt of the regulatory
approvals referred to in paragraph 7(e).
(m) 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 First Bank, 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 the Consolidation as a pooling of interests, they will not dispose of
shares of Norwest or First Bank during the period commencing 30 days prior to
the Effective Date and ending upon publication by Norwest of financial results
including at least 30 days of combined operations of First Bank and Norwest.
(n) For a period not exceeding fifteen days prior to the Closing Date,
Norwest will permit First Bank and its representatives to examine its books,
records and properties and interview officers, employees and agents of Norwest
at all reasonable times when it is open for business. No such examination by
First Bank or its representatives shall in any way affect, diminish or terminate
any of the representations, warranties or covenants of Norwest herein expressed.
(o) Norwest shall take such actions on its part as may be necessary to
cause each share of Restricted Stock outstanding immediately prior to the
Effective Time of the Consolidation to become and represent (i) the number of
shares of Norwest Common Stock ("Substitute Restricted Stock") determined by
multiplying the number of shares of Restricted Stock by the Norwest Share
Amount. After the Effective Time of the Consolidation, each share of Substitute
Restricted Stock shall be subject to the same terms and conditions as were
applicable to the related share of Restricted Stock immediately prior to the
Effective Time of the Consolidation. The number of shares of Substitute
Restricted Stock, as determined herein, shall be rounded to the nearest whole
share. Norwest shall (i) register under the Securities Act on Form S-8 or other
appropriate form (and use its best efforts to maintain the effectiveness
thereof) all shares of Norwest Common Stock issuable pursuant to the Substitute
Restricted Stock, (ii) cause such shares to be authorized for listing on the New
York Stock Exchange and the Chicago Stock Exchange, and (iii) reserve a
sufficient number of such shares for issuance upon such exercise.
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<PAGE>
(p) With respect to the indemnification of directors and officers and
with respect to directors' and officers' insurance, Norwest agrees as follows:
(i) Norwest shall ensure that all rights to indemnification
and all limitations of liability existing in favor of any person who is
now, or has been at any time prior to the date hereof, or who becomes
prior to the Effective Time of the Consolidation, a director or officer
of First Bank or any First Bank Subsidiary, (an "Indemnified Party"
and, collectively, the "Indemnified Parties") in First Bank's Articles
of Incorporation or By-laws or similar governing documents of any First
Bank Subsidiary, as applicable in the particular case and as in effect
on the date hereof, shall, with respect to claims arising from (A)
facts or events that occurred before the Effective Time of the
Consolidation, or (B) this Agreement or any of the transactions
contemplated by this Agreement, whether in any case asserted or arising
before or after the Effective Time of the Consolidation, survive the
Consolidation and shall continue in full force and effect. Nothing
contained in this paragraph 5(p)(i) shall be deemed to preclude the
liquidation, consolidation or merger of First Bank or any First Bank
Subsidiary, in which case all of such rights to indemnification and
limitations on liability shall be deemed to survive and continue as
contractual rights notwithstanding any such liquidation or
consolidation or merger; PROVIDED, HOWEVER, that in the event of
liquidation or sale of substantially all of the assets of First Bank,
Norwest shall guarantee, to the extent of the net asset value of First
Bank or any First Bank Subsidiary as of the Effective Date of the
Consolidation, the indemnification obligations of First Bank or any
First Bank Subsidiary to the extent of indemnification obligations of
First Bank and the First Bank Subsidiaries described above.
Notwithstanding anything to the contrary contained in this paragraph
5(p)(i), nothing contained herein shall require Norwest to indemnify
any person who was a director or officer of First Bank or any First
Bank Subsidiary to a greater extent than First Bank or any First Bank
Subsidiary is, as of the date of this Agreement, required to indemnify
any such person;
(ii) any Indemnified Party wishing to claim indemnification
under paragraph 5(p)(i), upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Norwest thereof, but
the failure to so notify shall not relieve Norwest of any liability it
may have to such Indemnified Party. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or
after the Effective Time of the Consolidation), (A) Norwest shall have
the right to assume the defense thereof and Norwest shall not be liable
to any Indemnified Party for any legal expenses of other counsel or any
other expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof, except that if Norwest elects not
to assume such defense or counsel for the Indemnified Party advises
that there are issues which raise conflicts of interest between Norwest
and the Indemnified Party, the Indemnified Party may retain counsel
satisfactory to them, and Norwest shall pay the reasonable fees and
A-26
<PAGE>
expenses of such counsel for the Indemnified Party promptly as
statements therefor are received; PROVIDED, HOWEVER, that Norwest shall
be obligated pursuant to this subparagraph (ii) to pay for only one
firm of counsel for all Indemnified Parties in any jurisdiction unless
the use of one counsel for such Indemnified Parties would present such
counsel with a conflict of interest and (B) such Indemnified Party
shall cooperate in the defense of any such matter;
(iii) for a period of three years after the Effective Time of
the Consolidation, Norwest shall use its best efforts to cause to be
maintained in effect the current policies of directors' and officers'
liability insurance maintained by First Bank (provided that Norwest may
substitute therefor policies of at least the same coverage and amount
containing terms and conditions which are substantially no less
advantageous) with respect to claims arising from facts or events which
occurred before the Effective Time of the Consolidation; PROVIDED,
HOWEVER, that Norwest shall not be required to maintain the coverage
for Employment Practices Liability or the coverage for employees (other
than directors and officers), both of which coverages are currently
included by endorsement in the directors' and officers' liability
policies maintained by First Bank; and PROVIDED, FURTHER, HOWEVER, that
in no event shall Norwest be obligated to expend, in order to maintain
or provide insurance coverage pursuant to this paragraph 5(p)(iii), any
amount per annum in excess of 125% of the amount of the annual premiums
paid as of the date hereof by First Bank for such insurance (the
"Maximum Amount") and provided further that, prior to the Effective
Time of the Consolidation, First Bank shall notify the appropriate
directors' and officers' liability insurers of the Consolidation and of
all pending or threatened claims, actions, suits, proceedings or
investigations asserted or claimed against any Indemnified Party, or
circumstances likely to give rise thereto, in accordance with terms and
conditions of the applicable policies. If the amount of the annual
premiums necessary to maintain or procure such insurance coverage
exceeds the Maximum Amount, Norwest shall use reasonable efforts to
maintain the most advantageous policies of directors' and officers'
insurance obtainable for an annual premium equal to the Maximum Amount;
(iv) if Norwest or any of its successors or assigns (A) shall
consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (B) shall transfer all or substantially all
of its properties and assets to any individual, corporation or other
entity, then and in each such case, proper provision shall be made so
that the successors and assigns of Norwest shall assume the obligations
set forth in this paragraph 5(p); and
(v) the provisions of this paragraph 5(p) are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party
and his or her heirs and representatives.
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<PAGE>
6. CONDITIONS PRECEDENT TO OBLIGATION OF FIRST BANK. The obligation of
First Bank to effect the Consolidation shall be subject to the satisfaction at
or before the Effective Time of the Consolidation of the following further
conditions, which may be waived in writing by First Bank:
(a) Except as they may be affected by transactions contemplated hereby
and except to the extent such representations and warranties are by their
express provisions made as of a specified date and except for activities or
transactions after the date of this Agreement made in the ordinary course of
business and not expressly prohibited by this Agreement, the representations and
warranties contained in paragraph 3 hereof shall be true and correct in all
respects material to Norwest and its subsidiaries taken as a whole as if made at
the Effective Time of the Consolidation.
(b) Norwest shall have, or shall have caused to be, performed and
observed in all material respects all covenants, agreements and conditions
hereof to be performed or observed by it at or before the Effective Time of the
Consolidation.
(c) First Bank shall have received a favorable certificate, dated as of
the Effective Date of the Consolidation, signed by the Chairman, the President
or any Executive Vice President or Senior Vice President and by the Secretary or
Assistant Secretary of Norwest, as to the matters set forth in subparagraphs (a)
and (b) of this paragraph 6.
(d) This Agreement, the Conversion and the Consolidation Agreement
shall have been approved by the affirmative vote of the holders of the
percentage of the outstanding shares of First Bank required for approval of a
plan of consolidation in accordance with the provisions of First Bank's articles
of incorporation and applicable law.
(e) Norwest shall have received approval by the Federal Reserve Board,
the OCC 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.
(f) No court or governmental authority of competent jurisdiction shall
have issued an order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(g) The shares of Norwest Common Stock to be delivered to the
stockholders of First Bank pursuant to this Agreement and the Consolidation
Agreement shall have been authorized for listing on the New York Stock Exchange
and the Chicago Stock Exchange.
(h) First Bank shall have received an opinion substantially in the form
attached hereto as Exhibit C, dated the Closing Date, of counsel to First Bank,
substantially to the effect that on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing on the Closing Date, for federal income tax purposes: (i) the
Consolidation will constitute a reorganization within the
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<PAGE>
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 First Bank 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
First Bank will be the same as the basis of First Bank Common Stock exchanged
therefor; and (iv) the holding period of the shares of Norwest Common Stock
received by the shareholders of First Bank will include the holding period of
the First Bank Common Stock, provided such shares of First Bank Common Stock
were held as a capital asset as of the Effective Time of the Consolidation. In
rendering such opinion, tax counsel may require and rely upon (and may
incorporate by reference) representations and warranties, including those
contained in certificates of officers of First Bank and Norwest and certain
holders of First Bank Common Stock substantially in form of the certificates
attached to Exhibit C hereto (the "Tax Certificates"). First Bank shall have
received executed copies of Tax Certificates from officers of First Bank and
Norwest and from such holders of First Bank Common Stock that may reasonably be
required by counsel in connection with the tax opinion to be rendered.
(i) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order, and no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened and be unresolved. Norwest shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
(j) Prior to the mailing of the Proxy Statement referred to in
paragraph 4(c), First Bank and the Board of Directors of First Bank shall have
received an opinion of NationsBanc Montgomery Securities, Inc. addressed to
First Bank and the Board of Directors of First Bank, and for their exclusive
benefit, for inclusion in said Proxy Statement and dated effective as of the
date of mailing of such Proxy Statement, based on such matters as of NationsBanc
Montgomery Securities, Inc. deems appropriate or necessary, to the effect that
the consideration to be received by stockholders of First Bank pursuant to the
Consolidation is fair from a financial point of view. First Bank shall promptly
provide a copy of such opinion to Norwest upon receipt.
7. CONDITIONS PRECEDENT TO OBLIGATION OF NORWEST. The obligation of
Norwest to effect the Consolidation shall be subject to the satisfaction at or
before the Effective Time of the Consolidation of the following conditions,
which may be waived in writing by Norwest:
(a) Except as they may be affected by transactions contemplated hereby
and except to the extent such representations and warranties are by their
express provisions 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
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<PAGE>
paragraph 2 hereof shall be true and correct in all respects material to First
Bank and the First Bank Subsidiaries taken as a whole as if made at the
Effective Time of the Consolidation.
(b) First Bank shall have, or shall have caused to be, performed and
observed in all material respects all covenants, agreements and conditions
hereof to be performed or observed by it at or before the Effective Time of the
Consolidation.
(c) This Agreement, the Conversion and the Consolidation Agreement
shall have been approved by the affirmative vote of the holders of the
percentage of the outstanding shares of First Bank required for approval of a
plan of consolidation in accordance with the provisions of First Bank's articles
of incorporation and the National Bank Act.
(d) Norwest shall have received a favorable certificate dated as of the
Effective Date of the Consolidation signed by the Chairman or President and by
the Secretary or Assistant Secretary of First Bank, as to the matters set forth
in subparagraphs (a) through (c) of this paragraph 7.
(e) Norwest shall have received approval by all governmental agencies
as may be required by law of the transactions contemplated by this Agreement and
the Consolidation Agreement and all waiting and appeal periods prescribed by
applicable law or regulation shall have expired. No approvals, licenses or
consents granted by any regulatory authority shall contain any condition or
requirement relating to First Bank or any First Bank Subsidiary that, in the
good faith judgment of Norwest, is unreasonably burdensome to Norwest.
(f) First Bank and each First Bank Subsidiary shall have obtained any
and all material consents or waivers from other parties to loan agreements,
leases or other contracts material to First Bank's or such subsidiary's business
required for the consummation of the Consolidation, and First Bank and each
First Bank Subsidiary shall have obtained any and all material permits,
authorizations, consents, waivers and approvals required for the lawful
consummation by it of the Consolidation.
(g) No court or governmental authority of competent jurisdiction shall
have issued an order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(h) The Consolidation shall qualify as a "pooling of interests" for
accounting purposes and Norwest shall have received from KPMG Peat Marwick LLP
an opinion to that effect.
(i) At any time since the date hereof the total number of shares of
First Bank Common Stock outstanding and subject to issuance upon exercise
(assuming for this purpose that phantom shares and other share-equivalents
constitute First Bank Common
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<PAGE>
Stock) of all warrants, options, conversion rights, phantom shares or other
share-equivalents, other than any option held by Norwest, shall not have
exceeded 1,782,505.
(j) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order, and no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened or be unresolved. Norwest shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
(k) Norwest shall have received from the Chairman and Chief Operating
Officer of First Bank 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 First Bank
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
First Bank;
(ii) the amounts reported in the interim quarterly financial
statements of First Bank agree with the general ledger of First Bank;
(iii) the annual and quarterly financial statements of First
Bank and the First Bank Subsidiaries included in, or incorporated by
reference in, the Registration Statement comply as to form in all
material respects with the applicable accounting requirements of the
Securities Act and the published rules and regulations thereunder;
(iv) from the date of the most recent unaudited consolidated
financial statements of First Bank and the First Bank Subsidiaries as
may be included in the Registration Statement to a date 5 days prior to
the effective date of the Registration Statement or 5 days prior to the
Closing, there are no increases in long-term debt, changes in the
capital stock or decreases in stockholders' equity of First Bank and
the First Bank Subsidiaries, except in each case for changes, increases
or decreases which the Registration Statement discloses have occurred
or may occur or which are described in such letters. For the same
period, there have been no decreases in consolidated net interest
income, consolidated net interest income after provision for credit
losses, consolidated income before income taxes, consolidated net
income and net income per share amounts of First Bank and the First
Bank Subsidiaries, or in income before equity in undistributed income
of subsidiaries, in each case as compared with the comparable period of
the preceding year, except in each case for changes, increases or
decreases which
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<PAGE>
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 First Bank and the First Bank Subsidiaries, which
appear in the Registration Statement under the certain captions to be
specified by Norwest, and have compared certain of such amounts,
percentages, numbers and financial information with the accounting
records of First Bank and the First Bank Subsidiaries and have found
them to be in agreement with financial records and analyses prepared by
First Bank included in the annual and quarterly financial statements,
except as disclosed in such letters.
(l) First Bank and the First Bank Subsidiaries considered as a whole
shall not have sustained since December 31, 1996 any material loss or
interference with their business from any civil disturbance or any fire,
explosion, flood or other calamity, whether or not covered by insurance.
(m) There shall be no reasonable basis for any proceeding, claim or
action of any nature seeking to impose, or that could result in the imposition
on First Bank or any First Bank Subsidiary of, any liability relating to the
release of hazardous substances as defined under any local, state or federal
environmental statute, regulation or ordinance including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
as amended, which has had or could reasonably be expected to have a material
adverse effect upon First Bank and its subsidiaries taken as a whole.
(n) Since September 30, 1997, no change shall have occurred and no
circumstances shall exist which has had or might reasonably be expected to have
a material adverse effect on the financial condition, results of operations,
business or prospects of First Bank and the First Bank 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). No action taken by First Bank solely in order to
comply with the requirements of paragraph 4(m) hereof shall be deemed to have a
material adverse effect for purposes of this paragraph 7(n).
(o) Effective as of the Effective Time of the Consolidation, First Bank
shall have terminated any and all agreements to register its securities,
including the agreements described in Schedule 2(r) herein.
8. EMPLOYEE BENEFIT PLANS. Each person who is an employee of First Bank
or any First Bank Subsidiary as of the Effective Date of the Consolidation
("First Bank Employees") shall be eligible for participation in the employee
welfare and retirement plans of Norwest, as in effect from time to time, as
follows:
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<PAGE>
(a) EMPLOYEE WELFARE BENEFIT PLANS. Each First Bank 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
(but not subject to any preexisting conditions or exclusions except for the Long
Term Care Plan), and shall enter each plan not later than the first day of the
calendar quarter which begins at least 32 days after the Effective Date of the
Consolidation (provided, however, that it is Norwest's intent that the
transition from the First Bank plans to the Norwest plans be facilitated without
gaps in coverage for participants in the plans and without duplication of costs
caused by the continuation of such plans after coverage is available under
Norwest plans):
Medical Plan
Dental Plan
Vision Plan
Short Term Disability Plan Long Term Disability Plan Long Term
Care Plan Flexible Benefits Plan Basic Group Life Insurance
Plan Group Universal Life Insurance Plan Dependent Group Life
Insurance Plan Business Travel Accident Insurance Plan
Accidental Death and Dismemberment Plan Severance Pay Plan
Vacation Program
For the purpose of determining each First Bank Employee's benefit for the year
in which the Consolidation occurs under the Norwest vacation program, vacation
taken by a First Bank Employee in the year in which the Consolidation occurs
will be deducted from the total Norwest benefit. First Bank Employees shall
receive credit for years of service to First Bank, the First Bank Subsidiaries
and any predecessors of the First Bank Subsidiaries (to the extent credited
under the vacation programs of First Bank and the First Bank Subsidiaries) for
the purpose of determining benefits under the Norwest vacation program and short
term disability plan.
(b) EMPLOYEE RETIREMENT BENEFIT PLANS.
Each First Bank 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 First Bank
and the First Bank Subsidiaries for the purpose of satisfying any eligibility
and vesting periods applicable to the SIP, to the extent credited under the
respective employee retirement benefit plans of First Bank and the First Bank
Subsidiaries), and shall enter the SIP not later than the first day of the
calendar quarter which begins at least 32 days after the Effective Date of the
Consolidation.
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<PAGE>
Each First Bank Employee shall be eligible for participation, as a new employee,
in the Norwest Pension Plan under the terms thereof.
9. TERMINATION OF AGREEMENT.
(a) This Agreement may be terminated at any time prior to the Effective
Time of the Consolidation:
(i) by mutual written consent of the parties hereto;
(ii) by either of the parties hereto upon written notice to
the other party if the Consolidation shall not have been consummated by
June 30, 1998 unless such failure of consummation shall be due to the
failure of the party seeking to terminate to perform or observe in all
material respects the covenants and agreements hereof to be performed
or observed by such party; or
(iii) by First Bank or Norwest upon written notice to the
other party if any court or governmental authority of competent
jurisdiction shall have issued a final order restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated
by this Agreement.
(b) Termination of this Agreement under this paragraph 9 shall not
release, or be construed as so releasing, 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 in performance of any of its covenants, agreements, duties
or obligations arising hereunder, and the obligations under paragraphs 4(g),
5(h) and 10 shall survive such termination.
(c) If this Agreement is terminated pursuant to this paragraph 9,
Norwest shall immediately pay First Bank an amount equal to First Bank's actual
expenses in connection with obtaining the environmental assessments, asbestos
surveys, title commitments and boundary surveys required by paragraphs 4(n) and
4(o) hereof.
10. EXPENSES. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by First Bank and First Bank Subsidiaries shall be
borne by First Bank, and all such expenses incurred by Norwest shall be borne by
Norwest.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, but shall not be assignable by either party hereto without the prior
written consent of the other party hereto.
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<PAGE>
12. THIRD PARTY BENEFICIARIES. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto.
13. NOTICES. Any notice or other communication provided for herein or
given hereunder to a party hereto shall be in writing and shall be delivered in
person or shall be mailed by first class registered or certified mail, postage
prepaid, addressed as follows:
If to Norwest:
Norwest Corporation
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Attention: Secretary
If to First Bank:
First Bank
5622 Third Street
P. O. Box 635
Katy, Texas 77492-0635
Attention: Mr. Dana Cook
With a copy to:
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
3400 Texas Commerce Tower
600 Travis
Houston, Texas 77002-3095
Attention: Annette L. Tripp, Esq.
or to such other address with respect to a party as such party shall notify the
other in writing as above provided.
14. COMPLETE AGREEMENT. This Agreement and the Consolidation Agreement
contain the complete agreement between the parties hereto with respect to the
Consolidation and other transactions contemplated hereby and supersede all prior
agreements and understandings between the parties hereto with respect thereto.
15. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
16. WAIVER AND OTHER ACTION. Either party hereto may, by a signed
writing, give any consent, take any action pursuant to paragraph 9 hereof or
otherwise, or waive
A-35
<PAGE>
any inaccuracies in the representations and warranties by the other party and
compliance by the other party with any of the covenants and conditions herein.
17. AMENDMENT. At any time before the Effective Time of the
Consolidation, the parties hereto, by action taken by their respective Boards of
Directors or pursuant to authority delegated by their respective Boards of
Directors, may amend this Agreement; provided, however, that no amendment after
approval by the shareholders of First Bank shall be made which changes in a
manner adverse to such shareholders the consideration to be provided to said
shareholders pursuant to this Agreement and the Consolidation Agreement.
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
19. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No representation
or warranty contained in the Agreement or the Consolidation Agreement shall
survive the Consolidation or except as set forth in paragraph 9(b), the
termination of this Agreement. Paragraph 10 shall survive the Consolidation.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NORWEST CORPORATION FIRST BANK
By: /S/ JOHN E. GANOE By: /S/ DANA H. COOK
------------------------------ -----------------------------
Its: EXECUTIVE VICE PRESIDENT Its: CHAIRMAN
----------------------------- ----------------------------
A-36
<PAGE>
AGREEMENT AND PLAN OF CONSOLIDATION
This Agreement and Plan of Consolidation (the "Consolidation
Agreement") is dated as of _______________________, 19__, between NORWEST
INTERIM BANK KATY, NATIONAL ASSOCIATION ("Interim Bank") and FIRST BANK KATY,
NATIONAL ASSOCIATION, a national banking association ("First Bank"). Interim
Bank and First Bank are sometimes referred to herein as the "Consolidating
Banks".
PREAMBLE
Interim Bank and First Bank acknowledge and confirm the following:
(a) Interim Bank is a national banking association having its principal
office and place of business at 5622 3rd Street, P. O. Box 635, Katy, Harris
County, Texas 77493. As of __________, 1998, Interim Bank had capital of
$100,000, divided into 1,000 shares of common stock, par value $100 per share
("Interim Bank Common Stock"), and surplus of $20,000.
(b) First Bank is a national banking association having its principal
office and place of business at 5622 3rd Street, P. O. Box 635, Katy, Harris
County, Texas 77493. As of __________, 1998, First Bank had capital of
$_________, divided into ______ shares of common stock, par value $_____ per
share ("First Bank Common Stock"), surplus of $______, and retained earnings of
$_______.
(c) First Bank and Norwest Corporation ("Norwest") have entered into an
Agreement and Plan of Reorganization dated as of December __, 1997 (the
"Reorganization Agreement"), which Reorganization Agreement contemplates the
transactions to be effected by this Consolidation Agreement.
(d) A majority of the Boards of Directors of Interim Bank and of First
Bank have duly approved this Consolidation Agreement and authorized its
execution.
(e) It is the intent of the parties hereto to effect a corporate
reorganization which qualifies as a tax-free reorganization pursuant to Sections
368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code.
AGREEMENTS
IN CONSIDERATION OF THE PREMISES, Interim Bank and First Bank make this
Consolidation Agreement and fix the terms and conditions of the Consolidation of
Interim Bank and First Bank (the "Consolidation") as follows:
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<PAGE>
SECTION 1
1.1 Pursuant to the authority of and in accordance with the provisions
of 12 U.S.C. 215, Interim Bank shall be consolidated with First Bank, under the
charter of First Bank (the "Consolidated Bank").
1.2 The name of the Consolidated Bank shall be "First Bank Katy,
National Association."
1.3 The Consolidation shall be effective as of 12:01 a.m. on the
date specified in the certificate of approval to be issued by the Comptroller of
the Currency of the United States, under the seal of his office, approving the
Consolidation (the "Effective Date").
1.4 The business of the Consolidated Bank shall be that of a national
banking association and shall be conducted at the main office of the
Consolidated Bank, which shall be located at 5622 3rd Street, P. O. Box 635,
Katy, Harris County, Texas 77493, and at its legally established branches.
SECTION 2
As of the Effective Date:
2.1 The corporate existences of the Consolidating Banks shall be
consolidated into the Consolidated Bank.
2.2 All rights, franchises, and interests of the Consolidating Banks in
and to every type of property (real, personal and mixed) and choses in action
shall be transferred to and vested in the Consolidated Bank by virtue of the
Consolidation without any deed or other transfer. The Consolidated Bank, upon
the Consolidation and without any order or other action on the part of any court
or otherwise, shall hold and enjoy all rights of property, franchises, and
interests, including appointments, designations, and nominations, and all other
rights and interests as trustee, executor, administrator, registrar of stocks
and bonds, guardian of estates, assignee, receiver, and in every other fiduciary
capacity, in the same manner and to the same extent as such rights, franchises,
and interests were held or enjoyed by either of the Consolidating Banks at the
time of Consolidation.
2.3 The Consolidated Bank shall be liable for all liabilities of every
kind and description, including liabilities arising out of the operation of a
trust department, of each of the Consolidating Banks existing as of the
Effective Date.
2.4 The amount of capital stock of the Consolidated Bank shall be
$________, divided into _____ shares of common stock, each of $____ par value,
and at the time the Consolidation shall become effective, the Consolidated Bank
shall have a surplus of $________ and retained earnings which, when combined
with the capital and surplus, will be equal to the
A-38
<PAGE>
combined capital structures of the Consolidating Banks as stated in the preamble
of this Consolidation Agreement, adjusted, however, for the results of
operations, the payment of dividends, if any, between __________, and the
Effective Date, and the payment provided for in Section 3.2 hereof.
SECTION 3
As of the Effective Date:
3.1 Each share of First Bank Common Stock outstanding immediately prior
to the Effective Time of the Consolidation (other than shares as to which
statutory dissenters' appraisal rights have been exercised) will be converted
into and exchanged for the number of shares of Norwest Common Stock determined
by dividing 2,000,000 by the number of shares of First Bank Common Stock then
outstanding. As soon as practicable after the consolidation becomes effective,
each holder of a certificate for shares of First Bank Common Stock outstanding
immediately prior to the time of consolidation shall be entitled, upon surrender
of such certificate for cancellation to Norwest Bank Minnesota, National
Association, as the designated agent of the Consolidated Bank (the "Agent"), to
receive the Norwest Common Stock to which such holder shall be entitled on the
basis above set forth. Until so surrendered each certificate which, immediately
prior to the time of consolidation, represented shares of First Bank Common
Stock shall not be transferable on the books of the Consolidated Bank but shall
be deemed (except for the payment of dividends as provided below) to evidence
ownership of the number of whole shares of Norwest Common Stock into which such
shares of First Bank Common Stock have been converted on the basis above set
forth; provided, however, that, until the holder of such certificate shall have
surrendered the same for exchange as above set forth, no dividend payable to
holders of record of Norwest Common Stock as of any date subsequent to the
effective date of consolidation shall be paid to such holder with respect to the
Norwest Common Stock represented by such certificate, but, upon surrender and
exchange thereof as herein provided, there shall be paid by the Agent to the
record holder of such certificate for Norwest Common Stock issued in exchange
therefor an amount with respect to such shares of Norwest Common Stock equal to
all dividends that shall have been paid or become payable to holders of record
of Norwest Common Stock between the effective date of the consolidation and the
date of such exchange.
3.2 The shares of Interim Bank outstanding immediately prior to the
time of Consolidation shall be converted into and exchanged for _______ shares
of the Consolidated Bank, plus cash in the amount of $120,000.
3.3 From and after the Effective Date, there shall be no transfers on
the stock transfer books of Consolidated Banks of the shares of First Bank
Common Stock or Interim Bank Common Stock which were issued and outstanding
immediately prior to the Effective Date.
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<PAGE>
SECTION 4
4.1 As of the Effective Date, the Articles of Association of the
Consolidated Bank shall be the Articles of Association of First Bank and shall
read in their entirety as set forth in Appendix A attached hereto, and the
Consolidated Bank shall be authorized under such Articles of Association to
issue _______ shares of common stock, par value $____ per share.
4.2 The by-laws of First Bank as they exist at the Effective Date shall
continue in full force as the by-laws of the Consolidated Bank until altered,
amended, or repealed as provided therein or as provided by law.
4.3 As of the Effective Date, the following named persons shall serve
as the Board of Directors of the Consolidated Bank until the next annual meeting
of the shareholders or until such time as their successors have been elected and
have qualified:
-----------------
-----------------
-----------------
4.4 The officers of First Bank holding office at the Effective Date
shall continue as the officers of the Consolidated Bank for the term prescribed
in the by-laws or until the Board of Directors otherwise shall determine.
SECTION 5
5.1 This Consolidation Agreement shall be submitted to the shareholders
of First Bank and Interim Bank, respectively, for approval at meetings to be
called and held in accordance with the articles of association of First Bank and
the articles of association of Interim Bank, and in accordance with applicable
provisions of law. Such approval by the shareholders shall require the
affirmative vote of the shareholders of each of the Consolidating Banks owning
at least two-thirds of its capital stock outstanding.
SECTION 6
6.1 The Consolidation shall be subject to and conditioned upon the
following:
(a) approval of this Consolidation Agreement by the shareholders of
First Bank and Interim Bank as required by law;
(b) approval of the Consolidation by all appropriate banking and
regulatory authorities and the satisfaction of all other requirements
prescribed by law necessary for consummation of the Consolidation; and
(c) satisfaction of the conditions precedent set forth in paragraphs 6
and 7 of the Reorganization Agreement.
A-40
<PAGE>
6.2 At any time before the Effective Date, if any of the following
circumstances obtain, this Consolidation Agreement may be terminated, at the
election of First Bank or Interim Bank, by written notice from the party so
electing to the other, or the consummation of the Consolidation may be postponed
for such period, and subject to such further rights of First Bank and Interim
Bank, or either of them, to terminate this Consolidation Agreement as First Bank
and Interim Bank may agree in writing:
(a) by mutual consent of the Boards of Directors of the Consolidating
Banks if consummation of the Consolidation would be inadvisable in the
opinion of said Boards; or
(b) by action of the Board of Directors of any party hereto if the
Reorganization Agreement is terminated.
SECTION 7
7.1 First Bank and Interim Bank, by mutual consent of their respective
Boards of Directors, may amend this Consolidation Agreement before the Effective
Date; provided, however, that after this Consolidation Agreement has been
approved by the shareholders of First Bank, no such amendment shall affect the
rights of such shareholders of First Bank in a manner which is materially
adverse to such shareholders.
7.2 This Consolidation Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, First Bank and Interim Bank have caused this
Consolidation Agreement to be executed by their respective duly authorized
officers and their corporate seals, if any, to be hereunto affixed as of the
date first above written, pursuant to a resolution of each Consolidating Bank's
Board of Directors, acting by a majority thereof, and witness the signatures
hereto of a majority of each of said Consolidating Bank's Board of Directors.
A-41
<PAGE>
(NO BANK SEAL) NORWEST INTERIM BANK KATY,
NATIONAL ASSOCIATION
ATTEST:
By:
------------------------------------
- ---------------------------------- Its:
Secretary -----------------------------------
A majority of the Board of Directors of Norwest Interim Bank Katy,
National Association:
------------------------ -------------------------
------------------------ -------------------------
------------------------ -------------------------
------------------------ -------------------------
STATE OF TEXAS )
) ss
COUNTY OF )
On this _____ day of __________, 19__, before me, a Notary Public for
the State and County aforesaid, personally came _________________________, as
___________________, and ________________________, as ______________________, of
NORWEST INTERIM BANK KATY, NATIONAL ASSOCIATION, and each in his or her said
capacity acknowledged the foregoing instrument to be the act and deed of said
bank; and came also:
------------------------ -------------------------
------------------------ -------------------------
------------------------ -------------------------
------------------------ -------------------------
being a majority of the Board of Directors of said bank, and each of them
acknowledged said instrument to be the act and deed of said bank and of himself
or herself as a director thereof.
WITNESS my official seal and signature this day and year aforesaid.
----------------------------
(Seal of Notary) Notary Public, __________ County
My Commission Expires ________
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<PAGE>
(BANK SEAL) FIRST BANK KATY,
NATIONAL ASSOCIATION
ATTEST:
By:
------------------------------------
- ---------------------------------- Its:
Secretary -----------------------------------
A majority of the Board of Directors of First Bank Katy, National
Association:
------------------------ -------------------------
------------------------ -------------------------
------------------------ -------------------------
------------------------ -------------------------
STATE OF TEXAS )
) ss
COUNTY OF )
On this _____ day of ______________, 19__, before me, a Notary Public
for the State and County aforesaid, personally came _______________________, as
_________________, and ____________________, as __________________, of FIRST
BANK KATY, NATIONAL ASSOCIATION, and each in his or her said capacity
acknowledged the foregoing instrument to be the act and deed of said bank and
the seal affixed thereto to be its seal; and came also:
------------------------ -------------------------
------------------------ -------------------------
------------------------ -------------------------
------------------------ -------------------------
being a majority of the Board of Directors of said bank, and each of them
acknowledged said instrument to be the act and deed of said bank and of himself
or herself as a director thereof.
WITNESS my official seal and signature this day and year aforesaid.
----------------------------
(Seal of Notary) Notary Public, __________ County
My Commission Expires ________
A-43
<PAGE>
APPENDIX B
FAIRNESS OPINION
OF NATIONSBANC MONTGOMERY SECURITIES, INC.
<PAGE>
NATIONSBANC MONTGOMERY SECURITIES, LLC
April __, 1998
Board of Directors
First Bank
5622 Third Street
Katy, TX 77493
Gentlemen:
We understand that First Bank, a Texas banking corporation ("First
Bank"), and Norwest Corporation, a Delaware corporation ("NOB"), entered into an
Agreement and Plan of Reorganization dated as of December 24, 1997 (the
"Reorganization Agreement"), pursuant to which First Bank will be consolidated
into a subsidiary of NOB, which subsidiary will be the surviving entity (the
"Consolidation"). Pursuant to the Consolidation, as more fully described in the
Reorganization Agreement and as further described to us by management of First
Bank, we understand that all of the outstanding shares of First Bank stock,
$1.00 par value per share ("First Bank Stock"), will be converted into 2,000,000
shares of NOB Common Stock ("NOB Common Stock"). The terms and conditions of the
Consolidation are set forth in more detail in the Reorganization Agreement.
You have asked for our opinion as investment bankers as to whether the
Consideration to be received by the stockholders of First Bank pursuant to the
Consolidation is fair to such stockholders from a financial point of view, as of
the date hereof.
In connection with our opinion, we have, among other things: (i)
reviewed certain financial statements provided by First Bank publicly available
financial and other data with respect to First Bank and NOB, including the
consolidated financial statements for recent years to December 31, 1997, and
certain other relevant financial and operating data relating to First Bank and
NOB made available to us from published sources and, in the case of First Bank,
from the internal records of First Bank; (ii) reviewed the Reorganization
Agreement; (iii) reviewed certain publicly available information concerning the
trading of, and the trading market for, NOB Common Stock; (iv) compared First
Bank and NOB from a financial point of view with certain other companies in the
banking industry which we deemed to be relevant; (v) considered the financial
terms, to the extent publicly available, of selected recent business
combinations of companies in the banking industry which we deemed to be
comparable, in whole or in part, to the Consolidation; (vi) reviewed and
discussed with representatives of the management of First Bank certain
information of a business and financial nature
<PAGE>
First Bank
April __, 1998
Page 2
regarding First Bank, furnished to us by them, including financial forecasts and
related assumptions of First Bank; (vii) reviewed estimates of earnings
regarding First Bank prepared by the management of First Bank and estimates of
earnings regarding NOB prepared by third party analysts'; (viii) performed such
other analyses and examinations as we have deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for First Bank provided to us by First Bank's management, upon your
advice and with your consent we have assumed for purposes of our opinion that
the forecasts have been reasonably prepared on bases reflecting the best
available estimates and judgments of First Bank's management at the time of
preparation as to the future financial performance of First Bank and that they
provide a reasonable basis upon which we can form our opinion. We have also
assumed with your consent that the third party analysts' estimates as to the
future financial performance of NOB have been reasonably prepared on bases
reflecting the best available estimates and judgements of such third party
analysts at the time of preparation and provide a reasonable basis upon which we
can form our opinion. We have assumed that there have been no material changes
in First Bank's or NOB's assets, financial condition, results of operations,
business or prospects since the respective dates of their last financial
statements made available to us. We have assumed that the Consolidation will be
consummated in a manner that complies in all respects with the applicable
provisions of the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934 and all other applicable federal and state
statutes, rules and regulations. We are not experts in the evaluation of loan
portfolios for purposes of assessing the adequacy of the allowances for losses
with respect thereto and have assumed, with your consent, that such allowances
for each of First Bank and NOB are in the aggregate adequate to cover such
losses. In addition, we have not assumed responsibility for reviewing any
individual credit files, or making an independent evaluation, appraisal or
physical inspection of any of the assets or liabilities (contingent or
otherwise) of First Bank or NOB, nor have we been furnished with any such
appraisals. You have informed us, and we have assumed, that the Consolidation
will be recorded as a pooling of interests transaction under generally accepted
accounting principles. Finally, our opinion is based on economic, monetary and
market and other conditions as in effect on, and the information made available
to us as of, the date hereof. Accordingly, although subsequent developments may
affect this opinion, we have not assumed any obligation to update, revise or
reaffirm this opinion.
We have further assumed with your consent that the Consolidation will
be consummated in accordance with the terms described in the Reorganization
Agreement, without any further amendments thereto, and without waiver by First
Bank of any of the conditions to its obligations thereunder.
<PAGE>
First Bank
April __, 1998
Page 3
We have acted as financial advisor to First Bank in connection with the
Consolidation and will receive a fee for our services, including rendering this
opinion, all of which is contingent upon the consummation of the Consolidation.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the stockholders of
First Bank pursuant to the Consolidation is fair to such stockholders from a
financial point of view, as of the date hereof.
This opinion is directed to the Board of Directors of First Bank in its
consideration of the Consolidation and is not a recommendation to any
stockholder as to how such stockholder should vote with respect to the
Consolidation. Further, this opinion addresses only the financial fairness of
the Consideration to the stockholders and does not address the relative merits
of the Consolidation and any alternatives to the Consolidation, First Bank's
underlying decision to proceed with or effect the Consolidation, or any other
aspect of the Consolidation. This opinion may not be used or referred to by
First Bank, or quoted or disclosed to any person in any manner, without our
prior written consent, which consent is hereby given to the inclusion of this
opinion in any proxy statement or prospectus filed with the Securities and
Exchange Commission and delivered to the shareholders of First Bank in
connection with the Consolidation. In furnishing this opinion, we do not admit
that we are experts within the meaning of the term "experts" as used in the
Securities Act and the rules and regulations promulgated thereunder, nor do we
admit that this opinion constitutes a report or valuation within the meaning of
Section 11 of the Securities Act.
Very truly yours,
NATIONSBANC MONTGOMERY SECURITIES, LLC
<PAGE>
APPENDIX C
ARTICLES 5.11, 5.12 AND 5.13
OF THE
TEXAS BUSINESS CORPORATION
<PAGE>
TEXAS BUSINESS CORPORATION ACT
Art. 5.11 Rights of Dissenting Shareholders in the Event of Certain Corporate
Actions
A. Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party
if shareholder approval is required by Article 5.03 or 5.16 of this
Act and the shareholder holds shares of a class or series that was
entitled to vote thereon as a class or otherwise:
(2) Any sale, lease, exchange or other disposition (not
including any pledge, mortgage, deed of trust or trust indenture
unless otherwise provided in the articles of incorporation) of all, or
substantially all, the property and assets, with or without good will,
of a corporation requiring the special authorization of the
shareholders as provided by this Act;
(3) Any plan of exchange pursuant to Article 5.02 of this
Act in which the shares of the corporation of the class or series held
by the shareholder are to be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of
merger in which there is a single surviving or new domestic or foreign
corporation, or from any plan of exchange, if (1) the shares held by
the shareholder are part of a class shares of which are listed on a
national securities exchange, or are held of record by not less than
2,000 holders, on the record date fixed to determine the shareholders
entitled to vote on the plan of merger or the plan of exchange, and
(2) the shareholder is not required by the terms of the plan of merger
or the plan of exchange to accept for his shares any consideration
other than (a) shares of a corporation that, immediately after the
effective time of the merger or exchange, will be part of a class or
series of shares of which are (i) listed, or authorized for listing
upon official notice of issuance, on a national securities exchange,
or (ii) held of record by not less than 2,000 holders, and (b) cash in
lieu of fractional shares otherwise entitled to be received.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1957, 55th Leg., p. 111, ch. 54, (S)10; Acts 1973, 63rd Leg., p.
1508, ch. 545, (S)36, eff. Aug. 27, 1973; Acts 1989, 71st Leg., ch.
801, (S)34, eff. Aug. 28, 1989; Acts 1991, 72nd Leg., ch. 901, (S)32,
eff. Aug 26, 1991.
C-1
<PAGE>
Art. 5.12 Procedure for Dissent by Shareholders as to Said Corporate Actions
A. Any shareholder of any domestic corporation who has the right to
dissent from any of the corporate actions referred to in Article 5.11
of this Act may exercise that right to dissent only by complying with
the following procedures:
(1) (a) With respect to proposed corporate action that is
submitted to a vote of shareholders at a meeting, the shareholder
shall file with the corporation, prior to the meeting, a written
objection to the action, setting out that the shareholder's right to
dissent will be exercised if the action is effective and giving the
shareholder's address, to which notice thereof shall be delivered or
mailed in that event. If the action is effected and the shareholder
shall not have voted in favor of the action, the corporation, in the
case of action other than a merger, or the surviving or new
corporation (foreign or domestic) or other entity that is liable to
discharge the shareholder's right of dissent, in the case of a merger,
shall, within ten (10) days after the action is effected, deliver or
mail to the shareholder written notice that the action has been
effected, and the shareholder may, within ten (10) days from the
delivery or mailing of the notice, make written demand on the
existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, for payment of the fair value of the
shareholder's shares. The fair value of the shares shall be the value
thereof as of the day immediately preceding the meeting, excluding any
appreciation or depreciation in anticipation of the proposed action.
The demand shall state the number and class of the shares owned by the
shareholder and the fair value of the shares as estimated by the
shareholder. Any shareholder failing to make demand within the ten
(10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is
approved pursuant to Section A of Article 9.10 of this Act, the
corporation, in the case of action other than a merger, and the
surviving or new corporation (foreign or domestic) or other entity
that is liable to discharge the shareholder's right of dissent, in the
case of a merger, shall, within ten (10) days after the date the
action is effected, mail to each shareholder of record as of the
effective date of the action notice of the fact and date of the action
and that the shareholder may exercise the shareholder's right to
dissent from the action. The notice shall be accompanied by a copy of
this Article and any articles or documents filed by the Corporation
with the Secretary of State to effect the action. If the shareholder
shall not have consented to the taking of the action, the shareholder
may, within twenty (20) days after the mailing of the notice, make
written demand on the existing, surviving, or new corporation (foreign
or domestic) or other entity, as the case may be, for payment of the
fair value of the shareholder's shares. The fair value of the shares
shall be the value thereof as of the date the written consent
authorizing the action was delivered to the corporation pursuant to
Section A of Article 9.10 of this Act, excluding any appreciation or
depreciation in anticipation of the action. The demand shall state the
number and class of shares owned by the dissenting shareholder and the
fair value of the shares as estimated by the shareholder. Any
shareholder failing to make demand within the twenty (20) day period
shall be bound by the action.
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(2) Within twenty (20) days after receipt by the existing,
surviving, or new corporation (foreign or domestic) or other entity,
as the case may be, of a demand for payment made by a dissenting
shareholder in accordance with Subsection (1) of this Section, the
corporation (foreign or domestic) or other entity shall deliver or
mail to the shareholder a written notice that shall either set out
that the corporation (foreign or domestic) or other entity accepts the
amount claimed in the demand and agrees to pay that amount within
ninety (90) days after the date on which the action was effected, and,
in the case of shares represented by certificates, upon the surrender
of the certificates duly endorsed, or shall contain an estimate by the
corporation (foreign or domestic) or other entity of the fair value of
the shares, together with an offer to pay the amount of that estimate
within ninety (90) days after the date on which the action was
effected, upon receipt of notice within sixty (60) days after that
date from the shareholder that the shareholder agrees to accept that
amount and, in the case of shares represented by certificates, upon
the surrender of the certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the
corporate action was effected, the value of the shares is agreed upon
between the shareholder and the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be,
payment for the shares shall be made within ninety (90) days after the
date on which the action was effected and, in the case of shares
represented by certificates, upon surrender of the certificates duly
endorsed. Upon payment of the agreed value, the shareholder shall
cease to have any interest in the shares or in the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing,
surviving, or new corporation (foreign or domestic) or other entity,
as the case may be, do not so agree, then the shareholder or the
corporate (foreign or domestic) or other entity may, within sixty (60)
days after the expiration of the sixty (60) day period, file a
petition in any court of competent jurisdiction in the county in which
the principal office of the domestic corporation is located, asking
for a finding and determination of the fair value of the shareholder's
shares. Upon the filing of any such petition by the shareholder,
service of a copy thereof shall be made upon the corporation (foreign
or domestic) or other entity, which shall, within ten (10) days after
service, file in the office of the clerk of the court in which the
petition was filed a list containing the names and addresses of all
shareholders of the domestic corporation who have demanded payment for
their shares and with whom agreements as to the value of their shares
have not been reached by the corporation (foreign or domestic) or
other entity. If the petition shall be filed by the corporation
(foreign or domestic) or other entity, the petition shall be
accompanied by such a list. The clerk of the court shall give notice
of the time and place fixed for the hearing of the petition by
registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses
therein stated. The forms of the notices by mail shall be approved by
the court. All shareholders thus notified and the corporation
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(foreign or domestic) or other entity shall thereafter be bound by the
final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and
have become entitled to the valuation of and payment for their shares,
and shall appoint one or more qualified appraisers to determine that
value. The appraisers shall have power to examine any of the books and
records of the corporation the shares of which they are charged with
the duty of valuing, and they shall make a determination of the fair
value of the shares upon such investigation as to them may seem
proper. The appraisers shall also afford a reasonable opportunity to
the parties interested to submit to them pertinent evidence as to the
value of the shares. The appraisers shall also have such power and
authority as may be conferred on Masters in Chancery by the Rules of
Civil Procedure or by the order of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their
shares and shall file their report of that value in the office of the
clerk of the court. Notice of the filing of the report shall be given
by the clerk to the parties in interest. The report shall be subject
to exceptions to be heard before the court both upon the law and the
facts. The court shall by its judgment determine the fair value of the
shares of the shareholders entitled to payment for their shares and
shall direct the payment of that value by the existing, surviving, or
new corporation (foreign or domestic) or other entity, together with
interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to
dissent was effected to the date of such judgment, to the shareholders
entitled to payment. The judgment shall be payable to the holders of
uncertificated shares immediately but to the holders of shares
represented by certificates only upon, and simultaneously with, the
surrender to the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, of duly endorsed
certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those
shares or in the corporation. The court shall allow the appraisers a
reasonable fee as court costs, and all court costs shall be allotted
between the parties in the manner that the court determines to be fair
and equitable.
E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, pursuant to
the payment of the agreed value of the shares or pursuant to payment
of the judgment entered for the value of the shares, as in this
Article provided, shall, in the case of a merger, be treated as
provided in the plan of merger and, in all other cases, may be held
and disposed of by the corporation as in the case of other treasury
shares.
F. The provisions of this Article shall not apply to a merger if, on the
date of filing of the articles of merger, the surviving corporation is
the owner of all the outstanding shares of the other corporations,
domestic or foreign, that are parties to the merger.
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G. In the absence of fraud in the transaction, the remedy provided by
this Article to a shareholder objecting to any corporate action
referred to in Article 5.11 of this Act is the exclusive remedy for
the recovery of the value of his shares or money damages to the
shareholder with respect to the action. If the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may
be, complies with the requirements of this Article, any shareholder
who fails to comply with the requirements of this Article shall not be
entitled to bring suit for the recovery of the value of his shares or
money damages to the shareholder with respect to the action.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1967, 60th Leg., p. 1721, ch. 657 (S) 12, eff. June 17, 1967;
Acts 1983, 68th Leg., p. 2570, ch. 442 (S) 9, eff. Sept. 1, 1983; Acts
1987, 70th Leg., ch. 93, (S) 27, eff. Aug. 31, 1987; Acts 1989, 71st
Leg., ch. 801, (S) 35, eff. Aug 28, 1989; Acts 1993, 73rd Leg., ch
215, (S) 2.16, eff. Sept. 1, 1993.
Art. 5.13 Provisions Affecting Remedies of Dissenting Shareholders
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act shall not thereafter be
entitled to vote or exercise any other rights of a shareholder except
the right to receive payment for his shares pursuant to the provisions
of those articles and the right to maintain an appropriate action to
obtain relief on the ground that the corporate action would be or was
fraudulent, and the respective shares for which payment has been
demanded shall not thereafter be considered outstanding for the
purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder,
the corporation shall make an appropriate notation thereof in its
shareholder records. Within twenty (20) days after demanding payment
for his shares in accordance with either Article 5.12 or 5.16 of this
Act, each holder of certificates representing shares so demanding
payment shall submit such certificates to the corporation for notation
thereon that such demand has been made. The failure of holders of
certificated shares to do so shall, at the option of the corporation,
terminate such shareholder's rights under Articles 5.12 and 5.16 of
this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated
shares for which payment has been demanded or shares represented by a
certificate on which notation has been so made shall be transferred,
any new certificate issued therefor shall bear similar notation
together with the name of the original dissenting holder of such
shares and a transferee of such shares shall acquire by such transfer
no rights in the corporation other than those which the original
dissenting shareholder had after making demand for payment of the fair
value thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand
at any time before payment for his shares or before any petition has
been filed pursuant to Article 5.12 or 5.16 of this Act asking for a
finding and determination of the fair
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value of such shares, but no such demand may be withdrawn after such
payment has been made or, unless the corporation shall consent
thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to
Section B of this Article the corporation shall terminate the
shareholder's rights under Article 5.12 or 5.16 of this Act, as the
case may be, or if no petition asking for a finding and determination
of fair value of such shares by a court shall have been filed within
the time provided in Article 5.12 or 5.16 of this Act, as the case may
be, or if after the hearing of a petition filed pursuant to Article
5.12 or 5.16, the court shall determine that such shareholder is not
entitled to the relief provided by those articles, then, in any such
case, such shareholder and all persons claiming under him shall be
conclusively presumed to have approved and ratified the corporate
action from which he dissented and shall be bound thereby, the right
of such shareholder to be paid the fair value of his shares shall
cease, and his status as a shareholder shall be restored without
prejudice to any corporate proceedings which may have been taken
during the interim, and such shareholder shall be entitled to receive
any dividends or other distributions made to shareholders in the
interim.
Acts 1955, 54th Leg., p. 239, ch. 64, eff. Sept. 6, 1955. Amended by
Acts 1967, 60th Leg., p. 1723, ch. 657, (S) 13, eff. June 17, 1967;
Acts 1983, 68th Leg., p. 2573, ch. 442, (S) 10, eff. Sept. 1, 1983;
Acts 1993, 73rd Leg., ch. 215, (S) 2.17, eff. Sept. 1, 1993.
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APPENDIX D
TITLE 12, SECTION 215
OF THE
UNITED STATES CODE
<PAGE>
(S) 215. Consolidation of national banks or State banks with national banks
(a) Approval of Comptroller, board and shareholders; terms and conditions;
notice
Any national banking association or any bank incorporated under the laws of
any State may, with the approval of the Comptroller, be consolidated with one or
more national banking associations located in the same State under the charter
of a national banking association on such terms and conditions as may be
lawfully agreed upon by a majority of the board of directors of each association
or bank proposing to consolidate, and be ratified and confirmed by the
affirmative vote of the shareholders of each such association or bank owning at
least two-thirds of its capital stock outstanding, or by a greater proportion of
such capital stock in the case of such State bank if the laws of the State where
it is organized so require, at a meeting to be held on the call of the directors
after publishing notice of the time, place and object of the meeting for four
consecutive weeks in a newspaper of general circulation published in the place
where the association or bank is located, or, if there is no such newspaper,
then in the paper of general circulation published nearest thereto, and after
sending such notice to each shareholder of record by certified or registered
mail at least ten days prior to the meting, except to those shareholders who
specifically waive notice, but any additional notice shall be given to the
shareholders of such State bank which may be required by the laws of the State
where it is organized. Publication of notice may be waived, in cases where the
Comptroller determines that an emergency exists justifying such waiver, by
unanimous action of the shareholders of the association or State bank.
(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
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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
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.
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APPENDIX E
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.
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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.
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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.
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<PAGE>
APPRAISAL RESULTS
OCC Average Price/
Appraisal Appraisal Price Book Earnings Ratio
Date* Value Offered Value of Peer Group
- --------- --------- ------- ------ ---------------
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
- --------------------------------
* The "Appraisal Date" is the consummation date for the conversion,
consolidation, or merger.
NA - Not Available
NC - Not Computed
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- -------------------------------------------------------------------------------
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
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes indemnification
of directors and officers of a Delaware corporation under certain circumstances
against expenses, judgments and the like in connection with an action, suit or
proceeding. Article Fourteenth of Norwest's Restated Certificate of
Incorporation provides for broad indemnification of directors and officers.
Item 21. Exhibits and Financial Statement Schedules
Exhibits: Parenthetical references to exhibits in the description of Exhibits
3.1, 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5, 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 December 24, 1997 between
First Bank and Norwest Corporation (included in Proxy
Statement-Prospectus as Appendix A).
3.1 -- Restated Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 3(b) to Norwest's Current Report on Form 8-K
dated June 28, 1993, 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).
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 November 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).
3.1.6 -- Certificate of Designations with respect to the 1998 ESOP Cumulative
Convertible Preferred Stock (incorporated by reference to Exhibit 3 to
Norwest's Current Report on Form 8-K dated April 6, 1998).
3.2 -- By-Laws (incorporated by reference to Exhibit 3 to Norwest's Current
Report on Form 8-K dated October 10, 1997).
II-1
<PAGE>
4.1 -- 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).
4.2 -- 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 Stanley S. Stroup.
8 -- Opinion of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.*
23.1 -- Consent of Stanley S. Stroup (included as part of Exhibit 5).
23.2 -- Consent of KPMG Peat Marwick LLP.
23.3 -- Consent of KPMG Peat Marwick LLP.
23.4 -- Consent of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. (included as a
part of Exhibit 8).
24 -- Powers of Attorney.
99 -- Form of proxy for Special Meeting of Shareholders of First Bank
*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
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.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such posteffective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a posteffective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis, State of
Minnesota, on April 6, 1998.
NORWEST CORPORATION
By: /s/ Richard M. Kovacevich
--------------------------------
Richard M. Kovacevich
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed on April 6, 1998 by the following persons
in the capacities indicated:
/s/ Richard M. Kovacevich Chairman and Chief Executive Officer
- ---------------------------------- (Principal Executive Officer)
Richard M. Kovacevich
/s/ John T. Thornton Executive Vice President and Chief
- ---------------------------------- Financial Officer
John T. Thornton (Principal Financial Officer)
/s/ Michael A. Graf Senior Vice President and Controller
- ---------------------------------- (Principal Financial Officer)
Michael A. Graf
LES S. BILLER )
J.A. BLANCHARD III )
DAVID A. CHRISTENSEN )
PIERSON M. GRIEVE )
CHARLES M. HARPER )
WILLIAM A. HODDER )
LLOYD P. JOHNSON )
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-4
<PAGE>
INDEX TO EXHIBITS
EXHIBIT FORM OF
NUMBER DESCRIPTION* FILING
- -------- ------------ -------
2.1 Agreement and Plan of Reorganization dated December 24,
1997 between First Bank and Norwest Corporation
(included in Proxy Statement-Prospectus as Appendix A).
3.1 Restated Certificate of Incorporation, as amended
(incorporated by reference to Exhibit 3(b) to Norwest's
Current Report on Form 8-K dated June 28, 1993, 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).
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 November 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).
3.1.6 Certificate of Designations with respect to the 1998
ESOP Cumulative Convertible Preferred Stock
(incorporated by reference to Exhibit 3 to Norwest's
Current Report on Form 8-K dated April 6, 1998.
3.2 By-Laws (incorporated by reference to Exhibit 3 to
Norwest's Current Report on Form 8-K dated October 10,
1997).
4.1 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).
4.2 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).
<PAGE>
EXHIBIT FORM OF
NUMBER DESCRIPTION* FILING
- -------- ------------ -------
5 Opinion of Stanley S. Stroup. Electronic
Transmission
8 Opinion of Liddell, Sapp, Zivley, Hill & LaBoon,
L.L.P.**
23.1 Consent of Stanley S. Stroup (included as part of
Exhibit 5).
23.2 Consent of KPMG Peat Marwick LLP. Electronic
Transmission
23.3 Consent of KPMG Peat Marwick L.L.P. Electronic
Transmission
23.4 Consent of Liddell, Sapp, Zivley, Hill & LaBoon,
L.L.P.** (included as part of Exhibit 8)
24 Powers of Attorney. Electronic
Transmission
99 Form of proxy for Special Meeting of Shareholders of
First Bank. Electronic
Transmission
________________________
* Parenthetical references to exhibits in the description of Exhibits
3.1, 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5, 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.
** To be filed by amendment.
<PAGE>
EXHIBIT 5
[LETTERHEAD OF THE LAW DIVISION OF NORWEST CORPORATION]
April 6, 1998
Board of Directors
Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-1000
Ladies and Gentlemen:
In connection with the proposed registration under the Securities Act of
1933, as amended, of up to 2,250,000 shares of common stock, par value $1-2/3
per share (the "Shares"), of Norwest Corporation, a Delaware corporation (the
"Corporation"), which are proposed to be issued by the Corporation in connection
with the consolidation (the "Consolidation") of a wholly-owned subsidiary of the
Corporation with First Bank, I have examined such corporate records and other
documents, including the Registration Statement on Form S-4 relating to the
Shares, and have reviewed such matters of law as I have deemed necessary for
this opinion, and I advise you that in my opinion:
1. The Corporation is a corporation duly organized and existing under the
laws of the State of Delaware.
2. All necessary corporate action on the part of the Corporation has been
taken to authorize the issuance of the Shares in connection with the
Consolidation, and, when issued as described in the Registration Statement, the
Shares will be legally and validly issued, fully paid and nonassessable.
I consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Stanley S. Stroup
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
Independent Auditors' Consent
The Board of Directors
Norwest Corporation:
We consent to the use of our report dated January 15, 1998 incorporated herein
by reference and to the reference to our firm under the heading "EXPERTS" in the
prospectus.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
April 3, 1998
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
Independent Auditors' Consent
The Board of Directors
First Bank:
We consent to the use of our report dated February 24, 1998 included herein and
to the reference to our firm under the heading "EXPERTS" in the proxy
statement-prospectus.
/s/ KPMG Peat Marwick LLP
Houston, Texas
April 6, 1998
<PAGE>
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ Les S. Biller
Les S. Biller
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ J.A. Blanchard
J.A. Blanchard III
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ David A. Christensen
David A. Christensen
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ Pierson M. Grieve
Pierson M. Grieve
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ Charles M. Harper
Charles M. Harper
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ William A. Hodder
William A. Hodder
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ Lloyd P. Johnson
Lloyd P. Johnson
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ Reatha Clark King
Reatha Clark King
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ Richard M. Kovacevich
Richard M. Kovacevich
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ Richard S. Levitt
Richard S. Levitt
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ Richard D. McCormick
Richard D. McCormick
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ Cynthia H. Milligan
Cynthia H. Milligan
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ Benjamin F. Montoya
Benjamin F. Montoya
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ Ian M. Rolland
Ian M. Rolland
<PAGE>
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of NORWEST CORPORATION, a Delaware corporation, does hereby make,
constitute and appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP,
JOHN T. THORNTON, and LAUREL A. HOLSCHUH, and each or any one of them, the
undersigned's true and lawful attorneys-in-fact, with power of substitution, for
the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Corporation with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,250,000 shares of Common Stock of the Corporation, adjusted for any
change in the number of outstanding shares of Common Stock resulting from stock
splits, reverse stock splits or stock dividends occurring after the date hereof,
which may be issued in connection with the acquisition by the Corporation of
First Bank, located in Katy, Texas, and to file the same, with all exhibits
thereto and other supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 25th day of November, 1997.
/s/ Michael W. Wright
Michael W. Wright
<PAGE>
EXHIBIT 99
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS OF FIRST BANK
The undersigned hereby appoints ____________________ and
___________________, or either of them, as proxies to vote all shares of Common
Stock the undersigned is entitled to vote at the Special Meeting of Shareholders
of First Bank to be held on [date of meeting] at [time of meeting] local time,
at [location of meeting], or at any adjournment or postponement thereof, as
follows, hereby revoking any proxy previously given:
1. To approve the conversion of First Bank to a national banking
association from a Texas banking association.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To approve the Agreement and Plan of Reorganization dated December 24,
1997 (the "Reorganization Agreement") between First Bank and Norwest Corporation
("Norwest") pursuant to which a wholly-owned subsidiary of Norwest will
consolidate with First Bank and First Bank will become a wholly-owned subsidiary
of Norwest (the "Consolidation"), all upon the terms and subject to the
conditions set forth in the Reorganization Agreement, a copy of which is
included as Appendix A in the accompanying Proxy Statement-Prospectus; and to
authorize such further action by the Board of Directors and officers of First
Bank as may be necessary or appropriate to carry out the intent and purposes of
the Consolidation.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In the discretion of the persons appointed proxies hereby on such other
matters as may properly come before the Special Meeting.
Shares represented by this proxy will be voted as directed by the
shareholder. The Board of Directors recommends a vote "FOR" proposal 1 and a
vote "FOR" proposal 2. If no direction is supplied, the proxy will be voted
"FOR" proposal 1 and "FOR" proposal 2.
Dated:_______________________________, 1998.
(Please sign exactly as name appears at left.)
(If stock is owned by more than one person, all
owners should sign. Persons signing as
executors administrators, trustees, or in
similar capacities should so indicate.)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF FIRST BANK
