<PAGE>
As filed with the Securities and Exchange Commission on June 19, 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)
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Delaware 6711 41-0449260
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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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 J. Kevin Costley
Norwest Corporation Scott Coleman
Norwest Center Lindquist & Vennum P.L.L.P.
Sixth and Marquette 4200 IDS Center
Minneapolis, Minnesota 55479-1026 Minneapolis, Minnesota 55402
------------------
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
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===========================================================================================================================
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
- ---------------------------------- --------------------- ------------------------ ------------------------ ----------------
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Common Stock 600,000 N/A $6,078,581 (2) $1,841.99
(par value $1-2/3 per share) (1)
===========================================================================================================================
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(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>
[Little Mountain symbol]
The board of directors of Little Mountain Bancshares, Inc. has approved the
acquisition of Little Mountain by Norwest Corporation. The acquisition is
subject to the approval of Little Mountain's shareholders. A special meeting of
shareholders will be held to vote on the proposed acquisition. The date, time
and place of the meeting are as follows:
WEDNESDAY, JULY 29, 1998
1:00 P.M., LOCAL TIME
407 PINE STREET
MONTICELLO, MINNESOTA
If the acquisition is completed on or before September 30, 1998, Norwest
will exchange $18,100,000 of Norwest common stock for all of the outstanding
common stock of Little Mountain. Based on 13,576 shares of Little Mountain
common stock outstanding, this works out to approximately $1,333.24 of Norwest
common stock for each share of Little Mountain common stock.
The exchange ratio, or the number of shares of Norwest common stock you
will receive for each share of Little Mountain common stock you own, will be
determined by dividing $1,333.24 by the average of the closing prices of a share
of Norwest common stock as reported on the New York Stock Exchange composite
tape for the period of 20 trading days ending immediately before the special
meeting.
FOR EXAMPLE, IF THIS AVERAGE IS $35, YOU WOULD RECEIVE APPROXIMATELY 38.09
SHARES OF NORWEST COMMON STOCK FOR EACH SHARE OF LITTLE MOUNTAIN COMMON STOCK
YOU OWN. IF THIS AVERAGE IS $40, YOU WOULD RECEIVE APPROXIMATELY 33.33 SHARES OF
NORWEST COMMON STOCK FOR EACH SHARE OF LITTLE MOUNTAIN COMMON STOCK.
If the acquisition is completed after September 30, 1998, the exchange
ratio will be adjusted for the cash dividend, if any, paid on Norwest common
stock on September 1, 1998. Norwest expects to complete the acquisition before
September 30, 1998, so you should assume that the exchange ratio will not be
adjusted.
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
acquisition. If you fail to return your card, the effect will be a vote against
the acquisition.
This Proxy Statement-Prospectus provides detailed information about the
proposed acquisition. Please read this entire document carefully.
James P. Gardner
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" ON PAGE 42.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NORWEST COMMON STOCK TO BE ISSUED
OR DETERMINED IF THIS PROXY STATEMENT-PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PROXY STATEMENT-PROSPECTUS DATED JUNE 30, 1998.
FIRST MAILED TO LITTLE MOUNTAIN SHAREHOLDERS ON OR ABOUT JUNE 30, 1998.
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IMPORTANT INFORMATION NOT INCLUDED
IN THIS PROXY STATEMENT-PROSPECTUS
This Proxy Statement-Prospectus incorporates important business and
financial information about Norwest that is not included in or delivered with
this document. Page 49 has a list of the documents containing this information.
This information is available to you without charge upon written or oral request
to Norwest's Corporate Secretary as follows:
Corporate Secretary
Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Telephone (612) 667-8655
TO RECEIVE DOCUMENTS IN TIME FOR THE SPECIAL MEETING, YOUR REQUEST MUST BE
RECEIVED NO LATER THAN JULY 22, 1998.
<PAGE>
TABLE OF CONTENTS
GLOSSARY OF IMPORTANT TERMS...........................1
QUESTIONS AND ANSWERS
ABOUT THE MERGER......................................3
QUESTIONS AND ANSWERS ABOUT
THIS PROXY STATEMENT-
PROSPECTUS............................................5
SUMMARY...............................................6
Parties to the Merger..............................6
Reasons for the Merger.............................6
Required Vote; Voting Agreements...................7
Recommendation of Little Mountain's
Board of Directors..............................7
The Merger.........................................7
Comparative Per Common Share Data..................11
Selected Historical Financial Information..........12
Share Prices and Dividends for
Norwest Common Stock............................14
NORWEST-WELLS FARGO MERGER............................15
Agreement and Plan of Merger.......................15
Management of the Combined Company.................15
Ownership of the Combined Company..................15
Stock Option Agreements............................15
Conditions to the Norwest-Wells Fargo
Merger..........................................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...................16
Solicitation of Proxies............................17
Other Matters......................................17
THE MERGER............................................18
Purpose and Effect of the Merger...................18
Background of and Reasons for the
Merger..........................................18
Additional Interests of Little Mountain's
Management in the Merger........................18
Appraisal Rights...................................19
Exchange of Certificates...........................21
Regulatory Approvals...............................22
Effect on Little Mountain's Employee
Benefit Plans...................................22
Certain U.S. Federal Income Tax
Consequences of the Merger to
Little Mountain Shareholders....................23
Resale of Norwest Common Stock.....................23
Stock Exchange Listing.............................24
Accounting Treatment...............................24
THE REORGANIZATION AGREEMENT..........................25
Basic Plan of Reorganization.......................25
Representations and Warranties.....................26
Certain Covenants..................................26
Conditions to the Completion of the
Merger..........................................27
Termination of the Reorganization
Agreement.......................................27
Effect of Termination..............................27
Waiver and Amendment...............................28
Expenses...........................................28
COMPARISON OF RIGHTS OF HOLDERS OF LITTLE MOUNTAIN
COMMON STOCK AND NORWEST COMMON STOCK..............29
Capital Stock......................................29
Rights Plan........................................29
Directors..........................................30
Amendment of Charter Document
and Bylaws......................................30
Approval of Mergers and Asset Sales................30
Appraisal Rights...................................31
Special Meetings...................................31
Directors' Duties..................................31
Action Without a Meeting...........................32
Limitation of Director Liability...................32
Indemnification of Officers and Directors..........32
Dividends..........................................33
Corporate Governance Procedures;
Nomination of Directors.........................33
INFORMATION ABOUT LITTLE MOUNTAIN.....................34
Little Mountain....................................34
(i)
1
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The Bank...........................................34
Legal Proceedings..................................34
Market Price and Dividends.........................34
Beneficial Ownership of Little Mountain
Common Stock by Little Mountain
Management and Principal Stockholders...........34
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF LITTLE MOUNTAIN'S
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.................................36
General............................................36
Quarters Ended March 31,
1998 and 1997...................................36
Years Ended December 31,
1997 and 1996...................................37
CERTAIN REGULATORY AND
OTHER CONSIDERATIONS PERTAINING
TO NORWEST............................................42
Bank Regulatory Agencies...........................42
Bank Holding Company Activities;
Interstate Banking..............................42
Dividend Restrictions..............................43
Holding Company Structure..........................44
Regulatory Capital Standards and
Related Matters.................................44
FDIC Insurance.....................................47
Fiscal and Monetary Policies.......................47
Competition........................................48
EXPERTS...............................................48
LEGAL MATTERS.........................................48
INFORMATION CONCERNING
NORWEST MANAGEMENT....................................49
WHERE YOU CAN FIND MORE
INFORMATION...........................................49
FINANCIAL STATEMENTS OF
LITTE MOUNTAIN........................................F-1
APPENDIX A AGREEMENT AND PLAN
OF REORGANIZATION
APPENDIX B MINNESOTA STATUTES
CHAPTER 302A
BUSINESS
CORPORATIONS
SECTIONS 302A.471 AND
302A.473
(ii)
2
<PAGE>
GLOSSARY OF IMPORTANT TERMS
Following are the meanings of some important terms used in this Proxy
Statement-Prospectus. Each term should be considered in the context in which it
is used.
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ADJUSTED NORWEST SHARES............................. If the Merger is completed on or before September 30,
1998, the number determined by dividing $18,100,000 by
the Norwest Measurement Price. If the Merger is
completed after September 30, 1998, the number of
Adjusted Norwest Shares will be adjusted in accordance
with the Reorganization Agreement.
BANK ............................................ First National Bank of Monticello.
BANK HOLDING COMPANY ACT ........................... Bank Holding Company Act of 1956.
DGCL ............................................... Delaware General Corporation Law.
EFFECTIVE DATE OF THE MERGER........................ The day on which the Articles of Merger are filed with
and accepted by the Minnesota Secretary of State.
EFFECTIVE TIME OF THE MERGER........................ 11:59 p.m, Minneapolis, Minnesota time on the Effective
Date of the Merger.
EXCHANGE ACT ....................................... Securities Exchange Act of 1934.
EXCHANGE RATIO...................................... The number of shares of Norwest common stock that
Norwest will exchange in the Merger for each share of
Little Mountain common stock, as determined in
accordance with the formula in the Reorganization
Agreement.
FEDERAL RESERVE BOARD .............................. Board of Governors of the Federal Reserve System.
FDI ACT ............................................ Federal Deposit Insurance Act.
FDIC ............................................... Federal Deposit Insurance Corporation.
INTERSTATE BANKING ACT ............................. Reigle-Neal Interstate Banking and Branching Act.
LITTLE MOUNTAIN..................................... Little Mountain Bancshares, Inc. and its consolidated
subsidiary.
LITTLE MOUNTAIN COMMON STOCK........................ Little Mountain's common stock, par value $1.00 per
share.
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1
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MERGER.............................................. The statutory merger of Little Mountain with a
wholly-owned subsidiary of Norwest pursuant to
the terms of the Reorganization Agreement. The
Merger is the means by which Norwest will acquire
Little Mountain.
MBCA................................................ Minnesota Business Corporation Act.
NORWEST ............................................ Norwest Corporation and its consolidated subsidiaries.
NORWEST COMMON STOCK ............................... Norwest's common stock, par value $1-2/3 per share.
NORWEST MEASUREMENT PRICE........................... The average of the closing prices of a share of Norwest
common stock as reported on the New York Stock Exchange
composite tape during the period of 20 trading days
ending on the day immediately before the special
meeting.
OCC ............................................ Office of the Comptroller of the Currency.
REORGANIZATION AGREEMENT ........................... The Agreement and Plan of Reorganization dated as of
March 9, 1998 between Little Mountain and Norwest.
SEC ................................................ Securities and Exchange Commission.
SECURITIES ACT ..................................... Securities Act of 1933.
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2
<PAGE>
QUESTIONS AND ANSWERS
ABOUT THE MERGER
Q: WHY HAS LITTLE MOUNTAIN AGREED TO BE ACQUIRED BY NORWEST?
A: Little Mountain has agreed to be acquired by Norwest because Little
Mountain's board of directors believes that of all publicly-traded bank
holding companies, Norwest's style of operation and method of handling
customers most closely reflects Little Mountain's method of operating.
Additionally, the board of directors believes that the communities
currently served by Little Mountain will be better served by Norwest than
any other bank of similar size. Little Mountain's board of directors also
believes that the Merger will benefit Little Mountain shareholders by
providing risk diversification, and increased liquidity, given the public
market for Norwest common stock.
Q: WHAT DO I NEED TO DO NOW?
A: Just sign the enclosed proxy card and mail it to Little Mountain in the
enclosed return envelope as soon as possible. This way, your shares will be
represented at the special meeting on July 29, 1998. Little Mountain's
board of directors recommends that you vote FOR the Merger.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the Merger is completed, Norwest will send you written
instructions for exchanging your stock certificates.
Q: WHAT WILL I RECEIVE FOR MY SHARES OF LITTLE MOUNTAIN COMMON STOCK?
A: Norwest will exchange $18,100,000 of Norwest common stock for all of the
outstanding shares of Little Mountain common stock. Based on 13,576 shares
of Little Mountain common stock outstanding, this works out to
approximately $1,333.24 of its common stock for each share of Little
Mountain common stock.
Q: HOW MANY SHARES OF NORWEST COMMON STOCK WILL I RECEIVE?
A: The Exchange Ratio, or the number of shares of Norwest common stock you
will receive for each share of Little Mountain common stock you own, will
be determined by dividing the Adjusted Norwest Shares by the number of
shares of Little Mountain common stock then outstanding. If the Merger is
completed on or before September 30, 1998, the number of Adjusted Norwest
Shares will be determined by dividing $18,100,000 by the Norwest
Measurement Price.
FOR EXAMPLE, BASED ON 13,576 SHARES OF LITTLE MOUNTAIN COMMON STOCK
OUTSTANDING, IF THE NORWEST MEASUREMENT PRICE IS $35, YOU WOULD RECEIVE
APPROXIMATELY 38.09 SHARES OF NORWEST COMMON STOCK FOR EACH SHARE OF LITTLE
MOUNTAIN COMMON STOCK YOU OWN. IF THE NORWEST MEASUREMENT PRICE IS $40, YOU
WOULD RECEIVE APPROXIMATELY 33.33 SHARES.
Q: WHAT IF THE MERGER IS COMPLETED AFTER SEPTEMBER 30, 1998?
A: The Exchange Ratio will be adjusted to reflect the cash dividend, if any,
paid on Norwest common stock on September 1, 1998. The adjustment will be
made by increasing the number of shares of Norwest common stock that
Norwest will issue in the Merger. See page 25 for information on how this
adjustment will be reflected in the Exchange Ratio. Norwest expects to
complete the Merger before September 30, 1998.
3
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Q: WHAT ARE THE TAX CONSEQUENCES TO SHAREHOLDERS OF THE MERGER?
A: The exchange of Norwest common stock for shares of Little Mountain common
stock generally will be tax free to Little Mountain shareholders for
federal income tax purposes. Two exceptions apply to this general rule.
First, the personal circumstances of some shareholders could result in the
exchange having federal income tax consequences to them. Second, the
receipt of cash in lieu of fractional shares of Norwest common stock will
be a taxable event. To review the tax consequences to Little Mountain
shareholders in greater detail, see page 23.
YOU SHOULD CONSULT A TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO YOU
OF THE MERGER.
Q: WHEN WILL THE MERGER BE COMPLETED?
A: Little Mountain and Norwest expect to complete the Merger 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 DISSENT FROM THE MERGER?
A: You have a right to an appraisal of the fair value of your Little Mountain
common stock. See page 19 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 Little Mountain and a
prospectus of Norwest. As a proxy statement, it is being provided to you
because Little Mountain'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 its common stock for your shares of
Little Mountain 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 Merger and your
rights as a Little Mountain shareholder, you will need to read carefully
this entire document including appendices.
Q: IS THERE OTHER INFORMATION I SHOULD CONSIDER?
A: This Proxy Statement-Prospectus incorporates important business and
financial information about Norwest that is not included in or delivered
with this document. For example, Norwest's consolidated financial
statements for the year ended December 31, 1997 are not included in this
document. Instead, they are incorporated from 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.
INFORMATION THAT IS INCORPORATED FROM 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 THE INFORMATION THAT HAS BEEN INCORPORATED BY REFERENCE?
A: Information incorporated from other documents is available to you without
charge upon written or oral request. See page 49 under "WHERE YOU CAN FIND
MORE INFORMATION" for a list of the documents that Norwest has incorporated
by reference into this Proxy Statement-Prospectus, and how to obtain copies
of these documents.
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
MERGER FULLY, AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE
MERGER, YOU SHOULD CAREFULLY READ THIS DOCUMENT AND THE OTHER INFORMATION
AVAILABLE TO YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION."
PARTIES TO THE MERGER
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NORWEST CORPORATION........................... Norwest is a diversified financial services company
Sixth and Marquette organized under the laws of Delaware and registered under
Minneapolis, Minnesota 55479 the Bank Holding Company Act. Through its subsidiaries and
(612) 667-1234 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 March 31, 1998, Norwest had consolidated total assets of
$96.1 billion, total deposits of $57.8 billion and total
stockholders' equity of $7.1 billion. Based on total assets at
March 31, 1998, Norwest was the 11th largest commercial
banking organization in the United States.
LITTLE MOUNTAIN .............................. Little Mountain is a financial services company organized
407 Pine Street under the laws of the State of Minnesota and registered
Monticello, Minnesota 55362 under the Bank Holding Company Act. Little Mountain
(612) 295-2290 operates through its subsidiary bank, First National Bank
of Monticello, to provide retail, commercial, corporate and
mortgage banking services to customers in the Monticello
and Lakeville market areas.
At March 31, 1998, Little Mountain had consolidated total
assets of approximately $76.5 million, total deposits of
approximately $69.9 million and total stockholders' equity of
approximately $6.1 million.
REASONS FOR THE MERGER (SEE PAGE 18)........... Little Mountain has agreed to be acquired by Norwest because
Little Mountain's board of directors feels that of all
publicly-traded holding companies, Norwest's style of
operation and method of handling customers most closely
reflects Little Mountain's method of operating. Additionally,
the board of directors feels
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6
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that the communities served by Little Mountain will be better
served by Norwest than any other publicly-held bank. The board
of directors of Little Mountain believes that Little Mountain
shareholders will benefit by becoming owners of the company
that has more resources to compete in the financial services
industry, increased risk diversification and increased
liquidity due to the fact that Norwest common stock is
publicly traded.
REQUIRED VOTE; VOTING AGREEMENTS............... The holders of a majority of the outstanding shares of Little
Mountain common stock must approve the Merger. Little
Mountain's directors have agreed to vote in favor of the
Merger all shares of Little Mountain common stock beneficially
owned by them at the record date for the special meeting. At
the record date, the directors beneficially owned an aggregate
of 10,822 shares of Little Mountain common stock, representing
approximately 79.7% of the shares of Little Mountain common
stock outstanding at the record date. As a result, the
directors can approve the Merger without the vote of any other
shareholders.
RECOMMENDATION OF LITTLE MOUNTAIN'S
BOARD OF DIRECTORS........................... Little Mountain's board of directors has approved the Merger
as being in the best interests of Little Mountain shareholders
and recommends that Little Mountain shareholders approve the
Merger at the special meeting.
THE MERGER..................................... In the Merger, Little Mountain will merge with a newly-formed,
wholly-owned subsidiary of Norwest. Little Mountain will be
the surviving entity in the Merger.
WHAT LITTLE MOUNTAIN SHAREHOLDERS
WILL RECEIVE (SEE PAGE 25).................. In the Merger, Norwest will exchange a total of $18,100,000 of
Norwest common stock for all of the outstanding shares of
Little Mountain common stock. Based on 13,576 shares of Little
Mountain common stock outstanding, Norwest will exchange
approximately $1,333.24 of its common stock for each share of
Little Mountain common stock.
The Exchange Ratio will be determined by dividing the Adjusted
Norwest Shares by the number of shares of Little Mountain
common stock then outstanding. The number of Adjusted Norwest
Shares will be
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7
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<S> <C>
determined by dividing $18,100,000 by the Norwest Measurement
Price. The Norwest Measurement Price will be the average of
the closing prices of a share of Norwest common stock as
reported on the New York Stock Exchange consolidated tape
during the period of 20 consecutive trading days ending on the
day immediately before the special meeting.
Norwest will not issue fractional shares in the Merger. If the
total number of shares of Norwest common stock you are
entitled to receive in the Merger does not equal a whole
number, Norwest will pay you cash in lieu of the fractional
share.
MANAGEMENT AND OPERATIONS OF LITTLE
MOUNTAIN AFTER THE MERGER................... When the Merger is complete, Norwest will own all of the
outstanding shares of Little Mountain common stock. As a
result, Norwest will be able to elect or appoint all of the
directors and officers of Little Mountain.
As a result of the Merger, the Bank will become an indirect
subsidiary of Norwest. Norwest expects that after the Merger
the Bank will operate at its current location, providing
products and services offered by Norwest affiliates.
ADDITIONAL INTERESTS OF LITTLE MOUNTAIN'S
MANAGEMENT (SEE PAGE 18).................... Little Mountain's management will receive the same
consideration for their shares of Little Mountain common stock
as you will. Certain members of management, however, have
employment agreements that provide them with interests in the
Merger that are different from, or in addition to, your
interests in the Merger. Also, certain Little Mountain
shareholders have interests in the partnership that owns the
building used by the Bank. The Bank will purchase the building
from the partnership before the Merger is completed.
CONDITIONS TO THE MERGER
(SEE PAGE 27)............................... A number of conditions must be satisfied before the Merger can
be completed, including the following:
o The Merger must be approved by the holders of a
majority of the outstanding Little Mountain common
stock.
o The Merger must be approved by governmental
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8
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authorities without unreasonably burdensome demands
on Norwest.
o Little Mountain must receive a legal opinion that
its shareholders will not recognize any gain or loss
for federal income tax purposes as a result of the
Merger (except for cash received in lieu of fractional
shares).
o There cannot be any change since December 31, 1997
that has had, or might reasonably be expected to have,
a material adverse effect on Little Mountain.
Some of the conditions to the Merger 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 PAGE 22).......... The Merger is subject to the prior approval of the Federal
Reserve Board. Approval of the Federal Reserve Board is
required because Norwest is a bank holding company.
Norwest has applied to the Federal Reserve Board for approval
of the Merger. The application is pending as of the date of
this Proxy Statement-Prospectus.
TERMINATION OF THE REORGANIZATION
AGREEMENT (SEE PAGE 27)..................... Norwest and Little Mountain can mutually agree to terminate
the Reorganization Agreement without completing the Merger.
Also, either party can terminate the Reorganization Agreement
under the following circumstances:
o if a court or other governmental authority prohibits
the Merger; or
o the Merger is not completed by December 31, 1998,
unless the failure to complete the Merger on or before
that date is the fault of the party seeking to
terminate.
ACCOUNTING TREATMENT (SEE PAGE 24).......... Norwest expects to account for the Merger under the purchase
method of accounting. Norwest will record, at fair value, the
acquired assets and assumed liabilities of Little Mountain. To
the extent the total purchase price exceeds the fair value of
the assets acquired and liabilities assumed, Norwest will
record
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
goodwill. Norwest will include in its consolidated results of
operations the results of Little Mountain's operations after
the Merger is completed.
APPRAISAL RIGHTS (SEE PAGE 31
AND APPENDIX B)............................ Little Mountain shareholders who dissent from the Merger are
entitled to receive a cash payment equal to the value of their
shares of Little Mountain common stock. To receive this cash
payment, dissenting shareholders must follow the procedures
outlined in Appendix B. Failure to comply strictly with these
procedures will result in the forfeiture of appraisal rights.
U.S. FEDERAL INCOME TAX
CONSEQUENCES (SEE PAGE 23)................. The Merger has been structured so that Little Mountain
shareholders generally will not recognize any gain or loss for
U.S. federal income tax purposes as a result of the Merger
(except for cash received in lieu of fractional shares). The
Merger is conditioned on the receipt by Little Mountain of a
legal opinion to this effect.
MARKET INFORMATION (SEE PAGE 11)........... Norwest common stock is listed on the New York Stock Exchange
and the Chicago Stock Exchange under the symbol NOB. On March
6, 1998, the last full trading day before Little Mountain and
Norwest signed the Reorganization Agreement, Norwest common
stock closed at $43.3750 per share. On ____________, 1998,
Norwest common stock closed at $___ per share.
There is no public market for Little Mountain common stock.
</TABLE>
10
<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 Little
Mountain common stock on a historical and pro forma equivalent basis. The
historical information should be read with (a) the selected consolidated
financial data (and related notes) for Norwest and Little Mountain appearing
elsewhere in this Proxy Statement-Prospectus, (b) the complete consolidated
financial statements of Little Mountain appearing elsewhere in this Proxy
Statement-Prospectus and (c) the complete consolidated financial statements of
Norwest included in the documents incorporated by reference in this Proxy
Statement-Prospectus. See "WHERE YOU CAN FIND MORE INFORMATION." The information
in the 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 Merger become effective prior to the periods indicated.
The pro forma information in the table assumes that Norwest will exchange
33.33 shares of its common stock for each share of Little Mountain common stock.
This is the Exchange Ratio that would result if the Norwest Measurement Price is
$40. See "THE REORGANIZATION AGREEMENT--BASIC PLAN OF REORGANIZATION." The pro
forma information also assumes the Merger is accounted for using the purchase
method of accounting. See "THE MERGER--ACCOUNTING TREATMENT."
<TABLE>
<CAPTION>
NORWEST COMMON STOCK LITTLE MOUNTAIN COMMON STOCK
-------------------- ----------------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL EQUIVALENT
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
BOOK VALUE (1):
March 31, 1998 $9.13 9.14 447.74 304.64
December 31, 1997 9.01 9.01 427.90 300.31
DIVIDENDS DECLARED (2):
Quarter Ended March 31, 1998 0.165 0.165 -- 5.50
Year Ended December 31, 1997 0.615 0.615 -- 20.50
NET INCOME (3):
Quarter Ended March 31, 1998 0.47 0.47 19.86 15.67
Year Ended December 31, 1997 1.75 1.75 73.63 58.33
- --------------------------------------
</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 Little Mountain divided by total pro forma common shares of the
combined entities. The pro forma equivalent book value per share of Little
Mountain common stock represents the pro forma combined book value per
share of Norwest common stock multiplied by an assumed Exchange Ratio of
33.33.
(2) Assumes no changes in cash dividends per share by Norwest. The pro forma
equivalent dividends per share of Little Mountain common stock represent
cash dividends declared per share of Norwest common stock multiplied by an
assumed Exchange Ratio of 33.33.
(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 Little Mountain divided by the average pro forma common and
common equivalent shares of the combined entities. The pro forma equivalent
net income per share of Little Mountain common stock represents the pro
forma combined net income per share multiplied by an assumed Exchange Ratio
of 33.33.
11
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected financial information is to aid you in your
analysis of the financial aspects of the Merger. The information for Norwest is
derived from its historical 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 Little Mountain is derived from its historical
financial statements (and related notes) contained elsewhere in this Proxy
Statement-Prospectus.
NORWEST CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
QUARTERS ENDED
MARCH 31 YEARS ENDED DECEMBER 31
---------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993(1)
---------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(In millions, except per share data)
INCOME STATEMENT DATA
Interest income ........... $ 1,754.5 1,607.4 6,697.4 6,318.3 5,717.3 4,393.7 3,946.3
Interest expense .......... 687.9 649.1 2,664.0 2,617.0 2,448.0 1,590.1 1,442.9
---------- --------- --------- --------- --------- --------- ---------
Net interest income ....... 1,066.6 958.3 4,033.4 3,701.3 3,269.3 2,803.6 2,503.4
Provision for credit losses 124.5 109.0 524.7 394.7 312.4 164.9 158.2
Non-interest income ....... 810.3 684.6 2,962.3 2,564.6 1,848.2 1,638.3 1,585.0
Non-interest expenses ..... 1,210.0 1,041.5 4,421.3 4,089.7 3,382.3 3,096.4 3,050.4
---------- --------- --------- --------- --------- --------- ---------
Income before income taxes 542.4 492.4 2,049.7 1,781.5 1,422.8 1,180.6 879.8
Income tax expense ........ 174.7 170.5 698.7 627.6 466.8 380.2 266.7
---------- --------- --------- --------- --------- --------- ---------
Net income ................ $ 367.7 321.9 1,351.0 1,153.9 956.0 800.4 613.1
========== ========= ========= ========= ========= ========= =========
PER COMMON SHARE DATA
Net income:
Basic .................. $ 0.48 0.43 1.78 1.55 1.39 1.23 0.95
Diluted ................ 0.47 0.42 1.75 1.54 1.36 1.20 0.93
Dividends declared ........ 0.1650 0.1500 0.6150 0.5250 0.4500 0.3825 0.3200
BALANCE SHEET DATA
At period end:
Total assets ............. $ 96,093.7 83,580.3 88,540.2 80,175.4 72,134.4 59,315.9 54,665.0
Long-term debt ........... 12,486.5 11,971.4 12,766.7 13,082.2 13,676.8 9,186.3 6,850.9
Total stockholders' equity 7,105.4 6,187.2 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.
12
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
QUARTERS ENDED YEARS ENDED
MARCH 31 DECEMBER 31
1998 1997 1997 1996
---------- -------- -------- ---------
(In thousands, except per share data)
INCOME STATEMENT DATA
Interest income .............. $ 1,374.5 1,268.4 5,301.2 4,925.2
Interest expense ............. 542.2 491.9 2,074.1 1,941.7
---------- -------- -------- ---------
Net interest income ........ 832.3 776.5 3,227.1 2,983.5
Provision for losses on loans -- -- -- --
Non-interest income .......... 341.9 239.2 1,116.9 1,236.5
Non-interest expenses ........ 720.7 678.2 2,703.5 2,538.2
---------- -------- -------- ---------
Income before income taxes . 453.5 337.5 1,640.5 1,681.8
Income tax expense ........... 183.9 127.3 640.9 636.4
---------- -------- -------- ---------
Net income ................... $ 269.6 210.2 999.6 1,045.4
========== ======== ======== =========
PER COMMON SHARE DATA
Net income:
Basic ...................... $ 19.86 15.48 73.63 77.01
Diluted .................... 19.86 15.48 73.63 77.01
Dividends declared ........... -- -- -- --
BALANCE SHEET DATA At period end:
Total assets ............... $ 76,464.2 66,679.7 74,740.1 67,928.5
Total liabilities .......... 70,385.7 61,664.5 68,930.9 63,118.9
Total stockholders' equity . 6,078.6 5,015.2 5,809.2 4,89.6
13
<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 Little Mountain 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 June __, 1998)
14
<PAGE>
NORWEST-WELLS FARGO MERGER
THE FOLLOWING SUMMARIZES THE PROPOSED MERGER BETWEEN NORWEST AND WELLS
FARGO & COMPANY. THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
NORWEST'S CURRENT REPORT ON FORM 8-K DATED JUNE 8, 1998, WHICH IS INCORPORATED
HEREIN BY REFERENCE. SEE "WHERE YOU CAN FIND MORE INFORMATION."
AGREEMENT AND PLAN OF MERGER
Norwest has entered into an Agreement and Plan of Merger dated June 7, 1998
with Wells Fargo & Company ("Wells Fargo") under which Wells Fargo will merge
with Norwest. The name of the combined company will be Wells Fargo & Company,
and its headquarters will be San Francisco, California.
MANAGEMENT OF THE COMBINED COMPANY
Paul Hazen, currently Chairman and Chief Executive Officer of Wells Fargo,
will become Chairman of the combined company. Richard M. Kovacevich, currently
Chairman and Chief Executive Officer of Norwest, will become President and Chief
Executive Officer of the combined company.
OWNERSHIP OF THE COMBINED COMPANY
In the proposed combination, Norwest will exchange 10 shares of its common
stock for each share of Wells Fargo common stock. After the exchange, it is
expected that Wells Fargo stockholders will own approximately 52.5% of the
outstanding shares of the combined company.
STOCK OPTION AGREEMENTS
As an inducement and condition to Wells Fargo's entering into the merger
agreement, Norwest granted Wells Fargo an option to purchase approximately 19.9%
of the outstanding shares of Norwest common stock. The option is exercisable
only if certain events occur, including the acquisition by any person other than
Wells Fargo of the beneficial ownership of 20% or more of the outstanding
Norwest common stock. Certain business combinations involving Norwest will also
cause the option to become exercisable.
Wells Fargo has granted Norwest a substantially identical option to
purchase approximately 19.9% of the outstanding Wells Fargo common stock.
CONDITIONS TO THE NORWEST-WELLS FARGO MERGER
The Norwest-Wells Fargo merger is subject to a number of conditions,
including the approval of the merger agreement by the stockholders of each
company and the receipt of all required governmental approvals. There is no
assurance that the Norwest-Wells Fargo merger will be completed.
15
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS
Little Mountain is sending you this Proxy Statement-Prospectus to provide
you with information concerning the Merger and to solicit your proxy for use at
the special meeting of shareholders. At the special meeting, shareholders of
Little Mountain will be asked to approve the Merger.
DATE, TIME AND PLACE OF SPECIAL MEETING
The date, time and place of the special meeting are as follows:
WEDNESDAY, JULY 29, 1998
1:00 P.M., LOCAL TIME
407 PINE STREET
MONTICELLO, MINNESOTA
RECORD DATE
Little Mountain has established June 15, 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 13,576 shares of Little Mountain common
stock outstanding and entitled to vote at the special meeting. The holders of
Little Mountain 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 Merger each
requires the affirmative vote, in person or by proxy, of the holders of a
majority of the outstanding shares of Little Mountain common stock on the record
date.
VOTING AGREEMENTS
Each Little Mountain director has entered into a voting agreement with
Norwest pursuant to which the director has agreed to vote in favor of the Merger
all shares of Little Mountain common stock beneficially owned by the director at
the record date. Little Mountain's directors owned at the record date 10,822
shares of Little Mountain common stock, representing approximately 79.7% of the
shares of Little Mountain common stock outstanding at the record date. As a
result, the directors can approve the Merger without the vote of any other
shareholders. See "INFORMATION ABOUT LITTLE MOUNTAIN--BENEFICIAL OWNERSHIP OF
LITTLE MOUNTAIN COMMON STOCK BY LITTLE MOUNTAIN MANAGEMENT AND PRINCIPAL
SHAREHOLDERS."
VOTING AND REVOCATION OF PROXIES
All shares of Little Mountain 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 MERGER.
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 Little Mountain
16
<PAGE>
before or at the special meeting or (b) voting the shares subject to the proxy
in person at the special meeting. Attendance at the special meeting will not by
itself result in your proxy being revoked.
A proxy may indicate that all or a portion of the shares represented by the
proxy are not being voted with respect to a specific proposal. This could occur,
for example, when a broker is not permitted to vote shares held in the name of a
nominee on certain proposals in the absence of instructions from the beneficial
owner. Shares that are not voted with respect to a specific proposal will be
considered as not present for that proposal, even though the shares will be
considered present for purposes of determining a quorum and voting on other
proposals. Abstentions on a specific proposal will be considered as present but
will not be counted as voting in favor of the proposal.
The proposal to approve the Merger must be approved by the holders of a
majority of the outstanding shares of Little Mountain common stock. Because
approval of the Merger requires the affirmative vote of a specified percentage
of outstanding shares, not voting on the 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
Little Mountain may solicit proxies from Little Mountain 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.
Little Mountain will bear its own expenses in connection with any solicitation
of proxies for the special meeting.
OTHER MATTERS
If an insufficient number of votes for the Merger is received before the
scheduled meeting date, Norwest and Little Mountain may decide to postpone or
adjourn the special meeting. If this happens, proxies that have been received
that either have been voted for the Merger or contain no instructions will be
voted for adjournment.
Little Mountain's board of directors is not aware of any business to be
brought before the special meeting other than the proposals to approve the
Merger. 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
Little Mountain.
17
<PAGE>
THE MERGER
PURPOSE AND EFFECT OF THE MERGER
Norwest is using the Merger to acquire Little Mountain. As a result of the
Merger, Little Mountain will become a wholly-owned subsidiary of Norwest and
shareholders of Little Mountain will receive shares of Norwest common stock for
their shares of Little Mountain common stock. Norwest will own all of the
outstanding shares of Little Mountain common stock. Shareholders of Little
Mountain will become stockholders of Norwest, and their rights will be governed
by Norwest's restated certificate of incorporation and bylaws rather than Little
Mountain's articles of incorporation and bylaws. See "COMPARISON OF RIGHTS OF
HOLDERS OF LITTLE MOUNTAIN COMMON STOCK AND NORWEST COMMON STOCK."
BACKGROUND OF AND REASONS FOR THE MERGER
Little Mountain has agreed to be acquired by Norwest because Little
Mountain's board of directors believes that of all publicly-traded holding
companies, Norwest's style of operation and method of handling customers most
closely reflects Little Mountain's method of operating. Additionally, the board
of directors feels that the communities served by Little Mountain will be better
served by Norwest than any other publicly-held bank holding company. The board
of directors of Little Mountain believes that Little Mountain shareholders will
benefit by becoming owners of the company that has more resources to compete in
the financial services industry, increased risk diversification and increased
liquidity due to the fact that Norwest common stock is publicly traded.
ADDITIONAL INTERESTS OF LITTLE MOUNTAIN'S MANAGEMENT IN THE MERGER
In considering the recommendation of Little Mountain's board of directors
to approve the Merger, you should be aware that certain directors have interests
in the Merger that are different from, or in addition to, the interests of
Little Mountain shareholders generally.
THOMAS A. POGATCHNIK EMPLOYMENT AGREEMENT. Thomas A. Pogatchnik will be
employed as a Norwest bank president for a period of three years, commencing on
the Effective Date of the Merger. Mr. Pogatchnik will receive annual base
compensation of $118,000, subject to increase after the first year. Mr.
Pogatchnik will also be eligible for all benefits available to regular,
full-time employees of Norwest and its bank affiliates. During the term of his
employment with Norwest and for two years thereafter, Mr. Pogatchnik will be
subject to certain non-competition restrictions in Wright County and Dakota
County, Minnesota. Mr. Pogatchnik is currently the Bank's President and Chief
Executive Officer.
BARRY POGATCHNIK EMPLOYMENT AGREEMENT. Barry Pogatchnik will be employed as
a Norwest bank vice president for a period of three years, commencing on the
Effective Date of the Merger. Mr. Pogatchnik will receive annual base
compensation of $52,500, subject to increase after the first year. Mr.
Pogatchnik will also be eligible for all benefits available to regular,
full-time employees of Norwest and its bank affiliates. During the term of his
employment with Norwest and for two years thereafter, Mr. Pogatchnik will be
subject to certain non-competition restrictions in Wright County and Dakota
County, Minnesota. Mr. Pogatchnik is currently a Vice President of Little
Mountain and of the Bank.
SALE OF BANK BUILDING. Little Mountain Land & Cattle Co., a limited
partnership, owns the building used by the Bank. The partnership's sale of the
building to the Bank is a condition to completion of the
18
<PAGE>
Merger. The purchase price of the building will be determined under appraisal
procedures agreed to by Norwest and Little Mountain in the Reorganization
Agreement. Barbara L. Bacich, James P. Gardner, John O. Irvine, Richard C.
Magnuson, Thomas A. Pogatchnik and Barry P. Pogatchnik is each a general and
limited partner of the partnership and a director and shareholder of Little
Mountain.
APPRAISAL RIGHTS
Under Sections 302A.471 and 302A.473 of the MBCA, shareholders of Little
Mountain have the right to dissent from the Merger and receive the fair value of
their shares of Little Mountain common stock. "Fair value," for this purpose,
means the value of the shares immediately before the Effective Date of the
Merger. Little Mountain is required by law to notify its shareholders of their
dissenters' rights and to provide them with a copy of Sections 302A.471 and
302A.473. This Proxy Statement-Prospectus is such notice. A copy of Sections
302A.471 and 302A.473 is included in this Proxy Statement-Prospectus as Appendix
B.
The following discussion is not a complete statement of the laws pertaining
to dissenters' rights under Minnesota law and is qualified in its entirety by
the full text of Sections 302A.471 and 302A.473 included as Appendix B to this
Proxy Statement-Prospectus. Any shareholder who wishes to exercise the right to
dissent and demand the fair value of such shareholder's shares, or who wishes to
preserve the right to do so, should review the following discussion and Appendix
B carefully. DISSENTERS' RIGHTS WILL BE LOST IF THE PROCEDURAL REQUIREMENTS ARE
NOT FULLY AND PRECISELY SATISFIED.
A holder of Little Mountain common stock wishing to exercise the right to
demand the fair value of such shareholder's shares must first file, BEFORE the
vote of shareholders is taken at the special meeting, a written notice of intent
to demand the fair value of such shareholder's shares and must, in addition, not
vote in favor of the Reorganization Agreement. A vote against the Reorganization
Agreement, whether in person or by proxy, will not in and of itself satisfy the
requirement of a written notice of intent to demand the fair value of a
shareholder's common stock.
A demand for fair value must be executed by or for the shareholder of
record, fully and correctly, as such shareholder's name appears on the
certificate or certificates representing such shareholder's shares. If the
common stock is owned of record in a fiduciary capacity, such as by a trustee,
guardian, or custodian, such demand must be executed by the fiduciary. If the
common stock is owned of record by more than one person, as in a joint tenancy
or tenancy in common, such demand must be executed by all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
the demand for a shareholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in making the demand, the
agent is acting as agent for the record owner.
A record owner who holds shares as a nominee for others, such as a broker,
may demand fair value of the shares held for all, or fewer than all, of the
beneficial owners of such shares. In such a case, the written demand should set
forth the number of shares to which it relates. When no number of shares is
expressly mentioned, the demand will be presumed to cover all shares standing in
the name of the record owner. A beneficial owner of common stock who is not the
record owner may assert dissenters' rights with respect to shares held on behalf
of the beneficial owner if the beneficial owner submits to Little Mountain at
the time of or before the assertion of dissenters' rights a written consent of
the record owner of the shares. From that point forward, Little Mountain will
treat the beneficial owner in the same fashion as a record shareholder.
19
<PAGE>
Little Mountain shareholders who elect to exercise dissenters' rights and
demand fair value should mail (by certified or registered mail) or deliver their
written demand to Little Mountain Bancshares, Inc., 407 Pine Street, Monticello,
Minnesota 55362. Such written demand should specify the shareholder's name and
mailing address, the number of shares owned, and that the shareholder is thereby
demanding the fair value of such shareholder's shares.
After the Effective Date of the Merger, Norwest, on behalf of Little
Mountain, which will be the surviving entity following the Merger (which Norwest
subsidiary is referred for purposes of this discussion as "Norwest"), will cause
to be mailed to each shareholder of Little Mountain who has properly asserted
dissenters' rights a notice that contains the following:
(a) the address to which a demand for payment and stock certificates must
be sent in order to receive payment and the date by which they must be
received;
(b) a form to be used to certify the date on which the shareholder, or the
beneficial owner on whose behalf the shareholder dissents, acquired the
shares or an interest in them, and to demand payment; and
(c) another copy of Sections 302A.471 and 302A.473, together with a brief
description of these sections.
To receive the fair value of common stock a dissenting shareholder must demand
payment and deposit the certificates representing such shares within 30 days
after the notice is given.
After Norwest receives a valid demand for payment, it will cause to be
remitted to each dissenting shareholder who has properly asserted dissenters'
rights the fair value of the shares of Little Mountain common stock with
interest at the judgment rate computed from the Effective Date of the Merger.
Such payment will be accompanied by (a) the audited financial statements of
Norwest for its most recently completed fiscal year, together with the latest
available interim financial statements; (b) an estimate of the fair value of the
shares with respect to which dissenters' rights have been exercised and a brief
description of the method used to reach the estimate; and (c) additional copies
of Sections 302A.471 and 302A.473 along with a brief description of the
procedures to be followed to demand the supplemental payment discussed below. If
Norwest fails to remit payment within 60 days after receiving shares from a
dissenting shareholder, it is obligated to return any certificates for such
shares to the dissenting shareholder.
If a dissenting shareholder believes that the amount remitted by Norwest is
less than the fair value of the shares plus interest, such dissenting
shareholder may give written notice to Norwest of such shareholder's own
estimate of the fair value for the shares plus interest and demand a
supplemental payment for the difference. Any written demand for supplemental
payment must be made within 30 days after Norwest has mailed its original
remittance. Otherwise, the dissenting shareholder is entitled only to the amount
remitted by Norwest.
Within 60 days after receiving a demand for supplemental payment, Norwest,
as the surviving entity, must either pay the amount of the supplemental payment
demanded (or agreed to between the dissenting shareholder and Norwest) or file a
petition in the state courts of Minnesota requesting that the court determine
the fair value of the shares plus interest. Any petition so filed must name as
parties all dissenting shareholders who have demanded supplemental payments and
who have been unable to reach an agreement with Norwest concerning the fair
value of their shares. Norwest must, after filing
20
<PAGE>
the petition, serve all parties with the summons and a copy of the petition
under the rules of civil procedure. Non-resident parties may be served by
registered or certified mail, or by publication as provided by law. Unless
otherwise provided, the rules of civil procedure apply to the proceeding. The
court may appoint appraisers, with such power and authority as the court deems
proper, to receive evidence on and recommend the amount of fair value of the
shares. The jurisdiction of the court is plenary and exclusive, and the fair
value as determined by the court is binding on all shareholders, wherever
located. A dissenting shareholder, if successful, is entitled to a judgment in
cash for the amount by which the fair value of such shareholder's shares as
determined by the court exceeds the amount originally remitted by Norwest.
Generally, the costs and expenses associated with a court proceeding to
determine the fair value of the shares will be borne by the surviving entity,
unless the court finds that a dissenting shareholder has demanded supplemental
payment in a manner which is arbitrary, vexatious, or not in good faith. Similar
costs and expenses may also be assessed in instances where Norwest has failed to
comply with the procedures in Section 302A.473 pertaining to dissenters' rights
discussed above. The court may, in its discretion, award attorneys' fees to an
attorney representing dissenting shareholders out of any amount awarded to such
dissenters.
Failure to follow the steps required by Section 302A.473 for asserting
dissenters' rights may result in the loss of a shareholder's rights to demand
the fair value of such shareholder's shares of common stock. Shareholders
considering seeking appraisal should realize that the fair value of their
shares, as determined under Section 302A.473 in the manner outlined above, could
be more than, the same as, or less than the value of the Norwest common stock
they would be entitled to as a result of the Merger if they did not seek
appraisal of their shares.
EXCHANGE OF CERTIFICATES
After completion of the Merger, Norwest Bank Minnesota, National
Association, acting as exchange agent for Norwest, will mail to each holder of
record of shares of Little Mountain 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.
LITTLE MOUNTAIN 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 Merger will be paid to the holder of any certificates for
shares of Little Mountain 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
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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 Little Mountain
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 Merger, no transfers will be permitted on the books
of Little Mountain. If, after completion of the Merger, certificates for Little
Mountain common stock are presented for transfer to the exchange agent, they
will be canceled and exchanged for certificates representing Norwest common
stock.
None of Norwest, Little Mountain, the exchange agent or any other person
will be liable to any former holder of Little Mountain 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 Merger is subject to the prior approval of the Federal Reserve Board.
The approval of the Federal Reserve Board is required because Norwest is a bank
holding company registered under the Bank Holding Company Act. Norwest has filed
an application with the Federal Reserve Board requesting approval of the Merger.
The application is 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 Little
Mountain shareholders is fair. Regulatory approval does not constitute an
endorsement or recommendation of the Merger.
Norwest and Little Mountain are not aware of any governmental approvals or
compliance with banking laws and regulations that are required for the Merger to
become effective other than those described above. Norwest and Little Mountain
intend to seek any other approval and to take any other action that may be
required to effect the Merger. There can be no assurance that any required
approval or action can be obtained or taken prior to the special meeting.
The Merger cannot be completed unless all necessary regulatory approvals
are granted. In addition, Norwest may elect not to complete the Merger 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 MERGER" AND "--TERMINATION OF THE REORGANIZATION AGREEMENT."
EFFECT ON LITTLE MOUNTAIN'S EMPLOYEE BENEFIT PLANS
The Reorganization Agreement provides that, subject to any eligibility
requirements applicable to such plans, employees of Little Mountain will be
entitled to participate in those Norwest employee benefit and welfare plans
specified in the Reorganization Agreement. Eligible employees of Little
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Mountain 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 Merger.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO LITTLE MOUNTAIN
SHAREHOLDERS
The following is a summary of the anticipated U.S. federal income tax
consequences of the Merger to Little Mountain shareholders. The summary is based
on the parties' understanding of the U.S. federal income tax laws as currently
in effect and as currently interpreted. It does not cover issues of state, local
or foreign taxation. Nor does it address all aspects of U.S. federal income
taxation that may be important to particular shareholders in light of their
personal circumstances or to shareholders subject to special rules under U.S.
federal income tax laws. Future legislation, regulations, administrative rulings
and court decisions may alter the tax consequences summarized below.
The anticipated U.S. federal income tax consequences to Little Mountain
shareholders are as follows:
* A shareholder who receives shares of Norwest common stock in exchange
for shares of Little Mountain common stock will not recognize any gain
or loss on the receipt of the shares of Norwest common stock, except
for cash received in lieu of a fractional share. The shareholder's
gain or loss on the receipt of cash in lieu of a fractional share will
equal the difference between the cash received and the basis of the
fractional share exchanged.
* A shareholder's tax basis in the shares of Norwest common stock
received will be the same as the shareholder's tax basis in the shares
of Little Mountain common stock exchanged in the Merger, less any cash
received in lieu of fractional shares.
* The holding period of the shares of Norwest common stock received by a
shareholder will include the holding period of the shareholder's
shares of Little Mountain common stock exchanged in the Merger, but
only if the shares of Little Mountain common stock were held as a
capital asset at the time the Merger is completed.
Little Mountain is not required to complete the Merger unless it receives
an opinion of its counsel that these will be the U.S. federal income tax
consequences of the Merger. The opinion may make certain assumptions and may
rely on representations of the parties to the Merger as to factual matters. It
will represent counsel's judgment as to the tax status of the Merger 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 Merger. Nor
is there is any assurance that the IRS would not prevail in the event the tax
consequences of the Merger were litigated.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC
TAX CONSEQUENCES TO THEM FROM THE MERGER.
RESALE OF NORWEST COMMON STOCK
The Norwest common stock issued in the Merger will be freely transferable
under the Securities Act, except for shares issued to Little Mountain
shareholders who are considered to be "affiliates" of Little Mountain or Norwest
under Rule 145 under the Securities Act or of Norwest under Rule 144 under the
Securities Act. The definition of "affiliate" is complex and depends on the
specific facts, but
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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 Little Mountain may not sell the shares of Norwest common
stock received in the Merger 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.
Little Mountain 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
Little Mountain that the person will not sell, transfer or otherwise dispose of
the shares of Norwest common stock to be received by the person in the Merger
except in compliance with the applicable provisions of the Securities Act and
the rules and regulations promulgated thereunder.
This Proxy Statement-Prospectus does not cover any resales of Norwest
common stock received by affiliates of Little Mountain.
STOCK EXCHANGE LISTING
The shares of Norwest common stock to be issued in the Merger will be
listed on the New York Stock Exchange and the Chicago Stock Exchange.
ACCOUNTING TREATMENT
Norwest will account for the Merger as a purchase. Norwest will record, at
fair value, the acquired assets and assumed liabilities of Little Mountain. To
the extent the total purchase price exceeds the fair value of the assets
acquired and liabilities assumed, Norwest will record goodwill. Norwest will
include in its results of operations the results of Little Mountain's operations
after the Merger.
The unaudited pro forma data included in this Proxy Statement-Prospectus
for the Merger have been prepared using the purchase method of accounting. SEE
"SUMMARY--COMPARATIVE PER COMMON SHARE DATA."
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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. LITTLE MOUNTAIN 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 will acquire Little Mountain pursuant to a statutory
merger of Little Mountain with a newly-formed, wholly-owned subsidiary of
Norwest. Little Mountain will be the surviving company in the Merger. Norwest
will exchange shares of Norwest common stock for all of the outstanding shares
of Little Mountain common stock, so that after the Merger Little Mountain will
be a wholly-owned subsidiary of Norwest. (PARAGRAPH 1(A))
CONSIDERATION.
NORWEST COMMON STOCK. As part of the Merger, each share of Little
Mountain common stock outstanding immediately before the Merger will be
converted into and exchanged for the number of shares of Norwest common stock
determined by dividing the Adjusted Norwest Shares by the number of shares of
Little Mountain common stock then outstanding. The number of Adjusted Norwest
Shares will equal the sum of (i) $18,100,000 divided by the Norwest Measurement
Price plus (ii) if the Effective Date of the Merger is after September 30, 1998,
the number of shares of Norwest common stock equal to (A) the product of (x) the
number of shares of Norwest common stock determined in accordance with clause
(i) above times (y) the dividend amount per share for the cash dividend, if any,
paid on Norwest common stock on September 1, 1998, divided by (B) the Norwest
Measurement Price. The Norwest Measurement Price will be the average of the
closing prices of a share of Norwest common stock as reported on the New York
Stock Exchange consolidated tape during the period of 20 consecutive trading
days ending on the day immediately before the special meeting. (PARAGRAPH 1(A))
THE PRICE OF NORWEST COMMON STOCK ON THE EFFECTIVE DATE OF THE MERGER
MAY BE HIGHER OR LOWER THAN THE NORWEST MEASUREMENT PRICE. NO ADJUSTMENT WILL BE
MADE TO THE NUMBER OF SHARES OF NORWEST COMMON STOCK YOU WILL RECEIVE TO REFLECT
FLUCTUATIONS IN THE PRICE OF NORWEST COMMON STOCK OCCURRING AFTER THE SPECIAL
MEETING.
CASH IN LIEU OF FRACTIONAL SHARES. If the aggregate number of shares of
Norwest common stock you will receive in the Merger does not equal a whole
number, you will receive cash in lieu of the fractional share. The cash payment
will be equal to the product of the fractional part of the share of Norwest
common stock multiplied by the average of the closing prices of a share of
Norwest common stock as reported by the 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 MERGER. Norwest and Little Mountain expect the Merger to
be completed promptly after approval of the Merger by Little Mountain
shareholders and the satisfaction (or waiver)
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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 Little Mountain 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 Merger, (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
Merger, 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 Merger is completed).
CERTAIN COVENANTS
The Reorganization Agreement contains various covenants and agreements that
govern the actions of Little Mountain and Norwest pending completion of the
Merger. Some of the more important covenants are summarized below.
CONDUCT OF BUSINESS.
LITTLE MOUNTAIN. Little Mountain 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, Little
Mountain 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
$100,000. The Reorganization Agreement places restrictions on the ability of
Little Mountain to take certain actions without Norwest's consent, including (a)
incurring indebtedness, (b) granting rights to acquire shares of its capital
stock, (c) issuing shares of its capital stock 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.
NORWEST. Norwest has agreed to conduct its business and to cause its
significant subsidiaries to conduct their respective businesses in compliance
with all material obligations and duties imposed by laws, regulations, rules and
ordinances or by judicial orders, judgments and decrees applicable to them or to
their businesses or properties.
COMPETING TRANSACTIONS. Little Mountain 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 Little Mountain (b) make a tender or exchange offer for any
shares of its common stock or other equity security of Little Mountain, (c)
purchase, lease or otherwise acquire the assets of Little Mountain except in the
ordinary course of business or (d) merge, consolidate or otherwise combine with
Little Mountain. Little Mountain has also agreed to promptly inform Norwest if
any third party makes an offer or inquiry concerning any of the foregoing.
(PARAGRAPH 4(H))
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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 Merger. In addition, Little Mountain 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 Little Mountain's
business after the Merger and (b) use its best efforts to deliver to Norwest
prior to completion of the Merger signed representations substantially in the
form attached as Exhibit B to the Reorganization Agreement from each executive
officer, director or shareholder of Little Mountain who may reasonably be deemed
an "affiliate" of Little Mountain within the meaning of each term used in Rule
145 of the Securities Act. (PARAGRAPHS 4(L) AND 4(M)) See "THE MERGER--RESALE OF
NORWEST COMMON STOCK."
CONDITIONS TO THE COMPLETION OF THE MERGER
Under the Reorganization Agreement, various conditions are required to be
met before the parties are obligated to complete the Merger. These conditions
are customary and include such items as the receipt of shareholder, regulatory
and listing approval, and the receipt by Little Mountain of a favorable tax
opinion. (PARAGRAPHS 6 AND 7) See "THE MERGER--CERTAIN U.S. FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO LITTLE MOUNTAIN SHAREHOLDERS." An additional
condition is that Little Mountain Land & Cattle Co., a limited partnership
controlled by certain shareholders of Little Mountain, sell to the Bank the
Bank's building located at 407 Pine Street, Monticello, Minnesota. See "THE
MERGER--ADDITIONAL INTERESTS OF LITTLE MOUNTAIN'S MANAGEMENT IN THE MERGER."
The obligations of the parties are also subject to the continued accuracy
of the other party's representations and warranties, the performance by the
other party of its obligations under the Reorganization Agreement, and, subject
to certain exceptions, the absence of any changes that have had or might be
reasonably expected to have an adverse effect on Little Mountain. Some of the
conditions to the Merger are subject to exceptions and/or a "materiality"
standard. Certain conditions to the Merger may be waived by the party seeking to
assert the condition. (PARAGRAPHS 6 AND 7)
TERMINATION OF THE REORGANIZATION AGREEMENT
TERMINATION BY MUTUAL CONSENT. Norwest and Little Mountain can agree to
terminate the Reorganization Agreement at any time before completion of the
Merger. (PARAGRAPH 9(A)(I))
TERMINATION BY EITHER NORWEST OR LITTLE MOUNTAIN. Either Norwest or Little
Mountain can terminate the Reorganization Agreement if any of the following
occurs:
* The Merger has not been completed by December 31, 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 Merger 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))
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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 Merger continue in effect after termination of
the Reorganization Agreement. (PARAGRAPH 9(B))
WAIVER AND AMENDMENT
Either Norwest or Little Mountain 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 Little Mountain can amend the Reorganization Agreement at any
time before the Merger is completed; however, the Reorganization Agreement
prohibits them from amending the Reorganization Agreement after Little Mountain
shareholders approve the Merger if the amendment would change in a manner
adverse to Little Mountain shareholders the consideration to be received by
Little Mountain shareholders in the Merger. (PARAGRAPH 17)
EXPENSES
Norwest and Little Mountain will each pay their own expenses in connection
with the Merger, including fees and expenses of their respective independent
auditors and counsel. (PARAGRAPH 10)
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COMPARISON OF RIGHTS OF HOLDERS OF LITTLE MOUNTAIN
COMMON STOCK AND NORWEST COMMON STOCK
Little Mountain currently is a Minnesota corporation. The rights of Little
Mountain shareholders are governed by the MBCA and Little Mountain's articles of
incorporation 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 Merger, Little Mountain 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 Little Mountain
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 2,000,000,000 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 March 31, 1998,
there were 757,610,647 shares of Norwest common stock outstanding, 1,057,828
shares of Norwest preferred stock outstanding, and no shares of Norwest
preference stock outstanding. In connection with the Norwest-Wells Fargo merger,
Norwest's board of directors has recommended that Norwest's restated certificate
of incorporation be amended to authorize a total of 4,000,000,000 shares of
common stock. Norwest's stockholders are scheduled to vote on the amendment as
part the vote on the Norwest-Wells Fargo merger. See "NORWEST-WELLS FARGO
MERGER."
LITTLE MOUNTAIN. Little Mountain's articles of incorporation currently
authorize the issuance of 25,000 shares of common stock, $1.00 par value per
share. At December 31, 1997, there were 13,576 shares of common stock
outstanding.
RIGHTS PLAN
NORWEST. Each share of Norwest common stock (including shares that will be
issued in the Merger) 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
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common stock. The rights are designed to protect the interests of Norwest and
its stockholders against coercive takeover tactics. The rights are intended to
encourage potential acquirors to negotiate on behalf of all stockholders the
terms of any proposed takeover. Although not their purpose, the rights may deter
takeover proposals.
LITTLE MOUNTAIN. Little Mountain has no comparable rights plan.
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 14. Directors of Norwest may be removed with or
without cause by the affirmative vote of the holders of a majority of the shares
of Norwest capital stock entitled to vote thereon. Vacancies on 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.
LITTLE MOUNTAIN. Little Mountain's bylaws provide for a board of directors
of one or more persons, each serving a term of one year or until his or her
earlier death, resignation or removal. The number of directors of Little
Mountain is currently fixed at seven. The directors of Little Mountain may be
removed with or without cause by the affirmative vote of the holders of the
majority of the shares of Little Mountain capital stock entitled to vote
thereon. Vacancies on Little Mountain's board of directors may be filled by the
affirmative vote of the majority of the remaining directors. The directors of
Little Mountain are elected by a plurality of the votes of shares of Little
Mountain capital stock entitled to vote thereon, present in person or by proxy
at the meeting at which directors are elected. Little Mountain's certificate of
incorporation does not permit cumulative voting.
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.
LITTLE MOUNTAIN. Little Mountain's articles of incorporation may be amended
only if the proposed amendment is approved by Little Mountain's board of
directors and thereafter approved by a majority of the shareholders entitled to
vote thereon. Little Mountain's bylaws may be amended by a majority of Little
Mountain's board of directors or by the affirmative vote of holders of a
majority of the outstanding stock entitled to vote thereon. Little Mountain has
no preferred stock.
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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.
LITTLE MOUNTAIN. The affirmative vote of a majority of the outstanding
shares of the Little Mountain common stock entitled to vote thereon is required
to approve a merger involving Little Mountain, or the sale, lease or exchange of
all or substantially all of Little Mountain's corporate assets.
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
described above are satisfied, holders of Norwest common stock will not have
appraisal rights in connection with mergers and consolidations involving
Norwest.
LITTLE MOUNTAIN. Sections 302A.471 and 302A.473 of the MBCA provide
shareholder appraisal rights in connection with mergers. For a specific
discussion of the appraisal rights available to shareholders of Little Mountain,
see the "THE MERGER--APPRAISAL RIGHTS."
SPECIAL MEETINGS
NORWEST. Under the DGCL, special meetings of stockholders may be called by
the board of directors or by such persons as may be authorized in the
certificate of incorporation or bylaws. 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.
LITTLE MOUNTAIN. Under the MBCA, special meetings of the shareholders of a
corporation may be called by the board of directors or by such persons as may be
authorized in the certificate of incorporation or bylaws. Little Mountain's
bylaws provide that a special meeting of shareholders may be called by the
president, the board of directors or a shareholder or shareholders holding 10%
or more of the voting power of all shares entitled to vote, except that a
special meeting for the purpose of
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considering any action to directly or indirectly facilitate or effect a business
combination must be called by 25% or more of the voting power of all shares
entitled to vote.
DIRECTORS' 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.
LITTLE MOUNTAIN. Section 302A.251 of the MBCA provides that a director
shall discharge the duties of the position of director "in good faith, in a
manner the director reasonably believes to be in the best interest of the
corporation, and with the care an ordinarily prudent person in a like position
would exercise under similar circumstances." Section 302A.251 of the MBCA also
describes what information may be relied upon by a director in the performance
of his or her duties, and under what circumstances a director may be personally
liable to the corporation or its shareholders and what considerations a director
may exercise in determining whether an action is in the best interest of the
corporation.
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.
LITTLE MOUNTAIN. As permitted by Section 302A.441 of the MBCA, an action
required or permitted to be taken at a meeting of the shareholders may be taken
without a meeting by written action signed by all of the shareholders entitled
to vote on that action.
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.
LITTLE MOUNTAIN. Little Mountain's articles of incorporation do not
eliminate or limit the liability of a director to the corporation or its
shareholders from monetary damages for breach of director's fiduciary duty.
32
<PAGE>
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 Bylaws, agreement, vote of stockholders
or disinterested directors or otherwise.
LITTLE MOUNTAIN. Little Mountain's restated certificate of incorporation
does not enumerate any circumstance under which Little Mountain must indemnify
any officer or director of Little Mountain.
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."
LITTLE MOUNTAIN. Under Section 302A.551 of the MBCA, the board of directors
of Little Mountain may authorize and cause the corporation to make a
distribution only if the board determines that the corporation will be able to
pay its debts in the ordinary course of business after making the distribution
and the board does not know before the distribution is made that the
determination was or has become erroneous. Little Mountain is also subject to
the Federal Reserve Board policies regarding payment of dividends, which
generally limit dividends to operating earnings.
33
<PAGE>
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.
LITTLE MOUNTAIN. No procedures are set forth in Little Mountain's bylaws
regarding the ability of a shareholder of Little Mountain to nominate a person
to serve as a director. Generally, Little Mountain requires a shareholder to
give notice of a proposed nominee in advance of the shareholder's meeting at
which directors will be elected.
34
<PAGE>
INFORMATION ABOUT LITTLE MOUNTAIN
LITTLE MOUNTAIN
Little Mountain is a Minnesota corporation with its corporate headquarters
in Monticello, Minnesota. Little Mountain is a registered bank holding company
that holds 100% of the outstanding stock of First National Bank of Monticello,
Monticello, Minnesota. At March 31, 1998, Little Mountain had consolidated total
assets of $76,464,239, consolidated deposits of $69,917,265 and shareholders'
equity of $6,078,581.
Little Mountain derives its revenues from cash dividends paid by First
National Bank of Monticello. Dividend payments by the Bank are determined after
consideration of the Bank's earnings, deposit, growth, and capital requirements.
THE BANK
The Bank is a national banking association with offices in Monticello,
Minnesota and Lakeville, Minnesota. The Bank serves a wide range of commercial
and consumer borrowing needs within its market, including retail, commercial,
corporate and mortgage banking services.
The Bank competes primarily in the Monticello and Lakeville market areas.
The Bank competes with numerous financial institutions in its market areas,
including commercial banks, savings and loan associations, savings banks,
mortgage companies, commercial bank loan production offices, insurance
companies, consumer finance companies and credit unions.
LEGAL PROCEEDINGS
In the normal course of its business, the Bank is from time to time
involved in legal proceedings. The 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 Little Mountain common stock. As of
the record date for the special meeting, there were 13,576 shares of Little
Mountain common stock outstanding held by 15 persons or entities. Little
Mountain did not pay dividends on Little Mountain common stock in 1997 or 1996.
BENEFICIAL OWNERSHIP OF LITTLE MOUNTAIN COMMON STOCK BY LITTLE MOUNTAIN
MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table shows, as of the record date for the special meeting,
the number of shares of Little Mountain common stock beneficially owned by each
director and officer of Little Mountain and by each person known by Little
Mountain to be the beneficial owner of more than 5% of the outstanding shares of
Little Mountain common stock. Cecil Pogatchnik, a Little Mountain director, does
not own any shares of Little Mountain common stock.
35
<PAGE>
NUMBER OF
SHARES OF STOCK
NAME OF DIRECTORS, EXECUTIVE BENEFICIALLY PERCENT OF TOTAL
OFFICERS AND SHAREHOLDERS OWNED OUTSTANDING SHARES
- ------------------------- --------------- ------------------
Barbara Bacich 2,700 19.9%
P.O. Box 1298
Anna Marie, Florida 34216
James P. Gardner 1,985 14.6
2507 Manitou Island
White Bear Lake, Minnesota 55110
John O. Irvine 1,917 14.1
2503 Manitou Island
White Bear Lake, Minnesota 55110
Richard Magnuson 6 *
4901 Lake Avenue
White Bear Lake, Minnesota 55110
Dale R. Pettis 992 7.3
C/o Pro-Temp, Inc.
401(k) Profit Sharing Plan
21210 Eaton Avenue
Farmington, Minnesota 55024
Barry Pogatchnik 2,113 15.6
19069 Orchard Trail
Lakeville, Minnesota 55044
Thomas A. Pogatchnik 2,101 15.5
19037 180th Avenue
Big Lake, Minnesota 55309
36
<PAGE>
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF LITTLE MOUNTAIN'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following is Little Mountain's management's discussion and analysis of
the significant factors affecting Little Mountain's financial condition and
results of operations. This should be read in conjunction with Little Mountain's
audited and unaudited consolidated financial statements and accompanying
footnotes and other selected financial data presented elsewhere herein.
Little Mountain, a bank holding company headquartered in Monticello,
Minnesota, derives substantially all of its income from the operation of its
wholly-owned subsidiary, First National Bank of Monticello. The Bank is a full
service independent community bank that provides a full range of commercial
banking services. References to the operations of Little Mountain include the
operations of the Bank, unless the context otherwise requires.
Little Mountain's earnings depend primarily on the Bank's net interest
income, the difference between the income earned on the Bank's loans and
investments and the interest paid on its deposits. Among the factors affecting
net interest income are the type, volume and quality of the Bank's assets, the
type and volume of its deposits and the relative sensitivity of the Bank's
interest earning assets and its interest bearing deposits to changes in interest
rates. In addition, the Bank's income is significantly affected by the fees it
receives from other banking services, by its required provision for loan losses
and by the level of its operating expenses. All aspects of the Bank's operations
are affected generally by market, economic and competitive conditions.
QUARTERS ENDED MARCH 31, 1998 AND 1997
FINANCIAL CONDITION
At March 31, 1998, total assets were $76.5 million, an increase of $1.7
million from $74.7 million at December 31, 1997. This increase was primarily due
to a $1.1 million increase in cash and cash equivalents and an $830 thousand
increase in investment securities.
At March 31, 1998, total liabilities were $70.4 million, an increase of
$1.5 million from $68.9 million at December 31, 1997. The increase was due to an
increase in time and demand deposits.
As of March 31, 1998, the Bank remained in the "well-capitalized" category
with the ratio of total capital to risk-weighted assets in excess of 13%.
EARNINGS PERFORMANCE
Net income for the three months ended March 31, 1998 was $269,605 compared
to $210,223 for the same period in 1997. Net interest income totaled $832,281
through March 31, 1998, an increase of $55,745 over the same period last year.
The increase in net interest income resulted from the overall growth in the loan
portfolio, which was offset, in part, by a general decrease in rates during 1997
and 1998. As a result of the decrease in rates, the yield on total earning
assets decreased to 8.21% for the three months ended March 31, 1998, compared to
8.69% for the three months ended March 31, 1997.
37
<PAGE>
The increase in interest income was further offset by an increase in interest
expense due to growth in deposits.
The Bank made no provision for loan losses for the first three months of
1998 or for the first three months of 1997. Net charge offs for the first three
months of 1998 have totaled $32,162 leaving a reserve for loan losses of
$657,794, or 1.34% of total average loans as of March 31, 1998.
Non-interest income for the first three months of 1998 increased by
$102,731 to $341,957 compared to the same period the previous year, primarily
due to increases of $55,419 in fees and service charges and $42,448 in gain on
the sale of loans held for sale. Fees and service charges and gains on sales of
loans are subject to fluctuation based on customer behavior and market
conditions.
Non-interest expense for the first three months of 1998 increased $42,477
to $720,729, primarily due to an increase in compensation and benefits.
YEARS ENDED DECEMBER 31, 1997 AND 1996
FINANCIAL CONDITION
December 31,
------------
1997 1996
---- ----
Securities $ 12,650,769 $ 10,898,490
Loans (net of discount) 49,191,511 46,927,343
Loans held for sale 1,229,750 285,750
Earning assets 63,072,030 58,111,583
Total assets 74,740,121 67,928,488
Demand deposits 12,819,643 9,827,126
Time and savings deposits 55,550,580 52,496,315
Total deposits 68,370,223 62,323,441
Total equity 5,809,213 4,809,621
Total assets increased by $6.8 million during 1997 to $74.7 million at
December 31, 1997, an increase of 10.0%.
Earnings assets increased $5.0 million during 1997 due to loan growth of
$2.3 million and increases in securities and loans held for sale of $1.8 million
and $944,000, respectively. Increases of $2.9 million in residential real estate
loans and $774 thousand in other consumer loans during 1997 were partially
offset by a $1.3 million decrease in commercial loans. The increase in
securities during 1997 was due to funds provided by the increase in deposits.
Total deposits grew $6.0 million during 1997 to $68.4 million primarily due
to a $3.0 million increase in demand deposits and a $2.0 million increase in
time deposits.. The Bank's overall rate paid for non-maturity deposits during
1997 decreased to 1.31% at December 31, 1997 compared to 1.40% at December 31,
1996, while the rate paid for time deposits increased from 5.52% at December 31,
1996 to 5.68% at December 31, 1997.
38
<PAGE>
EARNINGS PERFORMANCE
Years Ended December 31,
------------------------
1997 1996
---- ----
Net interest income $ 3,227,129 2,983,517
Provision for loan losses - -
Non-interest income 1,116,934 1,236,478
Non-interest expense 2,703,590 2,538,191
Net income 999,558 1,045,356
Return on average assets 1.40% 1.67%
Return on average realized equity 18.84% 24.41%
Equity to assets 7.77% 7.08%
Loan loss reserve to average loans 1.43% 2.14%
Net interest margin 5.18% 5.25%
Loan-to-deposit ratio (average) 77.13% 78.83%
Consolidated net income for 1997 was $999,558 compared to $1,045,356 for
1996.
NET INTEREST INCOME
<TABLE>
<CAPTION>
Years Ending December 31,
-------------------------
1997 1996
(In thousands, except rate) Avg. Bal. Interest(1) Rate Avg. Bal. Interest(1) Rate
--------- ----------- ---- --------- ----------- ----
<S> <C> <C> <C> <C> <C> <C>
Loans $48,175 $ 4,491 9.32% 45,284 4,273 9.44%
Investment securities 11,384 660 5.80 8,911 511 5.73
Interest bearing deposits 1,411 77 5.46 1,594 84 5.27
Fed funds sold 984 54 5.49 784 41 5.23
Stock in banks 290 19 6.55 251 17 6.77
------- ------- ------- -------
Total earning assets 62,244 5,301 8.52 56,824 4,925 8.67
------- ------- ------- -------
Savings deposits 11,428 295 2.58 10,637 278 2.61
Interest-bearing checking 12,756 267 2.09 11,686 247 2.11
Money market savings 3,511 108 3.08 3,850 121 3.14
IRA deposits 3,974 218 5.49 3,176 176 5.54
Time deposits 20,445 1,144 5.60 18,783 1,067 5.68
------- ------- ------- -------
Total interest-bearing deposits 52,114 2,032 3.90 48,132 1,889 3.92
Fed funds purchased and other 24 1 4.17 5 -- 6.06
Note payable 453 41 9.05 629 53 8.43
------- ------- ------- -------
Total interest-bearing
liabilities 52,591 2,074 3.94 48,766 1,942 3.98
------- ------- ------- -------
Net interest income $ 3,227 2,983
======= =======
Net interest rate spread 4.58 4.69
Net interest margin 5.18 5.25
</TABLE>
(1) Tax-exempt income was not significant and thus has not been presented on a
tax equivalent basis. Tax-exempt income of $56,437 and $50,419 was
recognized during the years ended December 31, 1997 and 1996, respectively.
Net interest income increased $243,612 to $3,227,129 during 1997. Interest
income on loans increased $218,192 due primarily to an increase of $2.9 million
in residential real estate loans, while the overall yield on loans decreased
from 9.44% to 9.32%, due to a decline in interest rates on real estate loans.
39
<PAGE>
Total interest-bearing deposits increased $4.0 million during 1997
primarily in time deposits, while the average rate paid decreased from 3.92% to
3.90%. The overall rate of interest-bearing liabilities decreased slightly to
3.94% as a result of the decline in interest-bearing deposits.
The interest rate spread between earning assets and interest bearing
liabilities decreased from 4.69% to 4.58% during 1997. During the same period,
net interest margin decreased from 5.25% to 5.18%, due to an environment of
generally declining rates in 1997 and increased competition for loans.
PROVISION FOR LOAN LOSSES
The allowance represents an amount which, in Bank management's judgment,
will be adequate to absorb all losses that can reasonably be anticipated based
on current conditions. In determining the adequacy of the allowance, the Bank
evaluates the risk characteristics of the loan portfolio. This evaluation takes
into consideration factors including, but not limited to, specific occurrences,
general economic conditions, loan portfolio composition and historical
experience. Management's evaluation did not reveal conditions that would cause
it to provide for losses during 1997, 1996, or 1995. The allowance for loan
losses at December 31, 1997 was $689,956 and represents 1.40% of total loans.
Net charge-offs for the year totaled $279,436 or 0.58% of average loans.
Loans are placed on nonaccrual status when the Bank believes that the
borrower's financial condition, after giving consideration to economic and
business conditions and collection efforts, is such that collection of interest
is doubtful. At December 31, 1997, nonaccrual loans amounted to $0, compared to
$74,381 or 0.16% of loans outstanding at December 31, 1996.
NON-INTEREST INCOME
The following table summarizes non-interest income:
Years Ending December 31,
-------------------------
1997 1996
---- ----
Fees and service charges $ 925,170 951,573
Gain on sale of loans held for sale 150,270 193,620
Other income 41,494 91,285
---------- -----------
$1,116,934 1,236,478
---------- -----------
Other operating income decreased 9.67% to $1,116,934 for the year ended
December 31, 1997. Fees and service charges, the largest source of non-interest
income, declined 2.77% to $925,170 for the twelve months ended December 31,
1997. The fluctuations in fees and service charges primarily relate to deposit
fees, origination fees and income from the sale of real estate loans on the
secondary market. Loan sale activity has experienced fluctuations over the past
three years, resulting in higher income in 1996 than in 1997 and 1995.
Deposit fees fluctuate periodically depending on customer behavior.
NON-INTEREST EXPENSE
The following table summarizes non-interest expenses:
Years Ending December 31,
-------------------------
1997 1996
---- ----
Compensation & employee benefits $1,472,154 1,436,346
Occupancy 357,577 303,385
Data processing 160,365 149,128
40
<PAGE>
FDIC Premiums & regulatory assessments 79,752 79,005
Professional fees 109,948 56,950
Advertising 31,803 37,297
Other 491,991 476,080
---------- ------------
$2,703,590 2,538,191
========== ============
INCOME TAXES
Little Mountain Bancshares is subject to Federal and Minnesota income taxes
which fluctuate from period to period based upon Little Mountain's earning
performance. Income tax expense attributable to earnings before income taxes for
1997 and 1996 differed from the amounts computed by applying the U.S. federal
income tax rate of 34 percent to pretax earnings before income taxes as a result
of the following:
1997 1996
---- ----
Computed "expected" tax expense $ 557,761 571,813
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal income
tax benefit 102,529 105,449
Income from obligations of state and
political subdivisions (19,194) (17,154)
Other (181) (23,660)
--------- -----------
Actual income tax expense $ 640,915 636,448
========= ===========
REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements administered
by federal banking agencies. Failure to meet minimum capital requirements may
result in certain mandatory and possible additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgment by the regulators about
components, risk weighting and other factors. Qualitative measures established
by regulation to ensure capital adequacy require the Bank to maintain minimum
amounts and ratios of total and Tier I capital to risk-weighted assets and of
Tier I capital to average assets as defined.
At December 31, 1997, the Bank was "well capitalized" as defined by
regulations adopted by the federal bank regulatory agencies. To be categorized
as "well-capitalized," a bank must maintain a risk-adjusted total capital ratio
of at least 10%, a Tier 1 capital ratio of at least six percent, and a leverage
ratio of at least five percent, and is not subject to any order or written
directive to maintain a specific capital level. At December 31, 1997, the Bank
had total capital, Tier 1 capital, and leverage ratios of 12.06 percent, 10.83
percent, and 8.88 percent, respectively, and was not subject to any order or
written directive to maintain a specific capital level.
The consolidated capital amounts and ratios for Little Mountain were not
materially different from those of the Bank as disclosed above. Management
believes Little Mountain and the Bank meet all capital adequacy requirements.
ASSET AND LIABILITY MANAGEMENT
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<PAGE>
The goal of the asset and liability management process is to manage the
structure of the balance sheet to provide the maximum level of net interest
income while maintaining acceptable levels of interest rate sensitivity risk and
liquidity. The Bank's asset and liability committee monitors policies governing
investments, funding sources, and overall interest sensitivity risk and
liquidity. These policies form the framework for management of the asset and
liability process.
Interest sensitivity risk is the risk that future changes in interest rates
will reduce net interest income or the net market value of the Bank's balance
sheet. Market risk is the risk of loss from adverse changes in market prices and
rates. The Bank's market risk arises primarily from interest rate risk inherent
in its investing, lending and deposit taking activities. Management monitors the
interest sensitivity and market risks to assess that the Bank is within
acceptable limits.
LIQUIDITY
Little Mountain's principal sources of funds consist of dividends from the
Bank, which derives its funds principally from customer deposits.
Asset liquidity is provided by cash and assets which are readily
marketable, which can be pledged, or which will mature in the near future. These
include cash, federal funds sold, and U.S. Government backed securities as a
percentage of total deposits, was 22.32% and 21.57% as of December 31, 1997 and
1996, respectively. Liability liquidity is provided by access to core funding
sources, principally various customers' interest-bearing deposits accounts in
the Bank's market area. The Bank does not have and does not solicit brokered
deposits.
Federal funds purchased and short-term borrowings by the Bank are
additional sources of liquidity. These sources of liquidity are short-term in
nature and can be used by the Bank as necessary to fund asset growth and meet
short-term liquidity needs. As of December 31, 1997 and 1996, the Bank had no
federal funds purchased, no borrowings from the Federal Reserve System, and no
borrowings on securities sold under repurchase agreements.
42
<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,
43
<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.
44
<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.
45
<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 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. The
remainder (Tier 2 and Tier 3 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 (the sum of Tier 1, Tier 2
and Tier 3) 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 March 31, 1998, Norwest's total capital and
Tier 1 capital to risk-adjusted assets ratios were 10.81% and 8.92%,
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 March 31, 1998, Norwest's
leverage ratio was 6.58%.
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 capital charge for market risk.
Significant trading activity means trading activity of at least 10% of total
assets or $1 billion, whichever is smaller, 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
46
<PAGE>
under certain circumstances. The market risk charge will be included in the
calculation of an organization's risk-based capital ratios.
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 fails to meet any of the required minimums for an
adequately capitalized institution; (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
March 31, 1998, all of Norwest's insured depository institutions met the
criteria for well capitalized institutions as set forth above.
A depository institution's primary federal bank regulator is authorized to
downgrade the institution's capital category to the next lower category upon a
determination that the institution is engaged in an unsafe or unsound condition
or is engaged in an unsafe or unsound practice. An unsafe or unsound practice
can include receipt by the institution of a less than satisfactory rating on its
most recent examination with respect to its asset quality, management, earnings
or liquidity.
The FDI Act generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would as a result be
undercapitalized. Undercapitalized depository institutions are subject to a wide
range of limitations on operations and activities (including asset growth) and
are required to submit a capital restoration plan. The federal banking agencies
may not accept a capital plan without determining, among other things, that the
plan is based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital. In addition, for a capital restoration plan to
be acceptable, the depository institution's parent holding company must
guarantee that the institution will comply with the plan. The aggregate
liability of the parent holding company is limited to the lesser of (a) 5% of
the depository institution's total assets at the time it became undercapitalized
or (b) the amount which is necessary (or would have been necessary) to bring the
institution into compliance with all capital standards applicable with respect
to the institution as of the time it fails to comply with the plan. If an
undercapitalized depository institution fails to submit an acceptable plan, it
is treated as if it were significantly undercapitalized.
47
<PAGE>
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.
Under FDI Act regulations, a bank may not accept brokered deposits (that
is, deposits obtained through a person engaged in the business of placing
deposits with insured depository institutions or with interest rates
significantly higher than prevailing market rates) unless (a) it is well
capitalized or (b) it is adequately capitalized and receives a waiver from the
FDIC. A bank that may not receive brokered deposits also may not offer
"pass-through" insurance on certain employee benefit accounts, unless it
provides certain notices to affected depositors. Also, a bank that is adequately
capitalized and that has not received a waiver from the FDIC may not pay an
interest rate on any deposits in excess of 75 basis points over certain
prevailing market rates. There are no such restrictions on a bank that is well
capitalized. At March 31, 1998, all of Norwest's subsidiary banks were well
capitalized.
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.
FDIC-insured depository institutions will continue to pay approximately 1.3
cents per $100 of BIF-assessable deposits until the earlier of December 31, 1999
or the last savings and loan association ceases to exist.
48
<PAGE>
FISCAL AND MONETARY POLICIES
Norwest's business and earnings are affected significantly by the fiscal
and monetary policies of the federal government and its agencies. Norwest is
particularly affected by the policies of the Federal Reserve Board, which
regulates the supply of money and credit in the United States. Among the
instruments of monetary policy available to the Federal Reserve are (a)
conducting open market operations in United States government securities, (b)
changing the discount rates of borrowings of depository institutions, (c)
imposing or changing reserve requirements against depository institutions'
deposits, and (d) imposing or changing reserve requirements against certain
borrowing by banks and their affiliates. These methods are used in varying
degrees and combinations to directly affect the availability of bank loans and
deposits, as well as the interest rates charged on loans and paid on deposits.
For that reason alone, the policies of the Federal Reserve Board have a material
effect on the earnings of Norwest's banking subsidiaries and, thus, those of
Norwest.
COMPETITION
The financial services industry is highly competitive. Norwest's
subsidiaries compete with 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 Little Mountain and subsidiary as
of December 31, 1997 and for the year then ended included in this Proxy
Statement-Prospectus are included herein in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing.
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
49
<PAGE>
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 Merger to Little
Mountain's shareholders will be passed upon for Little Mountain by Lindquist &
Vennum, P.L.L.P., Minneapolis, Minnesota.
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.
Little Mountain 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 Little Mountain shareholders in the
Merger. 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 Merger 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.
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 quarterly report on Form 10-Q for the quarter ended March
31, 1998;
* Norwest's current reports on Form 8-K dated January 22, 1998, April
14, 1998, April 20, 1998, June 7, 1998 and June 8, 1998;
50
<PAGE>
* 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.
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 JULY 22, 1998.
- --------------------------------------------------------------------------------
IN DECIDING HOW TO VOTE ON THE MERGER, YOU SHOULD RELY ONLY ON THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT-PROSPECTUS. NEITHER NORWEST NOR LITTLE MOUNTAIN 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 JUNE 30, 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.
- --------------------------------------------------------------------------------
51
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC.
AND SUBSIDIARY
Consolidated Financial Statements
December 31, 1997, 1996, and 1995
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC AND SUBSIDIARY
TABLE OF CONTENTS
================================================================================
Page(s)
-------
Independent Auditors' Report.............................................. 1
Financial Statements:
Consolidated Balance Sheets.......................................... 2
Consolidated Statements of Operations................................ 3
Consolidated Statements of Stockholders' Equity...................... 4
Consolidated Statements of Cash Flows................................ 5
Notes to Consolidated Financial Statements................................ 6-23
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Little Mountain Bancshares, Inc.:
We have audited the accompanying consolidated balance sheet of Little Mountain
Bancshares, Inc. and subsidiary (the Company) as of December 31, 1997 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Little Mountain
Bancshares, Inc. and subsidiary as of December 31, 1997, the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
April 23, 1998
1
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1997 and 1996
(All financial information for 1996 is unaudited)
================================================================================
<TABLE>
<CAPTION>
Assets 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash $ 4,762,861 3,281,329
Interest bearing deposits with banks 1,532,448 2,633,405
Federal funds sold 2,900,000 2,150,000
- ----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 9,195,309 8,064,734
Securities available for sale:
Mortgage-backed and related securities (amortized cost $745,976
and $1,054,319, respectively) 752,073 1,063,802
Investment securities (amortized cost $3,045,419 and $2,740,728, respectively) 3,045,485 2,737,351
- ----------------------------------------------------------------------------------------------------------------------------
Total securities available for sale 3,797,558 3,801,153
Securities held to maturity:
Mortgage-backed and related securities (market value $3,234,286 and $2,651,449, respectively) 3,227,922 2,664,680
Investment securities (market value $5,647,507 and $4,393,192, respectively) 5,625,289 4,432,657
- ----------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity 8,853,211 7,097,337
Loans held for sale 1,229,750 285,750
Loans receivable, net 48,501,555 45,957,951
Federal Home Loan Bank stock, at cost, which approximates market 241,000 202,300
Federal Reserve Bank Stock, at cost, which approximates market 57,000 57,000
Accrued interest receivable 463,071 447,817
Premises and equipment, net 1,803,466 1,628,175
Real estate, net 276,110 79,009
Other assets 322,091 307,262
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $74,740,121 67,928,488
============================================================================================================================
Liabilities and Stockholders' Equity
- ----------------------------------------------------------------------------------------------------------------------------
Deposits $68,370,223 62,323,441
Note payable 332,856 572,856
Accrued expenses and other liabilities 227,829 222,570
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 68,930,908 63,118,867
- ----------------------------------------------------------------------------------------------------------------------------
Common stock ($1.00 par value). Authorized and issued 25,000 shares;
13,576 shares issued and outstanding 13,576 13,576
Additional paid-in capital 1,401,619 1,401,619
Retained earnings 4,390,320 3,390,762
Net unrealized gain on securities available for sale 3,698 3,664
- ----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 5,809,213 4,809,621
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $74,740,121 67,928,488
============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Years ended December 31, 1997, 1996, and 1995
(All financial information for 1996 and 1995 is unaudited)
<TABLE>
<CAPTION>
==============================================================================================
1997 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans receivable $4,490,755 4,272,563 3,724,456
Investment securities--taxable 603,700 460,469 386,825
Investment securities--tax exempt 56,437 50,419 44,950
Federal funds sold 53,683 40,896 38,096
Interest bearing deposits with banks and other 96,666 100,831 24,253
- ----------------------------------------------------------------------------------------------
Total interest income 5,301,241 4,925,178 4,218,580
Interest expense:
Deposits 2,031,770 1,889,048 1,565,296
Note payable 41,055 52,064 65,024
Other 1,287 549 23,781
- ----------------------------------------------------------------------------------------------
Total interest expense 2,074,112 1,941,661 1,654,101
- ----------------------------------------------------------------------------------------------
Net interest income 3,227,129 2,983,517 2,564,479
- ----------------------------------------------------------------------------------------------
Provision for losses on loans -- -- --
- ----------------------------------------------------------------------------------------------
Net interest income after provision for losses on loans 3,227,129 2,983,517 2,564,479
- ----------------------------------------------------------------------------------------------
Noninterest income:
Fees and service charges 925,170 951,573 870,435
Gain on sales of loans held for sale 150,270 193,620 125,003
Other 41,494 91,285 13,545
- ----------------------------------------------------------------------------------------------
Total noninterest income 1,116,934 1,236,478 1,008,983
- ----------------------------------------------------------------------------------------------
Noninterest expense:
Compensation and employee benefits 1,472,154 1,436,346 1,334,220
Occupancy 357,577 303,385 340,828
Data processing 160,365 149,128 156,591
FDIC premiums and regulatory assessments 79,752 79,005 92,568
Professional fees 109,948 56,950 47,730
Advertising 31,803 37,297 38,952
Other 491,991 476,080 382,256
- ----------------------------------------------------------------------------------------------
Total noninterest expense 2,703,590 2,538,191 2,393,145
- ----------------------------------------------------------------------------------------------
Earnings before income taxes 1,640,473 1,681,804 1,180,317
Income tax expense 640,915 636,448 461,274
- ----------------------------------------------------------------------------------------------
Net earnings $ 999,558 1,045,356 719,043
==============================================================================================
Net income per common share:
Basic $ 73.63 77.01 52.91
Diluted 73.63 77.01 52.91
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1997, 1996, and 1995
(All financial information for 1996 and 1995 is unaudited)
<TABLE>
<CAPTION>
============================================================================================================
Net
unrealized
gain/(loss)
Additional securities Total
Common paid-in Retained available stockholders'
stock capital earnings for sale equity
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance on December 31, 1994 $ 13,622 1,400,511 1,650,073 (86,132) 2,978,074
Net earnings -- -- 719,043 -- 719,043
Redemption of common stock (50) -- (23,710) -- (23,760)
Change in net unrealized gain
on securities available for sale -- -- -- 99,413 99,413
- ------------------------------------------------------------------------------------------------------------
Balance on December 31, 1995 13,572 1,400,511 2,345,406 13,281 3,772,770
Net earnings -- -- 1,045,356 -- 1,045,356
Issuance of common stock 4 1,108 -- -- 1,112
Change in net unrealized gain on
securities available for sale -- -- -- (9,617) (9,617)
- ------------------------------------------------------------------------------------------------------------
Balance on December 31, 1996 13,576 1,401,619 3,390,762 3,664 4,809,621
Net earnings -- -- 999,558 -- 999,558
Change in net unrealized gain on
securities available for sale -- -- -- 34 34
- ------------------------------------------------------------------------------------------------------------
Balance on December 31, 1997 $ 13,576 1,401,619 4,390,320 3,698 5,809,213
============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended December 31, 1997, 1996, and 1995
(All financial information for 1996 and 1995 is unaudited)
<TABLE>
<CAPTION>
==========================================================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net earnings $ 999,558 1,045,356 719,043
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 168,864 139,238 116,903
Amortization of premiums and discounts, net (9,624) 27,392 20,406
(Increase) in other assets (14,829) (14,862) (8,569)
(Increase) decrease in accrued interest receivable (15,254) 31,054 (69,547)
Increase in accrued expenses and other liabilities 5,259 47,456 344,363
Originations of loans held for sale (17,358,054) (16,959,489) (13,736,520)
Proceeds from loans held for sale 16,414,054 17,325,487 13,502,490
Net gain on sale of loans held for sale (150,270) (193,620) (125,003)
Net gain on sale of other real estate owned -- (13,641) --
Other, net (46,854) (27,505) (15,507)
- --------------------------------------------------------------------------------------------------------------------------
Net cash (used) provided by operating activities (7,150) 1,406,866 748,059
- --------------------------------------------------------------------------------------------------------------------------
Investing activities:
Proceeds from maturities of investment securities held to maturity 700,000 1,000,000 500,000
Purchases of investment securities held to maturity (1,985,130) (5,156,287) --
Principal collected on mortgage-backed and related securities held
to maturity 237,611 122,001 185,232
Proceeds from maturities of investment securities available for sale 250,000 1,196,434 2,000,000
Purchases of investment securities available for sale (1,250,000) (1,037,008) (500,938)
Principal collected on mortgage-backed and related securities available
for sale 304,921 163,133 209,593
Increase in loans receivable, net (2,543,604) (4,362,054) (6,714,104)
Investment in Federal Home Loan Bank stock (38,700) (37,800) (164,500)
Purchases of premises and equipment (344,155) (194,519) (853,027)
- --------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (4,669,057) (8,306,100) (5,337,744)
- --------------------------------------------------------------------------------------------------------------------------
Financing activities:
Increase in deposits, net 6,046,782 9,806,048 5,940,757
Payments made on note payable (240,000) (111,500) (107,000)
Issuance of common stock -- 1,112 --
Redemption of common stock -- -- (23,760)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 5,806,782 9,695,660 5,809,997
- --------------------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 1,130,575 2,796,426 1,220,312
Cash and cash equivalents, beginning of year 8,064,734 5,268,308 4,047,996
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 9,195,309 8,064,734 5,268,308
==========================================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,080,851 1,923,943 1,061,499
Income taxes 570,551 722,682 245,733
Supplemental noncash flow disclosures:
Transfer of loans to real estate $ 197,628 226,351 --
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1997
(All financial information for 1996 and 1995 is unaudited)
================================================================================
(1) LITTLE MOUNTAIN BANCSHARES, INC.
Little Mountain Bancshares, Inc. (the Company) is a bank holding company
that owns 100 percent of its only subsidiary, First National Bank of
Monticello.
The First National Bank of Monticello is primarily engaged in commercial
banking and related services. The Bank makes commercial, residential,
and consumer loans to customers principally in the suburban Twin Cities
metro area and outlying communities. Although the Bank's portfolio is
diversified, a substantial portion of its customers' abilities to honor
their contracts is dependent upon the economy in the Twin Cities and
surrounding areas.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following summarizes the more significant accounting policies the
Company follows in preparing and presenting its consolidated financial
statements:
(a) BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of the Company and the Association. All significant intercompany account
balances and transactions have been eliminated in consolidation.
(b) MATERIAL ESTIMATES
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the balance sheet
and revenues and expenses for the period. Actual results could differ
significantly from those estimates.
A material estimate that is particularly susceptible to significant
change in the near-term relates to the determination of the allowance
for loan losses. Management believes that the allowance for losses on
loans is adequate. While management uses available information to
recognize losses on loans, future additions to the allowance may be
necessary based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the allowance for losses on loans. Such agencies may
require additions to the allowance based on their judgment about
information available to them at the time of their examination.
(c) INVESTMENT SECURITIES AND MORTGAGE-BACKED SECURITIES
The Company classifies investment securities into one of three
categories: held to maturity, available for sale, or trading.
Trading securities are bought and held principally for the purpose of
selling them in the near term. The Company had no securities classified
as trading for the years ended December 31, 1997 and 1996.
Securities available for sale are carried at market value. Unrealized
gains and losses, net of tax effects, are included as a separate
component of stockholders' equity.
Securities held to maturity are carried at amortized cost, as management
has the ability and positive intent to hold them to maturity.
(Continued)
6
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
Discounts and premiums on securities are amortized to income using the
level yield method over the estimated life of the security. Gains and
losses on the sale of securities, are determined using the specific
identification method and recognized on trade date.
(d) LOANS
Loans receivable are considered long-term investments and, accordingly,
are carried at amortized cost.
The allowance for loan losses is maintained at an amount considered
adequate to provide for probable losses. The allowance for loan losses
is based on periodic analysis of the loan portfolio by management. In
this analysis, management considers factors including, but not limited
to, specific occurrences, general economic conditions, loan portfolio
composition, and historical experience. Loans are charged off to the
extent they are deemed to be uncollectible.
Interest income is recognized on an accrual basis except when
collectibility is in doubt, generally when a loan becomes 90-days
delinquent, as determined on a loan by loan basis. When interest
accruals are suspended, interest previously accrued is reversed.
Interest is subsequently recognized as income to the extent cash is
received when, in management's judgment, principal is collectible.
Under the Company's credit policies and practices, all nonaccrual and
restructured construction, agriculture, and commercial real estate loans
meet the definition of impaired loans. Impaired loans exclude consumer
loans and residential real estate loans classified as nonaccrual. Loan
impairment is measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the observable market price of the loan or the
fair value of the collateral if the loan is collateral dependent.
Loan origination fees and certain related direct costs, when material,
are deferred and amortized to interest income using the effective
interest method over the life of the loan.
Loans held for sale are carried at the lower of cost or market
determined on an aggregate basis. Gains or losses on sales of loans held
for sale are recognized at settlement dates
(e) REAL ESTATE
Real estate owned or expected to be acquired in settlement of loans is
carried at the lower of the unpaid loan balance or estimated fair value
less estimated selling costs. After acquisition, costs of capital
improvements made to facilitate sales are expensed as incurred. Costs
incurred for holding properties after the redemption period are expensed
as incurred. The carrying value of individual properties is periodically
evaluated and reduced to the extent cost exceeds estimated fair value
less estimated selling costs.
(f) CASH EQUIVALENTS
Cash equivalents primarily represent amounts on deposit at other
financial institutions and highly liquid financial instruments with
original maturities at the date of purchase of three months or less.
(g) PREMISES AND EQUIPMENT
Land is carried at cost. Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed on a straight-line
basis over the estimated useful lives of 31 1/2 to 40 years for
buildings, 15 to 20 years for leasehold improvements, and 5 to 10 years
for furniture and equipment.
(Continued)
7
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
(h) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(i) NEW ACCOUNTING STANDARDS
Effective January 1, 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 125, ACCOUNTING
FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF
LIABILITIES. The adoption of SFAS No. 125 did not impact the Company's
financial condition or results of operations.
In February 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 129, "Disclosure of Information about Capital Structure," which
codifies existing disclosure requirements regarding capital structure.
SFAS No. 129 did not have a significant impact on the Company's current
capital structure disclosures.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, REPORTING COMPREHENSIVE INCOME, (SFAS 130) and
Statement of Financial Accounting Standards No. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION (SFAS 131). SFAS 130
requires disclosures of the components of comprehensive income and the
accumulated balance of other comprehensive income within total
stockholders' equity. SFAS 131 requires disclosure of selected
information about operating segments including segment income, revenues
and asset data. Operating segments, as defined in SFAS 131, would
include those components for which financial information is available
and evaluated regularly by the chief operating decision maker in
assessing performance and making resource allocation determinations for
operating components such as those which exceed 10 percent or more of
combined revenue, income, or assets. These standards are effective for
fiscal years beginning after December 15, 1997, and are not expected to
have a material impact on the Company's consolidated financial
statements.
In February 1998, the FASB issued SFAS No. 132, EMPLOYERS' DISCLOSURES
ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS, which revises
employers' disclosures about pension and other post retirement benefit
plans and suggests combined formats for presentation of pension and
other postretirement benefit disclosures. It is effective for fiscal
years beginning after December 15, 1997. Restatement of disclosures for
earlier periods provided for comparative purposes is required unless the
information is not readily available. This standard is not expected to
have a material impact on the Company's consolidated financial
statements.
(j) EARNINGS PER COMMON SHARE COMPUTATIONS
In February 1997, the FASB issued SFAS No. 128, EARNINGS PER SHARE. SFAS
No. 128 establishes standards for computing and presenting earnings per
share (EPS) and applies to entities with publicly held common stock or
potential common stock. It replaces the presentation of primary EPS with
a presentation of basic EPS. It also requires dual presentation of basic
and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation.
(Continued)
8
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
Basic earnings per share is 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 is computed by
dividing net income by the weighted average number of common stock and
dilutive potential common shares during the year. There are no
securities which have a dilutive effect at December 31, 1997, 1996, or
1995.
The table below presents a reconciliation of basic and diluted earnings
per share computations for the years ended December 31, 1997, 1996, and
1995:
================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------
Net income $999,558 1,045,356 719,043
================================================================================
Weighted average number of common shares
outstanding used in basic and diluted
EPS calculations 13,576 13,575 13,591
Basic EPS $ 73.63 77.01 52.91
Diluted EPS 73.63 77.01 52.91
(3) SECURITIES AVAILABLE FOR SALE
Securities available for sale at December 31, 1997 and 1996 are
summarized as follows:
<TABLE>
<CAPTION>
===============================================================================================
December 31, 1997
-----------------------------------------------------
Gross Gross
Amortized unrealized unrealized Approximate
cost gains losses market value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment securities:
U.S. Government agency bonds $1,498,707 1,562 (894) 1,499,375
U.S. Treasury notes 1,546,712 833 (1,435) 1,546,110
- -----------------------------------------------------------------------------------------------
Total investment securities 3,045,419 2,395 (2,329) 3,045,485
Mortgage-backed and related securities 745,976 6,097 -- 752,073
- -----------------------------------------------------------------------------------------------
Total securities available for sale $3,791,395 8,492 (2,329) 3,797,558
===============================================================================================
</TABLE>
(Continued)
9
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
<TABLE>
<CAPTION>
===============================================================================================
December 31, 1996
-----------------------------------------------------
Gross Gross
Amortized unrealized unrealized Approximate
cost gains losses market value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment securities:
U.S. Government agency bonds $ 247,575 -- (2,457) 245,118
U.S. Treasury notes 2,493,153 4,089 (5,009) 2,492,233
- -----------------------------------------------------------------------------------------------
Total investment securities 2,740,728 4,089 (7,466) 2,737,351
Mortgage-backed and related securities 1,054,319 9,483 -- 1,063,802
- -----------------------------------------------------------------------------------------------
Total securities available for sale $3,795,047 13,572 (7,466) 3,801,153
===============================================================================================
</TABLE>
There were no sales of securities available for sale during the years
ended December 31, 1997, 1996, or 1995.
Accrued interest receivable on securities available for sale aggregated
$59,213 and $61,170 at December 31, 1997 and 1996, respectively.
The amortized cost and approximate market value of securities available
for sale at December 31, 1997 and 1996, by contractual maturity, are
shown below:
<TABLE>
<CAPTION>
==============================================================================================
December 31, 1997 December 31, 1996
------------------------- ------------------------
Amortized Approximate Amortized Approximate
cost market value cost market value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due within one year $1,000,135 1,000,235 949,632 953,058
Due after one year through five years 2,045,284 2,045,250 1,791,096 1,784,293
- ----------------------------------------------------------------------------------------------
3,045,419 3,045,485 2,740,728 2,737,351
Mortgage-backed and related securities 745,976 752,073 1,054,319 1,063,802
- ----------------------------------------------------------------------------------------------
$3,791,395 3,797,558 3,795,047 3,801,153
==============================================================================================
</TABLE>
(Continued)
10
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
(4) SECURITIES HELD TO MATURITY
Securities held to maturity at December 31, 1997 and 1996 are summarized
as follows:
<TABLE>
<CAPTION>
===============================================================================================
December 31, 1997
-----------------------------------------------------
Gross Gross
Amortized unrealized unrealized Approximate
cost gains losses market value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment securities:
U.S. Government agency bonds $2,897,825 11,846 (5,650) 2,904,021
U.S. Treasury notes 247,997 -- (1,122) 246,875
Municipal bonds 1,484,254 11,662 (205) 1,495,711
Corporate bonds 995,213 5,687 -- 1,000,900
- -----------------------------------------------------------------------------------------------
Total investment securities 5,625,289 29,195 (6,977) 5,647,507
- -----------------------------------------------------------------------------------------------
Mortgage-backed and related securities 3,227,922 24,841 (18,477) 3,234,286
- -----------------------------------------------------------------------------------------------
Total securities held to maturity $8,853,211 54,036 (25,454) 8,881,793
===============================================================================================
December 31, 1996
-----------------------------------------------------
Gross Gross
Amortized unrealized unrealized Approximate
cost gains losses market value
- -----------------------------------------------------------------------------------------------
Investment securities:
U.S. Government agency bonds $2,396,814 4,221 (13,435) 2,387,600
U.S. Treasury notes 247,346 -- (4,065) 243,281
Municipal bonds 1,287,652 -- (23,771) 1,263,881
Corporate bonds 500,845 -- (2,415) 498,430
- -----------------------------------------------------------------------------------------------
Total investment securities 4,432,657 4,221 (43,686) 4,393,192
- -----------------------------------------------------------------------------------------------
Mortgage-backed and related securities 2,664,680 8,288 (21,519) 2,651,449
- -----------------------------------------------------------------------------------------------
Total securities held to maturity $7,097,337 12,509 (65,205) 7,044,641
===============================================================================================
</TABLE>
There were no sales of securities held to maturity for the years ended
December 31, 1997, 1996, or 1995.
Accrued interest receivable on securities held to maturity aggregated
$103,219 and $83,860 at December 31, 1997 and 1996, respectively.
(Continued)
11
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
The amortized cost and approximate market value of securities held to
maturity at December 31, 1997 and 1996, by contractual maturity, are
shown below:
<TABLE>
<CAPTION>
==============================================================================================
December 31, 1997 December 31, 1996
--------------------------- -----------------------
Amortized Approximate Amortized Approximate
cost market value cost market value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due within one year $ 999,600 993,950 -- --
Due after one year through five years 4,031,620 4,053,778 3,857,090 3,830,876
Due after five years through ten years 594,069 599,779 575,567 562,316
- ----------------------------------------------------------------------------------------------
5,625,289 5,647,507 4,432,657 4,393,192
Mortgage-backed and related securities 3,227,922 3,234,286 2,664,680 2,651,449
- ----------------------------------------------------------------------------------------------
$8,853,211 8,881,793 7,097,337 7,044,641
==============================================================================================
</TABLE>
(5) LOANS RECEIVABLE
============================================================================
1997 1996
- ----------------------------------------------------------------------------
Loans secured by real estate:
Residential one-to-four family $22,157,259 19,289,040
Commercial 6,550,127 6,797,101
Agricultural 192,747 266,534
Construction and land development 1,519,721 1,443,257
Home equity loans 2,382,902 2,170,092
Other consumer loans 11,350,094 10,576,522
Overdrafts 50,764 67,294
Commercial business loans 4,108,700 5,448,782
Agricultural loans 865,582 868,275
- ----------------------------------------------------------------------------
Lease financing 127,559 166,383
Total 49,305,455 47,093,280
- ----------------------------------------------------------------------------
Deferred loan fees and discounts 113,944 165,937
Allowance for losses 689,956 969,392
- ----------------------------------------------------------------------------
Net loans $48,501,555 45,957,951
============================================================================
Accrued interest receivable on loans receivable at December 31, 1997 and
1996 was $300,639 and $302,787, respectively.
At December 31, 1997, 1996, and 1995, loans in impaired status totaled
$0, $74,381, and $98,076, --respectively, for which the related
allowance for loan losses was $0, 7,438, and $9,808, respectively. --
The average balance of nonperforming loans during each of the fiscal
years ended December 31, 1997, 1996, and 1995 was $121,250, $106,917,
and $57,833, respectively.
(Continued)
12
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
The effect of non-accrual and impaired loans on interest income for each
of the three years ended December 31 was:
================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------
Interest income:
As originally contracted $ 12,731 11,297 6,114
As recognized (3,000) (1,000) (2,000)
- --------------------------------------------------------------------------------
Reduction of interest income $ 9,731 10,297 4,114
================================================================================
There were no loans to directors and executive officers of the Company
at December 31, 1997, 1996, or 1995.
The Company grants loans to customers who live primarily in the suburban
Twin Cities Metro area and outlying communities. Although the Company
has a diversified loan portfolio, a substantial portion of its debtors'
ability to honor their contracts is dependent upon local economic
conditions.
(6) ALLOWANCE FOR LOSSES ON LOANS RECEIVABLE
Activity in the allowance for losses on loans receivable is summarized
as follows:
================================================================================
Balance at December 31, 1994 $ 972,332
Provision for losses -
Gross charge-offs (32,426)
Gross recoveries 43,108
- --------------------------------------------------------------------------------
Balance at December 31, 1995 983,014
Provision for losses -
Gross charge-offs (48,045)
Gross recoveries 34,423
- --------------------------------------------------------------------------------
Balance at December 31, 1996 969,392
Provision for losses -
Gross charge-offs (291,820)
Gross recoveries 12,384
- --------------------------------------------------------------------------------
Balance at December 31, 1997 $ 689,956
================================================================================
(7) REAL ESTATE
Real estate owned totaled $276,110 and $79,009 at December 31, 1997 and
1996, respectively. The allowance for losses on real estate was $0 at
December 31, 1997 and 1996.
(Continued)
13
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
(8) PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31, 1997 and 1996 is as
follows:
================================================================================
1997 1996
- --------------------------------------------------------------------------------
Land $ 333,039 333,039
Office buildings 1,165,307 1,083,127
Furniture and equipment 1,474,189 1,267,512
Leasehold improvements 55,198 -
- --------------------------------------------------------------------------------
3,027,733 2,683,678
Less accumulated depreciation (1,224,267) (1,055,503)
- --------------------------------------------------------------------------------
$ 1,803,466 1,628,175
================================================================================
(9) DEPOSITS
Deposits and weighted-average interest rates at December 31 are
summarized as follows:
================================================================================
1997 1996
------------------------- ------------------------
Weighted Weighted
average average
Amount rate Amount rate
- --------------------------------------------------------------------------------
Savings deposits $ 12,353,147 2.22% $ 12,421,498 2.22%
Interest bearing checking 13,455,969 1.26 12,766,141 1.26
Money market savings 3,902,255 2.99 3,455,685 2.99
Demand deposits 12,819,643 0.00 9,827,126 0.00
- ----------------------------------------- ---------------
42,531,014 1.31% 38,470,450 1.40%
- ----------------------------------------- ---------------
Certificates of deposit:
3.01-4.00% - 1,088
4.01-5.00 1,228,848 849,519
5.01-6.00 15,683,148 20,374,765
6.01-7.00 8,927,213 2,627,619
- ----------------------------------------- ---------------
25,839,209 5.68% 23,852,991 5.52%
- ----------------------------------------- ---------------
$ 68,370,223 $ 62,323,441
========================================= ===============
(Continued)
14
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
Interest expense on deposits is summarized as follows:
================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------
Savings deposits $ 295,148 277,925 228,972
Interest bearing checking 267,180 246,562 228,710
Money market savings 107,793 120,804 114,422
Certificates of deposit 1,143,717 1,068,241 864,050
IRA deposits 217,932 175,516 129,142
- --------------------------------------------------------------------------------
$ 2,031,770 1,889,048 1,565,296
================================================================================
Certificates of deposit had the following remaining maturities at
December 31:
================================================================================
1997 1996
------------------------ -----------------------
Weighted Weighted
average average
Amount rate Amount rate
- -------------------------------------------------------------------------------
0-3 months $ 5,225,511 5.27% 5,663,933 5.22%
4-12 months 15,737,647 5.75 10,314,326 5.44
13-36 months 4,093,907 5.87 7,113,565 5.81
Over 36 months 782,144 5.90 761,167 6.16
- ------------------------------------------- ------------
$ 25,839,209 5.68% 23,852,991 5.52%
=========================================== ============
The Company had $4,309,656 and $3,796,576 of certificates of deposit
with balances of $100,000 or more at December 31, 1997 and 1996,
respectively.
At December 31, 1997, securities with an approximate amortized cost of
$4,906,997 were pledged as collateral for public deposits.
At December 31, 1997 and 1996, the aggregate amount of deposits by
directors and executive officers totaled $318,008 and $60,911,
respectively. Such deposits were accepted in the ordinary course of
business with normal interest rates, interest payment terms, and
maturities.
(10) NOTE PAYABLE
At December 31, 1997 and 1996, the Company had a note payable to a bank
at a variable interest rate equal to the prime rate. The note is secured
by all shares of First National Bank of Monticello stock and matures
annually. The balance outstanding on the note was $332,856 and $572,856
as of December 31, 1997 and 1996, respectively.
The note payable includes certain covenants including maintenance of
certain ratios, including capital to assets and average return on
assets. The Company is in compliance with these covenants at December
31, 1997.
(Continued)
15
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
(11) FEDERAL HOME LOAN BANK ADVANCES
The Company has a $1,500,000 line of credit with the FHLB which was not
drawn on at December 31, 1997. The line of credit was collateralized by
the Company's FHLB stock and investments with a carrying value of
approximately $241,000 and $13,111,675, respectively.
(12) INCOME TAXES
Income tax expense for the years ended December 31 is composed of the
following:
================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------
Total current $ 640,915 637,986 461,274
Total deferred - (1,538) -
- --------------------------------------------------------------------------------
$ 640,915 636,448 461,274
================================================================================
The reasons for the difference between the effective income tax rate and
the statutory federal income tax rate are as follows:
================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------
Federal "expected" income tax rate 34.00% 34.00 34.00
State income taxes, net of federal income tax benefit 6.25 6.27 6.22
Tax-exempt interest income (1.17) (1.02) (1.29)
Other, net (0.01) (1.41) 0.15
- --------------------------------------------------------------------------------
Effective income tax rate 39.07% 37.84 39.08
================================================================================
(Continued)
16
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
The tax effects of temporary differences that give rise to the deferred
tax assets and deferred tax liabilities at December 31, 1997 and 1996
are as follows:
================================================================================
1997 1996
- --------------------------------------------------------------------------------
Deferred tax assets:
Allowance for losses on loans receivable $ 256,735 256,735
Other 11,376 9,106
- --------------------------------------------------------------------------------
Total deferred tax assets 268,111 265,841
Deferred tax liabilities:
Premises and equipment 27,454 25,184
Unrealized gain on securities available for sale 3,664 3,698
- --------------------------------------------------------------------------------
Total deferred tax liabilities 31,118 28,882
- --------------------------------------------------------------------------------
Net deferred tax asset $ 236,993 236,959
================================================================================
No valuation allowance was required for deferred tax assets at December
31, 1997 or 1996.
(13) EMPLOYEE BENEFITS
(a) 401(k) PLAN
All employees who have three months of service at the Company are
eligible to participate in the Company's 401(k) plan. Participating
employees may contribute up to 14% of gross wages earned. Contributions
to the Plan by the Company are made at the discretion of the board of
directors. Contributions to the Plan were $64,997, $43,214, and $33,570
in 1997, 1996, and 1995, respectively.
(14) RETAINED EARNINGS AND REGULATORY CAPITAL
The Company, as a member of the Federal Home Loan Bank System, is
required to hold a specified number of shares of capital stock, which is
carried at cost, in the Federal Home Loan Bank of Des Moines. In
addition, the Company is required to maintain cash and other liquid
assets in an amount equal to 4% of its deposit accounts and other
obligations due within one year. The Company has met these requirements.
The Company is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory--and possibly
additional discretionary--actions by regulators that, if undertaken,
could have a direct material effect on the Company's financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company must meet specific
capital guidelines that involve quantitative measures of the Company's
assets, liabilities and certain off-balance sheet items as calculated
under regulatory accounting practices. The Company's capital amounts and
classification are also subject to qualitative judgments by the
regulators about components, risk weightings and other factors.
(Continued)
17
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
Quantitative measures established by regulation to ensure capital
adequacy require the Company to maintain minimum ratios (set forth in
the following table) of total and Tier I risk-based capital (as defined
in the regulations), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997, that
the Company meets all capital adequacy requirements to which it is
subject.
As of December 31, 1997, the Bank is 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 December 31, 1997 that
management believes have changed the Bank's category.
================================================================================
<TABLE>
<CAPTION>
For capital adequacy purposes
---------------------------
Well Adequately
Actual capitalized capitalized
===========================================================================================
<S> <C> <C> <C>
As of December 31, 1997:
Total risk-based capital (to risk-weighted assets) 12.06% 10.0% 8.0%
Tier I capital (to risk-weighted assets) 10.83 6.0 4.0
Leverage ratio (Tier I capital to average assets) 8.88 5.0 3.0
===========================================================================================
</TABLE>
(15) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
accompanying balance sheets. The contract amounts of these instruments
reflect the extent of involvement by the Company.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit is represented by the contract amount of these commitments. The
Company uses the same credit policies in making commitments as it does
for on-balance-sheet instruments.
The contract amount of these financial instruments at December 31, 1997
and 1996 is as follows:
================================================================================
Contract amount
----------------------
1997 1996
- --------------------------------------------------------------------------------
Financial instruments whose contract amount represents risk:
Commitments to extend credit $ 6,894,949 5,451,065
================================================================================
(Continued)
18
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
Commitments to extend credit are agreements to lend to a customer
provided there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since a portion of
the commitments may expire without being drawn upon, the total
commitment amount does not necessarily represent future cash
requirements. The Company evaluates each customer's creditworthiness on
a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon extension of credit, is based on the loan
type and on management's evaluation of the borrower. Collateral consists
primarily of residential real estate and personal property.
(16) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS,
requires disclosure of estimated fair values of the Company's financial
instruments, including assets, liabilities, and off-balance sheet items
for which it is practicable to estimate fair value. The fair value
estimates are made as of December 31, 1997 and 1996, based upon relevant
market information, if available, and upon the characteristics of the
financial instruments themselves. Because no market exists for a
significant portion of the Company's financial instruments, fair value
estimates are based upon judgments regarding future expected loss
experience, current economic conditions, risk characteristics of various
financial instruments, and other factors. The 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.
Fair value estimates are based only on existing financial instruments
without attempting to estimate the value of anticipated future business
or the value of assets and liabilities that are not considered financial
instruments. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant
effect on the fair value estimates and have not been considered in any
of the estimates.
(Continued)
19
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
The estimated fair value of the Company's financial instruments are
shown below. Following the table, there is an explanation of the methods
and assumptions used to estimate the fair value of each class of
financial instruments.
<TABLE>
<CAPTION>
=========================================================================================================
December 31
-----------------------------------------------------------
1997 1996
----------------------------- ---------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 9,195,309 9,159,309 8,064,734 8,064,734
Securities available for sale 3,797,558 3,797,558 3,801,153 3,801,153
Securities held to maturity 8,853,211 8,881,793 7,097,337 7,044,641
Loans held for sale 1,229,750 1,242,048 285,750 288,608
Loans receivable, net 48,501,555 48,221,205 45,957,951 45,815,123
Stock in Federal Home Loan Bank of
Des Moines, at cost 241,000 241,000 202,300 202,300
Stock in Federal Reserve Bank, at cost 57,000 57,000 57,000 57,000
Accrued interest receivable 463,071 463,071 447,817 447,817
Financial liabilities:
Deposits 68,370,223 68,352,562 62,323,441 62,313,723
Notes payable 332,856 332,856 572,856 572,856
Accrued interest payable 165,266 165,266 173,292 173,292
Off-balance sheet financial instruments:
Commitments to extend credit -- -- -- --
=========================================================================================================
</TABLE>
(a) CASH AND CASH EQUIVALENTS
The carrying amount of cash and cash equivalents approximates their fair
value.
(b) SECURITIES HELD TO MATURITY AND SECURITIES AVAILABLE FOR SALE
The fair values of securities held to maturity and securities available
for sale are based upon quoted market prices.
(c) LOANS HELD FOR SALE
The fair value of loans held for sale is based upon sales commitments or
estimated market price with loans of similar characteristics.
(d) LOANS RECEIVABLE, NET
The fair value of the loan receivable portfolio, with the exception of
the 1 to 4 family adjustable rate mortgage loan portfolio, was
calculated by discounting the scheduled cash flows through the estimated
maturity using anticipated prepayment speeds and using discount rates
that reflect credit and interest rate risk inherent in each loan
portfolio. The fair value of the 1 to 4 family adjustable rate mortgage
loan portfolio was estimated using the carrying value of the portfolio
due to its repricing frequency and comparison to observed secondary
market loans with similar characteristics.
(Continued)
20
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
(e) STOCK IN FEDERAL HOME LOAN BANK OF DES MOINES AND FEDERAL RESERVE
BANKS, AT COST
The carrying amount of FHLB and FRB stock approximates its fair value.
(f) ACCRUED INTEREST RECEIVABLE
The carrying amount of accrued interest receivable approximates its fair
value since it is short-term in nature and does not present
unanticipated credit concerns.
(g) DEPOSITS
Under SFAS No. 107, the fair value of deposits with no stated maturity
such as savings and money market accounts, is equal to the amount
payable on demand. The fair value of certificates of deposits is based
on the discounted value of contractual cash flows using as discount
rates the rates that were offered by the Company as of December 31, 1997
and 1996 for deposits with maturities similar to the remaining
maturities of the existing certificates of deposit.
The fair value estimate for deposits does not include the benefit that
results from the low cost funding provided by the Company's existing
deposits and long-term customer relationships compared to the cost of
obtaining different sources of funding. This benefit is commonly
referred to as the core deposit intangible.
(h) NOTE PAYABLE
The fair value of note payable approximates its carrying value due to
the short-term nature of its maturity.
(i) ACCRUED INTEREST PAYABLE
The carrying amount of accrued interest payable approximates its fair
value since it is short-term in nature.
(j) COMMITMENTS TO EXTEND CREDIT
The fair value of commitments to extend credit is estimated based on
comparison of the committed rate to observed secondary market rates and
prices and adjusted for expected fallout.
21
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
(17) LITTLE MOUNTAIN BANCSHARES, INC. FINANCIAL INFORMATION (PARENT COMPANY
ONLY)
The parent company's principal asset is its investment in the
subsidiary. The following are the condensed financial statements for
the parent company only as of and for the years ended December 31,
1997 and 1996.
================================================================================
CONDENSED BALANCE SHEETS
================================================================================
ASSETS 1997 1996
- ------------------------------------------------------------------------------
Cash and cash equivalents $ 7,214 9,438
Investment in subsidiary 6,126,763 5,361,301
Tax benefit receivable 8,092 11,738
- ------------------------------------------------------------------------------
Total assets $6,142,069 5,382,477
- ------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------
Note payable $ 332,856 572,856
- ------------------------------------------------------------------------------
Total liabilities 332,856 572,856
- ------------------------------------------------------------------------------
Common stock 13,576 13,576
Additional paid-in capital 1,401,619 1,401,619
Retained earnings 4,390,320 3,390,762
Net unrealized gain on securities available for sale 3,698 3,664
- ------------------------------------------------------------------------------
Total stockholders' equity 5,809,213 4,809,621
- ------------------------------------------------------------------------------
Total liabilities and stockholders' equity $6,142,069 5,382,477
==============================================================================
CONDENSED STATEMENTS OF INCOME
=========================================================================
1997 1996 1995
- -------------------------------------------------------------------------
Dividend income $ 260,000 144,000 188,000
Equity in earnings of subsidiary 765,428 934,972 571,093
- -------------------------------------------------------------------------
Operating income 1,025,428 1,078,972 759,093
Interest expense 41,055 52,064 65,024
Other expense 2,400 4,404 2,252
- -------------------------------------------------------------------------
Operating expense 43,455 56,468 67,276
Earnings before income tax benefit 981,973 1,022,504 691,817
Income tax benefit 17,585 22,852 27,226
- -------------------------------------------------------------------------
Net earnings $ 999,558 1,045,356 719,043
=========================================================================
22
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Financial Statements
(All financial information for 1996 and 1995 is unaudited)
================================================================================
CONDENSED STATEMENTS OF CASH FLOWS
================================================================================
<TABLE>
<CAPTION>
Year ended
December 31,
--------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net earnings $ 999,558 1,045,356 719,043
Adjustments to reconcile net earnings to cash
provided by operating activities:
Equity in earnings of subsidiary (765,428) (934,972) (571,093)
Decrease in tax benefit receivable 3,646 1,722 1,151
Decrease in accrued interest payable -- -- (14,767)
- -----------------------------------------------------------------------------------------
Net cash provided by operating activities 237,776 112,106 134,334
- -----------------------------------------------------------------------------------------
Financing activities:
Repayment of debt (240,000) (111,500) (107,000)
Cash received from issuance of stock -- 1,112 --
Cash paid for redemption of stock -- -- (23,760)
- -----------------------------------------------------------------------------------------
Net cash used for financing activities (240,000) (110,388) (130,760)
- -----------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (2,224) 1,718 3,574
Cash and cash equivalents, beginning of year 9,438 7,720 4,146
- -----------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 7,214 9,438 7,720
=========================================================================================
</TABLE>
23
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
March 31, 1998 and 1997
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
ASSETS 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash $ 4,282,329 4,699,766
Interest bearing deposits with banks 2,328,888 1,553,828
Federal funds sold 3,725,000 800,000
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 10,336,217 7,053,594
Securities available for sale:
Mortgage-backed and related securities (amortized cost $697,384
and $1,268,846, respectively) 701,918 1,278,159
Investment securities (amortized cost $3,046,438 and $2,244,273, respectively) 3,047,672 2,244,382
- -----------------------------------------------------------------------------------------------------------------------------
Total securities available for sale 3,749,590 3,522,541
Securities held to maturity:
Mortgage-backed and related securities (market value $3,109,601 and $2,593,555, respectively) 4,105,394 2,638,921
Investment securities (market value $5,462,019 and $4,353,849, respectively) 5,625,468 4,432,089
- -----------------------------------------------------------------------------------------------------------------------------
Total securities held to maturity 9,730,862 7,071,010
Loans held for sale 1,298,000 301,150
Loans receivable, net 48,311,045 45,982,845
Federal Home Loan Bank stock, at cost 276,300 241,000
Federal Reserve Bank Stock, at cost 57,000 57,000
Accrued interest receivable 404,767 424,644
Premises and equipment, net 1,784,276 1,618,392
Real estate, net 195,795 78,958
Other assets 342,345 328,548
- -----------------------------------------------------------------------------------------------------------------------------
Total assets $76,486,197 66,679,682
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------------
Deposits 69,917,265 60,949,269
Note payable 276,552 518,881
Accrued expenses and other liabilities 191,841 196,320
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 70,385,658 61,664,470
- -----------------------------------------------------------------------------------------------------------------------------
Common stock ($1.00 par value). Authorized and issued 25,000 shares;
13,576 shares issued and outstanding 13,576 13,576
Additional paid-in capital 1,401,619 1,401,619
Retained earnings, subject to certain restrictions 4,681,883 3,600,985
Net unrealized gain on securities available for sale 3,461 (968)
- -----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 6,100,539 5,015,212
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $76,486,197 66,679,682
=============================================================================================================================
</TABLE>
24
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Three months ended March 31, 1998 and 1997
(Unaudited)
================================================================================
1998 1997
- --------------------------------------------------------------------------------
Interest income:
Loans receivable $1,162,177 1,080,376
Investment securities--taxable 168,317 141,867
Investment securities--tax exempt 14,344 14,031
Federal funds sold 20,945 8,460
Interest bearing deposits with banks and other 30,670 23,654
- --------------------------------------------------------------------------------
Total interest income 1,396,453 1,268,388
Interest expense:
Deposits 534,507 480,037
Note payable 7,707 11,815
- --------------------------------------------------------------------------------
Total interest expense 542,214 491,852
- --------------------------------------------------------------------------------
Net interest income 854,239 776,536
- --------------------------------------------------------------------------------
Provision for losses on loans -- --
- --------------------------------------------------------------------------------
Net interest income after provision for losses on loans 854,239 776,536
- --------------------------------------------------------------------------------
Noninterest income:
Fees and service charges 259,255 203,836
Gain on sales of loans held for sale 65,426 22,978
Other 17,276 12,412
- --------------------------------------------------------------------------------
Total noninterest income 341,957 239,226
- --------------------------------------------------------------------------------
Noninterest expense:
Compensation and employee benefits 418,364 380,755
Occupancy 86,339 89,732
Data processing 37,910 41,198
FDIC premiums and regulatory assessments 17,941 16,342
Professional fees 14,477 13,327
Advertising 7,597 8,424
Other 138,101 128,474
- --------------------------------------------------------------------------------
Total noninterest expense 720,729 678,252
- --------------------------------------------------------------------------------
Earnings before income taxes 475,467 337,510
Income tax expense 183,904 127,287
- --------------------------------------------------------------------------------
Net earnings $ 291,563 210,223
- --------------------------------------------------------------------------------
Net income per common share:
Basic $ 21.48 15.48
Diluted 21.48 15.48
25
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Three months ended March 31, 1998 and 1997
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
Net
unrealized
gain/(loss)
Additional securities Total
Common paid-in Retained available stockholders'
stock capital earnings for sale equity
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance on December 31, 1996 $ 13,576 1,401,619 3,390,762 3,664 4,809,621
Net earnings -- -- 210,223 -- 210,223
Change in net unrealized loss on
securities available for sale -- -- -- (4,632) (4,632)
- ---------------------------------------------------------------------------------------------------------
Balance on March 31, 1997 $ 13,576 1,401,619 3,600,985 (968) 5,015,212
=========================================================================================================
Balance on December 31, 1997 13,576 1,401,619 4,390,320 3,698 5,809,213
Net earnings -- -- 291,563 -- 291,563
Change in net unrealized gain on
securities available for sale -- -- -- (237) (237)
- ---------------------------------------------------------------------------------------------------------
Balance on March 31, 1998 $ 13,576 1,401,619 4,681,883 3,461 6,100,539
=========================================================================================================
</TABLE>
26
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Three months ended March 31, 1998 and 1997
(Unaudited)
================================================================================
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities:
Net earnings $ 291,563 210,223
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation 38,470 38,406
Amortization of premiums and discounts, net (683) (128)
(Increase) in other assets (20,254) (21,286)
Decrease in accrued interest receivable 58,304 23,173
Increase in accrued expenses and other liabilities (35,988) (26,250)
Originations of loans held for sale (7,433,676) (2,252,387)
Proceeds from loans held for sale 7,365,426 2,236,987
Net gain on sale of loans held for sale (65,426) (22,978)
Net gain on sale of other real estate owned (7,956) --
Other, net 32,557 14,808
- ----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 222,337 200,568
- ----------------------------------------------------------------------------------------------------------
Investing activities:
Proceeds from maturities of investment securities held to maturity -- --
Purchases of investment securities held to maturity (850,000) --
Principal collected on mortgage-backed and related securities held
to maturity 93,571 25,537
Proceeds from maturities of investment securities available for sale 500,000 250,000
Purchases of investment securities available for sale (500,000) --
Principal collected on mortgage-backed and related securities available
for sale 48,332 33,109
(Increase) decrease in loans receivable, net 190,510 (24,894)
Investment in Federal Home Loan Bank stock (35,300) (38,700)
Purchases of premises and equipment (19,280) (28,613)
- ----------------------------------------------------------------------------------------------------------
Net cash (used) provided by investing activities (572,167) 216,439
- ----------------------------------------------------------------------------------------------------------
Financing activities:
Increase (decrease) in deposits, net 1,547,042 (1,374,172)
Payments made on note payable (56,304) (53,975)
- ----------------------------------------------------------------------------------------------------------
Net cash (used) provided by financing activities 1,490,738 (1,428,147)
- ----------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 1,140,908 (1,011,140)
Cash and cash equivalents, beginning of period 9,195,309 8,064,734
- ----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 10,336,217 7,053,594
==========================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 533,873 497,960
Income taxes 215,000 166,000
Supplemental noncash flow disclosures:
Transfer of loans to real estate $ -- --
</TABLE>
27
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1998
(Unaudited)
================================================================================
(1) LITTLE MOUNTAIN BANCSHARES, INC.
Little Mountain Bancshares, Inc. (the Company) is a bank holding company
that owns 100 percent of its only subsidiary, First National Bank of
Monticello.
The First National Bank of Monticello is primarily engaged in commercial
banking and related services. The Bank makes commercial, residential,
and consumer loans to customers principally in the suburban Twin Cities
metro area and outlying communities. Although the Bank's portfolio is
diversified, a substantial portion of its customers' abilities to honor
their contracts is dependent upon the economy in the Twin Cities and
surrounding areas.
(2) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements were
prepared in accordance with the instructions for Form 10-Q and,
therefore, do not include all disclosures necessary for a complete
presentation of the consolidated balance sheet, statements of
operations, statement of stockholders' equity and statements of cash
flows in conformity with generally accepted accounting principles.
However, all adjustments, consisting only of normal recurring
adjustments, which are, in the opinion of management, necessary for the
fair presentation of the interim financial statements have been
included. The statement of operations for the three months ended March
31, 1998, is not necessarily indicative of the results which may be
expected for the entire year.
The material contained herein is written with the presumption that the
users of the interim financial statements have read or have access to
the most recent annual financial statements of Little Mountain
Bancshares, Inc., and notes thereto, together with Management's
Discussion and Analysis of Financial Condition and Results of Operations
as of December 31, 1997, and for the year then ended.
(3) EARNINGS PER SHARE
Basic earnings per share is 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 is computed by
dividing net income by the weighted average number of common stock and
dilutive potential common shares during the year. The Company had no
dilutive securities in the periods presented. The weighted average
number of common shares outstanding used in basic and diluted earnings
per share calculations was 13,576 as of March 31, 1998 and 1997.
(4) NEW ACCOUNTING STANDARDS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standard No. 130, REPORTING COMPREHENSIVE INCOME, (SFAS 130).
The statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. The statement requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be disclosed in the financial statements.
Comprehensive income is defined as the change in equity during the
period from transactions and other events from nonowner sources.
Comprehensive income is the total net income and other comprehensive
income, which for the Company is comprised entirely of net unrealized
holding gains and losses on securities available for sale.
(Continued)
28
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
The following table summarizes the components of comprehensive income
for the period noted:
================================================================================
Three Months Ended
March 31,
----------------------
1998 1997
- -------------------------------------------------------------------------------
Net income $ 269,605 210,223
Other comprehensive income, net of tax:
Unrealized holding losses on securities:
Unrealized holding losses arising
during the period [net of tax benefit of ($158)
and ($3,087), respectively] (237) (4,632)
- -------------------------------------------------------------------------------
Total comprehensive income $ 269,368 205,591
===============================================================================
In February 1998, the FASB issued SFAS 132, EMPLOYERS' DISCLOSURES ABOUT
PENSIONS AND OTHER POSTRETIREMENT BENEFITS which revises employers'
disclosures about pension and other postretirement benefit plans. It is
effective for fiscal years beginning after December 15, 1997. Adopting
the disclosure requirements of SFAS 132 will not have a material impact
on the Company's financial condition or the results of its operations.
(5) LOANS RECEIVABLE
The carrying value of loans receivable at March 31, 1998 and December
31, 1997 were (in thousands):
================================================================================
March 31, December, 31
1998 1997
- --------------------------------------------------------------------------------
Loans secured by real estate:
Residential one-to-four family $ 21,252 22,157
Commercial 6,659 6,550
Agricultural 191 193
Construction and land development 2,041 1,520
Home equity loans 2,180 2,383
Other consumer loans 11,232 11,350
Overdrafts - 51
Commercial business loans 4,620 4,109
Agricultural loans 784 866
Lease financing 108 127
- --------------------------------------------------------------------------------
49,067 49,306
Deferred loan fees and discounts 98 114
Allowance for losses 658 690
- --------------------------------------------------------------------------------
Net loans $ 48,311 48,502
================================================================================
(Continued)
29
<PAGE>
LITTLE MOUNTAIN BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
================================================================================
Activity in the allowance for losses on loans receivable for the three
months ended March 31, is summarized as follows:
================================================================================
1998 1997
- --------------------------------------------------------------------------
Balance at beginning of period $ 689,956 969,392
Provision - -
Gross charge-offs (32,631) (59,050)
Gross recoveries 469 -
- --------------------------------------------------------------------------
Balance at end of period $ 657,794 910,342
==========================================================================
(6) DEPOSITS
Deposits as of March 31, 1998 consisted of $12,323,439 in non-interest
bearing deposits and $57,593,826 in interest-bearing deposits.
30
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
dated March 9, 1998 between
LITTLE MOUNTAIN BANCSHARES, INC.
and
NORWEST CORPORATION
<PAGE>
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as
of the 9th day of March, 1998, by and between LITTLE MOUNTAIN BANCSHARES, INC.
("Bancshares"), a Minnesota corporation, and NORWEST CORPORATION ("Norwest"), a
Delaware corporation.
WHEREAS, the parties hereto desire to effect a reorganization whereby a
wholly-owned subsidiary of Norwest will merge with and into Bancshares (the
"Merger") pursuant to an agreement and plan of merger (the "Merger Agreement")
in substantially the form attached hereto as Exhibit A, which provides, among
other things, for the conversion and exchange of the shares of Common Stock of
Bancshares of the par value of $1.00 per share ("Bancshares Common Stock")
outstanding immediately prior to the time the Merger becomes effective in
accordance with the provisions of the Merger Agreement into shares of voting
Common Stock of Norwest of the par value of $1-2/3 per share ("Norwest Common
Stock"),
NOW, THEREFORE, to effect such reorganization and in consideration of
the premises and the mutual covenants and agreements contained herein, the
parties hereto do hereby represent, warrant, covenant and agree as follows:
1. BASIC PLAN OF REORGANIZATION
(a) Merger. Subject to the terms and conditions contained herein, a
wholly-owned subsidiary of Norwest (the "Merger Co.") will be merged by
statutory merger with and into Bancshares pursuant to the Merger Agreement, with
Bancshares as the surviving corporation, in which merger each share of
Bancshares Common Stock outstanding immediately prior to the Effective Time of
the Merger (as defined below) (other than shares as to which statutory
dissenters' appraisal rights have been exercised) will be converted into and
exchanged the number of shares of Norwest Common Stock determined by dividing
the Adjusted Norwest Shares by the number of shares of Bancshares Common Stock
then outstanding. The "Adjusted Norwest Shares" shall be a number equal to the
sum of (i) $18,100,000 divided by the Norwest Measurement Price plus (ii) if the
closing occurs after September 30, 1998, the number of shares of Norwest Common
Stock equal to (A) the product of (x) the number of shares of Norwest Common
Stock determined in accordance with clause (i) above times (y) the dividend
amount per share for the cash dividend, if any, paid on Norwest Common Stock on
September 1, 1998, divided by (B) the Norwest Measurement Price. The "Norwest
Measurement Price"
A-1
<PAGE>
is defined as the average of the closing prices of a share of Norwest Common
Stock as reported on the consolidated tape of the New York Stock Exchange during
the period of 20 trading days ending on the day immediately preceding the
meeting of shareholders required by paragraph 4(c) of this Agreement.
(b) Norwest Common Stock Adjustments. If, between the date hereof and
the Effective Time of the Merger, shares of Norwest Common Stock shall be
changed into a different number of shares or a different class of shares by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or if a stock dividend thereon shall be
declared with a record date within such period (a "Common Stock Adjustment"),
then the number of shares of Norwest Common Stock into which a share of
Bancshares 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 Bancshares Common Stock
shall be converted will equal the number of shares of Norwest Common Stock which
holders of shares of Bancshares Common Stock would have received pursuant to
such Common Stock Adjustment had the record date therefor been immediately
following the Effective Time of the Merger.
(c) Fractional Shares. No fractional shares of Norwest Common Stock and
no certificates or scrip certificates therefor shall be issued to represent any
such fractional interest, and any holder thereof shall be paid an amount of cash
equal to the product obtained by multiplying the fractional share interest to
which such holder is entitled by the average of the closing prices of a share of
Norwest Common Stock as reported by the consolidated tape of the New York Stock
Exchange for each of the five (5) trading days ending on the day immediately
preceding the meeting of shareholders required by paragraph 4(c) of this
Agreement.
(d) Mechanics of Closing Merger. Subject to the terms and conditions
set forth herein, the Merger Agreement shall be executed and it or Articles of
Merger or a Certificate of Merger shall be filed with the Secretary of State of
the State of Minnesota 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 Merger
to be completed as soon as practicable after the receipt of final regulatory
approval of the Merger and the expiration of all required waiting periods. The
time that the filing referred to in the first sentence of this paragraph is made
is herein referred to as the "Time of Filing". The day on which such filing is
made and accepted is herein referred to as the "Effective Date of the Merger".
The "Effective Time of the Merger" shall be 11:59 p.m. Minneapolis, Minnesota
time on the Effective Date of the Merger. At the Effective Time of the Merger on
the Effective Date of the Merger, the separate existence of Merger Co. shall
cease and Merger Co. will be merged with and into Bancshares pursuant to the
Merger Agreement.
A-2
<PAGE>
The closing of the transactions contemplated by this Agreement and the
Merger Agreement (the "Closing") shall take place on the Closing Date at the
offices of Norwest, Norwest Center, Sixth and Marquette, Minneapolis, Minnesota.
2. REPRESENTATIONS AND WARRANTIES OF BANCSHARES. Bancshares represents
and warrants to Norwest as follows:
(a) Organization and Authority. Bancshares is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota, 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 Bancshares and the Bancshares 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. Bancshares is
registered as a bank holding company with the Federal Reserve Board under the
Bank Holding Company Act of 1956, as amended (the "BHC Act"). Bancshares has
furnished Norwest true and correct copies of its articles of incorporation and
by-laws, as amended.
(b) Bancshares' Subsidiaries. Schedule 2(b) sets forth a complete and
correct list of all of Bancshares' subsidiaries as of the date hereof
(individually a "Bancshares Subsidiary" and collectively the "Bancshares
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
Bancshares. No equity security of any Bancshares 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 Bancshares Subsidiary is bound to issue additional
shares of its capital stock, or any option, warrant or right to purchase or
acquire any additional shares of its capital stock. Subject to 12 U.S.C. ss. 55
(1982) and the Minnesota Business Corporation Act, all of such shares so owned
by Bancshares 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 Bancshares 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), Bancshares 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 Bancshares consists
of 25,000 shares of common stock, $1.00 par value, of which as of the close of
business on December 31, 1997, 13,576 shares were outstanding and no shares were
held in the treasury. The maximum number of shares of Bancshares Common Stock
(assuming for
A-3
<PAGE>
this purpose that phantom shares and other share-equivalents constitute
Bancshares Common Stock) that would be outstanding as of the Effective Date of
the Merger if all options, warrants, conversion rights and other rights with
respect thereto were exercised is 13,576. All of the outstanding shares of
capital stock of Bancshares have been duly and validly authorized and issued and
are fully paid and nonassessable. Except as set forth in Schedule 2(c), there
are no outstanding subscriptions, contracts, conversion privileges, options,
warrants, calls, preemptive rights or other rights obligating Bancshares or any
Bancshares Subsidiary to issue, sell or otherwise dispose of, or to purchase,
redeem or otherwise acquire, any shares of capital stock of Bancshares or any
Bancshares Subsidiary. Since December 31, 1997 no shares of Bancshares capital
stock have been purchased, redeemed or otherwise acquired, directly or
indirectly, by Bancshares or any Bancshares Subsidiary and no dividends or other
distributions have been declared, set aside, made or paid to the shareholders of
Bancshares.
(d) Authorization. Bancshares has the corporate power and authority to
enter into this Agreement and the Merger Agreement and, subject to any required
approvals of its shareholders, to carry out its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Merger Agreement by Bancshares and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Bancshares. Subject to such approvals of shareholders and of
government agencies and other governing boards having regulatory authority over
Bancshares as may be required by statute or regulation, this Agreement and the
Merger Agreement are valid and binding obligations of Bancshares enforceable
against Bancshares in accordance with their respective terms.
Except as set forth on Schedule 2(d), neither the execution, delivery
and performance by Bancshares of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor compliance
by Bancshares 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 Bancshares or any Bancshares 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 Bancshares or any Bancshares Subsidiary is a party or by which it may be
bound, or to which Bancshares or any Bancshares Subsidiary or any of the
properties or assets of Bancshares or any Bancshares 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 Bancshares, violate any judgment,
ruling, order, writ, injunction, decree, statute, rule or regulation applicable
to Bancshares or any Bancshares Subsidiary or any of their respective properties
or assets.
A-4
<PAGE>
Other than in connection or in compliance with the provisions of the
Securities Act of 1933 and the rules and regulations thereunder (the "Securities
Act"), the Securities Exchange Act of 1934 and the rules and regulations
thereunder (the "Exchange Act"), the securities or blue sky laws of the various
states or filings, consents, reviews, authorizations, approvals or exemptions
required under the BHC Act or the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 ("HSR Act"), and filings required to effect the Merger under Minnesota
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 Bancshares of the transactions contemplated by this Agreement
and the Merger Agreement.
(e) Bancshares Financial Statements. The unaudited consolidated balance
sheets of Bancshares and Bancshares' Subsidiaries as of December 31, 1996 and
1995 and related consolidated statements of income, shareholders' equity and
cash flows for the two years ended December 31, 1996, together with the notes
thereto, prepared by Larson, Allen and Weishair and Co., LLP, and the audited
consolidated balance sheets of Bancshares and Bancshares' Subsidiaries as of
December 31, 1997 and related consolidated statements of income, shareholders'
equity and cash flows for the year ended December 31, 1997, together with the
notes thereto, certified by Larson, Allen and Weishair and Co., LLP
(collectively, the "Bancshares Financial Statements"), will be, when delivered
to Norwest pursuant to paragraph 4(d) hereof, 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
Bancshares and Bancshares' Subsidiaries at the dates and the consolidated
results of operations and cash flows of Bancshares and Bancshares' Subsidiaries
for the periods stated therein.
(f) Reports. Since December 31, 1992, Bancshares and each Bancshares
Subsidiary has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with (i) the
Securities and Exchange Commission (the "SEC"), including, but not limited to,
Forms 10-K, Forms 10-Q and proxy statements, (ii) the Federal Reserve Board,
(iii) the Federal Deposit Insurance Corporation (the "FDIC"), (iv) the United
States Comptroller of the Currency (the "Comptroller") and (v) any applicable
state securities or banking authorities. All such reports and statements filed
with any such regulatory body or authority are collectively referred to herein
as the "Bancshares Reports". As of their respective dates, the Bancshares
Reports complied in all material respects with all the rules and regulations
promulgated by the SEC, the Federal Reserve Board, the FDIC, the Comptroller and
applicable state securities or banking authorities, as the case may be, and did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Copies of all the Bancshares Reports have been made available to
Norwest by Bancshares.
A-5
<PAGE>
(g) Properties and Leases. Except as may be reflected in the Bancshares
Financial Statements and except for any lien for current taxes not yet
delinquent, Bancshares and each Bancshares Subsidiary have good title free and
clear of any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Bancshares'
consolidated balance sheet as of December 31, 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 Bancshares or any Bancshares Subsidiary
pursuant to which Bancshares or such Bancshares 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 Bancshares or such
Bancshares Subsidiary or any event which, with notice or lapse of time or both,
would constitute such a material default. Substantially all Bancshares' and each
Bancshares 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 Bancshares and the Bancshares Subsidiaries has filed
all federal, state, county, local and foreign tax returns, including information
returns, required to be filed by it, and paid all taxes owed by it, including
those with respect to income, withholding, social security, unemployment,
workers compensation, franchise, ad valorem, premium, excise and sales taxes,
and no taxes shown on such returns to be owed by it or assessments received by
it are delinquent. The federal income tax returns of Bancshares and the
Bancshares Subsidiaries for the fiscal year ended December 31, 1994, 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 Bancshares nor any Bancshares Subsidiary
is a party to any pending action or proceeding, nor is any such action or
proceeding threatened by any governmental authority, for the assessment or
collection of taxes, interest, penalties, assessments or deficiencies and (ii)
no issue has been raised by any federal, state, local or foreign taxing
authority in connection with an audit or examination of the tax returns,
business or properties of Bancshares or any Bancshares Subsidiary which has not
been settled, resolved and fully satisfied. Each of Bancshares and the
Bancshares Subsidiaries has paid all taxes owed or which it is required to
withhold from amounts owing to employees, creditors or other third parties. The
consolidated balance sheet as of December 31, 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 Bancshares and the Bancshares Subsidiaries with respect to all
periods through the date thereof.
(i) Absence of Certain Changes. Since December 31, 1997 there has been
no change in the business, financial condition or results of operations of
Bancshares or any Bancshares Subsidiary, which has had, or may reasonably be
expected to have, a material
A-6
<PAGE>
adverse effect on the business, financial condition or results of operations of
Bancshares and the Bancshares Subsidiaries taken as a whole.
(j) Commitments and Contracts. Except as set forth on Schedule 2(j),
neither Bancshares nor any Bancshares 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 Bancshares or such Bancshares 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 Bancshares or any
Bancshares 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, Bancshares or any Bancshares 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. Bancshares has furnished Norwest
copies of (i) all attorney responses to the request of the independent auditors
for Bancshares with
A-7
<PAGE>
respect to loss contingencies as of December 31, 1997 in connection with the
Bancshares financial statements, and (ii) a written list of legal and regulatory
proceedings filed against Bancshares or any Bancshares Subsidiary since said
date. Neither Bancshares nor any Bancshares Subsidiary is a party to any pending
or, to the best knowledge of Bancshares, 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 Bancshares and the Bancshares Subsidiaries
taken as a whole.
(l) Insurance. Bancshares and each Bancshares Subsidiary is presently
insured, and during each of the past five calendar years (or during such lesser
period of time as Bancshares has owned such Bancshares 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. Bancshares and each Bancshares 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 Bancshares or such Bancshares
Subsidiary; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the best knowledge of Bancshares,
no suspension or cancellation of any of them is threatened; and all such
filings, applications and registrations are current. The conduct by Bancshares
and each Bancshares 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 Bancshares nor any Bancshares
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 Bancshares or any
Bancshares Subsidiary which reasonably could be expected to have a material
adverse effect on the business or properties of Bancshares and the Bancshares
Subsidiaries taken as a whole.
(n) Labor. No work stoppage involving Bancshares or any Bancshares
Subsidiary is pending or, to the best knowledge of Bancshares, threatened.
Neither Bancshares nor any Bancshares 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
Bancshares or such Bancshares Subsidiary. Employees of Bancshares and the
Bancshares Subsidiaries are not
A-8
<PAGE>
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 Bancshares no officer or director of
Bancshares or any Bancshares Subsidiary, or any "associate" (as such term is
defined in Rule l4a-1 under the Exchange Act) of any such officer or director,
has any interest in any material contract or property (real or personal),
tangible or intangible, used in or pertaining to the business of Bancshares or
any Bancshares Subsidiary.
Schedule 2(o) sets forth a correct and complete list of any loan from
Bancshares or any Bancshares 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 Bancshares' or such Bancshares Subsidiary's Board of Directors.
(p) Bancshares 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 Bancshares or any Bancshares 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 Bancshares or any Bancshares 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), Bancshares or the
Bancshares 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. Bancshares 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.
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<PAGE>
(iv) Except as disclosed in Schedule 2(p), and to the best
knowledge of Bancshares, no Plan or any trust created thereunder, nor
any trustee, fiduciary or administrator thereof, has engaged in a
"prohibited transaction", as such term is defined in Section 4975 of
the Code or Section 406 of ERISA or violated any of the fiduciary
standards under Part 4 of Title I of ERISA which could subject, to the
best knowledge of Bancshares, 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
Bancshares and the Bancshares 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 Merger
Agreement.
(vi) No Plan or any trust created thereunder has incurred any
"accumulated funding deficiency", as such term is defined in Section
412 of the Code (whether or not waived), since the effective date of
ERISA.
(vii) Except as disclosed in Schedule 2(p), neither the
execution and delivery of this Agreement and the Merger Agreement nor
the consummation of the transactions contemplated hereby and thereby
will (i) result in any material payment (including, without limitation,
severance, unemployment compensation, golden parachute or otherwise)
becoming due to any director or employee or former employee of
Bancshares or any Bancshares 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 Bancshares
and the Bancshares Subsidiaries supplied or to be supplied by Bancshares 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 Bancshares Common Stock pursuant to the provisions of
the Merger Agreement (the "Registration Statement"), (ii) the proxy statement to
be mailed to Bancshares' shareholders in connection with the meeting to be
called to consider the Merger (the "Proxy Statement") and (iii) any other
documents to be filed with the SEC or any regulatory authority in connection
with the transactions contemplated hereby or by the Merger Agreement will, at
the respective times such documents are filed with the SEC or any regulatory
authority and, in the case of the Registration Statement, when it becomes
effective and, with respect to the Proxy Statement, when mailed, 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
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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 Bancshares and the Bancshares
Subsidiaries are responsible for filing with the SEC and any other regulatory
authority in connection with the Merger will comply as to form in all material
respects with the provisions of applicable law.
(r) Registration Obligations. Except as set forth on Schedule 2(r),
neither Bancshares nor any Bancshares Subsidiary is under any obligation,
contingent or otherwise, which will survive the Merger by reason of any
agreement to register any of its securities under the Securities Act.
(s) Brokers and Finders. Neither Bancshares nor any Bancshares
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 Bancshares or any Bancshares
Subsidiary in connection with this Agreement and the Merger Agreement or the
transactions contemplated hereby and thereby.
(t) Administration of Trust Accounts. Bancshares and each Bancshares
Subsidiary has properly administered in all respects material and which could
reasonably be expected to be material to the financial condition of Bancshares
and the Bancshares Subsidiaries taken as a whole all accounts for which it acts
as a fiduciary, including but not limited to accounts for which it serves as a
trustee, agent, custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the governing documents and
applicable state and federal law and regulation and common law. Neither
Bancshares, any Bancshares Subsidiary, nor any director, officer or employee of
Bancshares or any Bancshares Subsidiary has committed any breach of trust with
respect to any such fiduciary account which is material to or could reasonably
be expected to be material to the financial condition of Bancshares and the
Bancshares Subsidiaries taken as a whole, and the accountings for each such
fiduciary account are true and correct in all material respects and accurately
reflect the assets of such fiduciary account.
(u) No Defaults. Neither Bancshares nor any Bancshares 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 Bancshares and the Bancshares Subsidiaries, taken
as a whole. To the best of Bancshares' knowledge, all parties with whom
Bancshares or any Bancshares Subsidiary has material leases, agreements or
contracts or who owe to Bancshares or any Bancshares Subsidiary material
obligations
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other than with respect to those arising in the ordinary course of the banking
business of the Bancshares 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 Bancshares or any Bancshares 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 Bancshares' knowledge, threatened against Bancshares or any Bancshares
Subsidiary the result of which has had or could reasonably be expected to have a
material adverse effect upon Bancshares and Bancshares' Subsidiaries taken as a
whole; to the best of Bancshares' knowledge there is no reasonable basis for any
such proceeding, claim or action; and to the best of Bancshares' knowledge
neither Bancshares nor any Bancshares 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. Bancshares 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 Bancshares 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, 1997, 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
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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. As of December 31, 1997, 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 December 31, 1997,
980,000 shares of Cumulative Tracking Preferred Stock, at $200 stated value, and
10,022 shares of ESOP Cumulative Convertible Preferred Stock, at $1,000 stated
value, 20,625 shares of 1995 ESOP Cumulative Convertible Preferred Stock, at
$1,000 stated value, 22,831 shares of 1996 ESOP Cumulative Convertible Preferred
Stock, at $1,000 stated value, and 22,927 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 December 31, 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 December 31, 1997, 758,619,494 shares were outstanding and
10,493,685 shares were held in the treasury. All of the outstanding shares of
capital stock of Norwest have been duly and validly authorized and issued and
are fully paid and nonassessable.
(d) Authorization. Norwest has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by Norwest and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Norwest. No approval or consent by the stockholders
of Norwest is necessary for the execution and delivery of this Agreement and the
Merger Agreement and the consummation of the transactions contemplated hereby
and thereby. Subject to such approvals of government agencies and other
governing boards having regulatory authority over Norwest as may be required by
statute or regulation, this Agreement is a valid and binding obligation of
Norwest enforceable against Norwest in accordance with its terms.
Neither the execution, delivery and performance by Norwest of this
Agreement or the Merger Agreement, nor the consummation of the transactions
contemplated hereby and thereby, nor compliance by Norwest with any of the
provisions hereof or thereof, will (i) 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
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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 Merger under Minnesota law, no notice to, filing with, exemption or
review by, or authorization, consent or approval of, any public body or
authority is necessary for the consummation by Norwest of the transactions
contemplated by this Agreement and the Merger Agreement.
(e) Norwest Financial Statements. The consolidated balance sheets of
Norwest and Norwest's subsidiaries as of December 31, 1997 and 1996 and related
consolidated statements of income, stockholders' equity and cash flows for the
three years ended December 31, 1997, together with the notes thereto, certified
by KPMG Peat Marwick LLP and included in Norwest's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 (the "Norwest 10-K") 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, 1992, 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,
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options, encumbrances or similar restrictions to all the real and personal
property reflected in Norwest's consolidated balance sheet as of December 31,
1997 included in Norwest's Annual Report on Form 10-K for the period then ended,
and all real and personal property acquired since such date, except such real
and personal property has been disposed of in the ordinary course of business.
All leases of real property and all other leases material to Norwest or any
Norwest Subsidiary pursuant to which Norwest or such Norwest Subsidiary, as
lessee, leases real or personal property, are valid and effective in accordance
with their respective terms, and there is not, under any such lease, any
material existing default by Norwest or such Norwest Subsidiary or any event
which, with notice or lapse of time or both, would constitute such a material
default. Substantially all Norwest's and each Norwest Subsidiary's buildings and
equipment in regular use have been well maintained and are in good and
serviceable condition, reasonable wear and tear excepted.
(h) Taxes. Each of Norwest and the Norwest Subsidiaries has filed all
material federal, state, county, local and foreign tax returns, including
information returns, required 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, 1997, 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, 1997 neither Norwest nor any Norwest Subsidiary is a party or
subject to any of the following (whether written or oral, express or implied):
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(i) any labor contract or agreement with any labor union;
(ii) any contract not made in the ordinary course of business
containing covenants which materially limit the ability of Norwest or
any Norwest Subsidiary to compete in any line of business or with any
person or which involve any material restriction of the geographical
area in which, or method by which, Norwest or any Norwest Subsidiary
may carry on its business (other than as may be required by law or
applicable regulatory authorities);
(iii) any other contract or agreement which is a "material
contract" within the meaning of Item 601(b)(10) of Regulation S-K.
(k) Litigation and Other Proceedings. Neither Norwest nor any Norwest
Subsidiary is a party to any pending or, to the best knowledge of Norwest,
threatened, claim, action, suit, investigation or proceeding, or is subject to
any order, judgment or 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
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Norwest Subsidiary which reasonably could be expected to have a material adverse
effect on the business or properties of Norwest and its subsidiaries taken as a
whole.
(n) Labor. No work stoppage involving Norwest or any Norwest Subsidiary
is pending or, to the best knowledge of Norwest, threatened. Neither Norwest nor
any Norwest Subsidiary is involved in, or threatened with or affected by, any
labor dispute, arbitration, lawsuit or administrative proceeding which could
materially and adversely affect the business of Norwest or such Norwest
Subsidiary. Except as set forth on Schedule 3(j), employees of Norwest and the
Norwest Subsidiaries are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees.
(o) Norwest Benefit Plans.
(i) As of January 1, 1998, 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
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subject, to the best knowledge of Norwest, such Norwest Plan or trust,
or any trustee, fiduciary or administrator thereof, or any party
dealing with any such Norwest Plan or trust, to the tax or penalty on
prohibited transactions imposed by said Section 4975 or would result in
material liability to Norwest and its subsidiaries taken as a whole.
(v) Except as set forth on Schedule 3(o), no Norwest Plan
which is subject to Title IV of ERISA or any trust created thereunder
has been terminated, nor have there been any "reportable events" as
that term is defined in Section 4043 of ERISA with respect to any
Norwest Plan, other than those events which may result from the
transactions contemplated by this Agreement and the Merger Agreement.
(vi) No Norwest Plan or any trust created thereunder has
incurred any "accumulated funding deficiency", as such term is defined
in Section 412 of the Code (whether or not waived), during the last
five Norwest Plan years which would result in a material liability.
(vii) Neither the execution and delivery of this Agreement and
the Merger Agreement nor the consummation of the transactions
contemplated hereby and thereby will (i) result in any material payment
(including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or employee
or former employee of Norwest under any Norwest Plan or otherwise, (ii)
materially increase any benefits otherwise payable under any Norwest
Plan or (iii) result in the acceleration of the time of payment or
vesting of any such benefits to any material extent.
(p) Registration Statement, etc. None of the information regarding
Norwest and its subsidiaries supplied or to be supplied by Norwest for inclusion
in (i) the Registration Statement, (ii) the Proxy Statement, or (iii) any other
documents to be filed with the SEC or any regulatory authority in connection
with the transactions contemplated hereby or by the Merger Agreement will, at
the respective times such documents are filed with the SEC or any regulatory
authority and, in the case of the Registration Statement, when it becomes
effective and, with respect to the Proxy Statement, when mailed, 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 Merger will comply as to form in all
material respects with the provisions of applicable law.
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(q) Brokers and Finders. Neither Norwest nor any Norwest Subsidiary nor
any of their respective officers, directors or employees has employed any broker
or finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted directly
or indirectly for Norwest or any Norwest Subsidiary in connection with this
Agreement and the Merger Agreement or the transactions contemplated hereby and
thereby.
(r) No Defaults. Neither Norwest nor any Norwest Subsidiary is in
default, nor has any event occurred which, with the passage of time or the
giving of notice, or both, would constitute a default under any material
agreement, indenture, loan agreement or other instrument to which it is a party
or by which it or any of its assets is bound or to which any of its assets is
subject, the result of which has had or could reasonably be expected to have a
material adverse effect upon Norwest and its subsidiaries taken as a whole. To
the best of Norwest's knowledge, all parties with whom Norwest or any Norwest
Subsidiary has material leases, agreements or contracts or who owe to Norwest or
any Norwest Subsidiary material obligations other than with respect to those
arising in the ordinary course of the banking business of the Norwest
Subsidiaries are in compliance therewith in all material respects.
(s) Environmental Liability. There is no legal, administrative, or
other proceeding, claim, or action of any nature seeking to impose, or that
could 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.
(t) Merger Co. As of the Closing Date, Merger Co. will be a corporation
duly organized, validly existing, duly qualified to do business and in good
standing under the laws of its jurisdiction of incorporation, and will have
corporate power and authority to own or lease its properties and assets and to
carry on its business.
4. COVENANTS OF BANCSHARES. Bancshares 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 Merger, Bancshares, and each
Bancshares 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
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prior written consent of Norwest (which consent requirement shall be deemed to
be waived as to any loan approval request to which Norwest has made no response
by the end of the second business day following the day of receipt of the
request by a representative designated by Norwest in writing), make any new loan
or modify, restructure or renew any existing loan (except pursuant to
commitments made prior to the date of this Agreement and except any mortgage
loan made pursuant to a commitment that such loan be promptly sold to an
investor) to any borrower if the amount of the resulting loan, when aggregated
with all other loans or extensions of credit to such person, would be in excess
of $100,000; maintain proper business and accounting records in accordance with
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 Merger; comply in all material respects
with all laws, regulations, ordinances, codes, orders, licenses and permits
applicable to the properties and operations of Bancshares and each Bancshares
Subsidiary the non-compliance with which reasonably could be expected to have a
material adverse effect on Bancshares and the Bancshares 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 Bancshares
herein expressed.
(b) Except as otherwise contemplated or required by this Agreement,
from the date hereof until the Effective Time of the Merger, Bancshares and each
Bancshares subsidiary will not (without the prior written consent of Norwest):
amend or otherwise change its articles of incorporation or association or
by-laws; issue or sell or authorize for issuance or sale, or grant any options
or make other agreements with respect to the issuance or sale or conversion of,
any shares of its capital stock, phantom shares or other share-equivalents, or
any other of its securities; authorize or incur any long-term debt (other than
deposit liabilities); mortgage, pledge or subject to lien or other encumbrance
any of its properties, except in the ordinary course of business; enter into any
material agreement, contract or commitment in excess of $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 made by bank subsidiaries in the ordinary course of business for
terms of up to one (1) year and in amounts of $100,000 or less; amend or
terminate any Plan except as required by law; make any contributions to any Plan
except as required by the terms of such Plan in effect as of the date hereof;
declare, set aside, make or pay any dividend or other distribution with respect
to its capital stock except any dividend declared by a subsidiary's Board of
Directors in accordance with applicable law and regulation; redeem, purchase or
otherwise acquire,
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directly or indirectly, any of the capital stock of Bancshares; increase the
compensation of any officers, directors or executive employees, except pursuant
to existing compensation plans and practices (it being understood that any
earned bonus under the Executive Compensation Plan shall be prorated through,
and payable by First National Bank of Monticello at, the Effective Time of the
Merger); sell or otherwise dispose of any shares of the capital stock of any
Bancshares 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 Bancshares will duly call, and will cause
to be held not later than twenty-five (25) business days following the effective
date of the Registration Statement referred to in paragraph 5(c) hereof, a
meeting of its shareholders and will direct that this Agreement and the Merger
Agreement be submitted to a vote at such meeting. The Board of Directors of
Bancshares will (i) cause proper notice of such meeting to be given to its
shareholders in compliance with the Minnesota Business Corporation Act and other
applicable law and regulation, (ii) recommend by the affirmative vote of the
Board of Directors a vote in favor of approval of this Agreement and the Merger
Agreement, and (iii) use its best efforts to solicit from its shareholders
proxies in favor thereof.
(d) Bancshares will furnish or cause to be furnished to Norwest all the
information concerning Bancshares and its subsidiaries required for inclusion in
the Registration Statement referred to in paragraph 5(c) hereof (including the
audited Bancshares Financial Statements for the year-ended December 31, 1997,
which Bancshares agrees to have prepared by Larson, Allen and Weishair and Co.,
LLP and delivered to Norwest within thirty (30) days of the date of this
Agreement), or any statement or application made by Norwest to any governmental
body in connection with the transactions contemplated by this Agreement. Any
financial statement for any fiscal year provided under this paragraph must
include the audit opinion and the consent of Larson, Allen and Weishair and Co.,
LLP to use such opinion in such Registration Statement.
(e) Bancshares 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 Bancshares 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) Bancshares 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) Bancshares will hold in confidence all documents and information
concerning Norwest and its subsidiaries furnished to Bancshares 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 Bancshares' outside professional
advisers in connection with this Agreement, with the
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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 Bancshares, in the public domain, or later acquired by Bancshares 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 Bancshares, nor any Bancshares 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 Bancshares or any Bancshares 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 Bancshares or any
Bancshares Subsidiary except in the ordinary course of business, or (iv) to
merge, consolidate or otherwise combine with Bancshares or any Bancshares
Subsidiary. If any corporation, partnership, person or other entity or group
makes an offer or inquiry to Bancshares or any Bancshares Subsidiary concerning
any of the foregoing, Bancshares or such Bancshares Subsidiary will promptly
disclose such offer or inquiry, including the terms thereof, to Norwest.
(i) Bancshares 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) Bancshares and each Bancshares Subsidiary will take all action
necessary or required (i) to terminate or amend, if requested by Norwest, all
qualified pension and welfare benefit plans and all non-qualified benefit plans
and compensation arrangements as of the Effective Date of the Merger, and (ii)
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
Merger.
(k) [Intentionally left blank]
(l) Bancshares shall use its best efforts to obtain and deliver at
least 32 days prior to the Effective Date of the Merger signed representations
substantially in the form attached hereto as Exhibit B to Norwest by each
executive officer, director or shareholder of Bancshares who may reasonably be
deemed an "affiliate" of Bancshares within the meaning of such term as used in
Rule 145 under the Securities Act.
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(m) Bancshares shall establish such additional accruals and reserves as
may be necessary to conform Bancshares' accounting and credit loss reserve
practices and methods to those of Norwest and Norwest's plans with respect to
the conduct of Bancshares' business following the Merger and to provide for the
costs and expenses relating to the consummation by Bancshares of the Merger and
the other transactions contemplated by this Agreement.
(n) Bancshares 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 of this Agreement. Bancshares 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. Bancshares shall obtain a survey and assessment of all potential
asbestos containing material in owned or leased properties (other than OREO
property) and a written report of the results shall be delivered to Norwest
within four weeks of execution of the definitive agreement.
(o) Bancshares shall obtain, at its sole expense, commitments for title
insurance and boundary surveys for each bank facility which shall be delivered
to Norwest no later than four (4) weeks from the date of this Agreement.
5. COVENANTS OF NORWEST. Norwest covenants and agrees with Bancshares
as follows:
(a) From the date hereof until the Effective Time of the Merger,
Norwest will maintain its corporate existence in good standing; conduct, and
cause the Norwest Subsidiaries to conduct, their respective businesses in
compliance with all material obligations and duties imposed on them by all laws,
governmental regulations, rules and ordinances, and judicial orders, judgments
and decrees applicable to Norwest or the Norwest Subsidiaries, their businesses
or their properties; maintain all books and records of it and the Norwest
Subsidiaries, including all financial statements, in accordance with the
accounting principles and practices consistent with those used for the Norwest
Financial Statements, except for changes in such principles and practices
required under generally accepted accounting principles.
(b) Norwest will furnish to Bancshares all the information concerning
Norwest required for inclusion in a proxy statement or statements to be sent to
the shareholders of Bancshares, or in any statement or application made by
Bancshares 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 Bancshares pursuant to the
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Merger Agreement, and will use its best efforts to cause the Registration
Statement to become effective. At the time the Registration Statement becomes
effective, the Registration Statement will comply in all material respects with
the provisions of the Securities Act and the published rules and regulations
thereunder, and will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not false or misleading, and at the time of mailing thereof
to the Bancshares shareholders, at the time of the Bancshares shareholders'
meeting referred to in paragraph 4(c) hereof and at the Effective Time of the
Merger the prospectus included as part of the Registration Statement, as amended
or supplemented by any amendment or supplement filed by Norwest (hereinafter the
"Prospectus"), will not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not false or
misleading; provided, however, that none of the provisions of this subparagraph
shall apply to statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information furnished by
Bancshares or any Bancshares 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 Merger 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 Bancshares pursuant to this Agreement and the Merger Agreement
will, upon such issuance and delivery to said shareholders pursuant to the
Merger Agreement, be duly authorized, validly issued, fully paid and
nonassessable. The shares of Norwest Common Stock to be delivered to the
shareholders of Bancshares pursuant to the Merger 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 Merger, all necessary Blue Sky permits and approvals, if
any, required to carry out the transactions contemplated by this Agreement, will
pay all expenses incident thereto and will use its best efforts to obtain such
permits and approvals.
(g) 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 Bancshares to obtain all such approvals and consents required by
Bancshares.
(h) Norwest will hold in confidence all documents and information
concerning Bancshares and Bancshares' 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
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Agreement shall not be consummated, such confidence shall be maintained and such
information shall not be used in competition with Bancshares (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 Bancshares.
(i) Norwest will file any documents or agreements required to be filed
in connection with the Merger under the Minnesota Business Corporation Act.
(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 Bancshares 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 Bancshares notice of receipt of the regulatory
approvals referred to in paragraph 7(e).
(m) [Intentionally left blank].
(n) For a period not exceeding fifteen days prior to the Closing Date,
Norwest will permit Bancshares 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
Bancshares or its representatives shall in any way affect, diminish or terminate
any of the representations, warranties or covenants of Norwest herein expressed.
6. CONDITIONS PRECEDENT TO OBLIGATION OF BANCSHARES. The obligation of
Bancshares to effect the Merger shall be subject to the satisfaction at or
before the Time of Filing of the following further conditions, which may be
waived in writing by Bancshares:
(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 Time of Filing.
(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 and Merger Co. at or before the Time of
Filing.
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<PAGE>
(c) Bancshares shall have received a favorable certificate, dated as of
the Effective Date of the Merger, signed by the Chairman, the President or any
Executive Vice President or Senior Vice President and by the Secretary or
Assistant Secretary of Norwest, as to the matters set forth in subparagraphs (a)
and (b) of this paragraph 6.
(d) This Agreement and the Merger Agreement shall have been approved by
the affirmative vote of the holders of the percentage of the outstanding shares
of Bancshares required for approval of a plan of merger in accordance with the
provisions of Bancshares' Articles of Incorporation and the Minnesota Business
Corporation Act.
(e) Norwest shall have received approval by the Federal Reserve Board
and by such other governmental agencies as may be required by law of the
transactions contemplated by this Agreement and the Merger 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 Bancshares pursuant to this Agreement and the Merger Agreement
shall have been authorized for listing on the New York Stock Exchange and the
Chicago Stock Exchange.
(h) Bancshares shall have received an opinion, dated the Closing Date,
of counsel to Bancshares, substantially to the effect that, for federal income
tax purposes: (i) the Merger will constitute a reorganization within the meaning
of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code; (ii) no gain or loss will
be recognized by the holders of Bancshares 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 Bancshares
will be the same as the basis of Bancshares Common Stock exchanged therefor; and
(iv) the holding period of the shares of Norwest Common Stock received by the
shareholders of Bancshares will include the holding period of the Bancshares
Common Stock, provided such shares of Bancshares Common Stock were held as a
capital asset as of the Effective Time of the Merger.
(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.
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<PAGE>
(j) Little Mountain Land & Cattle Co., a limited partnership which is
controlled by certain shareholders of Bancshares (the "Partnership"), shall have
entered into an agreement (the "Bank Premises Agreement"), on terms and
conditions acceptable to Norwest and the Partnership, providing for (i) the sale
to First National Bank of Monticello (the "Bank") of the Bank's building located
on land owned by the Bank in Monticello, Minnesota (the "Bank Premises") for a
cash price in an amount to be determined pursuant to the Appraisal Procedures
(as hereinafter defined), and (ii) the termination, without penalty to the Bank,
of the building lease and the land lease relating to the Bank Premises, in each
case effective as of the Effective Time of the Merger. The "Appraisal
Procedures" shall be as follows: (a) Norwest and the Partnership shall agree on
a third-party appraiser which shall determine the fair market value of the Bank
Premises, which shall be the cash purchase price unless within ten (10) days
after delivery of the appraisal results either Norwest or the Partnership has
given notice to the other party that it is dissatisfied with the appraisal
results; (b) if either Norwest or the Partnership has given notice to the other
party that it is dissatisfied with the appraisal results, then Norwest and the
Partnership shall each select an appraiser, who shall in turn together select a
third appraiser who shall determine the fair market value of the Bank Premises,
which shall be the cash purchase price. The costs of the initial appraisal shall
be borne equally by Norwest and the Partnership. If a further appraisal is
required pursuant to clause (b) above, each party shall bear the cost of its own
appraiser and the costs of the third appraiser shall be borne equally by Norwest
and the Partnership.
7. CONDITIONS PRECEDENT TO OBLIGATION OF NORWEST. The obligation of
Norwest to effect the Merger shall be subject to the satisfaction at or before
the Time of Filing of the following conditions, which may be waived in writing
by Norwest:
(a) Except as they may be affected by transactions contemplated hereby
and except to the extent such representations and warranties are by their
express provisions made as of a specified date and except for activities or
transactions or events occurring after the date of this Agreement made in the
ordinary course of business and not expressly prohibited by this Agreement, the
representations and warranties contained in paragraph 2 hereof shall be true and
correct in all respects material to Bancshares and the Bancshares Subsidiaries
taken as a whole as if made at the Time of Filing.
(b) Bancshares shall have, or shall have caused to be, performed and
observed in all material respects all covenants, agreements and conditions
hereof to be performed or observed by it at or before the Time of Filing.
(c) This Agreement and the Merger Agreement shall have been approved by
the affirmative vote of the holders of the percentage of the outstanding shares
of Bancshares required for approval of a plan of merger in accordance with the
provisions of Bancshares' Articles of Incorporation and the Minnesota Business
Corporation Act.
(d) Norwest shall have received a favorable certificate dated as of the
Effective Date of the Merger signed by the Chairman or President and by the
Secretary or Assistant
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<PAGE>
Secretary of Bancshares, 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 Merger Agreement and all waiting and appeal periods prescribed by applicable
law or regulation shall have expired. No approvals, licenses or consents granted
by any regulatory authority shall contain any condition or requirement relating
to Bancshares or any Bancshares Subsidiary that, in the good faith judgment of
Norwest, is unreasonably burdensome to Norwest.
(f) Bancshares and each Bancshares Subsidiary shall have obtained any
and all material consents or waivers from other parties to loan agreements,
leases or other contracts material to Bancshares' or such subsidiary's business
required for the consummation of the Merger, and Bancshares and each Bancshares
Subsidiary shall have obtained any and all material permits, authorizations,
consents, waivers and approvals required for the lawful consummation by it of
the Merger.
(g) No 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) [Intentionally left blank]
(i) At any time since the date hereof the total number of shares of
Bancshares Common Stock outstanding and subject to issuance upon exercise
(assuming for this purpose that phantom shares and other share-equivalents
constitute Bancshares Common Stock) of all warrants, options, conversion rights,
phantom shares or other share-equivalents, other than any option held by
Norwest, shall not have exceeded 13,576.
(j) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order, and no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened or be unresolved. Norwest shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
(k) Norwest shall have received from the Chief Executive Officer and
Chief Financial Officer of Bancshares 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 Bancshares
included or incorporated by reference in the Registration Statement are
prepared in
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<PAGE>
accordance with generally accepted accounting principles applied on a
basis consistent with the audited financial statements of Bancshares;
(ii) the amounts reported in the interim quarterly financial
statements of Bancshares agree with the general ledger of Bancshares;
(iii) the annual and quarterly financial statements of
Bancshares and the Bancshares 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 Bancshares and the Bancshares 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 Bancshares and
the Bancshares 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 Bancshares and the
Bancshares Subsidiaries, or in income before equity in undistributed
income of subsidiaries, in each case as compared with the comparable
period of the preceding year, except in each case for changes,
increases or decreases which the Registration Statement discloses have
occurred or may occur or which are described in such letters;
(v) they have reviewed certain amounts, percentages, numbers
of shares and financial information which are derived from the general
accounting records of Bancshares and the Bancshares 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 Bancshares and the Bancshares Subsidiaries and have found
them to be in agreement with financial records and analyses prepared by
Bancshares included in the annual and quarterly financial statements,
except as disclosed in such letters.
(l) Bancshares and the Bancshares Subsidiaries considered as a whole
shall not have sustained since December 31, 1997 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.
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<PAGE>
(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 Bancshares or any Bancshares 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 Bancshares and its subsidiaries taken as a whole.
(n) Since December 31, 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 Bancshares and the Bancshares Subsidiaries taken as a
whole (other than changes in banking laws or regulations, or interpretations
thereof, that affect the banking industry generally or changes in the general
level of interest rates).
(o) Bancshares shall have terminated the Shareholder Control Agreement
dated January 17, 1995 by and among Bancshares and certain shareholders of
Bancshares, effective immediately prior to the Effective Time of the Merger.
(p) Norwest and the Partnership shall have entered into the Bank
Premises Agreement, on terms and conditions acceptable to Norwest and the
Partnership,
8. EMPLOYEE BENEFIT PLANS. Each person who is an employee of Bancshares
or any Bancshares Subsidiary as of the Effective Date of the Merger ("Bancshares
Employees") shall be eligible for participation in the employee welfare and
retirement plans of Norwest, as in effect from time to time, as follows:
(a) Employee Welfare Benefit Plans. Each Bancshares employee shall be
eligible for participation in the employee welfare benefit plans of Norwest
listed below subject to any eligibility requirements applicable to such plans
and shall enter each plan not later than the first day of the calendar quarter
which begins at least 32 days after the Effective Date of the Merger:
Medical Plan
Dental Plan
Vision Plan
Short Term Disability Plan
Long Term Disability Plan Long Term
Care Plan Flexible Benefits Plan
Basic Group Life Insurance Plan Group
Universal Life Insurance Plan
Dependent Group Life Insurance Plan
Business Travel Accident Insurance Plan
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Accidental Death and Dismemberment Plan
Severance Pay Plan
Vacation Program
For the purpose of determining each Bancshares Employee's benefit for the year
in which the Merger occurs under the Norwest vacation program, vacation taken by
an Bancshares Employee in the year in which the Merger occurs will be deducted
from the total Norwest benefit. Bancshares Employees shall receive credit for
years of service to Bancshares, the Bancshares Subsidiaries and any predecessors
of the Bancshares Subsidiaries (to the extent credited under the vacation
programs of Bancshares and the Bancshares Subsidiaries) for the purpose of
determining benefits under the Norwest vacation program.
Bancshares Employees shall receive credit for years of service to Bancshares,
the Bancshares Subsidiaries and any predecessors of the Bancshares Subsidiaries
(to the extent credited under the severance programs of Bancshares and the
Bancshares Subsidiaries) for the purpose of determining benefits under the
Norwest Severance Pay Plan.
(b) Employee Retirement Benefit Plans.
Each Bancshares 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 Bancshares
and the Bancshares 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 Bancshares and the Bancshares
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
Merger.
Each Bancshares 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 Time of
Filing:
(i) by mutual written consent of the parties hereto;
(ii) by either of the parties hereto upon written notice to
the other party if the Merger shall not have been consummated by
December 31, 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
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(iii) by Bancshares 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.
10. EXPENSES. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by Bancshares and Bancshares Subsidiaries shall be
borne by Bancshares, 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.
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 Bancshares:
Little Mountain Bancshares, Inc.
407 Pine Street
Monticello, MN 55362
Attention: Thomas A. Pogatchnik
With a copy to:
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J. Kevin Costley, Esq.
Lindquist & Vennum P.L.L.P.
4200 IDS Center
Minneapolis, MN 55402
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 Merger Agreement contain
the complete agreement between the parties hereto with respect to the Merger and
other transactions contemplated hereby and supersede all prior agreements and
understandings between the parties hereto with respect thereto.
15. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
16. WAIVER AND OTHER ACTION. Either party hereto may, by a signed
writing, give any consent, take any action pursuant to paragraph 9 hereof or
otherwise, or waive any inaccuracies in the representations and warranties by
the other party and compliance by the other party with any of the covenants and
conditions herein.
17. AMENDMENT. At any time before the Time of Filing, the parties
hereto, by action taken by their respective Boards of Directors or pursuant to
authority delegated by their respective Boards of Directors, may amend this
Agreement; provided, however, that no amendment after approval by the
shareholders of Bancshares shall be made which changes in a manner adverse to
such shareholders the consideration to be provided to said shareholders pursuant
to this Agreement and the Merger Agreement.
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
19. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No representation
or warranty contained in the Agreement or the Merger Agreement shall survive the
Merger or except as set forth in paragraph 9(b), the termination of this
Agreement. Paragraph 10 shall survive the Merger.
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.
A-33
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NORWEST CORPORATION LITTLE MOUNTAIN BANCSHARES, INC.
By: /s/ John E. Ganoe By: /s/ James P. Gardner
Its: Vice President Its: Chairman
A-34
<PAGE>
APPENDIX B
MINNESOTA STATUTES
CHAPTER 302A BUSINESS CORPORATIONS
SECTIONS 302A.471 AND 302A.473
<PAGE>
MINNESOTA STATUTES ANNOTATED 1997
CHAPTER 302A. Business Corporations; Shares; Shareholders
302A.471. Rights of dissenting shareholders
Subdivision 1. Actions creating rights. A shareholder of a corporation may
dissent from, and obtain payment for the value of the shareholder's shares in
the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects
the rights or preferences of the shares of the dissenting shareholder in that
it:
(1) alters or abolishes a preferential right of the shares;
(2) created, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a sinking
fund for the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of
the shares to acquire shares, securities other than shares, or rights
to purchase shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a
matter, or to cumulate votes, except as the right may be excluded or
limited through the authorization or issuance of securities of an
existing or new class or series with similar or different voting
rights; except that an amendment to the articles of an issuing public
corporation that provides that section 302A.671 does not apply to a
control share acquisition does not give rise to the right to obtain
payment under this section;
(b) A sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the corporation, but not
including a transaction permitted without shareholder approval in section
302A.661, subdivision 1, or a disposition in dissolution described in section
302A.725, subdivision 2, or a disposition pursuant to an order of a court, or a
disposition for cash on terms requiring that all or substantially all of the net
proceeds of disposition be distributed to the shareholders in accordance with
their respective interests within one year after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B,
to which the corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter
322B, to which the corporation is a party as the corporation whose shares will
be acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or
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(e) Any other corporate action taken pursuant to a shareholder vote
with respect to which the articles, the bylaws, or a resolution approved by the
board directs that dissenting shareholders may obtain payment for their shares.
Subd. 2. Beneficial owners.
(a) A shareholder shall not assert dissenters' rights as to less than
all of the shares registered in the name of the shareholder, unless the
shareholder dissents with respect to all the shares that are beneficially owned
by another person but registered in the name of the shareholder and discloses
the name and address of each beneficial owner on whose behalf the shareholder
dissents. In that event, the rights of the dissenter shall be determined as if
the shares as to which the shareholder has dissented and the other shares were
registered in the names of different shareholders.
(b) The beneficial owner of shares who is not the shareholder may
assert dissenters' rights with respect to shares held on behalf of the
beneficial owner, and shall be treated as a dissenting shareholder under the
terms of this section and section 302A.473, if the beneficial owner submits to
the corporation at the time of or before the assertion of the rights a written
consent of the shareholder.
Subd. 3. Rights not to apply.
(a) Unless the articles, the bylaws, or a resolution approved by the
board otherwise provide, the right to obtain payment under this section does not
apply to a shareholder of the surviving corporation in a merger, if the shares
of the shareholder are not entitled to be voted on the merger.
(b) If a date is fixed according to section 302A.445, subdivision 1,
for the determination of shareholders entitled to receive notice of and to vote
on an action described in subdivision 1, only shareholders as of the date fixed,
and beneficial owners as of the date fixed who hold through shareholders, as
provided in subdivision 2, may exercise dissenters' rights.
Subd. 4. Other rights.
The shareholders of a corporation who have a right under this section
to obtain payment for their shares do not have a right at law or in equity to
have a corporate action described in subdivision 1 set aside or rescinded,
except when the corporate action is fraudulent with regard to the complaining
shareholder or the corporation.
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<PAGE>
MINNESOTA STATUTES ANNOTATED 1997
CHAPTER 302A. Business Corporations; Shares; Shareholders
302A.473. Procedures for asserting dissenters' rights.
Subdivision 1. Definitions.
(a) For purposes of this section, the terms defined in this subdivision
have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action referred to in section 302A.471, subdivision 1 or
the successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective
date of the corporate action referred to in section 302A.471, subdivision 1, up
to and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
Subd. 3. Notice of dissent.
If the proposed action must be approved by the shareholders, a
shareholder who is entitled to dissent under section 302A.471 and who wishes to
exercise dissenters' rights must file with the corporation before the vote on
the proposed action a written notice of intent to demand the fair value of the
shares owned by the shareholder and must not vote the shares in favor of the
proposed action.
Subd. 4. Notice of procedure; deposit of shares.
(a) After the proposed action has been approved by the board and, if
necessary, the shareholders, the corporation shall send to all shareholders who
have complied with subdivision 3 and to all shareholders entitled to dissent if
no shareholder vote was required, a notice that contains:
(1) The address to which a demand for payment and certificates
of certificated shares must be sent in order to obtain payment and the
date by which they must be received;
(2) Any restrictions on transfer of uncertificated shares that
will apply after the demand for payment is received;
B-3
<PAGE>
(3) A form to be used to certify the date on which the
shareholder, or the beneficial owner on whose behalf the shareholder
dissents, acquired the shares or an interest in them and to demand
payment; and
(4) A copy of section 302A.471 and this section and a brief
description of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
Subd. 5. Payment; return of shares.
(a) After the corporate action takes effect, or after the corporation
receives a valid demand for payment, whichever is later, the corporation shall
remit to each dissenting shareholder who has complied with subdivisions 3 and 4
the amount the corporation estimates to be the fair value of the shares, plus
interest, accompanied by:
(1) The corporation's closing balance sheet and statement of
income for a fiscal year ending not more than 16 months before the
effective date of the corporate action, together with the latest
available interim financial statements;
(2) An estimate by the corporation of the fair value of the
shares and a brief description of the method used to reach the
estimate; and
(3) A copy of section 302A.471 and this section, and a brief
description of the procedure to be followed in demanding supplemental
payment.
(b) The corporation may withhold the remittance described in paragraph
(a) from a person who was not a shareholder on the date the action dissented
from was first announced to the public or who is dissenting on behalf of a
person who was not a beneficial owner on that date. If the dissenter has
complied with subdivision 3 and 4, the corporation shall forward to the
dissenter the materials described in paragraph (a), a statement of the reason
for withholding the remittance, and an offer to pay to the dissenter the amount
listed in the materials if the dissenter agrees to accept that amount in full
satisfaction. The dissenter may decline the offer and demand payment under
subdivision 6. Failure to do so entitles the dissenter only to the amount
offered. If the dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the
deposit of certificates or the imposition of transfer restrictions on
uncertificated shares, it shall return all deposited certificates and cancel all
transfer restrictions. However, the corporation may again give notice under
subdivision 4 and require deposit or restrict transfer at a later time.
B-4
<PAGE>
Subd. 6. Supplemental payment; demand.
If a dissenter believes that the amount remitted under subdivision 5 is
less than the fair value of the shares plus interest, the dissenter may give
written notice to the corporation of the dissenter's owner estimate of the fair
value of the shares, plus interest, within 30 days after the corporation mails
the remittance under subdivision 5, and demand payment of the difference.
Otherwise, a dissenter is entitled only to the amount remitted by the
corporation.
Subd. 7. Petition; determination.
If the corporation receives a demand under subdivision 6, it shall,
within 60 days after receiving the demand, either pay to the dissenter the
amount demanded or agreed to by the dissenter after discussion with the
corporation or file in court a petition requesting that the court determine the
fair value of the shares, plus interest. The petition shall be filed in the
county in which the registered office of the corporation is located, except that
a surviving foreign corporation that receives a demand relating to the shares of
a constituent domestic corporation shall file the petition in the county in this
state in which the last registered office of the constituent corporation was
located. The petition shall name as parties all dissenters who have demanded
payment under subdivision 6 and who have not reached agreement with the
corporation. The corporation shall, after filing the petition, serve all parties
with a summons and copy of the petition under the rules of civil procedure.
Nonresidents of this state may be served by registered or certified mail or by
publication as provided by law. Except as otherwise provided, the rules of civil
procedure apply to this proceeding. The jurisdiction of the court is plenary and
exclusive. The court may appoint appraisers, with powers and authorities the
court deems proper, to receive evidence on and recommend the amount of the fair
value of the shares. The court shall determine whether the shareholder or
shareholders in question have fully complied with the requirements of this
section, and shall determine the fair value of the shares, taking into account
any and all factors the court finds relevant, computed by any method or
combination of methods that the court, in its discretion, sees fit to use,
whether or not used by the corporation or by a dissenter. The fair value of the
shares as determined by the court is binding on all shareholders, wherever
located. A dissenter is entitled to judgment in cash for the amount by which the
fair value of the shares as determined by the court, plus interest, exceeds the
amount, if any, remitted under subdivision 5, but shall not be liable to the
corporation for the amount, if any, by which the amount, if any, remitted to the
dissenter under subdivision 5 exceeds the fair value of the shares as determined
by the court, plus interest.
Subd. 8. Costs; fees; expenses.
(a) The Court shall determine the costs and expenses of a proceeding
under subdivision 7, including the reasonable expenses and compensation of any
appraisers appointed by the court, and shall assess those costs and expenses
against the corporation, except that the court may assess part or all of those
costs and expenses against a dissenter
B-5
<PAGE>
whose action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily , vexatiously,
or not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if any.
B-6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes indemnification
of directors and officers of a Delaware corporation under certain circumstances
against expenses, judgments and the like in connection with an action, suit or
proceeding. Article Fourteenth of Norwest's Restated Certificate of
Incorporation provides for broad indemnification of directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits: Parenthetical references to exhibits in the description of
Exhibits 3.1, 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5, 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 March 9, 1998 between
Little Mountain Bancshares, Inc. 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, Exhibit 3 to Norwest's Current
Report on Form 8-K dated June 3, 1997 and Exhibit 3 to Norwest's
Current Report on Form 8-K dated June 8, 1998).
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 20, 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 Lindquist & Vennum PLLP*
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 -- Opinion of Lindquist & Vennum PLLP. (included as a part of
Exhibit 8).
24 -- Powers of Attorney.
99 -- Form of proxy for Special Meeting of Shareholders of Little
Mountain Bancshares, Inc.
*To be filed by amendment.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a posteffective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent posteffective amendment thereof)
which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
(ss.230.424(b) of this chapter) if, in the aggregate, the changes
in volume and price represent no more than 20% change in the
maximum offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such
information in the registration statement.
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 June 16, 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 June 16, 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 Accounting 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 March 9,
1998 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, Exhibit 3 to Norwest's
Current Report on Form 8-K dated June 3, 1997 and
Exhibit 3 to Norwest's Current Report on Form 8-K
dated June 8, 1998).
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
20, 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 Lindquist & Vennum PLLP
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 LLP Electronic
Transmission
23.4 Consent of Lindquist & Vennum PLLP ** (included as
part of Exhibit 8)
24 Powers of Attorney. Electronic
Transmission
99 Form of proxy for Special Meeting of Shareholders of Electronic
Little Mountain Bancshares, Inc. Transmission
- ------------------------
* Parenthetical references to exhibits in the description of Exhibits 3.1,
3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5, 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]
June 16, 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 600,000 shares of common stock, par value $1-2/3
per share (the "Shares"), of Norwest Corporation, a Delaware corporation (the
"Corporation"), which are proposed to be issued by the Corporation in connection
with the merger (the "Merger") of a wholly-owned subsidiary of the Corporation
with Little Mountain Bancshares, Inc. I have examined such corporate records and
other documents, including the Registration Statement on Form S-4 relating to
the Shares, and have reviewed such matters of law as I have deemed necessary for
this opinion, and I advise you that in my opinion:
1. The Corporation is a corporation duly organized and existing under
the laws of the State of Delaware.
2. All necessary corporate action on the part of the Corporation has
been taken to authorize the issuance of the Shares in connection with the
Merger, and, when issued as described in the Registration Statement, the Shares
will be legally and validly issued, fully paid and nonassessable.
I consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Stanley S. Stroup
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Norwest Corporation:
We consent to the use of our report dated January 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
June 16, 1998
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Little Mountain Bancshares, Inc.
We consent to the use of our report dated April 23, 1998 included herein and to
the reference to our firm under the heading "EXPERTS" in the prospectus.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
June 16,1998
<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 600,000 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
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota, 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 23rd day of February, 1998.
/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 600,000 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 of
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota,, 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 23rd day of February, 1998.
/s/ J.A. Blanchard III
---------------------------
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 600,000 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
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota, 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 23rd day of February, 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 600,000 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
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota, 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 23rd day of February, 1998.
/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 600,000 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
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota, 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 23rd day of February, 1998.
/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 600,000 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
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota, 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 23rd day of February, 1998.
/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 600,000 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
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota, 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 23rd day of February, 1998.
/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 600,000 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
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota, 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 23rd day of February, 1998.
/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 600,000 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
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota, 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 23rd day of February, 1998.
/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 600,000 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
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota, 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 23rd day of February, 1998.
/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 600,000 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
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota, 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 23rd day of February, 1998.
/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 600,000 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
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota, 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 23rd day of February, 1998.
/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 600,000 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
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota, 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 23rd day of February, 1998.
/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 600,000 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
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota, 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 23rd day of February, 1998.
/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 600,000 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
Little Mountain Bancshares, Inc. and its subsidiary, located in Monticello,
Minnesota, 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 23rd day of February, 1998.
/s/ Michael W. Wright
---------------------------
Michael W. Wright
<PAGE>
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS OF LITTLE MOUNTAIN BANCSHARES, INC.
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 Little Mountain Bancshares, Inc. ("Bancshares") to be held on July 29, 1998
at 1:00 p.m., local time, at 407 Pine Street, Monticello, Minnesota, or at any
adjournment or postponement thereof, as follows, hereby revoking any proxy
previously given:
1. To approve the Agreement and Plan of Reorganization dated March 9,
1998 (the "Reorganization Agreement") between Little Mountain Bancshares, Inc.
and Norwest Corporation ("Norwest") pursuant to which a wholly-owned subsidiary
of Norwest will merge with Bancshares and Bancshares will become a wholly-owned
subsidiary of Norwest (the "Merger"), all upon the terms and subject to the
conditions set forth in the Reorganization Agreement, 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
Bancshares as may be necessary or appropriate to carry out the intent and
purposes of the Consolidation.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In the discretion of the persons appointed proxies hereby on such
other matters as may properly come before the Special Meeting.
Shares represented by this proxy will be voted as directed by the
shareholder. The Board of Directors recommends a vote "FOR" proposal 1. If no
direction is supplied, the proxy will be voted "FOR" proposal 1.
Dated:_______________________________, 199_.
_____________________________________________
(Please sign exactly as name appears at left.)
_____________________________________________
(If stock is owned by more than one person, all
owners should sign. Persons signing as executors
administrators, trustees, or in similar capacities
should so indicate.)
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF LITTLE MOUNTAIN BANCSHARES, INC.
