<PAGE>
As filed with the Securities and Exchange Commission on November 15, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
WELLS FARGO & COMPANY
(Exact name of registrant as specified in charter)
Delaware 6712 41-0449260
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94163
(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
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94163
415-396-6019
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Robert J. Kaukol William T. Luedke IV
Wells Fargo & Company Bracewell & Patterson, L.L.P.
1050 17th Street, Suite 120 711 Louisiana, Suite 2900
Denver, Colorado 80265 Houston, Texas 77002-2781
(303) 899-5802 (713) 223-2900
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this registration statement becomes
effective.
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: [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Proposed
Maximum Maximum Amount Of
Title Of Securities To Amount To Be Offering Price Aggregate Registration
Be Registered Registered Per Share(1) Offering Price Fee(2)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, $1 2/3 par
value (and associated
preferred stock purchase
rights) 6,032,096 $42.84 $258,414,993 $71,839.37
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</TABLE>
(1) Computed in accordance with Rule 457(f)(1) based on the aggregate market
value on November 10, 1999 of the maximum number of shares of Prime
Bancshares, Inc. common stock expected to be canceled in connection with
the merger described herein and computed by dividing (i) the product of (A)
the last sale price of Prime Bancshares, Inc. common stock as reported on
the Nasdaq National Market System for November 10, 1999 ($25.31) by (B)
10,209,483 representing the maximum number of shares of Prime Bancshares,
Inc. common stock expected to be canceled in the merger, by (ii) 6,032,096,
representing the maximum number of shares of Wells Fargo common stock
expected to be issued in the merger.
(2)Based on .000278 of the proposed maximum aggregate offering price.
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.
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<PAGE>
PRIME BANCSHARES, INC.
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY , 2000
----------------
TO THE SHAREHOLDERS OF PRIME BANCSHARES, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Prime
Bancshares, Inc., a Texas corporation ("Prime"), will be held on , January
, 2000, at .m., local time, at Prime's headquarters located at 12200
Northwest Freeway, Houston, Texas 77092, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Reorganization, dated as of July 27, 1999 (the "Reorganization
Agreement"), by and between Prime and Wells Fargo & Company ("Wells
Fargo"), pursuant to which, among other things, a wholly-owned
subsidiary of Wells Fargo will merge with and into Prime upon the terms
and subject to the conditions set forth in the Reorganization Agreement,
as more fully described in the proxy statement-prospectus which follows
this notice.
2. To transact such other business as may properly be brought before the
special meeting and any adjournments or postponements of the special
meeting.
The board of directors of Prime has fixed the close of business on December
, 1999 as the record date for determining those shareholders entitled to vote
at the special meeting and any adjournments or postponements of the special
meeting. Only shareholders of record on this date are entitled to notice of,
and to vote at, the special meeting and any adjournments or postponements of
the special meeting.
By Order of the Board of Directors
E. J. Guzzo
President
Houston, Texas
December , 1999
Please promptly complete, sign, date and return the enclosed proxy sheet
whether or not you plan to attend the special meeting. Failure to return a
properly executed proxy or to vote at the meeting will have the same effect
as a vote against the Reorganization Agreement and the merger. You may still
vote at the special meeting even if you have previously returned your proxy
sheet.
<PAGE>
[PRIME LOGO]
The board of directors of Prime Bancshares, Inc. has approved the sale of
Prime to Wells Fargo & Company. The sale requires the approval of Prime's
shareholders. A special meeting of shareholders will be held to vote on the
proposed sale. The date, time and place of the meeting are as follows:
, January , 2000
.m., local time
12200 Northwest Freeway
Houston, Texas 77092
If the sale is completed, Wells Fargo will exchange a total of 6,032,096
shares of its common stock for all shares of Prime common stock then
outstanding.
The exchange ratio, or the number of shares of Wells Fargo common stock you
will receive for each share of Prime common stock you own, will be determined
by dividing 6,032,096 by the number of shares of Prime common stock outstanding
immediately before the transaction is completed. Based on a maximum of
10,209,483 shares of Prime common stock outstanding, Wells Fargo will exchange
approximately 0.5908 shares of its common stock for each share of Prime common
stock.
On July 26, 1999, the day before Prime agreed to be acquired by Wells Fargo,
the closing price of Wells Fargo common stock was $40.88 a share, making the
value of 0.5908 shares of Wells Fargo common stock on that date equal to
$24.15. On July 26, 1999, Prime common stock last traded at $21.31 a share. The
prices of Wells Fargo and Prime common stock will fluctuate between now and the
time the transaction is completed.
This proxy statement-prospectus provides detailed information about the
proposed acquisition. Please read this entire document carefully. You can find
additional information about Wells Fargo and Prime from documents filed with
the Securities Exchange Commission.
Whether or not you plan to attend the meeting, please complete and mail the
enclosed proxy sheet. If you sign, date and mail your proxy sheet without
indicating how you want to vote, your proxy will be voted in favor of the
transaction. If you fail to return your sheet, the effect will be the same as a
vote against the transaction.
No vote of Wells Fargo stockholders is required to approve the transaction.
Fredric M. Saunders
Chairman of the Board and
Chief Executive Officer
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Wells Fargo 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 December , 1999.
First mailed to Prime shareholders on or about December , 1999.
<PAGE>
Additional Information
This proxy statement-prospectus incorporates important business and financial
information about Wells Fargo and Prime that is not included in or delivered
with this document. See "Where You Can Find More Information" on page for a
list of the documents that Wells Fargo and Prime have incorporated into this
proxy statement-prospectus.
Documents that have been incorporated by reference are available to you
without charge upon written or oral request made as follows:
Wells Fargo Documents: Prime Documents:
Corporate Secretary Corporate Secretary
Wells Fargo & Company Prime Bancshares, Inc.
MAC N9305-173 12200 Northwest Freeway
Sixth and Marquette Houston, Texas 77092
Minneapolis, Minnesota 55479 (713) 209-6000
(612) 667-8655
To obtain documents in time for the special meeting, your request should be
received by January , 2000.
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Questions and Answers About This Document................................... ii
Summary..................................................................... 1
Special Meeting Of Shareholders............................................. 7
Date, Time And Place...................................................... 7
Record Date............................................................... 7
Vote Required To Approve Merger........................................... 7
Voting And Revocation Of Proxies.......................................... 7
Agreement To Vote For The Merger.......................................... 7
Solicitation Of Proxies................................................... 8
Other Matters Considered At The Meeting................................... 8
The Merger.................................................................. 9
Purpose And Effect Of The Merger.......................................... 9
Background Of And Reasons For The Merger.................................. 9
Opinion Of Prime's Financial Advisor...................................... 10
Additional Interests Of Prime Management.................................. 14
Dissenters' Rights........................................................ 16
Exchange Of Certificates.................................................. 16
Regulatory Approvals...................................................... 17
Effect Of Merger On Prime's Employee Benefit Plans........................ 17
U.S. Federal Income Tax Consequences Of The Merger........................ 17
Resale Of Wells Fargo Common Stock Issued In The Merger................... 19
Stock Exchange Listing.................................................... 19
Accounting Treatment...................................................... 19
The Merger Agreement........................................................ 20
Basic Plan Of Reorganization.............................................. 20
Representations And Warranties............................................ 21
Certain Covenants......................................................... 21
Conditions To The Merger.................................................. 23
Termination Of The Merger Agreement....................................... 23
Waiver And Amendment...................................................... 25
Expenses.................................................................. 25
Comparison Of Stockholder Rights............................................ 26
General................................................................... 26
Authorized And Outstanding Capital Stock.................................. 26
Rights Plan............................................................... 26
Number And Election Of Directors.......................................... 26
Amendment Of Governing Documents.......................................... 27
Approval Of Mergers And Assets Sales...................................... 27
Preemptive Rights......................................................... 28
Appraisal Rights.......................................................... 28
Special Meetings.......................................................... 28
Directors' Duties......................................................... 28
Action Without A Meeting.................................................. 29
Limitations On Directors' Liability....................................... 29
Indemnification Of Officers And Directors................................. 29
Dividends................................................................. 30
Corporate Governance Procedures; Nomination Of Directors.................. 30
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Information About Wells Fargo............................................... 32
General................................................................... 32
Management And Additional Information..................................... 32
Information On Wells Fargo's Web Site..................................... 32
Regulation And Supervision Of Wells Fargo................................... 33
General................................................................... 33
Regulatory Agencies....................................................... 33
Bank Holding Company Activities........................................... 33
Dividend Restrictions..................................................... 34
Holding Company Structure................................................. 34
Capital Requirements...................................................... 35
FDIC Insurance............................................................ 36
Fiscal And Monetary Policies.............................................. 37
Competition............................................................... 37
Information About Prime..................................................... 38
General................................................................... 38
Management And Additional Information..................................... 38
Price Range Of Common Stock And Dividends................................... 39
Wells Fargo Share Prices And Dividends.................................... 39
Prime Share Prices And Dividends.......................................... 39
Experts..................................................................... 40
Wells Fargo's Auditors.................................................... 40
Prime's Auditors.......................................................... 40
Opinions.................................................................... 40
Share Issuance............................................................ 40
Tax Matters............................................................... 40
Where You Can Find More Information......................................... 41
SEC Filings............................................................... 41
Registration Statement.................................................... 41
Documents Incorporated By Reference....................................... 41
Appendix A Agreement and Plan of Reorganization
Appendix B Opinion of Keefe, Bruyette & Woods, Inc.
</TABLE>
ii
<PAGE>
Questions and Answers About This Document
What is the purpose of this document?
This document serves as both a proxy statement of Prime and a prospectus of
Wells Fargo. As a proxy statement, it's being provided to you because Prime's
board of directors is soliciting your proxy for use at the special meeting of
shareholders called to consider and vote on the proposed acquisition of Prime
by Wells Fargo. As a prospectus, it's being provided to you because Wells Fargo
is offering to exchange shares of its common stock for your shares of Prime
common stock.
Do I need to read the entire document?
Absolutely. Much of this proxy statement-prospectus summarizes information
that is described in greater detail elsewhere in this document or in the
appendices to this document. Each summary discussion is qualified by reference
to the full text. For example, the summary of the terms of the merger agreement
is qualified by the actual terms of the merger agreement, a copy of which is
attached as Appendix A.
Is there other information I should consider?
Yes. Much of the business and financial information about Wells Fargo and
Prime that may be important to you is not included in this document. Instead,
this information is incorporated by reference to documents separately filed by
Wells Fargo and Prime with the SEC. This means that Wells Fargo and Prime may
satisfy their disclosure obligations to you by referring you to one or more
documents separately filed by Wells Fargo or Prime with the Securities and
Exchange Commission (SEC). See "Where You Can Find More Information" on page
for a list of documents that Wells Fargo and Prime have incorporated by
reference into this proxy statement-prospectus and for instructions on how to
obtain copies of these documents. The documents are available to you without
charge.
What about future SEC reports?
Reports filed by Wells Fargo and Prime with the SEC after the date of this
proxy statement-prospectus and before the merger is completed are automatically
incorporated into this document. These reports may update, modify or correct
information in this document or in the documents incorporated by reference.
What if there is a conflict between documents?
You should rely on the later filed document. Information in this proxy
statement-prospectus may update information contained in one or more of the
Wells Fargo or Prime documents incorporated by reference. Similarly,
information in documents that Wells Fargo or Prime may file after the date of
this proxy statement-prospectus may update information in this proxy statement-
prospectus.
What if I choose not to read the incorporated documents?
Information contained in a document that is incorporated by reference is part
of this proxy statement-prospectus, unless it is superseded by information
contained directly in this proxy statement-prospectus or in one or more
documents filed with the SEC after the date of this proxy statement-prospectus.
Information that is incorporated from another document is considered to have
been disclosed to you whether or not you choose to read the document.
iii
<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 documents to
which this document refers you. See "Where You Can Find More Information."
The Merger (page )
In the proposed transaction, Wells Fargo will acquire Prime through the
merger of a Wells Fargo subsidiary into Prime. If the merger is completed,
Wells Fargo will exchange shares of its common stock for shares of Prime common
stock so that, after the merger is completed, Wells Fargo will own all of the
outstanding stock of Prime.
The merger agreement is attached to this proxy statement-prospectus as
Appendix A. Please read the merger agreement as it is the document that governs
the merger.
The Companies (pages and )
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94163
(800) 411-4932
Wells Fargo & Company is a diversified financial services company whose
subsidiaries and affiliates provide banking, insurance, investments, and
mortgage and consumer finance through stores located across North America. At
September 30, 1999, Wells Fargo had $207 billion of assets, 7th largest among
U.S. bank holding companies.
Prime Bancshares, Inc.
12200 Northwest Freeway
Houston, Texas 77092
(713) 209-6000
Prime Bancshares, Inc. is a bank holding company for Prime Bank, a Texas
state bank serving individuals and small businesses from 21 full-service
banking locations primarily in the greater Houston metropolitan area and
southeast Texas. At September 30, 1999, Prime had assets of $1.2 billion.
Exchange Of Wells Fargo Shares For Prime Shares (page )
If the merger is completed, Wells Fargo will exchange 6,032,096 shares of its
common stock for all of the outstanding shares of Prime common stock. The
exchange ratio, or the number of shares of Wells Fargo common stock you will
receive for each share of Prime common stock you own, will be determined by
dividing 6,032,096 by the number of shares of Prime common stock outstanding
immediately before the merger.
At the record date for the special meeting, there were outstanding shares
of Prime common stock and options to purchase an additional shares of Prime
common stock. All of the outstanding options are currently exercisable or will
become exercisable before the merger closes. Assuming all options are exercised
prior to the merger, there will be a total of 10,209,483 shares of Prime common
stock outstanding immediately before the merger. Based on this, the exchange
ratio will equal approximately 0.5908, calculated by dividing 6,032,096 by
10,209,483.
1
<PAGE>
The exchange ratio will be greater than 0.5908 if outstanding stock options
are not exercised before the merger. Outstanding stock options have exercise
prices ranging from $2.33 to $19.69 per share depending on the date the options
were granted. Under the merger agreement, any unexercised options will
terminate upon completion of the merger. As a result, so long as the market
value of Prime common stock exceeds the exercise price of an option, it is
likely that the option will be exercised prior to completion of the merger.
Management of Prime, however, cannot predict whether all outstanding options
will be exercised prior to completion of the merger.
Cash Instead Of Fractional Shares (page )
Wells Fargo will not issue fractional shares in the merger. If the total
number of shares of Wells Fargo common stock you will receive in the merger
does not equal a whole number, you will receive cash instead of the fractional
share.
Surrender Of Prime Shares (page )
To receive certificates for your shares of Wells Fargo common stock, you will
need to surrender your Prime share certificates. After the merger is completed,
Wells Fargo's stock transfer agent will send you written instructions for
exchanging your stock certificates. Please do not send in your certificates
until you receive these instructions.
Federal Income Tax Consequences (page )
Prime shareholders generally will not recognize gain or loss for U.S. federal
income tax purposes from the exchange of their shares of Prime common stock for
shares of Wells Fargo common stock. Prime shareholders will be taxed on cash
they receive instead of fractional shares.
The tax treatment described above may not apply to every Prime shareholder.
Determining the tax consequences of the merger to you may be complicated. You
should consult your own advisor for a full understanding of the merger's tax
consequences.
Fairness Opinion (page )
Keefe, Bruyette & Woods, Inc. has given its opinion to Prime's board of
directors that the consideration to be received in the merger by Prime
shareholders is fair from a financial point of view. A copy of the opinion is
set forth in Appendix B to this proxy statement-prospectus.
Recommendation Of Prime's Board (page )
Prime's board of directors believes that the merger is in the best interests
of Prime shareholders and recommends that Prime shareholders approve the
merger. Prime's board of directors believes that the merger will provide
Prime's shareholders with the opportunity to achieve an equity interest in a
larger, more diversified financial institution which is interested in expanding
its operations in Texas, but which is not dependent solely on the economic
conditions in the greater Houston metropolitan area and southeastern Texas.
Additional Benefits To Management (page )
In considering Prime's board of director's recommendation to approve the
merger, you should be aware that some members of Prime's management have
interests in the merger that are in addition to their interests as Prime
shareholders. These interests include employment and non-compete agreements and
the acceleration of unvested stock options because of the merger. The board of
directors of Prime was aware of these additional interests of Prime's
management when it approved the merger agreement.
2
<PAGE>
Dissenters' Rights (page )
Prime shareholders will not have dissenters' rights under Texas law or any
other statute in connection with the merger.
Special Meeting (page )
Prime will hold the special meeting of shareholders at , local time, on
, January , 2000, at Prime's headquarters located at 12200 Northwest
Freeway, Houston, Texas 77092. You can vote at the meeting if you owned Prime
common stock at the close of business on , 1999, the record date for the
meeting.
Vote Required To Approve Merger (page )
Approval of the merger requires the affirmative vote of a majority of the
outstanding shares of Prime common stock entitled to vote at the special
meeting. Not voting will have the same effect as voting against the merger. At
the record date, the directors and executive officers of Prime beneficially
owned a total of shares of Prime common stock, representing % of the
shares of Prime common stock entitled to vote at the special meeting.
All of Prime's directors have agreed to vote in favor of the merger all
shares of Prime common stock owned by them at the record date for the special
meeting. At the record date, these directors beneficially owned a total of %
of the shares of Prime common stock entitled to vote at the special meeting.
Management Of Prime After The Merger (page )
Following the merger, Wells Fargo will own all of the outstanding stock of
Prime. Wells Fargo will be able to elect or appoint all of the directors and
officers of Prime. Wells Fargo expects that, after the merger, Prime's bank
subsidiaries will offer products and services offered by Wells Fargo
subsidiaries and affiliates.
Differences In The Rights Of Shareholders (page )
Your rights as a Prime shareholder are currently governed by Texas law and
Prime's amended and restated articles of incorporation and bylaws. Upon
completion of the merger, you will become a Wells Fargo stockholder, and your
rights will be governed by Delaware law and Wells Fargo's restated certificate
of incorporation and bylaws.
Regulatory Approvals (page )
Wells Fargo must obtain the approval of the Board of Governors of the Federal
Reserve System before it can complete the merger. Wells Fargo must also notify
the Texas Department of Banking and comply with other requirements under Texas
law. Wells Fargo filed an application with the Federal Reserve Board on
November 4, 1999 requesting approval of the proposed merger. As of the date of
this proxy statement-prospectus, the Federal Reserve Board had not acted on
Wells Fargo's application for approval of the merger. Wells Fargo has filed the
required notice of merger with the Texas Department of Banking. Wells Fargo and
Prime are not aware of any other regulatory approvals that are required to
complete the merger.
Conditions To Completing The Merger (page )
In addition to the receipt of regulatory approvals, there are a number of
other conditions that must be met before the merger can be completed. These
conditions include:
. Prime shareholders must approve the merger agreement;
. Prime must receive an opinion from its counsel concerning the tax
consequences of the merger;
3
<PAGE>
. Prime's and Wells Fargo's representations in the merger agreement must
continue to be accurate and their respective covenants must have been
performed; and
. the New York and Chicago Stock Exchanges must approve the listing of the
shares of Wells Fargo common stock to be issued in the merger.
Wells Fargo or Prime may waive a condition it is entitled to assert so long
as the law does not require the condition to be met.
Termination Of The Merger Agreement (page )
Wells Fargo and Prime can agree to terminate the merger agreement at any time
without completing the merger. Also, either company can terminate the merger
agreement under the following circumstances:
. a court or other governmental authority prohibits the merger; or
. the merger is not completed by March 15, 2000, unless the failure to
complete the merger on or before that date is the fault of the company
seeking to terminate.
Prime may also terminate the merger agreement if the price of Wells Fargo
common stock falls below specified levels, both in absolute terms and relative
to an index of other bank holding companies.
Accounting Treatment (page )
Wells Fargo expects to account for the merger under the purchase method of
accounting. Wells Fargo will record, at fair value, the acquired assets and
assumed liabilities of Prime. To the extent the total purchase price exceeds
the fair value of the assets acquired and liabilities assumed, Wells Fargo will
record goodwill.
Market Price Information (page )
Wells Fargo common stock is listed on the New York and Chicago Stock
Exchanges under the symbol "WFC." On July 26, 1999, the last full trading day
before Prime and Wells Fargo signed the merger agreement, Wells Fargo common
stock closed on the New York Stock Exchange at $40.88 per share. On December ,
1999, Wells Fargo common stock closed on the New York Stock Exchange at $ per
share.
Prime common stock is traded on the Nasdaq National Market System under the
symbol "PBTX." On July 26, 1999, Prime common stock last traded at $21.31 per
share. On December , 1999, Prime common stock last traded at $ per share.
Regulation Of Wells Fargo (page )
Wells Fargo & Company, its banking subsidiaries and many of its nonbanking
subsidiaries are subject to extensive regulation by a number of federal and
state agencies. This regulation, among other things, may restrict Wells Fargo's
ability to diversify into other areas of financial services, acquire depository
institutions in certain states and pay dividends on its stock. It may also
require Wells Fargo to provide financial support to one or more of its
subsidiary banks, maintain capital balances in excess of those desired by
management and pay higher deposit premiums as a result of the deterioration in
the financial condition of depository institutions in general.
4
<PAGE>
Selected Financial Data
The following financial information is to aid you in your analysis of the
financial aspects of the merger. The balance sheet data for 1994 through 1998
for Wells Fargo is derived from its audited consolidated balance sheet as of
December 31, 1998, 1997 and 1996 and its unaudited financial information for
1995 and 1994. The income statement data for 1994 through 1998 for Wells Fargo
is derived from its audited consolidated statement of income for each of the
years in the four-year period ended December 31, 1998 and its unaudited
financial information for 1994. The data for Wells Fargo as of and for the nine
months ended September 30, 1999 and 1998 is derived from its unaudited
financial statements for those periods. The information for Prime is derived
from its audited financial statements for 1994 through 1998 and its unaudited
financial statements for the nine months ended September 30, 1999 and 1998. The
information in the table is only a summary and should be read with the full
financial statements and related notes of Wells Fargo and Prime. You should not
rely on the information for the nine months ended September 30, 1999 as being
indicative of the results expected for the entire year.
Wells Fargo & Company and Subsidiaries
<TABLE>
<CAPTION>
Nine Months Ended
September 30 Years Ended December 31
-------------------- -------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- --------- --------- --------- ------- ------- -------
(dollars in millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income..... $ 6,959 6,689 8,990 8,648 8,222 5,923 5,414
Net income.............. 2,777 2,144 1,950 2,499 2,228 1,988 1,642
Diluted earnings per
share.................. 1.65 1.29 1.17 1.48 1.36 1.62 1.36
Cash dividends per
share.................. 0.585 0.515 0.700 0.615 0.525 0.450 0.383
Book value per share.... 13.17 12.40 12.35 11.92 11.66 10.27 5.86
Total assets............ 207,060 195,863 202,475 185,685 188,633 122,200 112,674
Long-term debt.......... 24,911 18,486 19,709 17,335 18,142 16,726 12,039
Prime Bancshares, Inc. and Subsidiaries
<CAPTION>
Nine Months Ended
September 30 Years Ended December 31
-------------------- -------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- --------- --------- --------- ------- ------- -------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income..... $ 34,460 33,026 43,876 40,944 34,646 32,731 27,335
Net income.............. 10,968 10,337 13,824 11,846 10,169 10,183 8,492
Diluted earnings per
share.................. 1.07 0.97 1.30 1.11 0.97 0.95 0.81
Cash dividends per
share.................. 0.20 0.14 0.20 0.14 0.14 0.13 0.03
Book value per share.... 9.22 8.38 8.68 8.08 6.42 5.95 4.58
Total assets............ 1,199,442 1,034,784 1,078,332 1,052,135 890,688 839,454 939,396
Long-term debt.......... 100,000 -- -- -- -- -- --
</TABLE>
5
<PAGE>
Comparative Per Common Share Data
The following table shows comparative per share data for Wells Fargo common
stock on a historical and pro forma combined basis and for Prime common stock
on a historical and pro forma equivalent basis. The information in the table
assumes that Wells Fargo will account for the merger as a purchase and will
exchange 0.5908 shares of its common stock for each share of Prime common
stock. This is the exchange ratio that would result if there are 10,209,483
shares of Prime common stock outstanding immediately before the merger. See
"The Merger--Basic Plan Of Reorganization." The pro forma equivalent
information for Prime is calculated by multiplying the pro forma basic and
diluted earnings per share, the historical cash dividends per share and the pro
forma stockholders' equity per share by the assumed exchange ratio of 0.5908.
You should read the data with the historical financial statements and related
notes of Wells Fargo and Prime. Prime's historical financial statements are
included in this proxy statement-prospectus. Wells Fargo's historical financial
statements are included or incorporated in documents filed by Wells Fargo with
the SEC. See "Where You Can Find More Information" on page . Amounts are in
U.S. dollars.
<TABLE>
<CAPTION>
Wells Fargo Prime
-------------------- ---------------------
Pro Forma Pro Forma
Historical Combined Historical Equivalent
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Earnings Per Share
Basic
Nine Months Ended September 30,
1999............................. $ 1.67 1.67 1.10 0.99
Year Ended December 31, 1998...... 1.18 1.18 1.35 0.70
Diluted
Nine Months Ended September 30,
1999............................. 1.65 1.65 1.07 0.97
Year Ended December 31, 1998...... 1.17 1.17 1.30 0.69
Cash Dividends Declared Per Share
Nine Months Ended September 30,
1999............................. 0.585 0.585 0.200 0.346
Year Ended December 31, 1998...... 0.700 0.700 0.200 0.414
Stockholders' Equity Per Share
September 30, 1999................ 13.17 13.17 9.22 7.78
December 31, 1998................. 12.35 12.35 8.68 7.30
</TABLE>
6
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS
Date, Time And Place
The date, time and place of the special meeting of Prime's shareholders are:
, January , 2000
12200 Northwest Freeway
Houston, Texas 77092
Record Date
Prime's board of directors has established as the record date for the
meeting. Only shareholders of record on that date are entitled to attend and
vote at the special meeting.
Vote Required To Approve Merger
On the record date, there were shares of Prime common stock outstanding
and entitled to vote at the special meeting. The holders of Prime 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 entitled
to vote is necessary for a quorum. Approval of the merger requires the
affirmative vote, in person or by proxy, of the holders of a majority of the
shares of Prime common stock outstanding on the record date.
Voting And Revocation Of Proxies
All shares of Prime 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, in either case
bearing a later date with the corporate secretary of Prime 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 shares of Prime common stock outstanding on the record date.
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.
Agreement To Vote For The Merger
Prime's directors, some of whom are also executive officers of Prime, have
agreed to vote in favor of the merger all shares of Prime common stock
beneficially owned by them at the record date for the special
7
<PAGE>
meeting. At the record date, these directors and officers beneficially owned a
total of % of the shares of Prime common stock entitled to vote at the special
meeting, as follows:
<TABLE>
<CAPTION>
Name Shares
---- ---------
<S> <C>
Jerry S. Dominy.......................................................... 308,385
E. J. Guzzo.............................................................. 508,402
David Pasternak.......................................................... 360,006
Fredric M. Saunders...................................................... 3,174,420
Stuart D. Saunders....................................................... 10,260
James B. Wesley.......................................................... 30,000
---------
Total.................................................................. 4,391,473
=========
</TABLE>
See "Information About Prime--Management and Additional Information."
Solicitation Of Proxies
In addition to solicitation by mail, directors, officers and employees of
Prime may solicit proxies from Prime 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. Prime will
bear its own expenses in connection with any solicitation of proxies for the
special meeting.
Other Matters Considered At The Meeting
If an insufficient number of votes for the merger is received before the
scheduled meeting date, Wells Fargo and Prime 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.
Prime'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
Prime.
8
<PAGE>
THE MERGER
Purpose And Effect Of The Merger
Wells Fargo is using the merger to acquire Prime. As a result of the merger,
Prime will become a wholly-owned subsidiary of Wells Fargo and shareholders of
Prime will receive shares of Wells Fargo common stock for their shares of Prime
common stock. Wells Fargo will own all of the outstanding shares of Prime
common stock. Shareholders of Prime will become stockholders of Wells Fargo,
and their rights will be governed by Delaware law and Wells Fargo's restated
certificate of incorporation and bylaws rather than Texas law and Prime's
amended and restated articles of incorporation. See "Comparison Of Stockholder
Rights."
Background Of And Reasons For The Merger
During the first quarter of 1998, the board of directors of Prime began to
monitor developments in financial institutions acquisitions in Texas and on a
national level. As a result of a perceived improvement in the financial
institutions acquisition market and the prospects of increased competition in
Prime's market area, the board of directors decided to explore the possibility
of maximizing shareholder value by means of a business combination with another
financial institution. Pursuant to a letter dated March 9, 1998, Prime engaged
Keefe, Bruyette & Woods, Inc. to advise it with respect to a possible business
combination.
During the spring of 1998, KBW contacted a number of large commercial banking
organizations that it believed might have an interest in acquiring Prime.
Several of those banking organizations requested confidential information
regarding Prime and after analyzing such information, submitted non-binding
indications of interest. Based on the non-binding indications of interest
received, the board of directors of Prime decided to negotiate exclusively with
one large regional bank. KBW and Prime negotiated the financial terms of the
transaction and began negotiating a definitive acquisition agreement. After two
months of negotiations, the parties were unable to reach mutually agreeable
terms and Prime's board of directors decided to terminate discussions.
In January of 1999, senior managements of Prime and Wells Fargo held an
informal meeting to discuss the possible acquisition of Prime by Wells Fargo.
Soon thereafter, Prime sent Wells Fargo some confidential information to
analyze. Wells Fargo made an initial offer for Prime that was rejected by
Prime's board of directors.
In the summer of 1999, senior management of Prime met with another regional
bank that had expressed an interest in acquiring Prime, but that organization
ultimately never made a bid for Prime. At this time, KBW contacted Wells Fargo,
which subsequently submitted a written non-binding indication of interest to
Prime. The terms of the offer were acceptable to the board of directors, and
Prime and KBW began negotiating the financial terms and definitive agreement
for the transaction while Wells Fargo was conducting its due diligence
examination of Prime.
Prime's board of directors met on July 27, 1999 to review the proposed merger
agreement and consider the transaction with Wells Fargo. At the same meeting,
Prime's board of directors also considered a proposal set forth in a non-
binding indication of interest from another financial institution delivered to
Prime while negotiations with Wells Fargo were in their final stages. Based
primarily on an extensive discussion of the terms of the merger agreement and
of the financial condition and valuation for both Prime and Wells Fargo,
Prime's board of directors determined that the transaction with Wells Fargo was
advisable and in the best interests of both Prime and its shareholders. As a
result, Prime's board of directors authorized the execution and delivery of the
merger agreement.
9
<PAGE>
In making its decision the board of directors considered a number of factors
including, without limitation, the following:
1. The business, operations, management, financial condition, earnings and
future prospects for Wells Fargo based on the board of directors'
inquiry into Wells Fargo's past performance, current financial condition
and future prospects.
2. The financial terms of the transaction, including how the price to be
received related to prices received by other comparable banking
organizations in other financial institutions mergers.
3. The opinion of KBW, Prime's financial advisor, that the merger
consideration to be received by shareholders was fair from a financial
point of view.
4. The substantially increased liquidity that the Wells Fargo stock would
provide to Prime shareholders.
5. The prospects for Prime and Prime Bank continuing to operate as an
independent community-based banking organization, including increasing
competitive and regulatory burdens and technological challenges facing
community banks.
6. The tax free nature of the exchange of Prime stock for Wells Fargo
stock.
7. The potential for increased dividends.
8. The protection afforded to Prime by the merger agreement in the event of
a decline in the price of the Wells Fargo common stock to be issued in
the merger relative to the prices of the shares of a group of regional
bank holding companies which KBW believes are generally comparable to
Wells Fargo.
9. The non-economic terms of the transaction, such as impact on existing
customers and employees.
In connection with its discussion, the board of directors of Prime did not
give any particular relative weight to the various factors.
Prime's board of directors has unanimously approved the merger agreement and
recommends that Prime shareholders approve the merger agreement at the special
meeting.
Opinion Of Prime's Financial Advisor
The fairness opinion of Prime's financial advisor, Keefe, Bruyette & Woods,
Inc. is described below. The description contains the firm's projections,
estimates and/or other forward-looking statements about the future earnings or
other measures of the future performance of Wells Fargo and Prime. You should
not rely on any of these statements as having been made or adopted by Wells
Fargo or Prime.
Prime engaged Keefe, Bruyette & Woods, Inc. ("KBW") to act as its exclusive
financial advisor in connection with the merger. KBW agreed to assist Prime in
analyzing, structuring, negotiating and effecting a transaction with Wells
Fargo. Prime selected KBW because KBW is a nationally recognized investment
banking firm with substantial experience in transactions similar to the merger
and is familiar with Prime and its business. As part of its investment banking
business, KBW is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions.
As part of its engagement, representatives of KBW attended the meeting of
Prime's board of directors held on July 27, 1999 at which the board considered
and approved the merger agreement. At the July 27, 1999 meeting, KBW rendered
an oral opinion (subsequently confirmed in writing) that, as of that date, the
exchange ratio was fair to Prime and its shareholders from a financial point of
view. That opinion was reconfirmed in writing as of the date of this proxy
statement-prospectus.
The full text of KBW's updated written opinion is attached as Appendix B to
this proxy statement-prospectus and is incorporated herein by reference.
Prime's shareholders are urged to read the opinion in its
10
<PAGE>
entirety for a description of the procedures followed, assumptions made,
matters considered, and qualifications and limitations on the review undertaken
by KBW.
KBW's opinion is directed to the board of directors of Prime and addresses
only the exchange ratio. It does not address the underlying business decision
to proceed with merger and does not constitute a recommendation to any Prime
shareholder as to how the shareholder should vote at Prime's meeting with
respect to the merger or any matter related thereto.
In rendering its opinion, KBW:
. reviewed, among other things:
. the merger agreement,
. Annual Reports to shareholders and Annual Reports on Form 10-K of
Wells Fargo,
. Annual Reports on Form 10-K of Prime,
. Certain interim reports to shareholders and Quarterly Reports on
Form 10-Q of Wells Fargo,
. Quarterly Reports on Form 10-Q of Prime, and
. Certain internal financial analyses and forecasts for Prime prepared
by management.
. held discussions with members of senior management of Prime regarding:
. past and current business operations,
. regulatory relationships,
. financial condition, and
.future prospects of the respective companies.
. compared certain financial and stock market information for Wells Fargo
and Prime with similar information for certain other companies with
publicly traded securities,
. reviewed the financial terms of certain recent business combinations in
the banking industry, and
. performed other studies and analyses that it considered appropriate.
In conducting its review and arriving at its opinion, KBW relied upon and
assumed the accuracy and completeness of all of the financial and other
information provided to it or publicly available. KBW did not attempt to verify
such information independently. KBW relied upon the management of Prime as to
the reasonableness and achievability of the financial and operating forecasts
and projections (and assumptions and bases therefor) provided to KBW. KBW
assumed, without independent verification, that the aggregate allowances for
loan losses for Wells Fargo and Prime are adequate to cover those losses. KBW
did not make or obtain any evaluations or appraisals of the property of Wells
Fargo or Prime, and KBW did not examine any individual credit files.
The projections furnished to KBW and used by it in certain of its analyses
were prepared by Prime's senior management. Prime does not publicly disclose
internal management projections of the type provided to KBW in connection with
its review of the merger. As a result, such projections were not prepared with
a view towards public disclosure. The projections were based on numerous
variables and assumptions which are inherently uncertain, including factors
related to general economic and competitive conditions. Accordingly, actual
results could vary significantly from those set forth in the projections.
The following is a summary of the material analyses presented by KBW to the
Prime board on July 27, 1999 in connection with KBW's July 27, 1999 oral
opinion:
11
<PAGE>
Transaction Summary. KBW calculated the merger consideration to be paid
pursuant to the exchange ratio as a multiple of Prime's book value and Prime's
last twelve months of earnings, as well as Prime's 1999 and 2000 estimated
earnings. This computation assumed KBW estimates of Prime's earnings per share
of $1.33 for the last twelve months ended June 30, 1999, an estimated $1.45 in
1999 and an estimated $1.60 in 2000, and an exchange ratio of 0.5908 Wells
Fargo shares for each Prime share. Based on those assumptions, this analysis
indicated that Prime shareholders would receive shares of Wells Fargo common
stock worth $24.59 for each share of Prime common stock held, and that this
amount would represent a multiple of 2.8 times book value per share, 18.5 times
last twelve months earnings per share, 17.0 times estimated 1999 earnings per
share and 15.4 times estimated 2000 earnings per share.
Discounted Cash Flow Analysis. KBW estimated the present value of future cash
flows that would accrue to a holder of a share of Prime common stock, assuming
that the shareholder held the stock for five years and then sold it. The
analysis was based on earnings forecasts on a stand-alone and independent basis
for the years 1999 through 2000 and annual net income growth rate of 10.0% for
the years 2001 through 2004. A 22.0% dividend payout ratio was assumed for
Prime through the year 2004. An estimated year end stock price was estimated
for each year by multiplying the projected annual earnings by a price to
trailing twelve months earnings multiple of 14.0 times. In addition, the
estimated net income in the year 2004 was multiplied by an earnings multiple
ranging from 12.0x to 18.0x to generate a terminal value representing the
potential value of Prime in 2004. On the basis of these assumptions, KBW
calculated a range of present values ranging from $16.90 to $24.63. These
values were compared to the $24.59 offer from Wells Fargo.
KBW stated that the discounted cash flow present value analysis is a widely
used valuation methodology, but noted that it relies on numerous assumptions,
including asset and earnings growth rates, terminal values and discount rates.
The analysis did not purport to be indicative of the actual values or expected
values of Prime common stock.
Selected Transaction Analysis. KBW reviewed certain financial data related to
a set of comparable nationwide bank transactions with announced values between
$100 and $400 million since August 1, 1998.
KBW compared the multiples of price to various factors in the Wells Fargo-
Prime merger to the same multiples for mergers involving comparable groups at
the time those mergers were announced. The results were as follows:
Multiple of Price to Factor
<TABLE>
<CAPTION>
Comparable Group Wells Fargo-
Factor Considered Average Prime Merger
----------------- ---------------- ------------
<S> <C> <C>
Future 12 Months
Earnings............... 21.0x 17.0x
Trailing 12 Months
Earnings............... 23.3x 18.5x
Stated Book Value....... 3.17x 2.76x
Estimated Tangible Book
Value.................. 3.27x 2.90x
Tangible Book Premium To
Core Deposits Value.... 28.6% 20.4%
</TABLE>
KBW repeated this analysis using current acquiror stock prices. The results
were as follows:
Multiple of Price to Factor
<TABLE>
<CAPTION>
Comparable Group Wells Fargo-
Factor Considered Average Prime Merger
----------------- ---------------- ------------
<S> <C> <C>
Future 12 Months
Earnings............... 20.4x 17.0x
Trailing 12 Months
Earnings............... 22.3x 18.5x
Stated Book Value....... 3.04x 2.76x
Estimated Tangible Book
Value.................. 3.15x 2.90x
Tangible Book Premium To
Core Deposits Value.... 27.4% 20.4%
</TABLE>
12
<PAGE>
No company or transaction used as a comparison in the above analysis is
identical to Wells Fargo, Prime or the merger. Accordingly, an analysis of
these results is not mathematical. Rather, it involves complex considerations
and judgments concerning differences in financial and operating characteristics
of the companies and other factors that could affect the public trading value
of the companies to which they are being compared.
Selected Peer Group Analysis. KBW compared the financial performance and
market performance of Wells Fargo to those of a group of comparable holding
companies. The comparisons were based on:
. various financial measures
. earnings performance,
. operating efficiency,
. capital adequacy and
. asset quality.
. various measures of market performance
. including price/book value,
. price to earnings and
. dividend yields.
To perform this analysis, KBW used the financial information as of and for
the quarter ended June 30, 1999 and market price information as of July 23,
1999. The companies in the peer group were US regional banks that had total
market capitalizations ranging from $6.6 billion to $118.3 billion.
KBW's analysis showed the following concerning Wells Fargo's financial
performance:
<TABLE>
<CAPTION>
Performance Measure Wells Fargo Peer Group
- ------------------- ----------- ----------
<S> <C> <C>
Return on Equity, annualized........................... 16.81% 19.19%
Return on Assets, annualized........................... 1.81% 1.52%
Net Interest Margin, annualized........................ 5.65% 3.83%
Efficiency Ratio, annualized........................... 53.82% 56.27%
Leverage Ratio, annualized............................. 7.05% 7.25%
Non-Performing Assets to Total Loans and Other Real
Estate Owed........................................... 0.80% 0.55%
Loan Loss Reserve to Total Gross Loans................. 2.83% 1.45%
</TABLE>
KBW's analysis showed the following concerning Wells Fargo's market
performance:
<TABLE>
<CAPTION>
Performance Measure Wells Fargo Peer Group
- ------------------- ----------- ----------
<S> <C> <C>
Price to Earnings Multiple, based on 1999 estimated
earnings.............................................. 18.7x 17.2x
Price to Earnings Multiple, based on 2000 estimated
earnings.............................................. 16.7x 15.3x
Price to Book Multiples................................ 3.29x 3.38x
Price to Tangible Book Multiples....................... 5.77x 4.41x
Dividend Yield......................................... 1.98% 2.44%
</TABLE>
For purposes of the above calculations, all earnings estimates are based upon
the KBW estimates for Wells Fargo.
Contribution Analysis. KBW analyzed the relative contribution of each of
Wells Fargo and Prime to certain pro forma balance sheet and income statement
items of the combined entity. The contribution analysis showed:
<TABLE>
<S> <C>
Prime Contribution To:
Combined 2000 Estimated Net Income without Cost Savings.............. 0.39%
Combined Total Assets................................................ 0.58%
Prime Estimated Pro Forma Ownership.................................... 0.37%
</TABLE>
13
<PAGE>
KBW compared the relative contribution of the balance sheet and income
statement items with the estimated pro forma ownership for Prime shareholders
based on an exchange ratio of 0.5908.
Other Analyses. KBW reviewed the relative financial and market performance of
Prime and Wells Fargo to a variety of relevant industry peer groups and
indices. KBW also reviewed earnings estimates, balance sheet composition,
historical stock performance and other financial data for Wells Fargo.
In connection with its opinion dated as of the date of this proxy statement-
prospectus, KBW performed procedures to update, as necessary, certain of the
analyses described above. KBW reviewed the assumptions on which the analyses
described above were based and the factors considered in connection therewith.
KBW did not perform any analyses in addition to those described above in
updating its July 27, 1999 opinion.
Prime board of directors has retained KBW as an independent contractor to act
as financial adviser to Prime regarding the merger. As part of its investment
banking business, KBW is continually engaged in the valuation of banking
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. As specialists in the securities of banking
companies, KBW has experience in, and knowledge of, the valuation of banking
enterprises. In the ordinary course of its business as a broker-dealer, KBW
may, from time to time, purchase securities from, and sell securities to, Prime
and Wells Fargo. As a market maker in securities KBW may from time to time have
a long or short position in, and buy or sell, debt or equity securities of
Prime and Wells Fargo for KBW's own account and for the accounts of its
customers.
Prime and KBW have entered into an agreement relating to the services to be
provided by KBW in connection with the merger. Prime has agreed to pay KBW a
cash fee equal to a percentage of the market value of the aggregate
consideration offered in the merger for the outstanding Prime common stock,
based on the transaction value on a per share basis at the time the merger
closes, as follows:
<TABLE>
<CAPTION>
Percentage of
Aggregate
Transaction Value Per Share Consideration
--------------------------- -------------
<S> <C>
Less than $28.00............................................... 0.725
Greater than or equal to $28.00 but less than $29.00........... 0.800
Greater than or equal to $29.00 but less than $30.00........... 0.825
Greater than or equal to $30.00................................ 0.850
</TABLE>
Pursuant to the KBW engagement agreement, Prime also agreed to reimburse KBW
for reasonable out-of-pocket expenses and disbursements incurred in connection
with its retention and to indemnify against certain liabilities, including
liabilities under the federal securities laws.
Additional Interests Of Prime Management
Certain members of Prime's management have interests in the merger that are
in addition to their interests as shareholders of Prime generally. These
additional interests are described below. Prime's board of directors was aware
of these interests and considered them, among other things, when it approved
the merger agreement.
Employment And Non-Competition Agreements With Wells Fargo
The following officers of Prime have entered into employment and non-compete
agreements with Wells Fargo, Prime Bancshares, Inc. and Prime Bank: L. Anderson
Creel, James G. Dickson, Jr., E. J. Guzzo, Steven H. Jackson and Walter L.
Kopycinski. The terms of these agreements are described below.
Effective Date and Term. The term of each agreement will begin on the day
immediately following the effective date of the merger and will end one year
thereafter, except for Mr. Guzzo, whose employment term will end 18 months
following the effective date of the merger.
14
<PAGE>
Services and Payment. Messrs. Creel, Dickson, Jackson and Kopycinski each
will be employed as a regular employee of Prime Bank at an officer level. Mr.
Guzzo will be employed in the position of Vice Chairman of the Houston region.
In exchange for their services, Prime Bank will pay base annual salaries to
Messrs. Creel, Dickson, Jackson and Kopycinski of $126,787, $134,274, $137,812
and $126,787, respectively, and mandatory bonuses of $33,206, $35,167, $36,094
and $33,206, respectively. In exchange for his services, Mr. Guzzo will receive
a base annual salary of $252,000 for the first year of the term of his
agreement and a base annual salary of $264,600 for the remaining six months of
the term of his agreement. Mr. Guzzo will also receive a mandatory bonus of
$132,000 for the first year of the term of his agreement and a mandatory bonus
of $66,000 for the remaining six months of the term of his agreement.
Car Allowance. Messrs. Creel, Dickson, Jackson and Kopycinski will each
receive a car allowance of at least $500 per month ($650 in the case of Mr.
Jackson) during the term of their employment.
Non-Compete. Messrs. Creel, Dickson, Guzzo, Jackson and Kopycinski have also
each agreed that, while employed by Prime Bank and for a period of one year (18
months in case of Mr. Guzzo) thereafter, subject to a minimum in any event of
two years (three years in the case of Mr. Guzzo) from the effective date of
their respective employment agreements, they will not, directly or indirectly,
do any of the following within Harris County, Texas:
. engage in the commercial banking or thrift business;
. aid or assist anyone in engaging in or entering into the commercial
banking or thrift business;
. reestablish or reopen any business substantially the same as all or any
part of the business of Prime Bank or Wells Fargo;
. in any manner become interested directly or indirectly, as employee,
owner, partner, shareholder, director, officer or otherwise, in a
commercial banking or thrift business; provided, however, that for this
purpose the term "shareholder" does not include any investment in an
organization where the person owns less than 5% of the stock issued and
outstanding; or
. solicit, directly or indirectly, an employee of Prime Bank or Wells
Fargo for the purpose of encouraging that employee to leave said
employment.
In consideration of observing these restrictions, subject to certain
exceptions, Messrs. Creel, Dickson, Jackson and Kopycinski will receive lump
sum payments of $79,996, $84,720, $86,953 and $79,996, respectively, on the
last date of their employment and additional lump sum payments of $79,996,
$84,720, $86,953 and $79,996, respectively, six months later. Also subject to
certain exceptions, Mr. Guzzo will receive a lump sum payment of $198,300 on
his last date of employment, another lump sum payment of $198,300 six months
later and a final lump sum payment of $198,300 12 months after the last date of
his employment.
Accelerated Vesting of Prime Stock Options
In connection with the merger, options to purchase 129,400 shares of Prime
common stock will accelerate and be exercisable for a period of time prior to
the merger. Some of these options are held by the executive officers of Prime
named below. The remaining options are held by non-executive officers of Prime.
<TABLE>
<CAPTION>
Name Shares
---- -------
<S> <C>
E. J. Guzzo......................................................... 48,000
L. Anderson Creel................................................... 12,000
James G. Dickson, Jr................................................ 12,000
Steven H. Jackson................................................... 12,000
Walter L. Kopycinski................................................ 12,000
Non-executive officers as a group (17 persons)...................... 33,400
-------
Total............................................................. 129,400
=======
</TABLE>
15
<PAGE>
Benefit Plans
As described elsewhere in this proxy statement-prospectus, in connection with
the merger agreement, Prime has agreed to take certain actions on or before the
effective date of the merger with respect to the 1984 Incentive Stock Option
Plan of Independent Bancorp, Inc., the 1993 Incentive Stock Option Plan of
Independent Bancorp, Inc. and the Prime Bancshares, Inc. 1997 Stock Incentive
Plan, which actions may be construed to be a benefit to plan participants,
including management of Prime. See "The Merger Agreement--Certain Covenants--
Termination of Stock Option Plans and Cancellation of Unexercised Stock
Options."
Indemnification and Insurance
Wells Fargo has agreed to ensure that all rights to indemnification and all
limitations of liability existing in Prime's amended and restated articles of
incorporation or bylaws in favor of the present and former directors and
officers of Prime or any Prime subsidiary with respect to claims arising from
(a) facts or events that occurred before the effective time of the merger or
(b) the merger agreement or any of the transactions contemplated thereby will
survive the merger and continue in full force and effect.
Subject to certain exceptions and limitations, Wells Fargo has also agreed to
use its best efforts to cause to be maintained in effect the current policies
of directors' and officers' liability insurance maintained by Prime with
respect to claims arising from facts or events that occurred before the merger
becomes effective.
Dissenters' Rights
Prime shareholders will not be entitled to dissenters' appraisal rights under
Texas law or any other statute in connection with the merger. See "Comparison
Of Stockholder Rights--Appraisal Rights."
Exchange Of Certificates
After completion of the merger, Norwest Bank Minnesota, National Association,
acting as exchange agent for Wells Fargo, will mail to each holder of record of
shares of Prime common stock a form of letter of transmittal, together with
instructions for the exchange of the holder's Prime stock certificates for a
certificate representing Wells Fargo common stock.
Prime shareholders should not send in their certificates until they receive
the letter of transmittal form and instructions.
No dividend or other distribution declared on Wells Fargo common stock after
completion of the merger will be paid to the holder of any certificates for
shares of Prime 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 whole shares of Wells Fargo common stock to which the shareholder is
entitled, plus cash in the amount of any remaining fractional share and any
cash dividends that are payable with respect to the shares of Wells Fargo
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 Wells Fargo common stock may be issued in a name other than
the name in which the surrendered certificate is registered if (a) the
certificate surrendered is properly endorsed and accompanied by all documents
required to transfer the shares to the new holder and (b) the person requesting
the issuance of the Wells Fargo 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.
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The exchange agent will issue stock certificates for Wells Fargo common stock
in exchange for lost, stolen or destroyed certificates for Prime common stock
upon receipt of a lost certificate affidavit and a bond indemnifying Wells
Fargo for any claim that may be made against Wells Fargo as a result of the
lost, stolen or destroyed certificates.
After completion of the merger, no transfers will be permitted on the books
of Prime. If, after completion of the merger, certificates for Prime common
stock are presented for transfer to the exchange agent, they will be canceled
and exchanged for certificates representing Wells Fargo common stock.
None of Wells Fargo, Prime, the exchange agent or any other person will be
liable to any former holder of Prime 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 Board of Governors of the
Federal Reserve System. The approval of the Federal Reserve Board is required
because Wells Fargo is a bank holding company registered under the Bank Holding
Company Act. On November 4, 1999, Wells Fargo filed an application with the
Federal Reserve Board requesting approval of the merger. The Federal Reserve
Board has not yet acted on the application.
The merger is also subject to certain filing and other requirements of the
Texas Department of Banking. On , 1999, Wells Fargo filed the required
notice of merger with the Texas Department of Banking.
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 Prime
shareholders is fair. Regulatory approval does not constitute an endorsement or
recommendation of the merger.
Wells Fargo and Prime 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. Wells Fargo and Prime
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. Wells Fargo may elect not to complete the merger if any condition
under which any regulatory approval is granted is unreasonably burdensome to
Wells Fargo. See "The Merger Agreement--Conditions To The Merger" and "--
Termination Of The Reorganization Agreement."
Effect Of Merger On Prime's Employee Benefit Plans
The merger agreement provides that, subject to any eligibility requirements
applicable to such plans, employees of Prime will be entitled to participate in
those Wells Fargo employee benefit and welfare plans specified in the merger
agreement. Eligible employees of Prime 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.
U.S. Federal Income Tax Consequences Of The Merger
The federal income tax discussion set forth below is included herein for
general information only. Prime shareholders are urged to consult with their
own tax advisors to determine the particular tax consequences to them of the
merger, including the application and effect of state, local and foreign income
or other tax laws.
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Set forth below is a summary of the opinion provided by Bracewell &
Patterson, L.L.P. concerning the material federal income tax consequences to
holders of Prime common stock who dispose of their Prime common stock in the
merger. This discussion is primarily based on the Internal Revenue Code of
1986, as amended (the "Code") and the Treasury Regulations promulgated
thereunder.
The following discussion is limited to the material federal income tax
aspects of the merger to a holder of Prime common stock who is a citizen or
resident of the United States and who, on the date of disposition of his shares
of Prime common stock, holds such shares as a capital asset. This discussion
does not purport to deal with all aspects of taxation that may be relevant to
particular investors in light of their personal investment circumstances, or to
certain types of investors, including insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, "S" corporations,
limited liability corporations, foreign corporations and tax payers subject to
alternative minimum tax. Further, this discussion does not consider the state,
local, or foreign tax consequences of the merger to a holder of Prime common
stock.
Prime has been advised by its special counsel, Bracewell & Patterson, L.L.P.,
that based on the Code, judicial decisions, and certain factual assumptions,
the merger will qualify as a "reorganization" within the meaning of Section
368(a)(1)(A) of the Code. The following is a summary of the federal income tax
consequences set forth in the form of a proposed legal opinion to be delivered
by Bracewell & Patterson, L.L.P., a copy of which is included as an exhibit to
the Registration Statement filed by Wells Fargo. See "Where You Can Find More
Information." In rendering this opinion, Bracewell & Patterson, L.L.P. has
assumed, among other matters, that there is no plan or intention on the part of
Prime shareholders to sell, exchange or dispose of a number of shares of Wells
Fargo common stock received in the merger that would reduce the shareholders'
ownership of Wells Fargo common stock to a number of shares having a value, as
of the effective date of the merger, of less than 50% of the value of all of
the formerly outstanding Prime common stock as of the effective date of the
merger.
The merger should qualify for federal income tax purposes as a
"reorganization" within the meaning of Section 368(a)(1)(A) of the Code, and,
as such, will result in the following federal income tax consequences to
holders of Prime common stock:
1. No gain or loss will be realized by holders of Prime common stock to the
extent they exchange their shares of Prime common stock for shares of
Wells Fargo common stock pursuant to the terms of the merger.
2. The aggregate basis of Wells Fargo common stock received by each Prime
shareholder in the merger will be the same as the aggregate basis of the
Prime common stock surrendered and exchanged therefor, decreased by the
amount of cash received and increased by the amount of gain realized by
the shareholder under the exchange.
3. The holding period of Wells Fargo common stock received by each Prime
shareholder will include the period during which Prime common stock
surrendered therefor was held, provided the Prime common stock is a
capital asset in the hands of the Prime shareholder on the date of the
exchange. The payment of cash in lieu of fractional shares of Wells
Fargo common stock will be treated as a sale or exchange of such
fractional shares potentially eligible for capital gains treatment.
4. Unless an exemption applies, under the backup withholding rules of
Section 3406 of the Code, an exchange agent shall be required to
withhold, and will withhold, 31% of all cash payments to which a Prime
shareholder is entitled pursuant to the merger (unless such shareholder
provides his taxpayer identification number--social security number in
the case of an individual, or Employer Identification Number in other
cases) and certifies that such number is correct.
Neither the foregoing discussion nor the opinion of Bracewell & Patterson,
L.L.P. to Prime is binding on the Internal Revenue Service ("IRS") or the
courts. As such, the foregoing presents only a general description of the
material federal income tax consequences to holders of Prime common stock of
the
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transactions contemplated by the merger. Accordingly, each shareholder is urged
to consult his or her own tax advisor with respect to all tax consequences
stemming from the merger that may affect the shareholders.
Resale Of Wells Fargo Common Stock Issued In The Merger
The Wells Fargo common stock issued in the merger will be freely transferable
under the Securities Act of 1933, except for shares issued to Prime
shareholders who are considered to be "affiliates" of Prime or Wells Fargo
under Rule 145 under the Securities Act or of Wells Fargo under Rule 144 under
the Securities Act. The definition of "affiliate" is complex and depends on the
specific facts, but generally includes directors, executive officers, 10%
stockholders and other persons with the power to direct the management and
policies of the company in question.
Affiliates of Prime may not sell the shares of Wells Fargo 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 Wells Fargo has complied
with certain reporting requirements and the selling stockholder complies with
certain volume and manner of sale restrictions.
Prime has agreed to use its best efforts to deliver to Wells Fargo signed
representations by each person who may be deemed to be an affiliate of Prime
that the person will not sell, transfer or otherwise dispose of the shares of
Wells Fargo 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 Wells Fargo
common stock received by affiliates of Prime.
Stock Exchange Listing
The shares of Wells Fargo common stock to be issued in the merger will be
listed on the New York Stock Exchange and the Chicago Stock Exchange. The
listing of the Wells Fargo common stock to be issued in the merger is a
condition to Prime's obligation to complete the merger.
Accounting Treatment
Wells Fargo will account for the merger as a purchase. Wells Fargo will
record, at fair value, the acquired assets and assumed liabilities of Prime. To
the extent the total purchase price exceeds the fair value of the assets
acquired and liabilities assumed, Wells Fargo will record goodwill. Wells Fargo
will include in its results of operations the results of Prime'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 MERGER AGREEMENT
The following is a summary of certain provisions of the merger agreement, a
copy of which is attached to this proxy statement-prospectus as Appendix A. The
merger 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 merger agreement. Prime shareholders are encouraged to read the
merger agreement carefully and in its entirety. Parenthetical references are to
the relevant paragraph(s) or exhibit(s) of the merger agreement.
Basic Plan Of Reorganization
The merger agreement provides that a wholly-owned subsidiary of Wells Fargo
will merge by statutory merger with and into Prime, with Prime as the surviving
corporation. (paragraph 1(a))
Exchange Of Prime Shares For Wells Fargo Shares
In the merger, each share of Prime common stock outstanding immediately
before the merger will be exchanged for the number of shares of Wells Fargo
common stock determined by dividing 6,032,096 by the number of shares of Prime
common stock then outstanding. (paragraph 1(a))
At the record date for the special meeting, there were outstanding shares
of Prime common stock and options to purchase shares of Prime common stock.
All of the outstanding options are currently exercisable or will become
exercisable prior to the merger. Assuming all options are exercised, there will
be a total of 10,209,483 shares of Prime common stock outstanding immediately
before the merger. Based on this number, Wells Fargo will exchange 0.5908
shares of Wells Fargo common stock for each share of Prime common stock.
The outstanding options have exercise prices ranging from $2.33 to $19.69 per
share, depending on the date the options were granted. Under the merger
agreement, any options that are not exercised before the merger will terminate
upon completion of the merger. As a result, so long as the market value of
Prime common stock exceeds the exercise price of an option, it is likely that
the option will be exercised prior to completion of the merger. Management of
Prime, however, cannot predict whether all outstanding options to purchase
Prime common stock will be exercised.
If before the merger is completed the outstanding shares of Wells Fargo are
increased, decreased or changed into or exchanged for a different number or
kind of shares or securities as a result of a reorganization, reclassification,
recapitalization, stock dividend, stock split or other similar change in
capitalization, then an appropriate and proportionate adjustment will be made
to the exchange ratio. (paragraph 1(b))
No adjustment will be made to the number of shares of Wells Fargo common
stock you will receive to reflect fluctuations in the price of Wells Fargo
common stock occurring before or after the special meeting.
Cash In Lieu Of Fractional Shares
If the aggregate number of shares of Wells Fargo 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 Wells Fargo common stock multiplied by the
average of the closing prices of a share of Wells Fargo common stock as
reported on the consolidated tape of the New York Stock Exchange for each of
the five trading days ending on the day immediately preceding the special
meeting. (paragraph 1(c))
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Effective Date And Time Of The Merger
The effective date of the merger will be the day on which articles of merger
are filed with and accepted by the Texas Secretary of State. The merger
agreement provides that articles of merger will be filed within 10 business
days after the satisfaction or waiver of all conditions to the merger or such
other date as Wells Fargo and Prime may agree, except that the closing of the
merger may not occur before January 15, 2000. The effective time of the merger
will be 11:59 p.m., Austin, Texas time, on the effective date of the merger.
(paragraph 1(d))
Representations And Warranties
The merger agreement contains various representations and warranties by Wells
Fargo and Prime concerning (a) their organization and legal authority to engage
in their respective businesses; (b) their capitalization; (c) their corporate
authority to enter into the merger 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 merger agreement has a number of covenants and agreements that govern the
actions of Prime and Wells Fargo pending completion of the merger. Some of the
covenants and agreements are summarized below.
Termination of Stock Option Plans and Cancellation Of Unexercised Stock
Options
Prime has agreed to take such action as is necessary under the 1984 Incentive
Stock Option Plan of Independent Bancorp, Inc., the 1993 Incentive Stock Option
Plan of Independent Bancorp, Inc. and the Prime Bancshares, Inc. 1997 Stock
Incentive Plan to:
. terminate the plans as of immediately prior to the effective date of the
merger; and
. cancel, effective as of immediately prior to the effective date of the
merger, all options and awards granted under such plans that are
unexercised as of immediately prior to the effective date of the merger.
(paragraph 4(q))
Employee Benefit Plans and Compensation Arrangements
Prime and each of its subsidiaries has agreed to take all action necessary or
required to:
. terminate or amend, if requested by Wells Fargo, all qualified pension
and welfare benefit plans and compensation arrangements as of the
effective date of the merger; and
. authorize and delegate the power to vote Prime common stock held in the
Prime Bancshares, Inc. 401(k) to the plan's independent third party
fiduciary. (paragraph 4(j))
Conduct Of Business
Prime. Under the merger agreement, Prime and each Prime subsidiary is
required to maintain its corporate existence in good standing, maintain the
general character of its business, conduct its business in the ordinary and
usual manner, extend credit in accordance with existing lending policies and
provide Wells Fargo with access to its loan files. Prime and each Prime
subsidiary may make loans of up to $500,000 without the prior review of Wells
Fargo so long as the loans are made in accordance with existing lending
policies, except that it may not, without the prior written consent of Wells
Fargo, unless such consent is deemed waived under the merger agreement, make
any new loan or modify, restructure or renew any existing loan (except pursuant
to
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commitments made prior to the merger agreement and except for increases in
existing loans in excess of 10% of the principal amount of such loan, but up to
a maximum of $100,000 for such loan) 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 $1,000,000, provided such loan complies
fully with and is rated a "pass" under Prime's lending policy as in effect as
of the date of the merger agreement.
The merger agreement places restrictions on the ability of Prime and each
Prime subsidiary to take certain actions without Wells Fargo's consent,
including:
. amending or otherwise changing its articles of incorporation or
association or bylaws;
. issuing or selling or authorizing for issuance or sale, or granting any
options or making other agreements with respect to the issuance or sale
or conversion of, any shares of its capital stock, phantom shares or
other share equivalents, or any other of its securities, except that
Prime may issue shares of Prime common stock upon exercise of
outstanding options;
. amending or terminating any employee benefit plans except as required by
law except that Prime may take such action as is necessary to amend 1993
Incentive Stock Option Plan of Independent Bancorp, Inc. to permit the
acceleration of vesting of options thereunder and to permit such options
to be exercised prior to the effective date of the merger otherwise upon
and subject to the conditions set forth therein upon a change in
control;
. declaring dividends other than any dividend declared by a subsidiary's
board of directors in accordance with applicable law and regulation,
provided that Prime's board of directors may declare and pay cash
dividends to Prime shareholders out of net earnings of Prime between
June 30, 1999 and the effective time of the merger in accordance with
applicable law and regulation and in accordance with past practice in an
amount not to exceed a quarterly rate of $.08 per share, and provided
further that Prime shareholders shall be entitled to a dividend on Prime
common stock or Wells Fargo common stock, but not both, in the calendar
quarter in which the merger closes;
. redeeming, purchasing or otherwise acquiring any capital stock of Prime;
. increasing the compensation of any officers, directors or executive
employees, except pursuant to existing compensation plans and practices
(including bonus plans), provided that Prime may, in addition, accrue
and pay bonuses in the aggregate not to exceed $250,000 for retention
purposes. (paragraphs 4(a) and (b))
Some of these restrictions apply only if the amount in question exceeds a
threshold dollar value.
Wells Fargo. Wells Fargo 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
Neither Prime nor any Prime subsidiary nor any director, officer,
representative or agent of Prime or any Prime subsidiary may, 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 Prime or any of its subsidiaries, (b) make a
tender or exchange offer for any shares of its common stock or other equity
security of Prime or any of its subsidiaries, (c) purchase, lease or otherwise
acquire the assets of Prime or any of its subsidiaries except in the ordinary
course of business or (d) merge, consolidate or otherwise combine with Prime or
any of its subsidiaries. Prime and each of its subsidiaries, as applicable, has
also agreed to promptly inform Wells Fargo if any third party makes an offer or
inquiry concerning any of the foregoing. (paragraph 4(h))
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Year 2000 Compliance
Prime will cooperate with Wells Fargo to assess the impact of the merger on
Prime's continued compliance with the Year 2000 project management process as
set forth in the May 5, 1997 Federal Financial Institutions Examination Council
(FFIEC) Interagency Statement on the Year 2000 and subsequent guidance
documents. Prime will take such action, in consultation with Wells Fargo, as
may be necessary to amend Prime's Year 2000 project assessment and remediation
plan. Prime will continue its current preparations for compliance with the
FFIEC requirements and will not rely on the completion of the merger to satisfy
its FFIEC requirements. (paragraph 4(p))
Other Covenants
The merger 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 and Chicago
Stock Exchanges of the shares of Wells Fargo common stock to be issued in the
merger. In addition, Prime has agreed to (a) subject to a number of exceptions,
establish such additional accruals and reserves as are necessary to conform its
accounting and credit loss reserve practices and methods to those of Wells
Fargo and Wells Fargo's plans with respect to the conduct of Prime's business
after the merger and (b) use its best efforts to deliver to Wells Fargo prior
to completion of the merger signed representations substantially in the form
attached as Exhibit B to the merger agreement from each executive officer,
director or shareholder of Prime who may reasonably be deemed an "affiliate" of
Prime within the meaning of such term as used in Rule 145 of the Securities
Act. (paragraphs 4(l) and 4(m) and Exhibit B) See "The Merger--Resale Of Wells
Fargo Common Stock Issued In The Merger."
Conditions To The Merger
Under the merger 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 Prime of a favorable tax opinion.
(paragraphs 6 and 7) See "The Merger--U.S. Federal Income Tax Consequences Of
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 merger 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 the financial condition, results of
operations or business of Prime and its subsidiaries taken as a whole. 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 Merger Agreement
Termination by Mutual Consent. Wells Fargo and Prime may agree to terminate
the merger agreement at any time before completion of the merger. (paragraph
9(a)(i))
Termination by Either Wells Fargo or Prime. Either Wells Fargo or Prime may
terminate the merger agreement if any of the following occurs:
. The merger has not been completed by March 15, 2000, unless the failure
to complete the merger is due to the failure of the party seeking to
terminate to perform or observe in all material respects the covenants
and agreements to be observed or performed by the party. (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 merger agreement. (paragraph 9(a)(iii))
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Termination by Prime. Prime may terminate the merger agreement, within five
days after the end of the Index Measurement Period (defined below), if both of
the following conditions are satisfied:
(1) the Wells Fargo Measurement Price is less than $36.00; and
(2) the number obtained by dividing the Wells Fargo Measurement Price by
the closing price of Wells Fargo common stock on the trading day
immediately preceding the date of the merger agreement is less than the
number obtained by dividing the Final Index Price (defined below) by
the Initial Index Price (defined below) and subtracting 0.15 from such
quotient. (paragraph 9(a)(iv))
For purposes of this provision:
. The "Company Market Capitalization" means (a) the price of one share of
the common stock of a given company at the close of the trading day
immediately preceding the date of the merger agreement multiplied by (b)
the number of shares of common stock of such company outstanding as of
June 30, 1999 (adjusted for any stock dividend, reclassification,
recapitalization, exchange of shares or similar transaction between June
30, 1999 and the close of the trading day immediately preceding the date
of the merger agreement).
. The "Index Group" means all of those companies listed below the common
stock of which is publicly traded and as to which there is, during the
period of 20 trading days ending on the day immediately preceding the
special meeting of Prime shareholders (the "Index Measurement Period"),
no pending publicly announced proposal for such company to be acquired,
nor has there been any proposal by such company publicly announced
subsequent to the day before the date of the merger agreement to acquire
another company in exchange for stock where, if the company to be
acquired were to become a subsidiary of the acquiring company, the
company to be acquired would be a "significant subsidiary" as defined in
Rule 1-02 of Regulation S-X promulgated by the SEC nor has there been
any program publicly announced subsequent to the day before the date of
the merger agreement to repurchase 5% or more of the outstanding shares
of such company's common stock.
Bank of America Corporation
Bank One Corporation
First Union Corporation
U.S. Bancorp
Fleet Financial Group, Inc.
SunTrust Banks, Inc.
National City Corporation
Fifth Third Bancorp
Mellon Bank Corporation
PNC Bank Corp.
Wachovia Corporation
KeyCorp
State Street Corporation
BB&T Corporation
Northern Trust Corporation
Comerica Incorporated
Regions Financial Corporation
Huntington Bancshares Incorporated
Marshall & Ilsley Corporation
Summit Bancorp
. The "Initial Index Price" means the sum of the following, calculated for
each of the companies in the Index Group: (a) the closing price per
share of common stock of each such company on the trading day
immediately preceding the date of the merger agreement multiplied by (b)
the Weighting Factor (as defined below) for each such company.
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. The "Final Index Price" shall mean the sum of the following, calculated
for each of the companies in the Index Group: (a) the Final Price for
each such company multiplied by (b) the Weighting Factor (as defined
below) for each such company.
. The "Final Price" of any company in the Index Group shall mean the
average of the daily closing prices of a share of common stock of such
company, as reported on the consolidated transaction reporting system
for the market or exchange on which such common stock is principally
traded, during the Index Measurement Period.
. The "Total Market Capitalization" shall mean the sum of the Company
Market Capitalization for each of the companies in the Index Group.
. The "Weighting Factor" for any given company shall mean the Company
Market Capitalization for such company divided by the Total Market
Capitalization.
. The "Wells Fargo Measurement Price" means the average closing price of a
share of Wells Fargo common stock as reported on the composite tape of
the New York Stock Exchange during the Index Measurement Period.
(paragraph 9(c))
Any decision by Prime's board of directors regarding termination of the
merger agreement will be made in the board's sole discretion and could result
in either of the following:
. shareholders of Prime receiving merger consideration with less aggregate
value than was anticipated at the time the merger agreement was signed,
or
. termination of the merger agreement, in which event Prime shareholders
would not receive any merger consideration but would retain their Prime
common stock.
Waiver And Amendment
Either Wells Fargo or Prime 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 merger agreement. (paragraph 16)
Wells Fargo and Prime can amend the merger agreement at any time before the
merger is completed; however, the merger agreement prohibits them from amending
the merger agreement after Prime shareholders approve the merger if the
amendment would change in a manner adverse to Prime shareholders the
consideration to be received by Prime shareholders in the merger. (paragraph
17)
Expenses
Unless otherwise specified in the merger agreement, Wells Fargo and Prime
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 STOCKHOLDER RIGHTS
The following is a summary of material differences between the rights of
Prime shareholders and the rights of Wells Fargo stockholders. It is not a
complete statement of the provisions affecting, and the differences between,
the rights of Prime shareholders and Wells Fargo stockholders. The summary is
qualified in its entirety by reference to the Texas Business Corporation Act
(TBCA), the Delaware General Corporation Law (DGCL), Prime's amended and
restated articles of incorporation and bylaws, and Wells Fargo's restated
certificate of incorporation and bylaws.
General
Upon completion of the merger, holders of Prime common stock will become
stockholders of Wells Fargo. There are material differences in the rights of
Prime shareholders as compared with the rights of Wells Fargo stockholders. The
rights of Prime shareholders are governed by Texas law and Prime's amended and
restated articles of incorporation and bylaws. The rights of Wells Fargo
stockholders are governed by Delaware law and Wells Fargo's restated
certificate of incorporation and bylaws.
A description of Wells Fargo's common stock is contained in Wells Fargo's
current report on Form 8-K filed October 14, 1997. A description of the
preferred stock purchase rights that are attached to shares of Wells Fargo
common stock is included in Wells Fargo's registration statement on Form 8-A
dated October 21, 1998. See "Where You Can Find More Information." These
descriptions may be updated from time to time by amendments or reports filed by
Wells Fargo with the SEC.
Authorized And Outstanding Capital Stock
Wells Fargo. Wells Fargo's restated certificate of incorporation currently
authorizes the issuance of 4,000,000,000 shares of Wells Fargo common stock,
par value $1 2/3 per share, 20,000,000 shares of preferred stock, without par
value, and 4,000,000 shares of preference stock, without par value. At
September 30, 1999, there were shares of Wells Fargo common stock
outstanding, shares of Wells Fargo preferred stock outstanding, and no
shares of Wells Fargo preference stock outstanding.
Prime. Prime's amended and restated articles of incorporation authorize the
issuance of 15,000,000 shares of cumulative preferred stock, $1.00 par value
per share, none of which are issued and outstanding, and 50,000,000 shares of
common stock, $0.25 par value per share, of which 9,804,483 were issued and
outstanding as of September 30, 1999.
Rights Plan
Wells Fargo. Each share of Wells Fargo 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 Wells Fargo's Series C Junior Participating Preferred Stock. A right,
by itself, does not confer on its holder any rights of a Wells Fargo
stockholder, including the right to vote or receive dividends, until the right
is exercised. The rights trade automatically with shares of Wells Fargo common
stock. The rights are designed to protect the interests of Wells Fargo 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.
Prime. Prime has no comparable share purchase rights plan.
Number And Election Of Directors
Wells Fargo. Wells Fargo's bylaws provide for a board of directors consisting
of not less than 10 nor more than 28 persons, each serving a term of one year
or until his or her earlier death, resignation or removal.
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The number of directors of Wells Fargo is currently fixed at 25. Directors of
Wells Fargo may be removed with or without cause by the affirmative vote of the
holders of a majority of the shares of Wells Fargo capital stock entitled to
vote thereon. Vacancies on Wells Fargo'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 Wells Fargo
are elected by plurality of the votes of shares of Wells Fargo capital stock
entitled to vote thereon present in person or by proxy at the meeting at which
directors are elected. Wells Fargo's restated certificate of incorporation does
not currently permit cumulative voting in the election of directors.
Prime. Prime's bylaws provide that the number of directors composing the
board of directors shall be determined from time to time by the board of
directors. Prime's board of directors, by resolution, has fixed the number of
directors at six. In accordance with Prime's bylaws, members of the board of
directors are divided into three classes: Class I, Class II and Class III, with
the directors being elected for staggered, three-year terms. Cumulative voting
is not permitted for the election of directors. At any meeting of shareholders
called expressly for the purpose of removal, any director or the entire board
of directors of Prime may be removed, but only for cause, by a vote of the
holders of a majority of the shares entitled to vote for the election of such
directors. Vacancies existing on the board of directors for any reason may be
filled by the affirmative vote of a majority of the remaining directors.
Amendment Of Governing Documents
Wells Fargo. Wells Fargo's restated certificate of incorporation may be
amended only if the proposed amendment is approved by Wells Fargo'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. Wells Fargo's bylaws may be amended
by a majority of Wells Fargo's board of directors or by a majority of the
outstanding stock entitled to vote thereon. Shares of Wells Fargo preferred
stock and Wells Fargo preference stock currently authorized in Wells Fargo's
restated certificate of incorporation may be issued by Wells Fargo's board of
directors without amending Wells Fargo's restated certificate of incorporation
or otherwise obtaining the approval of Wells Fargo's stockholders.
Prime. Pursuant to Prime's amended and restated articles of incorporation,
amendments to Prime's amended and restated articles of incorporation require
the affirmative vote of the holders of at least a majority of the outstanding
shares entitled to vote thereon, unless any class or series of shares is
entitled to vote thereon. Prime's bylaws may be amended only by a vote of the
majority of Prime's board of directors. Prime's shareholders do not have the
power to amend the bylaws.
Approval Of Mergers And Assets Sales
Wells Fargo. Except as described below, the affirmative vote of a majority of
the outstanding shares of Wells Fargo common stock entitled to vote thereon is
required to approve a merger or consolidation involving Wells Fargo or the
sale, lease or exchange of all or substantially all of Wells Fargo's corporate
assets. No vote of the stockholders is required, however, in connection with a
merger in which Wells Fargo is the surviving corporation and (a) the agreement
of merger for the merger does not amend in any respect Wells Fargo'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 Wells Fargo 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 Wells Fargo's capital stock outstanding immediately before the
merger.
Prime. The affirmative vote of a majority of the outstanding shares of Prime
common stock entitled to vote thereon is required to approve a merger or
consolidation involving Prime or the sale, lease or exchange of all or
substantially all of Prime's corporate assets.
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Preemptive Rights
Wells Fargo. Neither Wells Fargo's restated certificate of incorporation nor
its bylaws grants preemptive rights to its stockholders.
Prime. Prime's amended and restated articles of incorporation deny preemptive
rights to the shareholders.
Appraisal Rights
Wells Fargo. Section 262 of the DGCL provides for stockholder appraisal
rights in connection with consolidations and mergers 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 consolidation
or merger, 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. Wells Fargo 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 Wells Fargo common
stock will not have appraisal rights in connection with consolidations and
mergers involving Wells Fargo.
Prime. Shareholders of Texas corporations are entitled to exercise certain
dissenters' appraisal rights in the event of a sale, lease, exchange, or other
disposition of all, or substantially all, of the property and assets of the
corporation not made in the ordinary course of business, and with the exception
discussed below, a merger or consolidation. Under Article 5.11B of the TBCA,
however, shareholders do not have dissenters' rights if, in connection with a
merger, the stock of the corporation held by the shareholders is either listed
on a national securities exchange or is held of record by not less than 2,000
shareholders and, pursuant to the plan of merger, such shareholders are not
required to accept for their shares any consideration other than (a) shares of
stock of a corporation which, immediately after the effective date of the
merger, (i) are listed on a national securities exchange, or (ii) are held of
record by not less than 2,000 shareholders, and (b) cash in lieu of fractional
shares otherwise entitled to be received. Because Prime shareholders will
receive merger consideration that satisfies the provisions of Article 5.11B
described above, Prime shareholders are not entitled to dissenters' rights with
respect to the merger.
Special Meetings
Wells Fargo. 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. Wells Fargo'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 Wells Fargo's board of
directors. Holders of Wells Fargo common stock do not have the ability to call
a special meeting of stockholders.
Prime. Prime's bylaws provide that a special meeting of Prime's shareholders
may be called at any time by either the chairman of the board, the president, a
majority of the board of directors, a majority of the executive committee or
the holders of a majority of the shares entitled to vote at the special
meeting.
Directors' Duties
Wells Fargo. 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, in performing
their duties, directors are bound to use that degree of care which ordinarily
prudent persons would use in similar circumstances.
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Prime. The TBCA does not specifically enumerate the fiduciary duties of a
director. Judicial decisions have established that the fiduciary duties of a
director include the duty of care and the duty of loyalty. The duty of care
requires directors to exercise reasonable care in performing duties, to be
diligent and prudent, and to inform themselves in making decisions and managing
the corporation's affairs. The duty of loyalty requires directors to act in
good faith and not allow personal interests to prevail over the interests of
the corporation and the shareholders.
Action Without A Meeting
Wells Fargo. As permitted by Section 228 of the DGCL and Wells Fargo'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.
Prime. Under the TBCA, no action required or permitted to be taken at an
annual or special meeting of shareholders may be taken by written consent in
lieu of a meeting of shareholders without the unanimous written consent of all
shareholders unless the articles of incorporation specifically allow action by
less than unanimous written consent. Prime's amended and restated articles of
incorporation do not contain such a provision.
Limitations On Directors' Liability
Wells Fargo. Wells Fargo's restated certificate of incorporation provides
that a director (including an officer who is also a director) of Wells Fargo
shall not be liable personally to Wells Fargo 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 Wells Fargo
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 Wells Fargo'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.
Prime. The Texas Miscellaneous Corporations Laws Act (TMCLA) permits a
corporation's articles of incorporation to set limits on the extent of a
director's liability, except that liability for monetary damages cannot be
eliminated for: (a) a breach of duty of loyalty to the corporation or its
shareholders, (b) an act or omission not in good faith that constitutes a
breach of duty to the corporation or an act or omission that involves
intentional misconduct or a knowing violation of law, (c) a transaction from
which the director receives an improper benefit, whether or not the benefit
resulted from an action taken within the scope of the director's office, and
(d) an act or omission for which liability is expressly provided for by
statute. Prime's amended and restated articles of incorporation contain
provisions limiting a director's liability consistent with the TMCLA and
contain a provision that if the TBCA or TMCLA is amended to authorize further
limitation of the liability of directors, then the liability of such persons
shall be limited to the fullest extent permitted by the TBCA and the TMCLA,
each as amended.
Indemnification Of Officers And Directors
Wells Fargo. Wells Fargo's restated certificate of incorporation provides
that Wells Fargo 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 Wells Fargo (or was serving at the request of Wells
Fargo 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
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brought by such person will be permitted only if the proceeding was authorized
by Wells Fargo's board of directors. Wells Fargo's restated certificate of
incorporation also provides that Wells Fargo 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. Wells
Fargo's restated certificate of incorporation authorizes Wells Fargo to provide
similar indemnification to employees or agents of Wells Fargo.
Pursuant to Wells Fargo's restated certificate of incorporation, Wells Fargo
may maintain insurance, at its expense, to protect itself and any directors,
officers, employees or agents of Wells Fargo or another entity against any
expense, liability or loss, regardless of whether Wells Fargo 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 Wells Fargo's
restated certificate of incorporation or Wells Fargo bylaws, agreement, vote of
stockholders or disinterested directors or otherwise.
Prime. The TBCA provides that a corporation may indemnify a director or
officer who was, is or is threatened to be made a named defendant or respondent
in a proceeding because the person is or was a director or officer if such
person: (a) conducted himself in good faith; (b) reasonably believed: (i) in
the case of conduct in his official capacity as a director or officer, that his
conduct was in the corporation's best interests and (ii) in all other cases,
that his conduct was at least not opposed to the corporation's best interests;
and (c) in the case of any criminal proceeding, had no reasonable cause to
believe his conduct was unlawful. The TBCA also provides that a corporation
must indemnify a director or officer against reasonable expenses incurred by
him in connection with a proceeding in which such person is a named defendant
or respondent because he is or was a director or officer if he has been wholly
successful, on the merits or otherwise, in the defense of the proceeding.
Certain other individuals serving at the request of the corporation may also be
indemnified under Texas law. Prime's bylaws provide that Prime shall indemnify
its directors and officers from and against any and all liabilities, costs and
expenses incurred by them in such capacities as and to the fullest extent
permitted by the TBCA and that Prime shall pay their expenses in defending an
action, suit or proceeding in advance of its final disposition.
Dividends
Wells Fargo. 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. Wells Fargo
is also subject to Federal Reserve Board policies regarding payment of
dividends, which generally limit dividends to operating earnings. See
"Regulation And Supervision Of Wells Fargo."
Prime. Under the TBCA, a Texas corporation may make a distribution to its
shareholders if the distribution does not exceed the corporation's surplus and
the corporation would not become insolvent after giving effect to the
distribution. Prime is also subject to Federal Reserve Board policies regarding
payment of dividends, which generally limit dividends to operating earnings.
Corporate Governance Procedures; Nomination Of Directors
Wells Fargo. Wells Fargo'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. Wells Fargo'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, Wells
Fargo's bylaws contain detailed advance notice
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and informational procedures which must be followed in order for a Wells Fargo
stockholder to propose an item of business for consideration at a meeting of
Wells Fargo stockholders.
Prime. Prime's bylaws establish an advance notice procedure for shareholders
to make nominations of candidates for election as directors or bring other
business before an annual meeting of shareholders of Prime. This notice
procedure provides that only persons who are nominated by, or at the direction
of, the board of directors, or by a shareholder who has given timely written
notice prior to the meeting at which directors are to be elected, will be
eligible for election as directors of Prime and that, at an annual meeting,
only such business may be conducted as has been brought before the meeting by,
or at the direction of, the board of directors or a shareholder who has given
timely written notice of such shareholder's intention to bring such business
before the meeting.
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INFORMATION ABOUT WELLS FARGO
General
Wells Fargo is a diversified financial services company. Through its
subsidiaries and affiliates, Wells Fargo provides retail, commercial, real
estate and mortgage banking, asset management and consumer finance, as well as
a variety of other financial services, including equipment leasing,
agricultural 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 September 30, 1999, Wells Fargo had consolidated total assets of $207.1
billion, consolidated total deposits of $131.6 billion and stockholders' equity
of $22.2 billion. Based on assets at September 30, 1999, Wells Fargo was the
7th largest commercial banking organization in the United States.
Wells Fargo expands its business in part by acquiring banking institutions
and other companies engaged in activities closely related to banking. Wells
Fargo continues to explore opportunities to acquire banking institutions and
other companies permitted by the Bank Holding Company Act of 1956. Discussions
are continually being carried on related to such acquisitions. It is not
presently known whether, or on what terms, such discussions will result in
further acquisitions. It is the policy of Wells Fargo not to comment on such
discussions or possible acquisitions until a definitive agreement with respect
thereto has been signed.
Wells Fargo is a legal entity separate and distinct from its banking and
nonbanking subsidiaries. As a result, the right of Wells Fargo--and thus the
right of Wells Fargo's creditors--to participate in any distribution of assets
or earnings of any subsidiary, other than in its capacity as a creditor of such
subsidiary, is subject to the prior payment of claims of creditors of such
subsidiary. The principal sources of Wells Fargo's revenues are dividends and
fees from its subsidiaries. See "Regulation And Supervision Of Wells Fargo--
Dividend Restrictions" for a discussion of the restrictions on the subsidiary
banks' ability to pay dividends to Wells Fargo.
Wells Fargo's executive offices are located at 420 Montgomery Street, San
Francisco, California 94163, and its telephone number is (800) 411-4932.
Management And Additional Information
Information concerning executive compensation, the principal holders of
voting securities, certain relationships and related transactions, and other
related matters concerning Wells Fargo is included or incorporated by reference
in its annual report on Form 10-K for the year ended December 31, 1998. Wells
Fargo's annual report on Form 10-K is incorporated by reference into this proxy
statement-prospectus. Prime shareholders who want a copy of this annual report
or any document incorporated by reference into the report may contact Wells
Fargo at the address or phone number indicated below under "Where You Can Find
More Information."
Information On Wells Fargo's Web Site
Information on the Internet web site of Wells Fargo or any subsidiary of
Wells Fargo is not part of this proxy statement-prospectus, and you should not
rely on that information in deciding whether to approve the merger unless that
information is also in this document or in a document that is incorporated by
reference into this proxy statement-prospectus.
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REGULATION AND SUPERVISION OF WELLS FARGO
To the extent that the following information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to the full
text of those provisions. Also, such statutes, regulations and policies are
continually under review by Congress and state legislatures and federal and
state regulatory agencies. A change in statutes, regulations or regulatory
policies applicable to Wells Fargo could have a material effect on the business
of Wells Fargo.
General
Wells Fargo, its banking subsidiaries and many of its nonbanking 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 not for the protection of security holders.
As discussed in more detail below, this regulatory environment, among other
things, may restrict Wells Fargo's ability to diversify into certain areas of
financial services, acquire depository institutions in certain states and pay
dividends on its capital stock. It may also require Wells Fargo to provide
financial support to one or more of its banking subsidiaries, maintain capital
balances in excess of those desired by management and pay higher deposit
insurance premiums as a result of the deterioration in the financial condition
of depository institutions in general.
Regulatory Agencies
Bank Holding Company. Wells Fargo & Company, as a bank holding company, is
subject to regulation under the Bank Holding Company Act of 1956 and to
inspection, examination and supervision by the Board of Governors of the
Federal Reserve System (Federal Reserve Board) under the Bank Holding Company
Act of 1956.
Subsidiary Banks. Wells Fargo's national banking subsidiaries are subject to
regulation and examination primarily by the Office of the Comptroller of the
Currency (OCC) and secondarily by the Federal Reserve Board and the Federal
Deposit Insurance Corporation (FDIC). Wells Fargo's state-chartered banking
subsidiaries are subject to primary federal regulation and examination by the
FDIC or the Federal Reserve Board and, in addition, are regulated and examined
by their respective state banking departments.
Nonbank Subsidiaries. Many of Wells Fargo's nonbank subsidiaries also are
subject to regulation by the Federal Reserve Board and other applicable federal
and state agencies. Wells Fargo's brokerage subsidiaries are regulated by the
SEC, the National Association of Securities Dealers, Inc. and state securities
regulators. Wells Fargo's insurance subsidiaries are subject to regulation by
applicable state insurance regulatory agencies. Other nonbank subsidiaries of
Wells Fargo 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
Banking-Related Requirement. Under the Bank Holding Company Act, bank holding
companies generally may not acquire the beneficial ownership or control of more
than 5% of the voting shares or substantially all of the assets of any company,
including a bank, without the Federal Reserve Board's prior approval. Also,
bank holding companies generally may engage, directly or indirectly, only in
banking and such other activities as the Federal Reserve Board determines to be
closely related to banking.
Interstate Banking. Under the Riegle-Neal Interstate Banking and Branching
Act (Riegle-Neal Act), 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
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requirement that the bank holding company not control, prior to or following
the proposed acquisition, more than 10% of the total amount of deposits of
insured depository institutions nationwide or, unless 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 Riegle-Neal Act also authorizes banks to merge across state lines,
thereby creating interstate branches. States may opt out of the Interstate
Banking Act and thereby prohibit interstate mergers in the state. Wells Fargo
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 Riegle-Neal Act.
The state of Montana has opted out until at least the year 2001.
Regulatory Approval. 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 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.
Dividend Restrictions
Wells Fargo & Company is a legal entity separate and distinct from its
subsidiary banks 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 statutory provisions
and regulations limit the amount of dividends that Wells Fargo's bank
subsidiaries may pay without regulatory approval. Dividends payable by a
national bank without the express approval of the OCC are limited to the bank's
retained net profits for the preceding two calendar years plus retained net
profits up to the date of any dividend declaration in the current calendar
year. The OCC defines retained net profits as net income, less dividends
declared during the period, both of which are based on regulatory accounting
principles. Wells Fargo's state-chartered subsidiary banks also are subject to
state regulations that limit dividends.
Before Wells Fargo Bank, National Association can declare dividends in 1999
without the prior approval of the OCC, it must have net income of $1.5 billion
plus an amount equal to or greater than the dividends declared in 1999. Because
it is not expected to meet this requirement, Wells Fargo Bank, National
Association must obtain the prior approval of the OCC before it declares any
dividends in 1999.
Federal bank regulatory agencies have the authority to prohibit Wells Fargo's
subsidiary banks from engaging in unsafe or unsound practices in conducting
their businesses. The payment of dividends, depending on the financial
condition of the bank in question, could be deemed an unsafe or unsound
practice. The ability of Wells Fargo's subsidiary banks to pay dividends in the
future is currently influenced, and could be further influenced, by bank
regulatory policies and capital guidelines.
Holding Company Structure
Transfer of Funds from Banking Subsidiaries. Wells Fargo's banking
subsidiaries are subject to restrictions under federal law that limit the
transfer of funds or other items of value from these subsidiaries to Wells
Fargo and its nonbanking subsidiaries, including affiliates, whether in the
form of loans and other extensions of credit, investments and asset purchases,
or as other transactions involving the transfer of value from a subsidiary to
an affiliate or for the benefit of an affiliate. Unless an exemption applies,
these transactions by a banking subsidiary with a single affiliate are limited
to 10% of the subsidiary bank's capital and surplus and, with respect to all
covered transactions with affiliates in the aggregate, to 20% of the subsidiary
bank's capital and surplus. Also, loans and extensions of credit to affiliates
generally are required to be secured in specified amounts.
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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 from Wells Fargo 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 Wells Fargo's bankruptcy, any
commitment by Wells Fargo to a federal bank regulatory agency to maintain the
capital of a subsidiary bank will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
Depositor Preference. The Federal Deposit Insurance Act (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 Wells Fargo.
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" means generally the appointment of a conservator
or receiver. "In danger of default" means generally the existence of certain
conditions indicating that a default is likely to occur in the absence of
regulatory assistance.
Capital Requirements
Wells Fargo and each of its subsidiary banks are subject to capital adequacy
requirements and guidelines administered by the Federal Reserve Board, the OCC
and the FDIC.
The Federal Deposit Insurance Corporation Act of 1991 (FDICIA) required that
the Federal Reserve Board, the OCC and the FDIC adopt regulations defining five
capital tiers for banks: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by regulators
that, if undertaken, could have a material adverse effect on Wells Fargo's
business.
Quantitative measures, established by the regulators to ensure capital
adequacy, require that Wells Fargo and each of its bank subsidiaries maintain
minimum ratios of total capital to risk-weighted assets of eight percent (8%)
and of Tier 1 capital to risk-weighted assets of four percent (4%).
There are two categories of capital under the guidelines. Tier 1 capital
includes common stockholders' equity, qualifying preferred stock and, for bank
holding companies, trust preferred securities, less goodwill and certain other
deductions, including the unrealized net gains and losses, after applicable
taxes, on available-for-sale securities carried at fair value. Tier 2 capital
includes preferred stock not qualifying as Tier 1 capital, mandatory
convertible debt, subordinated debt, certain unsecured senior debt issued by
Wells Fargo, the allowance for loans losses and net unrealized gains on
marketable securities, subject to limitations established by the guidelines. At
least half of total capital must be in the form of Tier 1 capital.
Under the guidelines, capital is compared to the relative risk related to the
balance sheet. To derive the risk included in the balance sheet, one of four
risk weights (0%, 20%, 50% and 100%) is applied to different balance sheet and
off-balance sheet assets, primarily based on the relative credit risk of the
counterparty. For example, claims guaranteed by the U.S. government or one of
its agencies are risk-weighted at 0%. Off-balance sheet items, such as loan
commitments and derivative financial instruments, are also assigned one of the
above risk weights after calculating balance sheet equivalent amounts. For
example, certain loan commitments are converted at 50% and then risk-weighted
at 100%. Derivative financial instruments are converted to balance
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sheet equivalents based on notional values, replacement costs and remaining
contractual terms. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors. In addition, the federal banking agencies have specified minimum
"leverage ratio" (the ratio of Tier 1 capital to quarterly average total
assets) guidelines for bank holding companies and state member banks. The
minimum leverage ratio guideline is three percent (3%) for banking
organizations that meet certain specified criteria, including that they have
the highest regulatory rating. All other banking organizations and state member
banks are required to maintain a leverage ratio of three percent (3%) plus an
additional cushion of at least two percent (2%).
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).
The Federal Reserve Board, the FDIC and the OCC have adopted rules to
incorporate market and interest rate risk components into their risk-based
capital standards. Amendments to the risk-based capital requirements,
incorporating market risk, became effective January 1, 1998. Under the new
market risk requirements, capital will be allocated to support the amount of
market risk related to a financial institution's ongoing trading activities.
At September 30, 1999, Wells Fargo's ratio of total capital (the sum of Tier
1 and Tier 2 capital) to risk-weighted assets was % and its ratio of Tier 1
capital to risk-weighted assets was %. Wells Fargo's leverage ratio at
September 30, 1999 was %. Wells Fargo's management believes that each of Wells
Fargo's subsidiary banks met all capital requirements to which they are
subject.
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.
Under FDICIA's prompt corrective action provisions applicable to banks, the
most recent regulatory notification from the OCC concerning each of Wells
Fargo's subsidiary banks categorized them as well capitalized. To be
categorized as well capitalized, the institution must maintain a risk-based
total capital ratio of at least ten percent (10%), a risk-based Tier 1 capital
ratio of at least six percent (6%) and a leverage ratio of at least five
percent (5%), and not be subject to a capital directive order. There are no
conditions or events since that notification that management believes have
changed the risk-based capital category of our subsidiary banks.
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.
FDIC Insurance
Through the Bank Insurance Fund (BIF), the FDIC insures the deposits of Wells
Fargo's depository institution subsidiaries up to prescribed limits for each
depositor. 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
36
<PAGE>
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.
The BIF assessment rate currently ranges from zero to 27 cents per $100 of
domestic deposits. The FDIC may increase or decrease the assessment rate
schedule on a semi-annual basis. An increase in the BIF assessment rate could
have a material adverse effect on Wells Fargo'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 for one or more of
Wells Fargo's subsidiary depository institutions could have a material adverse
effect on Wells Fargo'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 1.2 cents
per $100 of BIF-assessable deposits until the earlier of December 31, 1999 or
the date the last savings and loan association ceases to exist. Thereafter,
they will pay an assessment rate equal to the rate assessed on deposits insured
by the Savings Association Insurance Fund.
Fiscal And Monetary Policies
Wells Fargo's business and earnings are affected significantly by the fiscal
and monetary policies of the federal government and its agencies. Wells Fargo
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 Wells Fargo.
Competition
The financial services industry is highly competitive. Wells Fargo'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.
37
<PAGE>
INFORMATION ABOUT PRIME
General
Prime was incorporated as a business corporation under the laws of the State
of Texas in 1984 to serve as a bank holding company for Prime Bank, which was
chartered in 1958. Prime's headquarters are located at 12200 Northwest Freeway,
Houston, Texas 77092, and its telephone number is (713) 209-6000.
Prime has grown from an organization with two banking locations and assets of
$81.2 million at December 31, 1987 to its current 21 full-service banking
locations and assets of $1.2 billion at September 30, 1999.
Prime has developed a supercommunity banking network, with most of its
offices located either in separate communities or portions of urban areas that
function as distinct communities. Lending and investment activities are funded
from a strong core deposit base consisting of approximately 98,000 deposit
accounts from approximately 55,000 households. Each of Prime's offices has a
manager with the authority and flexibility to make pricing decisions within
overall ranges developed by Prime as a form of quality control. Prime believes
that its responsiveness to local customers and ability to adjust deposit rates
and price loans at each location gives it a distinct competitive advantage.
Adequate staffing is provided at each location to ensure that customers needs
are well addressed, and employees are committed to quality service and
developing long-term customer relationships. Prime provides economic incentives
to its officers to develop additional business for Prime and to cross sell
additional products and services to existing customers
Management And Additional Information
Certain information relating to management, executive compensation, various
benefit plans (including stock option plans), voting securities and the
principal holders thereof, certain relationships and related transactions and
other matters related to Prime is incorporated by reference or set forth in
Prime's Annual Report on Form 10-K for the year ended December 31, 1998,
incorporated herein by reference. Shareholders desiring copies of such
documents may contact Prime at its address or telephone number indicated under
"Where You Can Find More Information."
38
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Wells Fargo Share Prices And Dividends
The following table shows the high and low sales prices of Wells Fargo common
stock, and the cash dividends paid per share, for the quarterly periods
indicated. Wells Fargo common stock trades on the New York and Chicago Stock
Exchanges under the symbol "WFC." Before November 3, 1998, the common stock
traded under the symbol "NOB." The information for the first three quarters of
1997 has been adjusted to reflect a 2-for-1 stock split on October 10, 1997.
Amounts are in U.S. dollars.
<TABLE>
<CAPTION>
High Low Dividend
------ ------ --------
<S> <C> <C> <C>
1997
First Quarter....................................... $26.63 $21.63 $0.150
Second Quarter...................................... 29.63 22.19 0.150
Third Quarter....................................... 32.16 28.13 0.150
Fourth Quarter...................................... 39.50 29.75 0.165
1998
First Quarter....................................... 43.88 34.75 0.165
Second Quarter...................................... 43.75 34.00 0.165
Third Quarter....................................... 39.75 27.50 0.185
Fourth Quarter...................................... 40.88 30.19 0.185
1999
First Quarter....................................... 40.44 32.13 0.185
Second Quarter...................................... 44.88 34.38 0.200
Third Quarter....................................... 45.31 36.44 0.200
Fourth Quarter (through December ).................
</TABLE>
The timing and amount of future dividends will depend on earnings, cash
requirements, the financial condition of Wells Fargo and its subsidiaries,
applicable government regulations and other factors deemed relevant by Wells
Fargo's board of directors. As described in "Regulation And Supervision Of
Wells Fargo --Dividend Restrictions," various federal and state laws limit the
ability of affiliate banks to pay dividends to Wells Fargo.
Prime Share Prices And Dividends
Prime common stock is traded on the Nasdaq National Market System under the
symbol PBTX. The following table sets forth the high and low sales prices for
Prime common stock as reported on the Nasdaq National Market System for the
periods presented. Prime common stock commenced trading on the Nasdaq National
Market System on September 26, 1997. Prior to that time, there was no
established market for Prime common stock. Amounts are in U.S. dollars.
<TABLE>
<CAPTION>
High Low Dividend
------ ------ --------
<S> <C> <C> <C>
1997
First Quarter....................................... $ N/A $ N/A $0.0333
Second Quarter...................................... N/A N/A 0.0333
Third Quarter....................................... 19.50 19.00 0.0333
Fourth Quarter...................................... 20.88 18.25 0.0400
1998
First Quarter....................................... 25.38 20.00 0.0400
Second Quarter...................................... 28.75 23.00 0.0400
Third Quarter....................................... 26.25 14.50 0.0600
Fourth Quarter...................................... 18.00 12.00 0.0600
1999
First Quarter....................................... 17.63 14.00 0.0600
Second Quarter...................................... 17.88 13.75 0.0600
Third Quarter....................................... 24.38 17.06 0.0800
Fourth Quarter (through December ).................
</TABLE>
39
<PAGE>
EXPERTS
Wells Fargo's Auditors
The consolidated financial statements of Wells Fargo and subsidiaries as of
December 31, 1998 and 1997, and for each of the years in the three-year period
ended December 31, 1998, incorporated by reference herein, have been
incorporated herein in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
Prime's Auditors
The consolidated financial statements of Prime and its subsidiaries as of
December 31, 1998 and 1997, and for each of the years in the three-year period
ended December 31, 1998, incorporated by reference herein, have been
incorporated herein on the reliance upon the report of Grant Thornton LLP,
independent certified public accountants, upon authority of said firm as
experts in accounting and auditing.
OPINIONS
Share Issuance
Stanley S. Stroup, Executive Vice President and General Counsel of Wells
Fargo, has rendered a legal opinion that the shares of Wells Fargo common stock
offered hereby, when issued in accordance with the merger agreement, will be
validly issued, fully paid and nonassessable. Mr. Stroup beneficially owns
shares of Wells Fargo common stock and options to purchase additional shares of
Wells Fargo common stock. As of the date of this proxy statement-prospectus,
the total number of shares Mr. Stroup owns or has the right to acquire upon
exercise of his options is less than 0.1% of the outstanding shares of Wells
Fargo common stock.
Tax Matters
Bracewell & Patterson, L.L.P. has given an opinion regarding the material
U.S. federal income tax consequences of the merger. See "The Merger--U.S.
Federal Income Tax Consequences Of The Merger."
40
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
SEC Filings
Wells Fargo and Prime file annual, quarterly and current reports, proxy
statements and other information with the SEC. Wells Fargo's and Prime's SEC
filings are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You can also read and copy any document filed by Wells
Fargo or Prime with the SEC at the SEC's public reference rooms located at 450
Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. You can also obtain copies
of Wells Fargo's and Prime's SEC filings at prescribed rates by writing to the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549.
Wells Fargo's SEC filings are also available from commercial document
retrieval services and from the New York and Chicago Stock Exchanges. For
information on obtaining copies of Wells Fargo's SEC filings at the New York
Stock Exchange, call (212) 656-5060, and at the Chicago Stock Exchange, call
(312) 663-2423.
Prime's SEC documents are also available from commercial document retrieval
services.
Registration Statement
Wells Fargo filed a registration statement on Form S-4 to register with the
SEC the Wells Fargo common stock to be issued to Prime 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.
Documents Incorporated By Reference
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 Wells Fargo or Prime with the SEC.
Wells Fargo Documents
This proxy statement-prospectus incorporates by reference the Wells Fargo SEC
documents set forth below. All of the documents were filed under SEC File No.
001-2979. Documents filed before November 3, 1998 were filed under the name
Norwest Corporation.
. Annual Report on Form 10-K for the year ended December 31, 1998,
including information specifically incorporated by reference into the
Form 10-K from Wells Fargo's 1998 Annual Report to Stockholders and
Wells Fargo's definitive Notice and Proxy Statement for Wells Fargo's
1999 Annual Meeting of Stockholders;
. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999,
June 30, 1999 and September 30, 1999;
. Current Reports on Form 8-K filed January 29, 1999, April 21, 1999,
April 28, 1999, July 20, 1999, July 28, 1999, September 29, 1999 and
October 19, 1999;
. The description of Wells Fargo common stock contained in the Current
Report on Form 8-K filed October 14, 1997, including any amendment or
report filed to update such description;
. The description of preferred stock purchase rights contained in the
Registration Statement on Form 8-A dated October 21, 1998, including any
amendment or report filed to update such description; and
41
<PAGE>
. All reports and definitive proxy or information statements filed by
Wells Fargo pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after the date of this proxy statement-
prospectus and before completion of the merger and the exchange of Wells
Fargo common stock for Prime common stock.
Prime Documents
This proxy statement-prospectus incorporates by reference the Prime SEC
documents set forth below. All of the documents were filed under SEC File No.
000-23113.
. Annual Report on Form 10-K for the year ended December 31, 1998,
including information specifically incorporated by reference into the
Form 10-K from Prime's 1998 definitive Notice and Proxy Statement for
Prime's 1999 Annual Meeting of Shareholders;
. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999,
June 30, 1999 and September 30, 1999;
. Current Report on Form 8-K filed on July 29, 1999;
. The description of Prime common stock contained in the Registration
Statement on Form 8-A dated September 17, 1999, as updated in any
amendment or report filed for such purpose; and
. All reports and definitive proxy or information statements filed by
Prime pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 after the date of this proxy statement-prospectus
and before completion of the merger and the exchange of Wells Fargo
common stock for Prime common stock.
Wells Fargo and Prime 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 in
this proxy statement-prospectus. You may obtain a copy of any document
incorporated by reference by writing or calling Wells Fargo or Prime as
follows:
Wells Fargo: Prime:
Corporate Secretary Corporate Secretary
Wells Fargo & Company Prime Bancshares, Inc.
Norwest Center 12200 Northwest Freeway
Sixth and Marquette Houston, Texas 77092
Minneapolis, MN 55479-1026 (713) 209-6000
(612) 667-8655
To ensure delivery of the copies in time for the special meeting, your
request should be received by January , 2000.
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 Wells Fargo nor Prime 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
December , 1999. 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 Wells Fargo common stock will create any
implication to the contrary.
42
<PAGE>
APPENDIX A
----------------
AGREEMENT AND PLAN OF REORGANIZATION
by and between
PRIME BANCSHARES, INC.
and
WELLS FARGO & COMPANY
----------------
Dated as of July 27, 1999
<PAGE>
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as of the
27th day of July, 1999, by and between PRIME BANCSHARES, INC. ("Prime"), a
Texas corporation, and WELLS FARGO & COMPANY ("Wells Fargo"), a Delaware
corporation.
WHEREAS, the parties hereto desire to effect a reorganization whereby a
wholly-owned subsidiary of Wells Fargo will merge with and into Prime (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 exchange of the shares of Common Stock of Prime, $.25 par
value ("Prime 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 Wells Fargo of the par value of
$1 2/3 per share ("Wells Fargo 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 Wells Fargo (the "Merger Co.") will be merged by statutory
merger with and into Prime pursuant to the Merger Agreement, with Prime as the
surviving corporation, in which merger each share of Prime 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 exchanged for the number of shares of Wells Fargo
Common Stock determined by dividing 6,032,096 by the number of shares of Prime
Common Stock then outstanding.
(b) Wells Fargo Common Stock Adjustments. If, between the date hereof and the
Effective Time of the Merger, shares of Wells Fargo 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 Wells Fargo Common Stock into which a share of
Prime Common Stock shall be converted pursuant to subparagraph (a), above, will
be appropriately and proportionately adjusted so that the number of such shares
of Wells Fargo Common Stock into which a share of Prime Common Stock shall be
converted will equal the number of shares of Wells Fargo Common Stock which
holders of shares of Prime 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 Wells Fargo 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 Wells Fargo 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 Articles of Merger
shall be filed with the Secretary of State of the State of Texas 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"), provided that the
Closing Date shall not occur prior to January 15, 2000. Each of the parties
agrees to
A-1
<PAGE>
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. Austin, Texas 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 Prime pursuant to the Merger Agreement.
The closing of the transactions contemplated by this Agreement and the Merger
Agreement (the "Closing") shall take place on the Closing Date at the offices
of Wells Fargo, Norwest Center, Sixth and Marquette, Minneapolis, Minnesota, or
such other place mutually agreed upon by Wells Fargo and Prime.
2. Representations and Warranties of Prime. Prime represents and warrants to
Wells Fargo as follows:
(a) Organization and Authority. Prime is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas, 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 Prime and the Prime 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. Prime 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"). Prime has furnished Wells
Fargo true and correct copies of its articles of incorporation and by-laws, as
amended.
(b) Prime's Subsidiaries. Schedule 2(b) sets forth a complete and correct
list of all of Prime's subsidiaries as of the date hereof (individually a
"Prime Subsidiary" and collectively the "Prime 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 Prime. No equity security of any
Prime 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 Prime Subsidiary is
bound to issue additional shares of its capital stock, or any option, warrant
or right to purchase or acquire any additional shares of its capital stock. All
of such shares so owned by Prime 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 Prime Subsidiary is a corporation or state
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), Prime 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 Prime consists of
50,000,000 shares of common stock, $.25 par value per share and 15,000,000
shares of Preferred Stock, of which as of the close of business on March 31,
1999, 9,804,483 shares of common stock and no shares of preferred stock were
outstanding and 2,446,497 shares of common stock were held in the treasury. The
maximum number of shares of Prime Common Stock (assuming for this purpose that
phantom shares and other share-equivalents constitute Prime 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 10,209,483. All of the outstanding shares of capital stock of
Prime 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 Prime or any Prime Subsidiary to
issue, sell or otherwise dispose of, or to purchase, redeem or otherwise
acquire, any shares of
A-2
<PAGE>
capital stock of Prime or any Prime Subsidiary. Since March 31, 1999, no shares
of Prime capital stock have been purchased, redeemed or otherwise acquired,
directly or indirectly, by Prime or any Prime Subsidiary and no dividends or
other distributions have been declared, set aside, made or paid to the
shareholders of Prime.
(d) Authorization. Prime 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 Prime and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the Board of Directors of Prime. Subject
to such approvals of shareholders and of government agencies and other
governing boards having regulatory authority over Prime as may be required by
statute or regulation, this Agreement and the Merger Agreement are valid and
binding obligations of Prime enforceable against Prime in accordance with their
respective terms.
Except as set forth on Schedule 2(d), neither the execution, delivery and
performance by Prime of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor
compliance by Prime 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 Prime or any
Prime 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 Prime or any Prime Subsidiary is a party or by which it may
be bound, or to which Prime or any Prime Subsidiary or any of the properties or
assets of Prime or any Prime 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 Prime, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to Prime or any
Prime Subsidiary or any of their respective properties or assets.
Other than in connection or in compliance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act"), the Securities Exchange Act of 1934, as amended, 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 Texas law, no notice to, filing with,
exemption or review by, or authorization, consent or approval of, any public
body or authority is necessary for the consummation by Prime of the
transactions contemplated by this Agreement and the Merger Agreement.
(e) Prime Financial Statements. The consolidated balance sheets of Prime and
Prime's Subsidiaries as of December 31, 1998 and 1997 and related consolidated
statements of income, shareholders' equity and cash flows for the three years
ended December 31, 1998, together with the notes thereto, certified by Grant
Thornton and included in Prime's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 (the "Prime 10-K") as filed with the Securities and
Exchange Commission (the "SEC"), and the unaudited consolidated statements of
financial condition of Prime and Prime's Subsidiaries as of March 31, 1999 and
the related unaudited consolidated statements of income, shareholders' equity
and cash flows for the three (3) months then ended included in Prime's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1999 as
filed with the SEC (collectively, the "Prime 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 Prime and Prime's Subsidiaries at the dates
and the consolidated results of operations and cash flows of Prime and Prime's
Subsidiaries for the periods stated therein.
(f) Reports. Since December 31, 1993, Prime and each Prime Subsidiary has
filed all reports, registrations and statements, together with any required
amendments thereto, that it was required to file with
A-3
<PAGE>
(i) the SEC, including, but not limited to, Forms 10-K, Forms 10-Q and proxy
statements, (ii) the Federal Reserve Board, (iii) the Federal Deposit Insurance
Corporation (the "FDIC"), and (iv) any applicable state securities or banking
authorities. All such reports and statements filed with any such regulatory
body or authority are collectively referred to herein as the "Prime Reports."
As of their respective dates, the Prime Reports complied in all material
respects with all the rules and regulations promulgated by the SEC, the Federal
Reserve Board, the FDIC, 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
Prime Reports have been made available to Wells Fargo by Prime.
(g) Properties and Leases. Except as may be reflected in the Prime Financial
Statements and except for any lien for current taxes not yet delinquent, Prime
and each Prime 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 Prime's consolidated balance sheet as of
March 31, 1999 included in Prime's Quarterly Report on Form 10-Q for the period
then ended, and all real and personal property acquired since such date, except
such real and personal property as has been disposed of in the ordinary course
of business. All leases of real property and all other leases material to Prime
or any Prime Subsidiary pursuant to which Prime or such Prime 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
Prime or such Prime Subsidiary or any event which, with notice or lapse of time
or both, would constitute such a material default. Substantially all Prime's
and each Prime 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 Prime and the Prime 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 Prime and the Prime Subsidiaries
for the fiscal year ended December 31, 1995, 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 Prime nor any Prime 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 Prime or any Prime
Subsidiary which has not been settled, resolved and fully satisfied. Each of
Prime and the Prime 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 March 31, 1999, 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 Prime and the Prime Subsidiaries with respect to
all periods through the date thereof.
(i) Absence of Certain Changes. Since March 31, 1999 there has been no change
in the business, financial condition or results of operations of Prime or any
Prime 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 Prime and the Prime Subsidiaries taken as a whole.
(j) Commitments and Contracts. Except as set forth on Schedule 2(j), neither
Prime nor any Prime 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,
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director, employee or consultant (other than those which are terminable at
will by Prime or such Prime 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 Prime or any Prime 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, Prime or
any Prime 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;
(vi) any lease with annual rental payments aggregating $10,000 or more;
(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. Prime has furnished Wells Fargo copies
of (i) all attorney responses to the request of the independent auditors for
Prime with respect to loss contingencies as of December 31, 1998 in connection
with the Prime financial statements included in the Prime 10-K, and (ii) a
written list of legal and regulatory proceedings filed against Prime or any
Prime Subsidiary since said date. Neither Prime nor any Prime Subsidiary is a
party to any pending or, to the best knowledge of Prime, 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 Prime and the Prime
Subsidiaries taken as a whole.
(l) Insurance. Prime and each Prime Subsidiary is presently insured, and
during each of the past five calendar years (or during such lesser period of
time as Prime has owned such Prime 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. Prime and each Prime 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 Prime or such
Prime Subsidiary; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect and, to the best knowledge of Prime,
no suspension or cancellation of any of them is threatened; and all such
filings, applications and registrations are current. The conduct by Prime and
each Prime 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 Prime nor any Prime
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
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business or properties of Prime or any Prime Subsidiary which reasonably could
be expected to have a material adverse effect on the business or properties of
Prime and the Prime Subsidiaries taken as a whole.
(n) Labor. No work stoppage involving Prime or any Prime Subsidiary is
pending or, to the best knowledge of Prime, threatened. Neither Prime nor any
Prime 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 Prime or such Prime Subsidiary.
Employees of Prime and the Prime Subsidiaries are not represented by any labor
union nor are any collective bargaining agreements otherwise in effect with
respect to such employees.
(o) Material Interests of Certain Persons. Except as set forth on Schedule
2(o), to the best knowledge of Prime no officer or director of Prime or any
Prime 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 Prime or any Prime Subsidiary.
Schedule 2(o) sets forth a correct and complete list of any loan from Prime
or any Prime 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
Prime's or such Prime Subsidiary's Board of Directors.
(p) Prime Benefit Plans.
(i) Schedule 2(p)(i) sets forth each employee benefit plan with respect
to which Prime or any Prime Subsidiary contributes, sponsors or otherwise
has any obligation (the "Plans"). For purposes of this Section 2(p) and
Schedule 2(p)(i), "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and the term "Plan" or "Plans" means all employee
benefit plans as defined in Section 3(3) of ERISA, and all other benefit
arrangements including, without limitation, any plan, program, agreement,
policy or commitment providing for insurance coverage of employees,
workers' compensation, disability benefits, supplemental unemployment
benefits, vacation benefits, retirement benefits, severance or termination
of employment benefits, life, health, death, disability or accidental
benefits.
(ii) Except as disclosed on Schedule 2(p)(ii), no Plan is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA.
(iii) Except as disclosed on Schedule 2(p)(iii), no Plan promises or
provides health or life benefits to retirees or former employees except as
required by federal continuation of coverage laws or similar state laws.
(iv) Except as disclosed on Schedule 2(p)(iv), (a) each Plan is and has
been in all material respects operated and administered in accordance with
its provisions and applicable law including, if applicable, ERISA and the
Code; (b) all reports and filings with governmental agencies (including but
not limited to the Department of Labor, Internal Revenue Service, Pension
Benefit Guaranty Corporation and the Securities and Exchange Commission)
required in connection with each Plan have been timely made; (c) all
disclosures and notices required by law or Plan provisions to be given to
participants and beneficiaries in connection with each Plan have been
properly and timely made; (d) there are no actions, suits or claims
pending, other than routine uncontested claims for benefits with respect to
each Plan; and (e) each Plan intended to be qualified under Section 401(a)
of the Code has received a favorable determination letter from the Internal
Revenue Service stating that the Plan (including all amendments) is tax
qualified under Section 401(a) of the Code and Prime knows of no reason
that any such Plan is not qualified within the meaning of Section 401(a) of
the Code and knows of no reason that each related Plan trust is not exempt
from taxation under Section 501(a) of the Code.
(v) Except as disclosed on Schedule 2(p)(v), (a) all contributions,
premium payments and other payments required to be made in connection with
the Plans as of the date of this Agreement have been
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made; (b) a proper accrual has been made on the books of Prime for all
contributions, premium payments and other payments due in the current
fiscal year but not made as of the date of this Agreement; (c) no
contribution, premium payment or other payment has been made in support of
any Plan that is in excess of the allowable deduction for federal income
tax purposes for the year with respect to which the contribution was made
(whether under Sections 162, 280G, 404, 419, 419A of the Code or
otherwise); and (d) with respect to each Plan that is subject to Section
301 of ERISA or Section 412 of the Code, Prime is not liable for any
accumulated funding deficiency as that them is defined in Section 412 of
the Code and the projected benefit obligations determined as of the date of
this Agreement do not exceed the assets of the Plan.
(vi) Except as disclosed in Schedule 2(p)(vi) and to best knowledge of
Prime, 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 1 of ERISA
which could subject such Plan or trust, or any trustee, fiduciary or
administrator thereof, or any party dealing with any such Plan or trust, to
a tax penalty or prohibited transactions imposed by Section 4975 of the
Code or would result in material liability to Prime and the Prime
Subsidiaries as a whole.
(vii) No Plan subject to Title IV of ERISA or any trust created
thereunder has been terminated, nor have there been any "reportable events"
as that term is defined in Section 4043 of ERISA, with respect to any Plan,
other than those events which may result from the transactions contemplated
by this Agreement and the Merger Agreement.
(viii) Except as disclosed in Schedule 2(p)(viii), neither the execution
and delivery of this Agreement and the Merger Agreement nor the
consummation of the transactions contemplated hereby and thereby will (a)
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 Prime under any Plan or
otherwise, (b) materially increase any benefits otherwise payable under any
Plan, or (c) 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 Prime and the
Prime Subsidiaries supplied or to be supplied by Prime for inclusion in (i) a
Registration Statement on Form S-4 to be filed with the SEC by Wells Fargo for
the purpose of registering the shares of Wells Fargo Common Stock to be
exchanged for shares of Prime Common Stock pursuant to the provisions of the
Merger Agreement (the "Registration Statement"), (ii) the proxy statement to be
mailed to Prime's shareholders in connection with the meeting to be called to
consider the Merger (the "Proxy Statement") and (iii) any other documents to be
filed with the SEC or any regulatory authority in connection with the
transactions contemplated hereby or by the Merger Agreement will, at the
respective times such documents are filed with the SEC or any regulatory
authority and, in the case of the Registration Statement, when it becomes
effective and, with respect to the Proxy Statement, when mailed, 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 Prime and the Prime 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
Prime nor any Prime 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.
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(s) Brokers and Finders. Except for Keefe, Bruyette & Woods, Inc., neither
Prime nor any Prime 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 Prime or any Prime
Subsidiary in connection with this Agreement and the Merger Agreement or the
transactions contemplated hereby and thereby.
(t) Administration of Trust Accounts. Prime and each Prime Subsidiary has
properly administered in all respects material and which could reasonably be
expected to be material to the financial condition of Prime and the Prime
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 Prime, any Prime
Subsidiary, nor any director, officer or employee of Prime or any Prime
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 Prime and the Prime 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 Prime nor any Prime 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 Prime and the Prime Subsidiaries, taken as a whole. To the best of Prime's
knowledge, all parties with whom Prime or any Prime Subsidiary has material
leases, agreements or contracts or who owe to Prime or any Prime Subsidiary
material obligations other than with respect to those arising in the ordinary
course of the banking business of the Prime 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 Prime or any Prime 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 Prime's
knowledge, threatened against Prime or any Prime Subsidiary the result of which
has had or could reasonably be expected to have a material adverse effect upon
Prime and Prime's Subsidiaries taken as a whole; to the best of Prime's
knowledge there is no reasonable basis for any such proceeding, claim or
action; and to the best of Prime's knowledge neither Prime nor any Prime
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. Prime has provided Wells Fargo 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.
(w) Compliance with Year 2000 Requirements. Except as set forth in Schedule
2(w), Prime is in full compliance with its Year 2000 project management process
as set forth in the May 5, 1997 Federal Financial Institutions Examination
Council ("FFIEC") Interagency Statement on the Year 2000 and subsequent
guidance documents (the "FFIEC Requirements"). Prime has made its Year 2000
project assessment and remediation plan available to Wells Fargo for review and
has furnished Wells Fargo with copies of all communications between Prime or
any Prime Subsidiary and regulators having responsibility for overseeing
compliance with such FFIEC Requirements.
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3. Representations and Warranties of Wells Fargo. Wells Fargo represents and
warrants to Prime as follows:
(a) Organization and Authority. Wells Fargo 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 Wells Fargo 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. Wells Fargo is registered
as a bank holding company with the Federal Reserve Board under the BHC Act.
(b) Wells Fargo Subsidiaries. Schedule 3(b) sets forth a complete and correct
list as of December 31, 1998, of Wells Fargo's Significant Subsidiaries (as
defined in Regulation S-X promulgated by the SEC) (individually a "Wells Fargo
Subsidiary" and collectively the "Wells Fargo 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 Wells Fargo. No equity security of
any Wells Fargo Subsidiary is or may be required to be issued to any person or
entity other than Wells Fargo 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 Wells Fargo Subsidiary is bound to issue additional
shares of its capital stock, or options, warrants or rights to purchase or
acquire any additional shares of its capital stock. Subject to 12 U.S.C. (S) 55
(1982), all of such shares so owned by Wells Fargo 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 Wells Fargo
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) Wells Fargo Capitalization. As of March 31, 1999, the authorized capital
stock of Wells Fargo consists of (i) 20,000,000 shares of Preferred Stock,
without par value, of which as of the close of business on December 31, 1998,
980,000 shares of Cumulative Tracking Preferred Stock, at $200 stated value,
9,661 shares of ESOP Cumulative Convertible Preferred Stock, at $1,000 stated
value, 20,016 shares of 1995 ESOP Cumulative Convertible Preferred Stock, at
$1,000 stated value, 21,466 shares of 1996 ESOP Cumulative Convertible
Preferred Stock, at $1,000 stated value, 18,810 shares of 1997 ESOP Cumulative
Convertible Preferred Stock, at $1,000 stated value, 8,740 shares of 1998 ESOP
Cumulative Convertible Preferred Stock, $1,000 stated value, 58,787 shares of
1999 ESOP Cumulative Convertible Preferred Stock, $1,000 stated value,
1,500,000 shares of Adjustable-Rate Cumulative Preferred Stock, Series B, $50
stated value, and 4,000,000 shares of 6.59% Adjustable Rate Noncumulative
Preferred Stock, Series B, $50 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, 1998, no shares were outstanding; and (iii)
4,000,000,000 shares of Common Stock, $1 2/3 par value, of which as of the
close of business on March 31, 1999, 1,666,095,285 shares were outstanding and
13,478,919 shares were held in the treasury. All of the outstanding shares of
capital stock of Wells Fargo have been duly and validly authorized and issued
and are fully paid and nonassessable.
(d) Authorization. Wells Fargo 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 Wells Fargo and the consummation
of the transactions contemplated hereby have been duly authorized by the Board
of Directors of Wells Fargo. No approval or consent by the stockholders of
Wells Fargo 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 Wells Fargo as may be
required by statute or regulation, this Agreement is a valid and binding
obligation of Wells Fargo enforceable against Wells Fargo in accordance with
its terms.
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Neither the execution, delivery and performance by Wells Fargo of this
Agreement or the Merger Agreement, nor the consummation of the transactions
contemplated hereby and thereby, nor compliance by Wells Fargo 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 Wells Fargo or any Wells Fargo 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 Wells Fargo or any
Wells Fargo Subsidiary is a party or by which it may be bound, or to which
Wells Fargo or any Wells Fargo Subsidiary or any of the properties or assets of
Wells Fargo or any Wells Fargo 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 Wells Fargo, violate any judgment, ruling, order,
writ, injunction, decree, statute, rule or regulation applicable to Wells Fargo
or any Wells Fargo 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 Texas law, no notice to, filing with, exemption or
review by, or authorization, consent or approval of, any public body or
authority is necessary for the consummation by Wells Fargo of the transactions
contemplated by this Agreement and the Merger Agreement.
(e) Wells Fargo Financial Statements. The consolidated balance sheets of
Wells Fargo and Wells Fargo's subsidiaries as of December 31, 1998 and 1997 and
related consolidated statements of income, stockholders' equity and cash flows
for the three years ended December 31, 1998, together with the notes thereto,
certified by KPMG and included in Wells Fargo's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998 (the "Wells Fargo 10-K") as filed with
the SEC, and the unaudited consolidated balance sheets of Wells Fargo and its
subsidiaries as of March 31, 1999 and the related unaudited consolidated
statements of income and cash flows for the three (3) months then ended
included in Wells Fargo's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1999, as filed with the SEC (collectively, the "Wells Fargo
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 Wells Fargo and
its subsidiaries at the dates and the consolidated results of operations,
changes in financial position and cash flows of Wells Fargo and its
subsidiaries for the periods stated therein. The Year 2000 disclosure contained
in Wells Fargo's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999 as filed with the SEC and designated as Year 2000 Readiness
Disclosures related to the Year 2000 Information and Readiness Disclosure Act
is true and correct in all material respects as of the date hereof.
(f) Reports. Since December 31, 1993, Wells Fargo and each Wells Fargo
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 United States
Comptroller of the Currency ("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 "Wells Fargo Reports." As of their respective dates, the Wells Fargo
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.
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(g) Properties and Leases. Except as may be reflected in the Wells Fargo
Financial Statements and except for any lien for current taxes not yet
delinquent, Wells Fargo and each Wells Fargo Subsidiary has good title free and
clear of any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Wells Fargo's
consolidated balance sheet as of March 31, 1999 included in Wells Fargo's
Quarterly Report on Form 10-Q for the period then ended, and all real and
personal property acquired since such date, except such real and personal
property has been disposed of in the ordinary course of business. All leases of
real property and all other leases material to Wells Fargo or any Wells Fargo
Subsidiary pursuant to which Wells Fargo or such Wells Fargo 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 Wells Fargo or such Wells Fargo Subsidiary or any
event which, with notice or lapse of time or both, would constitute such a
material default. Substantially all Wells Fargo's and each Wells Fargo
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 Wells Fargo and the Wells Fargo 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 Wells Fargo and the Wells Fargo Subsidiaries for
the fiscal year ended December 31, 1982, 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 Wells Fargo nor any Wells Fargo Subsidiary is a party to any
pending action or proceeding, nor to Wells Fargo'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 Wells Fargo
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 Wells Fargo or any
Wells Fargo Subsidiary which has not been settled, resolved and fully
satisfied, or adequately reserved for. Each of Wells Fargo and the Wells Fargo
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, 1998, there has been no
change in the business, financial condition or results of operations of Wells
Fargo or any Wells Fargo 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 Wells Fargo and its subsidiaries taken as
a whole.
(j) Commitments and Contracts. Except as set forth on Schedule 3(j), as of
December 31, 1996 neither Wells Fargo nor any Wells Fargo Subsidiary is a party
or subject to any of the following (whether written or oral, express or
implied):
(i) any labor contract or agreement with any labor union;
(ii) any contract not made in the ordinary course of business containing
covenants which materially limit the ability of Wells Fargo or any Wells
Fargo 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, Wells Fargo or any Wells Fargo Subsidiary may carry on
its business (other than as may be required by law or applicable regulatory
authorities); or
(iii) any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K.
(k) Litigation and Other Proceedings. Neither Wells Fargo nor any Wells Fargo
Subsidiary is a party to any pending or, to the best knowledge of Wells Fargo,
threatened, claim, action, suit, investigation or
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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 Wells Fargo and its subsidiaries taken as a whole.
(l) Insurance. Wells Fargo and each Wells Fargo Subsidiary is presently
insured or self insured, and during each of the past five calendar years (or
during such lesser period of time as Wells Fargo has owned such Wells Fargo
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. Wells Fargo and each Wells Fargo 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 Wells Fargo 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 Wells
Fargo, no suspension or cancellation of any of them is threatened; and all such
filings, applications and registrations are current. The conduct by Wells Fargo
and each Wells Fargo 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 Wells Fargo nor any
Wells Fargo 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 Wells Fargo or any Wells Fargo Subsidiary which
reasonably could be expected to have a material adverse effect on the business
or properties of Wells Fargo and its subsidiaries taken as a whole. As of the
date hereof, all Wells Fargo Subsidiaries that are subject to the Community
Reinvestment Act ("CRA") have received a rating of "outstanding" or
"satisfactory" as of their most current CRA examination by the appropriate
federal regulator.
(n) Labor. No work stoppage involving Wells Fargo or any Wells Fargo
Subsidiary is pending or, to the best knowledge of Wells Fargo, threatened.
Neither Wells Fargo nor any Wells Fargo 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 Wells Fargo or such Wells Fargo Subsidiary. Except as set forth on
Schedule 3(j), employees of Wells Fargo and the Wells Fargo Subsidiaries are
not represented by any labor union nor are any collective bargaining agreements
otherwise in effect with respect to such employees.
(o) Wells Fargo Benefit Plans.
(i) For purposes of this Section 3(o), the term "Wells Fargo Plan" or
"Wells Fargo Plans" means all employee benefit plans as defined in Section
3(3) of ERISA, to which Wells Fargo contributes, sponsors, or otherwise has
any obligations.
(ii) No Wells Fargo Plan is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
(iii) Each Wells Fargo Plan is and has been in all material respects
operated and administered in accordance with its provisions and applicable
law, including, if applicable, ERISA and the Code.
(iv) Each Wells Fargo Plan intended to be qualified under Section 401(a)
of the Code has received a favorable determination letter from the Internal
Revenue Service stating that the Wells Fargo Plan (including all
amendments) is tax qualified under Section 401(a) of the Code and Wells
Fargo knows of no reason that any such Wells Fargo Plan is not qualified
within the meaning of Section 401(a) of the Code and knows of no reason
that each related Wells Fargo Plan trust is not exempt from taxation under
Section 501(a) of the Code.
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(v) All contributions, premium payments, and other payments required to
be made in connection with the Wells Fargo Plans as of the date of this
Agreement have been made.
(vi) With respect to each Wells Fargo Plan that is subject to Section 301
of ERISA or Section 412 of the Code, neither Wells Fargo nor any Wells
Fargo Subsidiary is liable for any accumulated funding deficiency as that
term is defined in Section 412 of the Code.
(vii) The present value of all benefits vested and all benefits accrued
under each Wells Fargo Plan that is subject to Title IV of ERISA does not,
in each case, exceed the value of the assets of the Wells Fargo Plans
allocable to such vested or accrued benefits as of the end of the most
recent Plan Year.
(p) Registration Statement, etc. None of the information regarding Wells
Fargo and its subsidiaries supplied or to be supplied by Wells Fargo 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 Wells Fargo and the Wells Fargo Subsidiaries are
responsible for filing with the SEC and any other regulatory authority in
connection with the Merger will comply as to form in all material respects with
the provisions of applicable law.
(q) Brokers and Finders. Neither Wells Fargo nor any Wells Fargo 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 Wells Fargo or any Wells Fargo Subsidiary in
connection with this Agreement and the Merger Agreement or the transactions
contemplated hereby and thereby.
(r) No Defaults. Neither Wells Fargo nor any Wells Fargo 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 Wells Fargo and its subsidiaries taken as a whole.
To the best of Wells Fargo's knowledge, all parties with whom Wells Fargo or
any Wells Fargo Subsidiary has material leases, agreements or contracts or who
owe to Wells Fargo or any Wells Fargo Subsidiary material obligations other
than with respect to those arising in the ordinary course of the banking
business of the Wells Fargo 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 Wells Fargo or any Wells Fargo 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 Wells Fargo's
knowledge, threatened against Wells Fargo or any Wells Fargo Subsidiary, the
result of which has had or could reasonably be expected to have a material
adverse effect upon Wells Fargo and its subsidiaries taken as a whole; to the
best of Wells Fargo's knowledge there is no reasonable basis for any such
proceeding, claim or action; and to the best of Wells Fargo's knowledge neither
Wells Fargo nor any Wells Fargo 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,
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and will have corporate power and authority to own or lease its properties and
assets and to carry on its business.
4. Covenants of Prime. Prime covenants and agrees with Wells Fargo as
follows:
(a) Except as otherwise permitted or required by this Agreement, from the
date hereof until the Effective Time of the Merger, Prime, and each Prime
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
and provide Wells Fargo access to its loan files (including credits extended
after the date hereof), except that it shall not, without the prior written
consent of Wells Fargo (which shall be deemed to be waived if Wells Fargo has
made no response by the end of the first complete business day following the
receipt (by confirmed facsimile) of the request by a Wells Fargo representative
designated 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 for increases in existing loans in excess of 10% of the
principal amount of such loan, but up to a maximum to $100,000 for such loan)
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
$1,000,000, provided that such loan complies fully with and is rated a "pass"
under Prime's lending policy as in effect as of the date hereof; 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 Prime and each Prime Subsidiary the non-compliance
with which reasonably could be expected to have a material adverse effect on
Prime and the Prime Subsidiaries taken as a whole; and permit Wells Fargo and
its representatives (including KPMG) 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 Wells
Fargo 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 Prime herein expressed.
(b) Except as otherwise contemplated or required by this Agreement, from the
date hereof until the Effective Time of the Merger, Prime and each Prime
Subsidiary will not (without the prior written consent of Wells Fargo): amend
or otherwise change its articles of incorporation or association or by-laws;
issue or sell or authorize for issuance or sale, or grant any options or make
other agreements with respect to the issuance or sale or conversion of, any
shares of its capital stock, phantom shares or other share-equivalents, or any
other of its securities, except that Prime may issue shares of Prime Common
Stock upon the exercise of outstanding stock options described in Schedule
4(b); 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 $25,000 except banking transactions in the
ordinary course of business and in accordance with policies and procedures in
effect on the date hereof; make any investments except investments made by bank
subsidiaries in the ordinary course of business for terms of up to one year and
in amounts of $100,000 or less (which consent requirement shall be deemed to be
waived as to any investment to which Wells Fargo has made no response by the
end of the second complete business day following the receipt of the request by
a Wells Fargo representative designated in writing); amend or terminate any
Plan except as required by law or the terms of this Agreement, except that
Prime may take such action as is necessary to amend the 1993 Incentive Stock
Option Plan of Independent Bancorp, Inc. to permit the acceleration of vesting
of options thereunder and to permit such options to be exercisable prior to the
Effective Date otherwise upon and subject to the conditions set forth therein
upon a change in control; 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
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stock except any dividend declared by the Board of Directors of a Prime
Subsidiary in accordance with applicable law and regulation, provided, however,
that the Board of Directors of Prime may declare and pay dividends to the Prime
shareholders out of the net earnings of Prime between June 30, 1999 and the
Effective Time of the Merger in accordance with applicable law and regulation
and in accordance with past practice in an amount not to exceed a quarterly
rate of $.08 per share and, provided further, however, that Prime shareholders
shall be entitled to a dividend on Prime Common Stock or Wells Fargo Common
Stock, but not both, in the calendar quarter in which the Closing shall occur;
redeem, purchase or otherwise acquire, directly or indirectly, any of the
capital stock of Prime; increase the compensation of any officers, directors or
executive employees, except pursuant to existing compensation plans and
practices, provided, however, that Prime may, in addition, accrue and pay
bonuses in the aggregate not to exceed $250,000 for retention purposes; sell or
otherwise dispose of any shares of the capital stock of any Prime 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 Prime will duly call, and will cause to be held
on a date mutually agreeable to Prime and Wells Fargo, but 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 Prime will (i) cause proper
notice of such meeting to be given to its shareholders in compliance with the
Texas 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) Prime will furnish or cause to be furnished to Wells Fargo all the
information concerning Prime and its subsidiaries required for inclusion in the
Registration Statement referred to in paragraph 5(c) hereof, or any statement
or application made by Wells Fargo 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 Grant Thornton to use such opinion in such Registration
Statement.
(e) Prime 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 Prime to carry out the transactions contemplated by this
Agreement and will cooperate with Wells Fargo to obtain all such approvals and
consents required of Wells Fargo.
(f) Prime 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) Prime will hold in confidence all documents and information concerning
Wells Fargo and its subsidiaries furnished to Prime 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 Prime's outside professional advisers in connection with this
Agreement, with the same undertaking from such professional advisers. If the
transactions contemplated by this Agreement shall not be consummated, such
confidence shall be maintained and such information shall not be used in
competition with Wells Fargo (except to the extent that such information can be
shown to be previously known to Prime, in the public domain, or later acquired
by Prime from other legitimate sources) and, upon request, all such documents,
any copies thereof and extracts therefrom shall immediately thereafter be
returned to Wells Fargo.
(h) Neither Prime, nor any Prime 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 Wells
Fargo) 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 Prime or any Prime Subsidiary, (ii) to make a tender or
exchange offer for any shares of such common stock or other equity
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security, (iii) to purchase, lease or otherwise acquire the assets of Prime or
any Prime Subsidiary except in the ordinary course of business, or (iv) to
merge, consolidate or otherwise combine with Prime or any Prime Subsidiary. If
any corporation, partnership, person or other entity or group makes an offer or
inquiry to Prime or any Prime Subsidiary concerning any of the foregoing, Prime
or such Prime Subsidiary will promptly disclose such offer or inquiry,
including the terms thereof, to Wells Fargo.
(i) Prime shall consult with Wells Fargo 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) Prime and each Prime Subsidiary will take all action necessary or
required (i) to terminate or amend, if requested by Wells Fargo, all qualified
pension and welfare benefit plans and all non-qualified benefit plans and
compensation arrangements as of the Effective Date of the Merger, (ii) to
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, and (iii) authorize and delegate the power to vote Prime
Common Stock held in the Prime Bancshares, Inc. 401(k) to such Plan's
independent third party fiduciary.
(k) [Intentionally omitted.]
(l) Prime shall use its best efforts to obtain and deliver prior to the
Effective Date of the Merger signed representations substantially in the form
attached hereto as Exhibit B to Wells Fargo by each executive officer, director
or shareholder of Prime who may reasonably be deemed an "affiliate" of Prime
within the meaning of such term as used in Rule 145 under the Securities Act.
(m) Prime shall establish such additional accruals and reserves as may be
necessary to conform Prime's accounting and credit loss reserve practices and
methods to those of Wells Fargo and Wells Fargo's plans with respect to the
conduct of Prime's business following the Merger and to provide for the costs
and expenses relating to the consummation by Prime of the Merger and the other
transactions contemplated by this Agreement; provided, however, that (a) Prime
shall not be required to take such actions more than three (3) business days
prior to the Closing Date or prior to the time Wells Fargo agrees that all of
the conditions to their obligation to close as set forth in paragraph 7 have
been satisfied or waived (other than the deliveries to be made on the Closing
Date) and no such adjustment shall (i) require any prior filing with any
governmental agency or regulatory authority, or (ii) violate any law, rule or
regulation applicable to Prime; provided that in any event no accrual or
reserve made by Prime pursuant to this paragraph 4(m), shall constitute or be
deemed to be a breach, violation of or failure to satisfy any representation,
warranty, covenant, condition or other provision of this Agreement or otherwise
be considered in determining whether any such breach, violation or failure to
satisfy shall have occurred.
(n) Prime 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 Wells Fargo no
later than four (4) weeks and written reports shall be delivered to Wells Fargo
no later than eight (8) weeks from the date of this Agreement. Prime shall
obtain, at its sole expense, Phase II environmental assessments for properties
identified by Wells Fargo on the basis of the results of such Phase I
environmental assessments. Prime 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
Wells Fargo within four (4) weeks of the date of this Agreement.
(o) Prime shall obtain, at its sole expense, commitments for title insurance
and boundary surveys for each bank facility which shall be delivered to Wells
Fargo no later than four (4) weeks from the date of this Agreement.
(p) Prime and Wells Fargo will work together to assess the impact of the
transactions contemplated by this Agreement on Prime's continued compliance
with the FFIEC Requirements and Prime will take such action, in
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consultation with Wells Fargo, as may be necessary to amend Prime's Year 2000
project assessment and remediation plan. Prime will continue its current
preparations for compliance with the FFIEC Requirements and will not rely on
the consummation of the transactions contemplated by this Agreement to satisfy
its FFIEC requirements. Prime will provide Wells Fargo with complete access to
its Year 2000 project and remediation plan documentation and permit Wells Fargo
to review and investigate Prime's continuing Year 2000 compliance efforts and
the results thereof. Prime will use its commercially reasonable efforts to
remove any exclusion from insurance coverage arising from Year 2000 issues
contained in its current Directors and Officers Liability coverage.
(q) Prime shall take such action as is necessary under the 1984 Incentive
Stock Option Plan of Independent Bancorp, Inc., 1993 Incentive Stock Option
Plan of Independent Bancorp, Inc., and the Prime Bancshares, Inc. 1997 Stock
Incentive Plan ("Plans") to (i) terminate such Plans as of immediately prior to
the Effective Date, and (ii) to cancel, effective as of immediately prior to
the Effective Date, all options and awards granted under such Plans that are
unexercised as of immediately prior to the Effective Date.
(r) Prime shall amend its bylaws to eliminate as of immediately prior to the
Effective Time any provision that permits the bylaws to be amended only by the
Board of Directors of Prime and to eliminate any requirement that the Board of
Directors of Prime be elected for staggered terms.
5. Covenants of Wells Fargo. Wells Fargo covenants and agrees with Prime as
follows:
(a) From the date hereof until the Effective Time of the Merger, Wells Fargo
will maintain its corporate existence in good standing; conduct, and cause the
Wells Fargo 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 Wells Fargo or the Wells Fargo Subsidiaries, their
businesses or their properties; maintain all books and records of it and the
Wells Fargo Subsidiaries, including all financial statements, in accordance
with the accounting principles and practices consistent with those used for the
Wells Fargo Financial Statements, except for changes in such principles and
practices required under generally accepted accounting principles.
(b) Wells Fargo will furnish to Prime all the information concerning Wells
Fargo required for inclusion in a proxy statement or statements to be sent to
the shareholders of Prime, or in any statement or application made by Prime to
any governmental body in connection with the transactions contemplated by this
Agreement.
(c) As promptly as practicable after the execution of this Agreement, but on
a date mutually agreeable to Wells Fargo and Prime, Wells Fargo 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 Wells Fargo Common Stock to be delivered to the shareholders of Prime
pursuant to the Merger Agreement, and will use its best efforts to cause the
Registration Statement to become effective; provided that Prime and Wells Fargo
will cooperate to determine a filing schedule that is not commercially
burdensome to either Prime or Wells Fargo . 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 Prime shareholders, at the time of the Prime
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
Wells Fargo (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 Prime or any Prime
Subsidiary for use in the Registration Statement or the Prospectus.
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(d) Wells Fargo will file all documents required to be filed to list the
Wells Fargo 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 Wells Fargo Common Stock to be issued by Wells Fargo to the
shareholders of Prime 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 Wells Fargo Common Stock to be delivered to the shareholders of
Prime pursuant to the Merger Agreement are and will be free of any preemptive
rights of the stockholders of Wells Fargo.
(f) Wells Fargo 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) Wells Fargo 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 Prime to obtain all such approvals and consents required by Prime.
(h) Wells Fargo will hold in confidence all documents and information
concerning Prime and Prime's Subsidiaries furnished to it and its
representatives in connection with the transactions contemplated by this
Agreement and will not release or disclose such information to any other
person, except as required by law and except to its outside professional
advisers in connection with this Agreement, with the same undertaking from such
professional advisers. If the transactions contemplated by this Agreement shall
not be consummated, such confidence shall be maintained and such information
shall not be used in competition with Prime (except to the extent that such
information can be shown to be previously known to Wells Fargo, in the public
domain, or later acquired by Wells Fargo from other legitimate sources) and,
upon request, all such documents, copies thereof or extracts therefrom shall
immediately thereafter be returned to Prime.
(i) Wells Fargo will file any documents or agreements required to be filed in
connection with the Merger under the Texas Business Corporation Act and the
Texas Banking Act of 1995.
(j) Wells Fargo 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) Wells Fargo shall consult with Prime 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) Wells Fargo shall give Prime notice of receipt of the regulatory
approvals referred to in paragraph 7(e).
(m) [Intentionally omitted.]
(o) With respect to the indemnification of directors and officers and with
respect to directors' and officers' insurance, Wells Fargo agrees as follows:
(i) Wells Fargo shall ensure that all rights to indemnification and all
limitations of liability existing in favor of any person who is now, or has
been at any time prior to the date hereof, or who becomes prior to the
Effective Time of the Merger, a director or officer of Prime or any Prime
Subsidiary (an "Indemnified Party" and, collectively, the "Indemnified
Parties"), in Prime's Articles of Incorporation or Bylaws or similar
governing documents of any Prime Subsidiary, as applicable in the
particular case and as in effect on the date hereof, shall, with respect to
claims arising from (A) facts or events that occurred before the Effective
Time of the Merger, or (B) this Agreement or any of the transactions
contemplated by this
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Agreement, whether in any case asserted or arising before or after the
Effective Time of the Merger, survive the Merger and shall continue in full
force and effect. Nothing contained in this paragraph 5(o)(i) shall be
deemed to preclude the liquidation, consolidation, or merger of Prime or
any Prime Subsidiary, in which case all of such rights to indemnification
and limitations on liability shall be deemed to survive and continue as
contractual rights notwithstanding any such liquidation or consolidation or
merger; provided, however, that in the event of liquidation or sale of
substantially all of the assets of Prime, Wells Fargo shall guarantee, to
the extent of the net asset value of Prime or any Prime Subsidiary as of
the Effective Date of the Merger, the indemnification obligations of Prime
or any Prime Subsidiary to the extent of indemnification obligations of
Prime and the Prime Subsidiaries described above. Notwithstanding anything
to the contrary contained in this paragraph 5(o)(i), nothing contained
herein shall require Wells Fargo to indemnify any person who was a
directors or officer of Prime or any Prime Subsidiary to a greater extent
than Prime or any Prime Subsidiary is, as of the date of this Agreement,
required to indemnify any such person.
(ii) any Indemnified Party wishing to claim indemnification under
paragraph 5(o)(i), upon learning of any such claim, action, suit,
proceeding, or investigation, shall promptly notify Wells Fargo thereof,
but the failure to so notify shall not relieve Wells Fargo of any liability
it may have to such Indemnified Party. In the event of any such claim,
action, suit, proceeding, or investigation (whether arising before of after
the Effective Time of the Merger) (A) Wells Fargo shall have the right to
assume the defense thereof and Wells Fargo shall not be liable to any
Indemnified Party for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Party in connection with
the defense thereof, except that if Wells Fargo elects not to assume such
defense or counsel for the Indemnified Party advises that there are issues
which raise conflicts of interest between Wells Fargo and the Indemnified
Party, the Indemnified Party may retain counsel satisfactory to them, and
Wells Fargo shall pay the reasonable fees and expenses of such counsel for
the Indemnified Party promptly as statements therefor are received,
provided, however, that Wells Fargo shall be obligated pursuant to this
subparagraph (ii) to pay for only one firm of counsel for all Indemnified
Parties in any jurisdiction unless the use of one counsel for such
Indemnified Parties would present such counsel with a conflict of interest,
and (B) such Indemnified Party shall cooperate in the defense of any such
matter.
(iii) for a period of six (6) years after the Effective Time of the
Merger, Wells Fargo shall use its best efforts to cause to be maintained in
effect the current policies of directors' and officers' liability insurance
maintained by Prime (provided that Wells Fargo may substitute therefor
policies of at least the same coverage and amount containing terms and
conditions which are substantially no less advantageous) with respect to
claims arising from facts or events which occurred prior to the Effective
Time of the Merger;
(iv) if Wells Fargo or any of its successors or assigns (A) shall
consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such
consolidation or merger; or (B) shall transfer all or substantially all of
its properties and assets to any individual, corporation, or other entity,
then and in each such case, proper provision shall be made so that the
successors and assigns of Wells Fargo shall assume the obligations set
forth in this paragraph 5(o); and
(v) the provisions of this paragraph 5(o) shall survive the Effective
Time of the Merger and are intended for the benefit of, and shall be
enforceable by, each Indemnified Party and his or her heirs and
representatives.
6. Conditions Precedent to Obligation of Prime. The obligation of Prime 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
Prime:
(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
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<PAGE>
shall be true and correct in all respects material to Wells Fargo and its
subsidiaries taken as a whole as if made at the Time of Filing.
(b) Wells Fargo shall have, or shall have caused to be, performed and
observed in all material respects all covenants, agreements and conditions
hereof to be performed or observed by it and Merger Co. at or before the Time
of Filing.
(c) Prime 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 Wells Fargo, 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
Prime required for approval of a plan of merger in accordance with the
provisions of Prime's Articles of Incorporation and the Texas Business
Corporation Act.
(e) Wells Fargo 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 Wells Fargo Common Stock to be delivered to the
stockholders of Prime 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) Prime shall have received an opinion, dated the Closing Date, of counsel
to Prime, 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 Prime Common Stock upon receipt of Wells Fargo
Common Stock except for cash received in lieu of fractional shares; (iii) the
basis of the Wells Fargo Common Stock received by the shareholders of Prime
will be the same as the basis of Prime Common Stock exchanged therefor; and
(iv) the holding period of the shares of Wells Fargo Common Stock received by
the shareholders of Prime will include the holding period of the Prime Common
Stock, provided such shares of Prime 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. Wells Fargo shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
(j) Since March 31, 1999, 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 conditions, results of operations, business or
prospects of Wells Fargo and the Wells Fargo Subsidiaries taken as a whole
(other than changes in banking laws or regulations, or interpretations thereof,
that affect the banking industry generally or changes in the general level of
interest rates).
7. Conditions Precedent to Obligation of Wells Fargo. The obligation of Wells
Fargo 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 Wells Fargo:
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<PAGE>
(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 Prime and the Prime Subsidiaries taken
as a whole as if made at the Time of Filing.
(b) Prime 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
Prime required for approval of a plan of merger in accordance with the
provisions of Prime's Articles of Incorporation and the Texas Business
Corporation Act.
(d) Wells Fargo shall have received a favorable certificate dated as of the
Effective Date of the Merger signed by the Chairman or President and by the
Secretary or Assistant Secretary of Prime, as to the matters set forth in
subparagraphs (a) through (c) of this paragraph 7.
(e) Wells Fargo 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 Prime or any Prime Subsidiary that, in the good faith
judgment of Wells Fargo, is unreasonably burdensome to Wells Fargo.
(f) Prime and each Prime Subsidiary shall have obtained any and all material
consents or waivers from other parties to loan agreements, leases or other
contracts material to Prime's or such subsidiary's business required for the
consummation of the Merger, and Prime and each Prime 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 omitted.]
(i) At any time since the date hereof the total number of shares of Prime
Common Stock outstanding and subject to issuance upon exercise (assuming for
this purpose that phantom shares and other share-equivalents constitute Prime
Common Stock) of all warrants, options, conversion rights, phantom shares or
other share-equivalents, other than any option held by Wells Fargo, shall not
have exceeded 10,209,483.
(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. Wells Fargo shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
(k) Wells Fargo shall have received from the Chief Executive Officer and
Chief Financial Officer of Prime 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 Wells Fargo, to the effect that:
(i) the interim quarterly financial statements of Prime included or
incorporated by reference in the Registration Statement are prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with the audited financial statements of Prime;
(ii) the amounts reported in the interim quarterly financial statements
of Prime agree with the general ledger of Prime;
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<PAGE>
(iii) the annual and quarterly financial statements of Prime and the
Prime 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 Prime and the Prime Subsidiaries as may be included in the
Registration Statement to a date five (5) days prior to the effective date
of the Registration Statement or five (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 Prime and the Prime 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 Prime
and the Prime 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 Prime and the Prime Subsidiaries, which appear in the
Registration Statement under the certain captions to be specified by Wells
Fargo, and have compared certain of such amounts, percentages, numbers and
financial information with the accounting records of Prime and the Prime
Subsidiaries and have found them to be in agreement with financial records
and analyses prepared by Prime included in the annual and quarterly
financial statements, except as disclosed in such letters.
(l) Prime and the Prime Subsidiaries considered as a whole shall not have
sustained since December 31, 1998 any material loss or interference with their
business from any civil disturbance or any fire, explosion, flood or other
calamity, whether or not covered by insurance.
(m) There shall be no reasonable basis for any proceeding, claim or action of
any nature seeking to impose, or that could result in the imposition on Prime
or any Prime 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 Prime and its subsidiaries taken as a whole.
(n) Since March 31, 1999, 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 Prime and the Prime 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) Prime shall be in full compliance with current FFIEC Requirements. There
shall be no feature of Prime's data processing, operating or platform systems
that would prevent those systems from continuing to run independently after
December 31, 1999 until such time as a subsequent conversion to Wells Fargo
systems can be completed. Prime's computer hardware and software used in the
receipt, transmission, processing, manipulation, storage, retrieval,
retransmission, or other utilization of data or in the operation of mechanical
or electrical systems of any kind will function at least as effectively in all
material respects after December 31, 1999 as in the case of dates or time
periods occurring prior to January 1, 2000.
(p) Prime shall have taken the actions required by paragraph 4(q), and the
Plans and any unexercised options or awards shall have been terminated as of
immediately prior to the Effective Date.
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<PAGE>
(q) The employment agreements of even date herewith between Wells Fargo and
the individuals listed on Schedule 7(q) shall be in full force and effect.
(r) Prime shall have taken the actions required by Paragraph 4(r).
(s) Prime shall have delivered the resignations of each member of its Board
of Directors as of the Effective Time, and such resignations shall not have
been withdrawn.
8. Employee Benefit Plans. Each person who is an employee of Prime or any
Prime Subsidiary as of the Effective Date of the Merger ("Prime Employees")
shall be eligible for participation in the employee welfare and retirement
plans of Wells Fargo, as in effect from time to time, as follows:
(a) Employee Welfare Benefit Plans. Each Prime Employee shall be eligible for
participation in the employee welfare benefit plans of Wells Fargo listed below
subject to any eligibility requirements applicable to such plans (and not
subject to pre-existing condition exclusions, except with respect to the Wells
Fargo Long Term Disability Plan and the Wells Fargo Long Term Care Plan) and
shall enter each plan no later than the first day of the calendar quarter which
begins at least thirty-two (32) days after the Effective Date of the Merger
("Benefits Conversion Date") (provided that the transition from Prime's Plans
to the Wells Fargo Plans will be facilitated without gaps in coverage to the
participants and without duplication of costs to Wells Fargo):
Medical Plan
Dental Plan
Vision Plan
Short Term Disability Plan
Long Term Disability Plan
Long Term Care Plan
Flexible Benefits Plan
Basic Group Life Insurance Plan
Group Universal Life Insurance Plan
Dependent Group Life Insurance Plan
Business Travel Accident Insurance Plan
Accidental Death and Dismemberment Plan
Salary Continuation Pay Plan
Paid Time Off Program
For purposes of the foregoing, "Medical Plan" means any medical plan sponsored
by Wells Fargo that is available to similarly situated Wells Fargo employees.
Prime Employees shall receive credit for years of service to Prime, the Prime
Subsidiaries and any predecessors of Prime or the Prime Subsidiaries (to the
extent credited under the vacation and short-term disability programs of Prime)
for the purpose of determining benefits under the Wells Fargo Paid Time Off
Program, Salary Continuation Pay Plan, and Short Term Disability Plan. The
Prime Employees listed on Schedule 7(q) are ineligible for participation in the
Wells Fargo Salary Continuation Pay Plan.
(b) Employee Retirement Benefit Plans. Each Prime Employee shall be eligible
to participate in the Wells Fargo 401(k) Plan (the "401(k) Plan"), subject to
any eligibility requirements applicable to the 401(k) Plan (with full credit
for years of past service to Prime and the Prime Subsidiaries for the purpose
of satisfying any eligibility and vesting periods applicable to the 401(k)
Plan), and shall enter the 401(k) Plan no later than the Benefits Conversion
Date.
Each Prime Employee shall be eligible to participate in the Wells Fargo Cash
Balance Plan (the "Cash Balance Plan") subject to any eligibility requirements
applicable to the Cash Balance Plan. Wells Fargo shall not recognize a Prime
Employee's past service with Prime or any Prime Subsidiary for any purpose
under the
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<PAGE>
Cash Balance Plan. Therefore, each Prime Employee shall be eligible for
participation, as a new employee, in the Wells Fargo Cash Balance Plan pursuant
to the terms thereof.
Each Prime Employee shall be eligible for access to Wells Fargo's retiree
medical benefit, subject to any eligibility requirements applicable to such
benefit. Wells Fargo shall recognize years of past service with Prime and the
Prime Subsidiaries for the purpose of eligibility to access Wells Fargo's
retiree medical benefit.
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 March 15, 2000
unless such failure of consummation shall be due to the failure of the
party seeking to terminate to perform or observe in all material respects
the covenants and agreements hereof to be performed or observed by such
party; or
(iii) by Prime or Wells Fargo 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; or
(iv) by Prime, within five (5) business days after the end of the Index
Measurement Period (as defined in subparagraph (c)(ii) below), if both of
the following conditions are satisfied:
(A) the Wells Fargo Measurement Price is less than $36.00; and
(B) the number obtained by dividing the Wells Fargo Measurement Price
by the closing price of Wells Fargo Common Stock on the trading day
immediately preceding the date of this Agreement is less than the
number obtained by dividing the Final Index Price (as defined in
subparagraph (c) below) by the Initial Index Price (as defined in
subparagraph (c) below) and subtracting .15 from such quotient.
(b) Termination of this Agreement under this paragraph 9 shall not release,
or be construed as so releasing, either party hereto from any liability or
damage to the other party hereto arising out of the breaching party's willful
and material breach of the warranties and representations made by it, or
willful and material failure in performance of any of its covenants,
agreements, duties or obligations arising hereunder, and the obligations under
paragraphs 4(g), 5(h) and 10 shall survive such termination.
(c) For purposes of this paragraph 9:
(i) The "Company Market Capitalization" shall mean (A) the price of one
share of the common stock of a given company at the close of the trading
day immediately preceding the date of this Agreement multiplied by (B) the
number of shares of common stock of such company outstanding as of June 30,
1999 (adjusted for any stock dividend, reclassification, recapitalization,
exchange of shares or similar transaction between June 30, 1999 and the
close of the trading day immediately preceding the date of this Agreement).
(ii) The "Index Group" shall mean all of those companies listed on
Exhibit C the common stock of which is publicly traded and as to which
there is, during the period of twenty (20) trading days ending on the day
immediately preceding the meeting of the shareholders of Prime held to vote
on this Agreement and the Merger Agreement (the "Index Measurement
Period"), no pending publicly announced proposal for such company to be
acquired, nor has there been any proposal by such company publicly
announced subsequent to the day before the date of this Agreement to
acquire another company in exchange for stock where, if the company to be
acquired were to become a subsidiary of the acquiring company, the company
to be acquired would be a "significant subsidiary" as defined in Rule 1-02
of Regulation S-X promulgated
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<PAGE>
by the SEC nor has there been any program publicly announced subsequent to
the day before the date of this Agreement to repurchase 5% or more of the
outstanding shares of such company's common stock.
(iii) The "Initial Index Price" shall mean the sum of the following,
calculated for each of the companies in the Index Group: (A) the closing
price per share of common stock of each such company on the trading day
immediately preceding the date of this Agreement multiplied by (B) the
Weighting Factor (as defined below) for each such company.
(iv) The "Final Index Price" shall mean the sum of the following,
calculated for each of the companies in the Index Group: (A) the Final
Price for each such company multiplied by (B) the Weighting Factor (as
defined below) for each such company.
(v) The "Final Price" of any company in the Index Group shall mean the
average of the daily closing prices of a share of common stock of such
company, as reported on the consolidated transaction reporting system for
the market or exchange on which such common stock is principally traded,
during the Index Measurement Period.
(vi) The "Total Market Capitalization" shall mean the sum of the Company
Market Capitalization for each of the companies in the Index Group.
(vii) The "Weighting Factor" for any given company shall mean the Company
Market Capitalization for such company divided by the Total Market
Capitalization.
(vii) The "Wells Fargo Measurement Price" means the average closing price
of a share of Wells Fargo Common Stock as reported on the composite tape of
the New York Stock Exchange during the Index Measurement Period.
If a Common Stock Adjustment occurs with respect to the shares of Wells Fargo
or any company in the Index Group between the date of this Agreement and the
Prime shareholder meeting date, the closing prices for the common stock of such
company shall be appropriately and proportionately adjusted for the purposes of
the definitions above so as to be comparable to what the price would have been
if the record date of the Common Stock Adjustment had been immediately
following the Effective Time of the Merger.
10. Expenses. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by Prime and Prime Subsidiaries shall be borne by
Prime, and all such expenses incurred by Wells Fargo shall be borne by Wells
Fargo.
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 Wells Fargo:
Wells Fargo & Company
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Attention: Secretary
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<PAGE>
If to Prime:
Prime Bancshares, Inc.
12200 Northwest Freeway
Houston, Texas 77092
Attn: President
With a copy to:
Bracewell & Patterson
South Tower Pennzoil Place
711 Louisiana St., Suite 2900
Houston, Texas 77002-2781
Attn: William Luedke IV, Esq.
or to such other address with respect to a party as such party shall notify the
other in writing as above provided.
14. Complete Agreement. This Agreement and the 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
Prime 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 Delaware.
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.
[The rest of this page has intentionally been left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
WELLS FARGO & COMPANY PRIME BANCSHARES, INC.
/s/ John E. Ganoe /s/ F. M. Saunders
By: _____________________________ By: _____________________________
Executive Vice President Chairman
Its: ____________________________ Its: ____________________________
[Signature page to Agreement and Plan of Reorganization]
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<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
between
PRIME BANCSHARES, INC.,
a Texas corporation
(the surviving corporation)
and
WELLS PRIME MERGER CO.,
a Texas corporation
(the merged corporation)
This Agreement and Plan of Merger dated as of , 2000, between PRIME
BANCSHARES, INC. ("Prime"), a Texas corporation (hereinafter sometimes called
"Prime" and sometimes called the "surviving corporation"), and WELLS PRIME
MERGER CO., a Texas corporation ("Wells Prime Merger Co.") (said corporations
being hereinafter sometimes referred to as the "constituent corporations").
WHEREAS, Wells Prime Merger Co., a wholly-owned subsidiary of Wells Fargo &
Company (formerly known as Norwest Corporation), a Delaware corporation ("Wells
Fargo"), was incorporated by Certificate of Incorporation filed in the office
of the Secretary of State of the State of Texas on , 1999, and said
corporation is now a corporation subject to and governed by the provisions of
the Texas Business Corporation Act. Wells Prime Merger Co. has authorized
capital stock of 65,000,000 shares, consisting of 50,000,000 shares of common
stock, $.25 par value per share ("Wells Prime Merger Co. Common Stock"). As of
, 2000, there were 1,000 shares of Wells Prime Merger Co. Common Stock
outstanding and no shares were held in the treasury; and
WHEREAS, Prime was incorporated by Certificate of Incorporation filed in the
office of the Secretary of State of the State of Texas on , 19 , and said
corporation is now a corporation subject to and governed by the provisions of
the Texas Business Corporation Act, with authorized capital stock consisting of
65,000,000 shares, consisting of 50,000,000 shares of common stock, $.25 par
value per share ("Prime Common Stock"), and 15,000,000 shares of preferred
stock ("Preferred Stock"), of which as of , 1999, shares of Prime
Common Stock, no shares of Preferred Stock were outstanding and shares of
Prime Common Stock were held in the treasury; and
WHEREAS, Wells Fargo and Prime are parties to an Agreement and Plan of
Reorganization dated as of [July] , 1999 (the "Reorganization Agreement"),
setting forth certain representations, warranties and covenants in connection
with the merger provided for herein;
WHEREAS, the directors, or a majority of them, of each of the constituent
corporations respectively deem it advisable for the welfare and advantage of
said corporation and for the best interests of the respective shareholders of
said corporations that said corporations merge and that Wells Prime Merger Co.
be merged with and into Prime, with Prime continuing as the surviving
corporation, on the terms and conditions hereinafter set forth in accordance
with the provisions of the Texas Business Corporation Act, which statute
permits such merger; and
NOW, THEREFORE, the parties hereto, subject to the approval of the
shareholders of Wells Prime Merger Co. and Prime, in consideration of the
premises and of the mutual covenants and agreements contained herein and of the
benefits to accrue to the parties hereto, have agreed and do hereby agree that
Wells Prime Merger Co. shall be merged with and into Prime pursuant to the laws
of the State of Texas, and do hereby agree upon, prescribe and set forth the
terms and conditions of the merger of Wells Prime Merger Co. with and into
Prime, the mode of carrying said merger into effect, the manner and basis of
exchanging the shares of Prime Common Stock for shares of common stock, par
value $1 2/3 per share, of Wells Fargo ("Wells Fargo Common Stock"), and such
other provisions with respect to said merger as are deemed necessary or
desirable, as follows:
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FIRST: At the time of merger, Wells Prime Merger Co. shall be merged with and
into Prime, one of the constituent corporations, which shall be the surviving
corporation, and the separate existence of Wells Prime Merger Co. shall cease
and the name of the surviving corporation shall remain "Prime Bancshares, Inc."
SECOND: The Articles of Incorporation of Prime at the time of merger shall be
the Articles of Incorporation of the surviving corporation until amended
according to law.
THIRD: The Bylaws of Prime at the time of merger shall be and remain the
Bylaws of the surviving corporation until amended according to the provisions
of the Articles of Incorporation of the surviving corporation or of said
Bylaws.
FOURTH: At the time of merger, the following-named persons shall become the
directors of the surviving corporation and shall hold office from the time of
merger until their respective successors are elected and qualify:
[To be provided by Wells Fargo]
FIFTH: At the time of merger, the following named persons shall become the
officers of the surviving corporation and shall hold office from the time of
merger until their respective successors are elected or appointed and qualify:
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
</TABLE>
[To be provided by Wells Fargo]
SIXTH: The manner and basis of converting the shares of Prime Common Stock
shall be as follows:
1. [To conform to Reorganization Agreement]
2. As soon as practicable after the merger becomes effective, each holder
of a certificate which, prior to the effective time of the merger,
represented shares of Prime Common Stock outstanding immediately prior to
the time of merger shall be entitled, upon surrender of such certificate
representing a share of Prime Common Stock for cancellation to the
surviving corporation or to Norwest Bank Minnesota, National Association,
as the designated agent of the surviving corporation (the "Agent"), to
receive a new certificate representing the number of whole shares of Wells
Fargo Common Stock to which such holder shall be entitled on the basis set
forth in paragraph 1 above. Until so surrendered each certificate which,
immediately prior to the time of merger, represented shares of Prime Common
Stock shall not be transferable on the books of the surviving corporation
but shall be deemed to evidence only the right to receive (except for the
payment of dividends as provided below) the number of whole shares of Wells
Fargo Common Stock issuable on the basis above set forth; provided,
however, until the holder of such certificate for Prime Common Stock shall
have surrendered the same as above set forth, no dividend payable to
holders of record of Wells Fargo Common Stock as of any date subsequent to
the effective date of merger shall be paid to such holder with respect to
the shares of Wells Fargo Common Stock, if any, issuable in connection with
the merger, but, upon surrender and exchange thereof as herein provided,
there shall be paid by the surviving corporation or the Agent to the record
holder of such certificate representing Wells Fargo Common Stock issued in
exchange therefor an amount with respect to such shares of Wells Fargo
Common Stock equal to all dividends that shall have been paid or become
payable to holders of record of Wells Fargo Common Stock between the
effective date of merger and the date of such exchange.
3. If between the date hereof and the time of merger, shares of Wells
Fargo Common Stock shall be changed into a different number of shares or a
different class of shares by reason of any reclassification,
recapitalization, split-up, combination, exchange of shares or
readjustment, or if a stock dividend thereon shall be declared with a
record date within such period, then the number of shares of Wells Fargo
A-29
<PAGE>
Common Stock, if any, into which a share of Prime Common Stock shall be
exchangeable on the basis above set forth, will be appropriately and
proportionately adjusted so that the number of such shares of Wells Fargo
Common Stock into which a share of Prime Common Stock shall be exchanged
will equal the number of shares of Wells Fargo Common Stock which the
holders of shares of Prime Common Stock would have received pursuant to
such reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or stock dividend had the record date therefor been
immediately following the time of merger.
4. No fractional shares of Wells Fargo Common Stock and no certificates
or scrip certificates therefor shall be issued to represent any such
fractional interest, and any holder of a fractional interest shall be paid
an amount of cash equal to the product obtained by multiplying the
fractional share interest to which such holder is entitled by the average
of the closing prices of a share of Wells Fargo 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 held to approve the merger.
5. Each share of Wells Prime Merger Co. Common Stock issued and
outstanding at the time of merger shall be converted into and exchanged for
one (1) share of the surviving corporation after the time of merger.
SEVENTH: The merger provided for by this Agreement shall be effective as
follows:
1. The effective date of merger shall be the date on which the Articles
of Merger (as described in subparagraph 1(b) of this Article Seventh) shall
be delivered to and filed by the Secretary of State of the State of Texas;
provided, however, that all of the following actions shall have been taken
in the following order:
a. This Agreement shall be approved and adopted on behalf of Wells
Prime Merger Co. and Prime in accordance with the Texas Business
Corporation Act; and
b. Articles of merger (with this Agreement attached as part thereof)
with respect to the merger, setting forth the information required by
the Texas Business Corporation Act, shall be executed by the President
or a Vice President of Wells Prime Merger Co. and by the Secretary or
an Assistant Secretary of Wells Prime Merger Co., and by the President
or a Vice President of Prime and by the Secretary or an Assistant
Secretary of Prime, and shall be filed in the office of the Secretary
of State of the State of Texas in accordance with the Texas Business
Corporation Act; and
2. The merger shall become effective as of 12:01 a.m. (the "time of
merger") on the effective date of merger.
EIGHTH: At the time of merger:
1. The separate existence of Wells Prime Merger Co. shall cease, and the
corporate existence and identity of Prime shall continue as the surviving
corporation.
2. The merger shall have the other effects prescribed by Section 506 of
the Texas Business Corporation Act.
NINTH: The following provisions shall apply with respect to the merger
provided for by this Agreement:
1. If at any time Prime shall consider or be advised that any further
assignment or assurance in law or other action is necessary or desirable to
vest, perfect or confirm in Prime the title to any property or rights of
Wells Prime Merger Co. acquired or to be acquired as a result of the merger
provided for herein, the proper officers and directors of Prime and Wells
Prime Merger Co. may execute and deliver such deeds, assignments and
assurances in law and take such other action as may be necessary or proper
to vest, perfect or confirm title to such property or right in Prime and
otherwise carry out the purposes of this Agreement.
A-30
<PAGE>
2. For the convenience of the parties and to facilitate the filing of
this Agreement, any number of counterparts hereof may be executed and each
such counterpart shall be deemed to be an original instrument.
3. This Agreement and the legal relations among the parties hereto shall
be governed by and construed in accordance with the laws of the State of
Texas.
4. This Agreement cannot be altered or amended except pursuant to an
instrument in writing signed by both of the parties hereto.
5. At any time prior to the filing of Articles of Merger with the
Secretary of State of the State of Texas, this Agreement may be terminated
in accordance with the terms of the Reorganization Agreement upon approval
by the Board of Directors of either of the constituent corporations
notwithstanding the approval of the shareholders of either constituent
corporation.
6. Prime will be responsible for the payment of all fees and franchise
taxes that may be owed by Wells Prime Merger Co. and Prime will be
obligated to pay such fees and franchise taxes if the same are not timely
paid.
[The rest of this page has been intentionally left blank.]
A-31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Agreement and Plan of
Merger to be signed in their respective corporate names by the undersigned
officers and their respective corporate seals to be affixed hereto, pursuant to
authority duly given by their respective Boards of Directors, all as of the day
and year first above written.
Wells Prime Merger Co.
By: _________________________________
Its _________________________________
Attest:
_____________________________________
, [Assistant] Secretary
[Signature page to Agreement and Plan of Merger between
Prime Bancshares, Inc. and Wells Prime Merger Co.]
A-32
<PAGE>
Prime Bancshares, Inc.
By: _________________________________
Its _________________________________
Attest:
_____________________________________
, Secretary
[Signature page to Agreement and Plan of Merger between
Prime Bancshares, Inc. and Wells Prime Merger Co.]
A-33
<PAGE>
EXHIBIT B
Wells Fargo & Company
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-1026
Attn: Secretary
Gentlemen:
I have been advised that I might be considered to be an "affiliate," as that
term is defined for purposes of paragraphs (c) and (d) of Rule 145 ("Rule 145")
promulgated by the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act") of Prime
Bancshares, Inc., a Texas corporation ("Prime").
Pursuant to an Agreement and Plan of Reorganization, dated as of [July] ,
1999 (the "Reorganization Agreement") between Prime and Wells Fargo & Company,
a Delaware corporation ("Wells Fargo"), it is contemplated that a wholly-owned
subsidiary of Wells Fargo will merge with and into Prime (the "Merger") and as
a result, I will receive in exchange for each share of Common Stock, no par
value, of Prime ("Prime Common Stock") owned by me immediately prior to the
Effective Time of the Merger (as defined in the Reorganization Agreement), a
number of shares of Common Stock, par value $1 2/3 per share, of Wells Fargo
("Wells Fargo Common Stock"), as more specifically set forth in the
Reorganization Agreement.
I hereby agree as follows:
I will not offer to sell, transfer or otherwise dispose of any of the
shares of Wells Fargo Common Stock issued to me pursuant to the Merger (the
"Stock") except (a) in compliance with the applicable provisions of Rule
145, (b) in a transaction that is otherwise exempt from the registration
requirements of the Securities Act, or (c) in an offering registered under
the Securities Act.
I consent to the endorsement of the Stock issued to me pursuant to the
Merger with a restrictive legend which will read substantially as follows:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act of
1933, as amended (the "Act"), applies, and may be sold or otherwise
transferred only in compliance with the limitations of such Rule 145,
or upon receipt by Wells Fargo & Company of an opinion of counsel
reasonably satisfactory to it that some other exemption from
registration under the Act is available, or pursuant to a registration
statement under the Act."
Wells Fargo's transfer agent shall be given an appropriate stop transfer
order and shall not be required to register any attempted transfer of the
shares of the Stock, unless the transfer has been effected in compliance with
the terms of this letter agreement.
It is understood and agreed that this letter agreement shall terminate and be
of no further force and effect and the restrictive legend set forth above shall
be removed by delivery of substitute certificates without such legend, and the
related stop transfer restrictions shall be lifted forthwith, if (i) any such
shares of Stock shall have been registered under the Securities Act for sale,
transfer or other disposition by me or on my behalf and are sold, transferred
or otherwise disposed of, or (ii) any such shares of Stock are sold in
accordance with the provisions of paragraphs (c), (e), (f) and (g) of Rule 144
promulgated under the Securities Act, or (iii) I am not at the time of such
disposition an affiliate of Wells Fargo and have been the beneficial owner of
the Stock for at least one year (or such other period as may be prescribed
thereunder) and Wells Fargo has filed with the Commission all of the reports it
is required to file under the Securities Exchange Act of 1934, as amended,
during the preceding twelve months, or (iv) I am not and have not been for at
least three months an affiliate of
A-34
<PAGE>
Wells Fargo and have been the beneficial owner of the Stock for at least two
years (or such other period as may be prescribed by the Securities Act, and the
rules and regulations promulgated thereunder), or (v) Wells Fargo shall have
received an opinion of counsel acceptable to Wells Fargo to the effect that the
stock transfer restrictions and the legend are not required.
I have carefully read this letter agreement and the Reorganization Agreement
and have discussed their requirements and other applicable limitations upon my
ability to offer to sell, transfer or otherwise dispose of shares of Prime
Common Stock, Wells Fargo Common Stock or the Stock, to the extent I felt
necessary, with my counsel or counsel for Prime.
Sincerely,
A-35
<PAGE>
EXHIBIT C
Bank of America Corporation
Bank One Corporation
First Union Corporation
U.S. Bancorp
Fleet Financial Group, Inc.
SunTrust Banks, Inc.
National City Corporation
Fifth Third Bancorp
Mellon Bank Corporation
PNC Bank Corp.
Wachovia Corporation
KeyCorp
State Street Corporation
BB&T Corporation
Northern Trust Corporation
Comerica Incorporated
Regions Financial Corporation
Huntington Bancshares Incorporated
Marshall & Ilsley Corporation
Summit Bancorp
A-36
<PAGE>
APPENDIX B
OPINION OF KEEFE, BRUYETTE & WOODS, INC.
<PAGE>
[KEEFE, BRUYETTE & WOODS, INC. LETTERHEAD]
[date of proxy statement-prospectus]
The Board of Directors
Prime Bancshares, Inc.
12200 Northwest Freeway
Suite 101
Houston, TX 77092
Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from
a financial point of view, to the common stockholders of Prime Bancshares, Inc.
("PBTX") of the exchange ratio in the proposed merger ("the Merger") of PBTX
with and into Wells Fargo & Company ("WFC") pursuant to the Agreement and Plan
of Reorganization ("Agreement") dated as of July 27, 1999 between PBTX and WFC.
It is our understanding that the Merger will be structured as a purchase under
generally accepted accounting principles.
As is more specifically set forth in the Agreement, upon consummation of the
Merger, each outstanding share of the common stock of PBTX, $0.25 per share
("PBTX Common Stock"), will be converted into and exchanged for 0.5908 (the
"Exchange Ratio") shares of WFC ("WFC Common Stock"), $1 2/3 par value per
share subject to certain adjustments as set forth in the Agreement.
Keefe, Bruyette & Woods, Inc. ("Keefe Bruyette"), as part of its investment
banking business, is continually engaged in the valuation of bank holding
companies and banks, thrift holding companies and thrifts and their securities
in connection with mergers and acquisitions, underwriting, private placements,
competitive bidding processes, market making as a NASD market maker, and
valuations for various other purposes. As specialists in the securities of
banking companies we have experience in, and knowledge of, the valuation of
banking enterprises. In the ordinary course of our business as a broker-dealer,
we may, from time to time, trade the securities of WFC or PBTX, for our own
account, and for the accounts of our customers and, accordingly, may at any
time hold a long or short position in such securities. To the extent we have
any such positions as of the date of this opinion it has been disclosed to
PBTX. KBW has served as financial advisor to PBTX in the negotiation of the
Agreement and in rendering this fairness opinion and will receive a fee from
PBTX for those services.
In arriving at our opinion, we have reviewed, analyzed and relied upon
material bearing upon the financial and operating condition of WFC and PBTX and
the Merger. In the course of our engagement as financial advisor we have, among
other things:
i. Reviewed the Merger Agreement;
ii. Reviewed certain historical financial and other information
concerning PBTX for the two years ending December 31, 1998, including
PBTX's Annual Report to Shareholders and Annual Reports on Forms 10-K, and
interim quarterly reports on Form 10-Q;
iii. Reviewed certain historical financial and other information
concerning WFC for the three years ending December 31, 1998, including
WFC's Annual Report to Stockholders and Annual Reports on Forms 10-K, and
interim quarterly reports on Form 10-Q;
iv. Reviewed and studied the historical stock prices and trading volumes
of the common stock of both PBTX and WFC;
v. Held discussions with senior management of PBTX with respect to their
past and current financial performance, financial condition and future
prospects;
vi. Reviewed certain internal financial data, projections and other
information of PBTX, including financial projections prepared by
management;
B-1
<PAGE>
vii. Analyzed certain publicly available information of other financial
institutions that we deemed comparable or otherwise relevant to our
inquiry, and compared PBTX and WFC from a financial point of view with
certain of these institutions;
viii. Reviewed the financial terms of certain recent business
combinations in the banking industry that we deemed comparable or otherwise
relevant to our inquiry; and
ix. Conducted such other financial studies, analyses and investigations
and reviewed such other information as we deemed appropriate to enable us
to render our opinion.
In conducting our review and arriving at our opinion, we have relied upon the
accuracy and completeness of all of the financial and other information
provided to us or publicly available and we have not assumed any responsibility
for independently verifying the accuracy or completeness of any such
information. We have relied upon the management of PBTX as to the
reasonableness and achievability of the financial and operating forecasts and
projections (and the assumptions and bases therefor) provided to us, and we
have assumed that such forecasts and projections reflect the best currently
available estimates and judgments of such managements. We are not experts in
the independent verification of the adequacy of allowances for loan and lease
losses and we have assumed that the current and projected aggregate reserves
for loan and lease losses for PBTX and WFC are adequate to cover such losses.
We did not make or obtain any independent evaluations or appraisals of any
assets or liabilities of PBTX, WFC, or any of their respective subsidiaries nor
did we verify any of PBTX's or WFC's books or records or review any individual
loan or credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including, among others, the following:
(i) the historical and financial position and results of operations of PBTX and
WFC; (ii) the assets and liabilities of PBTX and WFC; and (iii) the nature and
terms of certain other merger transactions involving banks and bank holding
companies. We have also taken into account our assessment of general economic,
market and financial conditions and our experience in other transactions, as
well as our experience in securities valuation and knowledge of the banking
industry generally. Our opinion is necessarily based upon conditions as they
exist and can be evaluated on the date hereof and the information made
available to us through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair, from a financial point of view, to
PBTX and its stockholders.
Very truly yours,
Keefe, Bruyette & Woods, Inc.
B-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE 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 the Registrant's
Restated Certificate of Incorporation provides for broad indemnification of
directors and officers.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. See Exhibit Index.
(b) Financial Statement Schedules. Not Applicable.
(c) Report, Opinion or Appraisal. See Exhibits 5.1 and 8.1
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
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) ((S)230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(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
II-1
<PAGE>
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.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of San Francisco, state of
California, on November 15, 1999.
Wells Fargo & Company
/s/ Richard M. Kovacevich
By: _________________________________
Richard M. Kovacevich
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed on November 15, 1999 by the following persons in the
capacities indicated:
<TABLE>
<S> <C>
/s/ Richard M. Kovacevich President and Chief Executive Officer
______________________________________ (Principal Executive Officer)
Richard M. Kovacevich
/s/ Rodney L. Jacobs Vice Chairman and Chief Financial Officer
______________________________________ (Principal Financial Officer)
Rodney L. Jacobs
/s/ Les L. Quock Senior Vice President and Controller
______________________________________ (Principal Accounting Officer)
Les L. Quock
</TABLE>
LES S. BILLER RICHARD D. McCORMICK
J.A. BLANCHARD III CYNTHIA H. MILLIGAN
MICHAEL R. BOWLIN BENJAMIN F. MONTOYA
EDWARD M. CARSON PHILIP J. QUIGLEY
DAVID A. CHRISTENSEN DONALD B. RICE
WILLIAM S. DAVILA IAN M. ROLLAND A
SUSAN E. ENGEL JUDITH M. RUNSTAD majority
PAUL HAZEN SUSAN G. SWENSON of the
WILLIAM A. HODDER DANIEL M. TELLEP Board of
RODNEY L. JACOBS CHANG-LIN TIEN Directors*
REATHA CLARK KING MICHAEL W. WRIGHT
RICHARD M. KOVACEVICH JOHN A. YOUNG
- --------
* 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-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
2.1 Agreement and Plan of Reorganization, dated as of July 27, 1999, by
and between Prime Bancshares, Inc. and Wells Fargo & Company,
included as Appendix A to the accompanying proxy statement-
prospectus.
3.1 Restated Certificate of Incorporation, incorporated by reference to
Exhibit 3(b) to the Registrant's Current Report on Form 8-K dated
June 28, 1993. Certificates of Amendment of Certificate of
Incorporation, incorporated by reference to Exhibit 3 to the
Registrant's Current Report on Form 8-K dated July 3, 1995
(authorizing preference stock), and Exhibits 3(b) and 3(c) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 (changing the Registrant's name and increasing
authorized common and preferred stock, respectively).
3.2 Certificate of Designations for the Registrant's ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 4
to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994.
3.3 Certificate of Designations for the Registrant's Cumulative Tracking
Preferred Stock, incorporated by reference to Exhibit 3 to the
Registrant's Current Report on Form 8-K dated January 9, 1995.
3.4 Certificate of Designations for the Registrant's 1995 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 4
to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995.
3.5 Certificate Eliminating the Certificate of Designations for the
Registrant's Cumulative Convertible Preferred Stock, Series B,
incorporated by reference to Exhibit 3(a) to the Registrant's Current
Report on Form 8-K dated November 1, 1995.
3.6 Certificate Eliminating the Certificate of Designations for the
Registrant's 10.24% Cumulative Preferred Stock, incorporated by
reference to Exhibit 3 to the Registrant's Current Report on Form 8-K
dated February 20, 1996.
3.7 Certificate of Designations for the Registrant's 1996 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 3
to the Registrant's Current Report on Form 8-K dated February 26,
1996.
3.8 Certificate of Designations for the Registrant's 1997 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 3
to the Registrant's Current Report on Form 8-K dated April 14, 1997.
3.9 Certificate of Designations for the Registrant's 1998 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 3
to the Registrant's Current Report on Form 8-K dated April 20, 1998.
3.10 Certificate of Designations for the Registrant's Adjustable Cumulative
Preferred Stock, Series B, incorporated by reference to Exhibit 3(j)
to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998.
3.11 Certificate of Designations for the Registrant's Fixed/Adjustable Rate
Noncumulative Preferred Stock, Series H, incorporated by reference to
Exhibit 3(k) to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998
3.12 Certificate of Designations for the Registrant's Series C Junior
Participating Preferred Stock, incorporated by reference to Exhibit
3(l) to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
3.13 Certificate Eliminating the Certificate of Designations for the
Registrant's Series A Junior Participating Preferred Stock,
incorporated by reference to Exhibit 3(a) to the Registrant's Current
Report on Form 8-K dated April 21, 1999.
3.14 Certificate of Designations for the Registrant's 1999 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit
3(b) to the Registrant's Current Report on Form 8-K dated April 21,
1999.
3.15 By-Laws, incorporated by reference to Exhibit 3(m) to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1998.
4.1 See Exhibits 3.1 through 3.15.
4.2 Rights Agreement, dated as of October 21, 1998, between the Registrant
and ChaseMellon Shareholder Services, L.L.C., as Rights Agent,
incorporated by reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form 8-A dated October 21, 1998.
5.1 Opinion of Stanley S. Stroup as to the legality of the shares to be
issued (including consent).
8.1 Form of Opinion of Bracewell & Patterson, L.L.P. regarding the U.S.
federal income tax consequences of the merger (including consent).
23.1 Consent of Stanley S. Stroup (included in Exhibit 5.1).
23.2 Consent of KPMG LLP relating to the audited financial statements of
Wells Fargo & Company.
23.3 Consent of Grant Thornton LLP relating to the audited financial
statements of Prime Bancshares, Inc.
23.4 Consent of Bracewell & Patterson, L.L.P. regarding its tax opinion
(included in Exhibit 8.1).
24.1 Powers of Attorney.
99.1 Form of proxy for special meeting of shareholders of Prime Bancshares,
Inc.
99.2 Consent of Keefe, Bruyette & Woods, Inc. relating to Prime Bancshares,
Inc.
</TABLE>
<PAGE>
Exhibit 5.1
[LETTERHEAD OF STANLEY S. STROUP
EXECUTIVE VICE PRESIDENT AND GENERAL
COUNSEL OF WELLS FARGO & COMPANY]
November 15, 1999
Board of Directors
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94163
Ladies and Gentlemen:
In connection with the proposed registration under the Securities Act of 1933,
as amended, of 6,032,096 shares of common stock, par value $1-2/3 per share, of
Wells Fargo & Company, a Delaware corporation (the "Company"), and associated
preferred stock purchase rights (such shares and rights collectively referred to
as the "Shares"), which are proposed to be issued by the Company in connection
with the merger (the "Merger") of a wholly-owned subsidiary of the Company with
Prime 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 Company 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 Company 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.
Sincerely,
/s/ Stanley S. Stroup
<PAGE>
Exhibit 8.1
[LETTERHEAD OF BRACEWELL & PATTERSON, L.L.P.]
[effective date of registration statement]
Board of Directors
Prime Bancshares, Inc.
12200 Northwest Freeway
Houston, Texas 77092
Re: Federal Income Tax Consequences to Shareholders of Prime
Bancshares, Inc. Disposing of Their Shares of Common Stock in the
Merger
Gentlemen:
You have asked us to provide Prime Bancshares, Inc. ("Prime") with our tax
opinion as to the likely federal income tax consequences to holders
("Shareholders") of the outstanding common stock, $0.25 par value, of Prime
("Prime Common Stock") with respect to the above-referenced Merger. You have
advised that Wells Fargo & Company, a Delaware corporation ("Wells Fargo"), is
acquiring all of the Prime Common Stock by way of a Merger ("Merger") of a
wholly-owned subsidiary of Wells Fargo with Prime in which Prime will be the
surviving entity.
In particular, it is our understanding that the Merger will be implemented by
having the holders of Prime Common Stock exchange such stock for shares of
common stock, $1-2/3 par value, of Wells Fargo ("Wells Fargo Common Stock").
Shareholders of Prime will also have the opportunity to exercise dissenters'
rights in accordance with the procedure provided in the Texas Business
Corporation Act, entitling them to receive cash for their shares of Prime Common
Stock.
Our opinions are set forth herein and are also discussed under the caption "The
Merger--Federal Income Tax Consequences" in the Prospectus and Proxy Statement
("Prospectus"), which is to be included in Wells Fargo's Registration Statement
on Securities and Exchange Commission Form S-4 ("Registration Statement"). Our
opinion, however, does not address issues dependent upon the individual tax
situation of any Shareholder. In addition, our opinion does not directly
consider tax consequences to the Shareholders for actions taken before the
------
Merger, nor tax consequences unique to Wells Fargo following the Merger.
---------
You have indicated you will rely on our opinions and will not seek a ruling from
the Internal Revenue Service ("Service") regarding these matters. Our opinions
represent only our best legal judgment and have no binding effect or official
status of any kind. No assurance can be given that our conclusions would be
sustained by a court if contested by the Service.
<PAGE>
Representations
In rendering our opinion, we have relied on representations made by both Wells
Fargo and Prime. Such representations are noted below. (The capitalized words
and phrases used herein, to the extent not defined herein, shall have the
meanings provided in the Registration Statement, as amended).
Wells Fargo's Representations
- -----------------------------
(i) The fair market value of the Wells Fargo Common Stock to be
received by each Shareholder will be approximately equal to the fair market
value of the Prime Common Stock surrendered by such Shareholder in the exchange.
(ii) Except for purchases made on the open market pursuant to an
authorized ongoing stock repurchase program, Wells Fargo has no plan or
intention to reacquire any of the Wells Fargo Common Stock issued in the Merger.
(iii) Wells Fargo has no plan or intention to sell or otherwise dispose
of any of the assets of Prime acquired in the transaction except for
dispositions made in the ordinary course of business or transactions described
in Section 368(a)(2)(C) of the Internal Revenue Code of 1986, as amended
("Code") or Treasury Regulation 1.368-2(K), or transfers or dispositions that do
not violate the "substantially all" requirement.
(iv) Following the Merger, Wells Fargo will continue the historic
business of Prime or use a significant portion of Prime's historical business
assets in a business.
(v) Wells Fargo will pay its respective expenses, if any, incurred in
connection with the Merger.
(vi) There is no intercorporate indebtedness existing between Wells
Fargo and Prime that was issued, acquired, or will be settled at a discount.
(vii) Wells Fargo is not an investment company as defined in Code
(S) 368(a)(2)(F)(iii) and (iv).
(viii) The fair market value of the assets of Prime transferred to
Wells Fargo will equal or exceed the sum of the liabilities assumed by Wells
Fargo, including the amount of liabilities, if any, to which the transferred
assets are subject.
Prime's Representations
- -----------------------
(i) The fair market value of the Wells Fargo Common Stock and other
consideration received by each Shareholder will be approximately equal to the
fair market value of the Prime Common Stock surrendered by such Shareholder in
the exchange.
<PAGE>
(ii) The liabilities of Prime assumed by Wells Fargo and the
liabilities to which the transferred assets of Prime are subject were incurred
by Prime in the ordinary course of business.
(iii) Prime will pay its respective expenses, if any, incurred in
connection with the Merger.
(iv) No intercorporate debt exists between Prime and Wells Fargo that
was issued, acquired, or will be settled at a discount.
(v) Prime is not an investment company as defined under Code ss.
368(a)(2)(F)(iii) and (iv).
(vi) Prime is not under the jurisdiction of a Court in a Title 11 or
similar case within the meaning of Code ss. 368(a)(3)(A).
(vii) The fair market value of the assets of Prime transferred to Wells
Fargo will equal or exceed the sum of the liabilities assumed by Wells Fargo,
including the amount of liabilities, if any, to which the transferred assets are
subject.
In addition, our opinion is based on the representation that there is no plan or
intention by Shareholders who own 1% or more of the Prime Common Stock, and to
the best knowledge of the management of Prime, there is no plan or intention on
the part of the remaining Shareholders, to sell, exchange, or otherwise dispose
of a number of shares of Wells Fargo Common Stock received in the transaction
that would reduce the Shareholders' ownership of Wells Fargo Common Stock to a
number of shares having a value, as of the date of the Merger, of less than 50%
of the value of all of the (formerly) outstanding Prime Common Stock as of the
same date. For purposes of this representation, shares of Prime Common Stock
exchanged for cash or other property, surrendered by dissenters, or exchanged
for cash in lieu of fractional shares of Wells Fargo Common Stock will be
treated as outstanding Prime Common Stock on the date of the Merger. Moreover,
shares of Prime Common Stock and shares of Wells Fargo Common Stock held by
Shareholders and otherwise sold, redeemed, or disposed of prior or subsequent to
the transaction will be considered in making this representation.
Opinion
- -------
Based on the foregoing and subject to the limitations and assumptions set forth
above and herein, and having due regard for such legal considerations as we deem
relevant, our opinion is set forth below.
The Merger will, for federal income tax purposes, constitute a reorganization
described in Code (S) 368(a)(1)(A). Accordingly, it is our opinion that the
following statements will be true with respect to the Shareholders:
1. No gain or loss will be realized by Shareholders to the extent they
exchange Prime Common Stock for Wells Fargo Common Stock pursuant to
the terms of the Merger.
<PAGE>
2. The aggregate basis of Wells Fargo Common Stock received by each
Shareholder in the Merger will be the same as the aggregate basis of
the Prime Common Stock surrendered and exchanged therefor, decreased by
the amount of cash received and increased by the amount of gain
realized by the Shareholder under the exchange.
3. The holding period of Wells Fargo Common Stock received by each
Shareholder will include the period during which Prime Common Stock
surrendered therefore was held, provided the Prime Common Stock is a
capital asset in the hands of the Shareholder on the date of the
exchange. The payment of cash in lieu of fractional shares of Wells
Fargo Common Stock will be treated as a sale or exchange of such
fractional shares potentially eligible for capital gains treatment.
6. Unless an exemption applies, under the backup withholding rules of Code
ss. 3406, an exchange agent (such as the exchange agent for Wells
Fargo) shall be required to withhold, and will withhold, 31% of all
cash payments to which a Shareholder is entitled pursuant to the Merger
(unless such Shareholder provides his taxpayer identification
number--Social Security Number in the case of an individual, or
Employer Identification Number in other cases) and certifies that such
number is correct.
Conclusion
In conclusion, this opinion is solely for the benefit of Prime and the
Shareholders and, as such, this opinion may not be relied upon in any manner by
any other person or entity.
Consent
We hereby consent to the filing of this letter as Exhibit 8 to the Registration
Statement on Form S-4 and to the reference to us in the section entitled "The
Merger--U.S. Federal Income Tax Consequences of the Merger."
Very truly yours,
Bracewell & Patterson, L.L.P.
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
of Wells Fargo & Company
We consent to the incorporation by reference in the proxy statement-prospectus
included in this registration statement on Form S-4 of Wells Fargo & Company of
our report dated January 19, 1999, with respect to the consolidated balance
sheet of Wells Fargo & Company and Subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of income, changes in
stockholders' equity and comprehensive income, and cash flows for each of the
years in the three-year period ended December 31, 1998, and to the reference to
our firm under the heading "Experts" in the proxy statement-prospectus.
/s/ KPMG LLP
San Francisco, California
November 15, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 19, 1999, accompanying the financial
statements of Prime Bancshares, Inc. contained in this Registration Statement
and Proxy Statement/Prospectus on Form S-4. We consent to the use of the
aforementioned report in the Registration Statement and Proxy
Statement/Prospectus, and to the use of our name as it appears under the caption
"Experts".
/s/ GRANT THORNTON LLP
Houston, Texas
November 15, 1999
<PAGE>
Exhibit 24.1
WELLS FARGO & COMPANY
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of WELLS FARGO & COMPANY, a Delaware Company, does hereby make,
constitute and appoint PAUL HAZEN, RICHARD M. KOVACEVICH, LES BILLER, RODNEY L.
JACOBS, STANLEY S. STROUP, 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 Company 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
Company 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 6,750,000 shares of Common Stock of the Company and any preferred stock
purchase rights associated with such shares, 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 Company of Prime
Bancshares, Inc., Houston, Texas and its subsidiaries, and to file the same,
with all exhibits thereto and other supporting documents, with said Commission,
granting unto said attorneys-in-fact, and each of them, full power and authority
to do and perform any and all acts necessary or incidental to the performance
and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 27th day of July, 1999.
/s/ Les S. Biller /s/ Richard D. McCormick
/s/ J. A. Blanchard III /s/ Cynthia H. Milligan
/s/ Michael R. Bowlin /s/ Benjamin F. Montoya
/s/ Edward M. Carson /s/ Philip J. Quigley
/s/ David A. Christensen /s/ Donald B. Rice
/s/ William S. Davila /s/ Ian M. Rolland
/s/ Susan E. Engel /s/ Judith M. Runstad
/s/ Paul Hazen /s/ Susan G. Swenson
/s/ William A. Hodder /s/ Daniel M. Tellep
/s/ Rodney L. Jacobs /s/ Chang-Lin Tien
/s/ Reatha Clark King /s/ Michael W. Wright
/s/ Richard M. Kovacevich /s/ John A. Young
<PAGE>
Exhibit 99.1
Form of Proxy for Special Meeting of
Shareholders of Prime 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 Prime Bancshares, Inc. ("Prime") to be held on _________, 2000 at
___________________________, Houston, Texas, 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 as of July
27, 1999 (the "Reorganization Agreement"), by and between Prime and
Wells Fargo & Company ("Wells Fargo") pursuant to which, among other
things, a wholly-owned subsidiary of Wells Fargo will merge with and
into Prime (the "Merger") 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 Prime as may be necessary or appropriate to carry out the intent
and purposes of the Merger.
_______ FOR _______ AGAINST _______ ABSTAIN
2. In the discretion of the persons appointed proxies hereby to vote 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: _______________________________.
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(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 PRIME BANCSHARES, INC.
<PAGE>
Exhibit 99.2
CONSENT OF KEEFE, BRUYETTE & WOODS, INC.
We hereby consent to the use of our opinion letter to the Board of
Directors of Prime Bancshares, Inc. included as Appendix B to the Proxy
Statement-Prospectus which forms part of the Registration Statement on Form S-4
relating to the proposed merger of Wells Fargo & Co. and Prime Bancshares, Inc.
and to the references to such opinion therein.
In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder, nor do we hereby admit that we are experts with
respect to any part of such Registration Statement within the meaning of the
term "experts" as used in the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
KEEFE, BRUYETTE & WOODS, INC.
By: /s/ Craig R. McMahen
--------------------
Name: Craig R. McMahen
Title: Vice President
Dated: November 15, 1999
