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REGISTRATION NO. 333-
==============================
As filed with the Securities and Exchange Commission on January 21, 1999
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 its charter)
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DELAWARE 6712 41-0449260
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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420 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94163
415-477-1000
(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 CHARLES BYBEE
WELLS FARGO & COMPANY TED R. SIKORA II
1050 17TH STREET, SUITE 120 DAVIS, GRAHAM & STUBBS, LLP
DENVER, COLORADO 80265 370 17TH STREET, SUITE 4700
DENVER, COLORADO 80202
__________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of the Registration
Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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TITLE OF SECURITIES AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- -----------------------------------------------------------------------------------------------------
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Common Stock 910,000 N/A $6,491,394/2/ $1,914.96/3/
(par value $1-2/3 per share)/1/
=====================================================================================================
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/1/ Each share of the registrant's common stock includes one preferred stock
purchase right.
/2/ Estimated solely for the purpose of computing the registration fee, in
accordance with Rule 457(f), based upon the book value as of September 30,
1998 of all shares of common stock to be acquired by the registrant in the
transaction described herein.
/3/ Based on .000295 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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[METROPOLITAN LETTERHEAD]
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The board of directors of Metropolitan Bancshares, Inc., the parent bank
holding company of Community Bank of Parker, has approved the acquisition of
Metropolitan by Wells Fargo & Company (formerly named Norwest Corporation). The
acquisition is subject to the approval of Metropolitan's shareholders. A special
meeting of shareholders will be held to vote on the proposed acquisition. The
date, time and place of the meeting are as follows:
FRIDAY, FEBRUARY 19, 1999
9:00 A.M., LOCAL TIME
SUITE 777
3600 S. YOSEMITE STREET
DENVER, COLORADO 80237
If the acquisition is completed, Wells Fargo will exchange a total of
$24,500,000 of its common stock for all of the outstanding common stock of
Metropolitan. Based on a maximum of 47,550 shares of Metropolitan common stock
outstanding, this works out to approximately $515.25 of Wells Fargo common stock
for each share of Metropolitan common stock.
The exchange ratio, or the number of shares of Wells Fargo common stock you
will receive for each share of Metropolitan common stock you own, will be
determined by dividing the share value (approximately $515.25) by the average of
the closing prices of a share of Wells Fargo common stock as reported on the New
York Stock Exchange Composite Transaction reporting system for the period of 20
trading days ending on the day immediately before the special meeting.
For example, if this average is $35, you would receive approximately 14.72
shares of Wells Fargo common stock for each share of Metropolitan common stock
you own. If this average is $40, you would receive approximately 12.88 shares of
Wells Fargo common stock for each share of Metropolitan common stock.
The closing price of Wells Fargo common on January ___, 1999 was $_____ a
share.
Whether or not you plan to attend the meeting, please complete and mail the
enclosed proxy card. If you sign, date and mail your proxy card without
indicating how you want to vote, your proxy will be voted in favor of the
acquisition. If you fail to return your card, the effect will be the same as a
vote against the acquisition.
This Proxy Statement-Prospectus provides detailed information about the
proposed acquisition. Please read this entire document carefully.
Robert W. Graf
Chairman of the Board
_______________________
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.
THE SHARES OF WELLS FARGO COMMON STOCK OFFERED BY THIS PROXY STATEMENT-
PROSPECTUS ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK
OR NONBANK SUBSIDIARY OF WELLS FARGO & COMPANY AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
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 MAY AFFECT, AMONG OTHER THINGS, WELLS FARGO'S
EARNINGS AND/OR RESTRICT ITS ABILITY TO PAY DIVIDENDS ON WELLS FARGO COMMON
STOCK. SEE "CERTAIN REGULATORY AND OTHER CONSIDERATIONS PERTAINING TO WELLS
FARGO" ON PAGE ___.
_______________________
Proxy Statement-Prospectus dated February 5, 1999.
First mailed to Metropolitan shareholders on or about February 5, 1999.
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METROPOLITAN BANCSHARES, INC.
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD
ON FEBRUARY 19, 1999
TO THE SHAREHOLDERS OF
METROPOLITAN BANCSHARES, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Metropolitan
Bancshares, Inc., a Colorado corporation ("Metropolitan"), will be held on
Friday, February 19, 1999, at 9:00 a.m., local time, at Suite 777, 3600 S.
Yosemite Street, Denver, Colorado, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan of
Reorganization, dated as of September 1, 1998 (the "Reorganization
Agreement"), by and between Metropolitan and Norwest Corporation, a Delaware
corporation now named Wells Fargo & Company ("Wells Fargo"), pursuant to
which, among other things, a wholly-owned subsidiary of Wells Fargo will
merge with and into Metropolitan upon the terms and subject to the conditions
set forth in the Reorganization Agreement, as more fully described in the
Proxy Statement-Prospectus of which this Notice is a part.
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 Metropolitan has fixed the close of business on
February 5, 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.
SHAREHOLDERS ARE ENTITLED TO ASSERT DISSENTERS' RIGHTS UNDER ARTICLE 113 OF THE
COLORADO BUSINESS CORPORATION ACT IN CONNECTION WITH THE MERGER DESCRIBED IN
ITEM 1 ABOVE, AS MORE FULLY DESCRIBED IN THE PROXY STATEMENT-PROSPECTUS OF WHICH
THIS NOTICE IS A PART. A COPY OF ARTICLE 113 IS INCLUDED IN THE PROXY STATEMENT-
PROSPECTUS AS APPENDIX B. SHAREHOLDERS WHO DO NOT SATISFY THE REQUIREMENTS FOR
ASSERTING DISSENTERS' RIGHTS WILL FORFEIT THEIR RIGHT TO DEMAND AND RECEIVE
PAYMENT FOR THEIR SHARES UNDER ARTICLE 113.
By Order of the Board of Directors
Steven M. Cohen
Secretary
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TABLE OF CONTENTS
IMPORTANT INFORMATION NOT INCLUDED IN THIS PROXY STATEMENT-PROSPECTUS......... 1
General...................................................................... 1
Norwest/Wells Fargo Merger................................................... 1
QUESTIONS AND ANSWERS
ABOUT THE MERGER.............................................................. 2
QUESTIONS AND ANSWERS ABOUT
THIS PROXY STATEMENT-
PROSPECTUS.................................................................... 2
SUMMARY....................................................................... 3
Parties to the Merger........................................................ 4
Reasons for the Merger;
Recommendation of Metropolitan's
Board of Directors......................................................... 4
Required Vote; Voting Agreements............................................. 5
The Merger................................................................... 5
Comparative Per Common Share Data............................................10
Selected Historical Financial Information....................................12
Share Prices and Dividends for
Wells Fargo Common Stock...................................................15
GLOSSARY OF IMPORTANT TERMS...................................................16
SPECIAL MEETING OF SHAREHOLDERS...............................................18
Date, Time and Place of Special Meeting......................................18
Record Date..................................................................18
Voting Rights; Votes Required for Approval...................................18
Voting Agreements............................................................18
Voting and Revocation of Proxies.............................................19
Solicitation of Proxies......................................................19
Other Matters................................................................19
THE MERGER....................................................................20
Purpose and Effect of the Merger.............................................20
Background of and Reasons for the
Merger.....................................................................20
Additional Interests of Metropolitan's
Management in the Merger...................................................21
Dissenters' Rights...........................................................22
Exchange of Certificates.....................................................23
Regulatory Approvals.........................................................24
Effect on Metropolitan's Employee
Benefit Plans..............................................................24
Material U.S. Federal Income Tax Consequences of the Merger to Metropolitan
Shareholders...............................................................24
Resale of Wells Fargo Common Stock...........................................25
Stock Exchange Listing.......................................................26
Accounting Treatment.........................................................26
Finder's Fee.................................................................26
THE REORGANIZATION AGREEMENT..................................................27
Basic Plan of Reorganization.................................................27
Representations and Warranties...............................................28
Certain Covenants............................................................28
Conditions to the Completion of the
Merger.....................................................................29
Termination of the Reorganization
Agreement..................................................................30
Effect of Termination........................................................30
Waiver and Amendment.........................................................30
Expenses.....................................................................30
COMPARISON OF RIGHTS OF HOLDERS OF METROPOLITAN COMMON STOCK AND WELLS FARGO
COMMON STOCK..................................................................31
Capital Stock................................................................31
Rights Plan..................................................................31
Directors....................................................................32
Amendment of Charter Document
and Bylaws.................................................................32
Approval of Mergers and Asset Sales..........................................32
Preemptive Rights............................................................33
Appraisal Rights.............................................................33
Special Meetings.............................................................33
Directors' Duties............................................................33
Action Without a Meeting.....................................................34
Limitation of Director Liability.............................................34
Indemnification of Officers and Directors....................................34
Dividends....................................................................35
Corporate Governance Procedures;
Nomination of Directors....................................................35
INFORMATION ABOUT
METROPOLITAN..................................................................37
General......................................................................37
The Bank.....................................................................37
Competition..................................................................37
Regulation and Supervision...................................................38
Employees....................................................................39
(i)
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Properties...................................................................40
Indebtedness of Metropolitan.................................................40
Material Contracts...........................................................40
Holders and Market...........................................................41
Legal Proceedings............................................................41
Security and Ownership of Certain Beneficial Owners and Management of
Metropolitan...............................................................41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF METROPOLITAN'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS....................................................43
Results of Operations........................................................43
Financial Condition..........................................................52
Impact of Inflation, Changing Prices and Monetary Policies...................62
Year 2000 Compliance.........................................................63
Recent Accounting Pronouncements.............................................63
CERTAIN REGULATORY AND OTHER CONSIDERATIONS PERTAINING TO WELLS FARGO.........65
Bank Regulatory Agencies.....................................................65
Bank Holding Company Activities;
Interstate Banking.........................................................65
Dividend Restrictions........................................................66
Holding Company Structure....................................................67
Regulatory Capital Standards and
Related Matters............................................................68
FDIC Insurance...............................................................70
Fiscal and Monetary Policies.................................................71
Competition..................................................................71
EXPERTS.......................................................................71
LEGAL MATTERS.................................................................72
INFORMATION CONCERNING WELLS FARGO MANAGEMENT.................................72
WHERE YOU CAN FIND MORE INFORMATION...........................................72
FINANCIAL STATEMENTS OF METROPOLITAN BANCSHARES, INC.........................F-1
APPENDIX A AGREEMENT AND PLAN OF REORGANIZATION
APPENDIX B COLORADO BUSINESS CORPORATION ACT ARTICLE 113-DISSENTERS' RIGHTS
(ii)
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IMPORTANT INFORMATION NOT INCLUDED
IN THIS PROXY STATEMENT-PROSPECTUS
GENERAL
This Proxy Statement-Prospectus incorporates important business and financial
information about Wells Fargo & Company (formerly named Norwest Corporation)
that is not included in or delivered with this document. The documents
containing this information are listed on page 72 and are available to you
without charge upon written or oral request to Wells Fargo's Corporate Secretary
as follows:
Corporate Secretary
Wells Fargo & Company
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Telephone (612) 667-8655
TO RECEIVE DOCUMENTS IN TIME FOR THE SPECIAL MEETING, YOUR REQUEST MUST BE
RECEIVED NO LATER THAN FEBRUARY 12, 1999.
NORWEST/WELLS FARGO MERGER
On November 2, 1998, Wells Fargo & Company ("old Wells Fargo") merged into WFC
Holdings Corporation, a wholly-owned subsidiary of Norwest Corporation. WFC
Holdings Corporation was the surviving company in the merger. In connection
with the merger, Norwest Corporation changed its name to "Wells Fargo &
Company."
In this Proxy Statement-Prospectus, unless otherwise indicated, "Wells Fargo"
or "new Wells Fargo" refers to the company formerly named Norwest Corporation
and now named Wells Fargo & Company.
The combination of the old Wells Fargo and Norwest Corporation is being
accounted for as a pooling of interests. This means that Norwest Corporation's
historical financial statements incorporated into this document by reference to
Norwest Corporation's annual report on Form 10-K for the year ended December 31,
1997 and quarterly report on Form 10-Q for the quarter ended September 30, 1998
have been restated as if Norwest Corporation and old Wells Fargo had been
combined for the periods presented in these reports. The supplemental
consolidated financial statements are included in the new Wells Fargo's current
report on Form 8-K filed with the Securities and Exchange Commission on January
19, 1999. This report on Form 8-K supplements Norwest Corporation's Form 10-K
for 1997 and Form 10-Q for the quarter ended September 30, 1998.
IN THIS PROXY STATEMENT-PROSPECTUS, UNLESS OTHERWISE INDICATED, THE FINANCIAL
STATEMENTS OF NORWEST CORPORATION HAVE BEEN RESTATED AS IF NORWEST CORPORATION
AND OLD WELLS FARGO HAD BEEN COMBINED FOR THE PERIODS PRESENTED.
For more information about the Norwest/Wells Fargo merger, you should review
the following documents filed with the Securities and Exchange Commission, each
of which is incorporated by reference into this Proxy Statement-Prospectus:
. Joint Proxy Statement-Prospectus of Norwest Corporation and old Wells Fargo
dated September 11, 1998 forming part of Norwest Corporation's Registration
Statement on Form S-4 filed with the Securities and Exchange Commission on
September 11, 1998 (Registration No. 333-63247).
. Current Report on Form 8-K dated November 2, 1998 and filed by Wells Fargo
& Company on November 16, 1998 reporting completion of the merger.
Copies of these documents are available, without charge, by contacting the
Wells Fargo Corporate Secretary at the address and telephone number set forth
above.
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QUESTIONS AND ANSWERS
ABOUT THE MERGER
Q: What do I need to do now?
A: Just sign the enclosed proxy card and mail it to Metropolitan in the
enclosed return envelope as soon as possible. This way, your shares will be
represented at the special meeting on February 19, 1999. Metropolitan's
board of directors recommends that you vote FOR the merger.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, Wells Fargo will send you written
instructions for exchanging your stock certificates.
Q: WHAT WILL I RECEIVE FOR MY SHARES OF METROPOLITAN COMMON STOCK?
A: Wells Fargo will exchange $24,500,000 of its common stock for all of the
outstanding shares of Metropolitan common stock. Based on a maximum of
47,550 shares of Metropolitan common stock outstanding, this works out to
approximately $515.25 of Wells Fargo common stock for each share of
Metropolitan common stock.
Q: HOW MANY SHARES OF WELLS FARGO COMMON STOCK WILL I RECEIVE?
A: The exchange ratio, or the number of shares of Wells Fargo common stock you
will receive for each share of Metropolitan common stock you own, will be
determined by dividing the share value (approximately $515.25) by the
average of the closing prices of a share of Wells Fargo common stock as
reported on the New York Stock Exchange composite transaction reporting
system for the period of 20 trading days ending immediately before the
special meeting.
For example, based on 47,550 shares of Metropolitan common stock
outstanding, if this average is $35, you would receive approximately 14.72
shares of Wells Fargo common stock for each share of Metropolitan common
stock you own. If this average is $40, you would receive approximately 12.88
shares.
The exchange ratio will increase if certain Metropolitan stock options are
not exercised. See page 27.
Q: WHAT ARE THE TAX CONSEQUENCES TO SHAREHOLDERS OF THE MERGER?
A: The exchange of Wells Fargo common stock for shares of Metropolitan common
stock generally will be tax free to Metropolitan shareholders for federal
income tax purposes. Metropolitan shareholders will recognize income or
gain, however, as a result of cash received instead of fractional shares. To
review the tax consequences to Metropolitan shareholders in greater detail,
see page 24.
THIS TAX TREATMENT MAY NOT APPLY TO SOME METROPOLITAN SHAREHOLDERS BECAUSE
OF THEIR SPECIFIC CIRCUMSTANCES. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR
A FULL UNDERSTANDING OF THE MERGER'S TAX CONSEQUENCES.
Q: WHEN WILL THE MERGER BE COMPLETED?
A: Metropolitan and Wells Fargo expect to complete the merger within several
days after the special meeting, assuming the required regulatory approvals
have been received by then.
Q: WHAT RIGHTS DO I HAVE IF I DISSENT FROM THE MERGER?
A: You have a right to the fair value of your Metropolitan common stock. See
page 22 for information on your dissenters' rights and how to exercise them.
2
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QUESTIONS AND ANSWERS
ABOUT THIS PROXY STATEMENT-PROSPECTUS
Q: WHAT IS THE PURPOSE OF THIS DOCUMENT?
A: This document serves as both a proxy statement of Metropolitan and a
prospectus of Wells Fargo. As a proxy statement, it is being provided to you
because Metropolitan's board of directors is soliciting your proxy for use
at the special meeting. As a prospectus, it is being provided to you because
Wells Fargo will exchange shares of its common stock for your shares of
Metropolitan common stock.
Q: DO I NEED TO READ THE ENTIRE DOCUMENT, INCLUDING THE APPENDICES?
A: Absolutely. Much of this Proxy Statement-Prospectus summarizes information
that is set forth in greater detail elsewhere in this document or in the
appendices to this document. Each summary is qualified in its entirety by
reference to the document being summarized. For example, the summary of the
terms of the Reorganization Agreement is qualified in its entirety by
reference to the full text of the Reorganization Agreement, a copy of which
is included as Appendix A. If there are any differences, the information in
the Reorganization Agreement will control over the information in the
summary. As a result, to fully understand the merger and your rights as a
Metropolitan shareholder, you'll need to read carefully this entire document
including appendices.
Q: IS THERE OTHER INFORMATION I SHOULD CONSIDER?
A: This Proxy Statement-Prospectus incorporates important business and
financial information about Wells Fargo that is not included in or delivered
with this document. For example, Wells Fargo's restated consolidated
financial statements for the year ended December 31, 1997 are not included
in this document. Instead, they are incorporated from Wells Fargo's current
report on Form 8-K filed with the SEC on January 19, 1999.
Information that is incorporated from another document is considered part of
this Proxy Statement-Prospectus. It's considered to have been disclosed to
you whether or not you actually review the information.
Q: WHERE CAN I FIND THE INFORMATION THAT HAS BEEN INCORPORATED BY REFERENCE?
A: Information incorporated from other documents is available to you without
charge upon written or oral request. See page 72 under "Where You Can Find
More Information" for a list of the documents that Wells Fargo has
incorporated by reference into this Proxy Statement-Prospectus, and how to
obtain copies of these documents.
Q: WHAT ABOUT REPORTS FILED BY WELLS FARGO AFTER THE DATE OF THIS PROXY
STATEMENT-PROSPECTUS?
A: Reports filed by Wells Fargo with the SEC after the date of this Proxy
Statement-Prospectus may update, modify or correct information in the
documents incorporated by reference. You should review these reports, as
they could disclose a change in the business prospects, financial condition
or other affairs of Wells Fargo since the date of this Proxy Statement-
Prospectus.
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SUMMARY
-------
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger fully, and for a more complete description of the legal terms of the
merger, you should carefully read this document and the other information
available to you. See "Where You Can Find More Information."
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PARTIES TO THE MERGER
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WELLS FARGO & COMPANY........................ Wells Fargo is a diversified financial services
420 Montgomery Street company. Through its subsidiaries and affiliates,
San Francisco, California 94163 Wells Fargo provides retail, commercial, real estate
(415) 477-1000 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, 1998, Wells Fargo had assets of
$195.8 billion, deposits of $130.0 billion and
stockholders' equity of $19.9 billion. Based on
assets at September 30, 1998, Wells Fargo was the 7th
largest commercial banking organization in the United
States.
METROPOLITAN................................. Metropolitan is a bank holding company headquartered
19590 E. Main Street in Parker, Colorado. Metropolitan derives
Parker, Colorado 80138 substantially all of its revenue and income from the
(303) 841-0970 operation of the Bank, which is also located in
Parker, Colorado. The Bank provides a full range of
commercial and consumer banking services to
individuals and small and middle market businesses in
and near Denver, Douglas and Elbert Counties. The
Bank has branches in Parker, Franktown, Elizabeth and
Denver, Colorado.
At September 30, 1998, Metropolitan had assets of
$77.0 million, deposits of $69.0 million and
stockholders' equity of $6.5 million.
REASONS FOR THE MERGER;
RECOMMENDATION OF METROPOLITAN'S
BOARD OF DIRECTORS (SEE PAGE 20)............. The directors of Metropolitan believe that the
proposed merger with Wells Fargo whereby Metropolitan
shareholders will receive Wells Fargo common stock in
a tax-free exchange provides Metropolitan
shareholders with the greatest available
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value for their Metropolitan common stock compared to
other offers. The merger will provide greater liquidity
for their investment because Wells Fargo common stock
trades on the New York Stock Exchange. The merger
offers prospects for greater yield on their investment
from dividends that will paid on Wells Fargo common
stock and for capital appreciation due to the prospects
of Wells Fargo generally. In addition, the directors
of Metropolitan believe that the combined institution
will be better able to meet the competitive and
technological challenges in the Bank's market area
due to Wells Fargo's greater resources. See "Plan
of Reorganization--Background of and Reasons for
the Reorganization" for a description of the factors
considered by Metropolitan's board of directors
resulting in their recommendation to Metropolitan
shareholders to approve the Reorganization Agreement.
For the reasons set forth above, Metropolitan's board
of directors believes the merger is in the best
interests of Metropolitan's shareholders.
METROPOLITAN'S BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT METROPOLITAN SHAREHOLDERS VOTE FOR
APPROVAL OF THE MERGER.
REQUIRED VOTE; VOTING AGREEMENTS............... The holders of at least a majority of the outstanding
shares of Metropolitan common stock must approve the
merger. Certain persons have agreed to vote shares
of Metropolitan common stock in favor of the merger.
At the record date, these persons had the right to
vote an aggregate of 25,000 shares of Metropolitan
common stock, representing approximately 58.8% of the
shares of Metropolitan common stock outstanding at
the record date.
THE MERGER..................................... In the merger, a newly-formed, wholly-owned
subsidiary of Wells Fargo will merge with
Metropolitan. Metropolitan will be the surviving
entity in the merger and will become a wholly-owned
subsidiary of Wells Fargo.
WHAT METROPOLITAN SHAREHOLDERS
WILL RECEIVE (SEE PAGE 27)................... In the merger, Wells Fargo will exchange a total of
$24,500,000 of Wells Fargo common stock for all of
the outstanding shares of Metropolitan common stock.
Based on a maximum of 47,550 shares of Metropolitan
common stock outstanding, this works out to
approximately $515.25 of Wells Fargo common stock for
each share of Metropolitan common stock.
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The exchange ratio, or the number of shares of Wells
Fargo common stock you will receive for each share of
Metropolitan common stock you own, will be determined
by dividing the share value (approximately $515.25)
by the average of the closing prices of a share of
Wells Fargo common stock as reported on the New York
Stock Exchange composite transaction reporting system.
For example, based on 47,550 shares of Metropolitan
common stock outstanding, if this average is $35, you
would receive approximately 14.72 shares of Wells
Fargo common stock for each share of Metropolitan
common stock you own. If this average is $40, you
would receive approximately 12.88 shares.
The exchange ratio will increase if certain
Metropolitan stock options are not exercised. See
page 27.
Wells Fargo will not issue fractional shares in the
merger. If the total number of shares of Wells Fargo
common stock you are entitled to receive in the
merger does not equal a whole number, Wells Fargo
will pay you cash instead of the fractional share.
MANAGEMENT AND OPERATIONS OF METROPOLITAN
AND THE BANK AFTER THE MERGER............... When the merger is complete, Wells Fargo will own all
of the outstanding shares of Metropolitan common
stock. As a result, Wells Fargo will be able to
elect or appoint all of the directors and officers of
Metropolitan.
As a result of the merger, Metropolitan and the Bank
will become subsidiaries of Wells Fargo. Wells Fargo
expects that after the merger the Bank will provide
products and services offered by Wells Fargo
affiliates.
ADDITIONAL INTERESTS OF METROPOLITAN'S
MANAGEMENT (SEE PAGE 21).................... Metropolitan's management will receive the same
consideration for their shares of Metropolitan common
stock as you will.
Robert W. Graf, the Chairman, President, Treasurer
and Chief Executive Officer of Metropolitan, has
entered into an employment and noncompetition
agreement with Wells Fargo. Under this agreement,
Mr. Graf will become an employee of the Bank for a
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period of one year beginning on the day the merger is
completed. See page 21 for a discussion of this
agreement.
CONDITIONS TO THE MERGER
(SEE PAGE 29)................................ A number of conditions must be satisfied before the
merger can be completed, including the following:
. The merger must be approved by the holders of at
least majority of the outstanding Metropolitan common
stock.
. The merger must be approved by governmental
authorities without unreasonably burdensome demands
on Wells Fargo.
. Metropolitan must receive a legal opinion that its
shareholders will not recognize any gain or loss for
federal income tax purposes as a result of the merger
(except for cash received in lieu of fractional
shares).
. There cannot be any change since December 31, 1997
that has had, or might reasonably be expected to
have, a material adverse effect on Metropolitan and
the Bank taken as a whole.
. Either Metropolitan must be in full compliance
with current Federal Financial Institutions
Examination Council Year 2000 requirements or there
must not be any feature of Metropolitan's data
processing, operating or platform systems that would
prevent those systems from being converted to Wells
Fargo's systems.
Some of the conditions to the merger are subject to
exceptions and/or to a "materiality" standard. Some
conditions may also be waived by the party entitled
to assert the condition.
REGULATORY APPROVALS (SEE PAGE 24)........... The merger is subject to the prior approval of the
Federal Reserve Board, as the regulator of bank
holding companies such as Wells Fargo. Federal
Reserve Board approval was received effective as of
November 25, 1998.
Because Wells Fargo will acquire control of the Bank
through its acquisition of Metropolitan, Wells Fargo
was also required to notify the Colorado Division of
Banking.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
TERMINATION OF THE REORGANIZATION
AGREEMENT (SEE PAGE 30)...................... Wells Fargo and Metropolitan can mutually agree to
terminate the Reorganization Agreement without
completing the merger. Also, either party can
terminate the Reorganization Agreement under the
following circumstances:
. if a court or other governmental authority
prohibits the merger; or
. the merger is not completed by March 31, 1999,
unless the failure to complete the merger on or
before that date is the fault of the party seeking to
terminate.
ACCOUNTING TREATMENT (SEE PAGE 26)........... 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 Metropolitan. 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 consolidated results of operations the results
of Metropolitan's operations after the merger is
completed.
DISSENTERS' RIGHTS (SEE PAGE 22 AND
APPENDIX B)................................. Metropolitan shareholders who dissent from the merger
are entitled to receive the fair value of their
shares of Metropolitan common stock. To exercise
this right, dissenting shareholders must follow the
procedures outlined in Appendix B. Failure to comply
strictly with these procedures will result in the
forfeiture of dissenters' rights.
U.S. FEDERAL INCOME TAX
CONSEQUENCES (SEE PAGE 24)................... The merger has been structured so that Metropolitan
shareholders generally will not recognize any gain or
loss for U.S. federal income tax purposes as a result
of the merger (except for cash received in lieu of
fractional shares). The merger is conditioned on the
receipt by Metropolitan of a legal opinion to this
effect.
THIS TAX TREATMENT MAY NOT APPLY TO CERTAIN
METROPOLITAN SHAREHOLDERS. YOU SHOULD CONSULT YOUR
OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE
MERGER'S TAX CONSEQUENCES.
MARKET INFORMATION (SEE PAGE 15)............. Wells Fargo common stock is listed on the New York
Stock Exchange and the Chicago Stock Exchange
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
under the symbol "WFC." Before November 3, 1998,
the common stock traded under the symbol "NOB."
On August 31, 1998, the last full trading day before
Metropolitan and Wells Fargo signed the
Reorganization Agreement, Wells Fargo common stock
closed at $29.75 per share. On January ___, 1999,
Wells Fargo common stock closed at $___ per share.
There is no public market for Metropolitan common
stock.
</TABLE>
9
<PAGE>
COMPARATIVE PER COMMON SHARE DATA
The following table presents selected comparative per common share data for
Wells Fargo common stock on a historical and pro forma combined basis and for
Metropolitan common stock on a historical and pro forma equivalent basis. The
historical information for Wells Fargo has been restated to reflect the
combination of Norwest Corporation and old Wells Fargo & Company under the
"pooling of interests" accounting method.
The information in the table should be read with (a) the selected historical
information (and related notes) for Wells Fargo and Metropolitan appearing
elsewhere in this Proxy Statement-Prospectus, (b) the complete financial
statements of Metropolitan appearing elsewhere in this Proxy Statement-
Prospectus, and (c) the restated financial statements of Wells Fargo included in
the documents incorporated by reference in this Proxy Statement-Prospectus. See
"Where You Can Find More Information." The information in the table is not
necessarily indicative of the results of the future operations of the combined
entity or the actual results that would have occurred had the merger become
effective prior to the periods indicated.
The pro forma information in the table assumes that Wells Fargo will exchange
12.88 shares of its common stock for each share of Metropolitan common stock.
See "The Reorganization Agreement--Basic Plan of Reorganization." The pro forma
information also assumes the merger is accounted for using the purchase method
of accounting. See "The Merger--Accounting Treatment."
<TABLE>
<CAPTION>
Wells Fargo common Metropolitan common
stock stock
---------------------------------- ----------------------------------
Pro Forma Pro Forma
Historical Combined Historical Equivalent
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
BOOK VALUE /1/:
September 30, 1998 $12.01 12.01 157.37 154.69
December 31, 1997 11.92 11.92 134.73 153.53
DIVIDENDS DECLARED /2/:
Nine Months Ended September 30, 1998 0.515 0.515 - 6.633
Year Ended December 31, 1997 0.615 0.615 - 7.921
NET INCOME /3/:
BASIC:
Nine Months Ended September 30, 1998 1.31 1.31 22.63 16.87
Year Ended December 31, 1997 1.50 1.50 14.50 19.32
DILUTED:
Nine Months Ended September 30, 1998 1.29 1.29 19.64 16.62
Year Ended December 31, 1997 1.48 1.48 12.57 19.06
</TABLE>
______________________________________
/1/ The pro forma combined book value per share of Wells Fargo common stock
represents the historical total combined common stockholders' equity for
Wells Fargo and Metropolitan divided by total pro forma common shares of the
combined entities. The pro forma equivalent book value per share of
Metropolitan common stock represents the pro forma combined book value per
share of Wells Fargo common stock multiplied by an assumed exchange ratio of
12.88.
/2/ Assumes no changes in cash dividends per share by Wells Fargo. The pro
forma equivalent dividends per share of Metropolitan common stock represent
cash dividends declared per share of Wells Fargo common stock multiplied by
an assumed exchange ratio of 12.88.
10
<PAGE>
/3/ The pro forma combined net income per share of Wells Fargo common stock
(based on weighted average number of common and common equivalent shares) is
the combined historical net income for Wells Fargo and Metropolitan divided
by the average pro forma common and common equivalent shares of the combined
entities. The pro forma equivalent net income per share of Metropolitan
common stock represents the pro forma combined net income per share
multiplied by an assumed exchange ratio of 12.88.
11
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected financial information is to aid you in your analysis of
the financial aspects of the merger. Except for the balance sheet data for
September 30, 1997, the information for Wells Fargo is derived from information
contained in its current report on Form 8-K filed with the SEC on January 19,
1999 and should be read with that information. The current report on Form 8-K is
incorporated by reference into this Proxy Statement-Prospectus. See "Where You
Can Find More Information." The balance sheet data for September 30, 1997 for
Wells Fargo is derived from the quarterly reports on Form 10-Q for the quarter
ended September 30, 1997 of Norwest Corporation and Old Wells Fargo. The
information for Metropolitan is derived from its historical financial statements
(and related notes) contained elsewhere in this Proxy Statement-Prospectus.
<TABLE>
<CAPTION>
Wells Fargo & Company and Subsidiaries
Nine Months Ended
September 30 Years Ended December 31
-------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(In millions, except per share data)
INCOME STATEMENT DATA
Interest income................. $ 10,458 10,159 13,602 12,841 9,802 8,159 7,707
Interest expense................ 3,769 3,691 4,954 4,619 3,879 2,745 2,547
-------- -------- -------- -------- -------- -------- --------
Net interest income............. 6,689 6,468 8,648 8,222 5,923 5,414 5,160
Provision for credit losses..... 921 799 1,140 500 312 365 708
Non-interest income............. 4,815 4,148 5,599 4,724 3,141 2,805 2,640
Non-interest expenses........... 7,042 6,675 8,914 8,679 5,551 5,217 5,183
-------- -------- -------- -------- -------- -------- --------
Income before income taxes...... 3,541 3,132 4,193 3,767 3,201 2,637 1,909
Income tax expense.............. 1,397 1,283 1,694 1,539 1,213 995 779
-------- -------- -------- -------- -------- -------- --------
Net income...................... $ 2,144 1,849 2,499 2,228 1,988 1,642 1,130
======== ======== ======== ======== ======== ======== ========
PER COMMON SHARE DATA
Net income:
Basic......................... $ 1.31 1.11 1.50 1.38 1.66 1.40 1.85
Diluted....................... 1.29 1.09 1.48 1.36 1.62 1.36 1.74
Dividends declared.............. 0.515 0.450 0.615 0.525 0.450 0.383 0.320
BALANCE SHEET DATA
At period end:
Total assets.................. $195,763 182,907 185,685 188,633 122,200 112,674 107,170
Long-term debt................ 18,486 17,516 17,335 18,142 16,726 12,039 11,072
Total stockholders' equity 20,558 19,743 19,778 20,051 9,239 7,629 7,947
</TABLE>
12
<PAGE>
METROPOLITAN BANCSHARES, INC.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------------------- ---------------------------------------------------------
1998(1) 1997(1) 1997 1996(2) 1995(3) 1994(3) 1993(3)
---- ---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total interest income $ 5,051 $ 4,179 $ 5,684 $ 4,647 $ 3,265 $ 2,583 $ 1,916
Total interest expense 1,460 1,322 1,800 1,398 760 515 377
------------------------ ---------------------------------------------------------
Net interest income 3,591 2,857 3,884 3,249 2,505 2,068 1,539
Provision for possible loan losses 60 160 180 140 103 125 164
------------------------ ---------------------------------------------------------
Net interest income after provision 3,531 2,697 3,704 3,109 2,402 1,943 1,375
for possible loan losses
------------------------ ---------------------------------------------------------
Total other income 673 599 855 877 900 876 668
Total other expenses (2,661) (2,644) (3,534) (2,673) (2,392) (2,007) (1,580)
------------------------ ---------------------------------------------------------
Income before taxes on income 1,543 652 1,025 1,313 910 812 463
Taxes on income 609 273 427 478 343 305 169
------------------------ ---------------------------------------------------------
Income before cumulative effect of
change in accounting principle 934 379 598 835 567 507 294
Cumulative effect of change in - - - - - - 112
accounting principle
Net income $ 934 $ 379 $ 598 $ 835 $ 567 $ 507 $ 406
======================== =========================================================
</TABLE>
<TABLE>
<CAPTION>
At September 30, December 31,
-----------------------------------------------------------------------------
1998(1) 1997(1) 1997 1996(2) 1995(3) 1994(3) 1993(3)
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets $76,986 $62,556 $64,980 $56,061 $37,927 $30,799 $23,333
Total liabilities 70,495 57,217 59,422 51,101 35,012 28,684 21,676
Total stockholders' equity 6,491 5,339 5,558 4,960 2,915 2,115 1,657
</TABLE>
13
<PAGE>
(1) The interim financial statements are unaudited and in management's opinion
contain all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation of financial position and results of
operations. Operating results for the nine months ended September 30, 1998
and 1997 are not necessarily indicative of the results that may be expected
for the full year.
(2) On January 10, 1996, Metropolitan acquired Wally Bancorp, Inc. ("Wally") the
former parent company of the Community Bank of Parker. Wally merged into
Metropolitan and Metropolitan assumed all of the assets of Wally consisting
primarily of the common stock of the Community Bank of Parker. The
transaction was accounted for using the purchase method of accounting. The
results of operations of the Community Bank of Parker for the nine day
period ended January 9, 1996 are immaterial and have been included in the
financial data for 1996.
(3) Financial data for 1995, 1994 and 1993 are that of the predecessor and were
derived from the financial statements of the Community Bank of Parker.
Because the financial data of the predecessor is presented on a cost basis
different from that of Metropolitan after the acquisition, the financial
data is not comparable to the 1997 and 1996 financial data (See note 2
above).
14
<PAGE>
SHARE PRICES AND DIVIDENDS FOR WELLS FARGO COMMON STOCK
The following table sets forth the high and low sales prices per share of the
Wells Fargo common stock, and the cash dividends paid on Wells Fargo common
stock, for the quarterly periods indicated. Wells Fargo common stock is listed
on the New York Stock Exchange and the Chicago Stock Exchange under the symbol
"WFC." Before November 3, 1998, the common stock was traded under the symbol
"NOB." The symbol was changed following the combination of Norwest Corporation
and old Wells Fargo on November 2, 1998.
The prices for Wells Fargo common stock are as reported on the New York Stock
Exchange. The cash dividend and stock price information for 1996 and the first
three quarters of 1997 has been adjusted to reflect the two-for-one split,
effected in the form of a 100% stock dividend, of Wells Fargo common stock on
October 10, 1997. The information for dividends paid before November 2, 1998
is based on dividends paid by Norwest Corporation.
There is no public market for Metropolitan common stock.
<TABLE>
<CAPTION>
WELLS FARGO COMMON STOCK
------------------------------------------------------
HIGH LOW Dividends
----------------- ------------------ ---------------
1996
<S> <C> <C> <C>
First Quarter 18.5625 15.2500 0.120
Second Quarter 18.7500 16.5000 0.135
Third Quarter 20.5000 16.0000 0.135
Fourth Quarter 23.4375 20.3750 0.135
1997
First Quarter 26.6250 21.3750 0.150
Second Quarter 29.6250 22.1875 0.150
Third Quarter 32.1563 28.1250 0.150
Fourth Quarter 39.5000 29.7500 0.165
1998
First Quarter 43.8750 34.7500 0.165
Second Quarter 43.7500 34.0000 0.165
Third Quarter 39.7500 27.5000 0.185
Fourth Quarter 40.8750 30.1875 0.185
1999
First Quarter
(through January __, 1999)
</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 "Certain Regulatory Considerations
Pertaining to Wells Fargo Dividend Restrictions," various federal and state
laws limit the ability of affiliate banks to pay dividends to Wells Fargo.
Because of limitations on the ability of Wells Fargo Bank, N.A. to pay
dividends, OCC approval will likely be required before Wells Fargo Bank, N.A.
may pay dividends to the parent company. See "Regulatory and Other
Considerations Pertaining to Wells Fargo Dividend Restrictions."
15
<PAGE>
GLOSSARY OF IMPORTANT TERMS
Following are the meanings of some important terms used in this Proxy
Statement-Prospectus. Each term should be considered in the context in which it
is used. Because the Reorganization Agreement was entered into before Norwest
Corporation changed its name to "Wells Fargo & Company," the terms "Adjusted
Wells Fargo Shares" and "Wells Fargo Measurement Price" are referred to in the
Reorganization Agreement as the "Norwest Adjusted Shares" and "Norwest
Measurement Price," respectively.
<TABLE>
<CAPTION>
<S> <C>
ADJUSTED WELLS FARGO SHARES....................... The number determined by dividing $24,500,000 by
the Wells Fargo Measurement Price.
BANK.............................................. Community Bank of Parker, a wholly-owned banking
subsidiary of Metropolitan.
BANK HOLDING COMPANY ACT.......................... Bank Holding Company Act of 1956.
DGCL.............................................. Delaware General Corporation Law.
EFFECTIVE DATE OF THE MERGER...................... The day on which Articles of Merger for the Merger
have been filed with and accepted by the Colorado
Secretary of State.
EFFECTIVE TIME OF THE MERGER...................... 11:59 p.m., Denver, Colorado time, on the
Effective Date of the Merger.
EXCHANGE ACT...................................... Securities Exchange Act of 1934.
EXCHANGE RATIO.................................... The number of shares of Wells Fargo common stock
that Wells Fargo will exchange in the Merger for
each share of Metropolitan common stock, as
determined in accordance with the formula in the
Reorganization Agreement.
FEDERAL RESERVE BOARD............................. Board of Governors of the Federal Reserve System.
FDI ACT........................................... Federal Deposit Insurance Act.
FDIC.............................................. Federal Deposit Insurance Corporation.
GRAF OPTION AGREEMENT............................. The Nonqualified Stock Option Agreement dated as
of January 9, 1996 between Metropolitan and Robert
W. Graf.
INTERSTATE BANKING ACT........................... Reigle-Neal Interstate Banking and Branching
Efficiency Act.
MERGER........................................... The statutory merger of a wholly-owned
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
subsidiary of Wells Fargo with Metropolitan
pursuant to the terms of the Reorganization
Agreement. The Merger is the means by which
Wells Fargo will acquire Metropolitan.
METROPOLITAN..................................... Metropolitan Bancshares, Inc.
METROPOLITAN COMMON STOCK........................ Metropolitan's common stock, par value $1.00 per
share.
OCC.............................................. Office of the Comptroller of the Currency.
OPTION AGREEMENTS................................ The Non-Qualified Stock Option Agreements dated as
of December 1, 1996 between Metropolitan and
certain officers of the Bank.
REORGANIZATION AGREEMENT......................... The Agreement and Plan of Reorganization dated as
of September 1, 1998 between Metropolitan
Bancshares, Inc. and Norwest Corporation, now
named Wells Fargo & Company.
SEC.............................................. Securities and Exchange Commission.
SECURITIES ACT................................... Securities Act of 1933.
WELLS FARGO...................................... Wells Fargo & Company, formerly named Norwest
Corporation, and its consolidated subsidiaries.
WELLS FARGO COMMON STOCK......................... Wells Fargo's common stock, par value $1-2/3 per
share.
WELLS FARGO MEASUREMENT PRICE.................... The average of the closing prices of a share of
Wells Fargo common stock as reported on the New
York Stock Exchange Composite Transaction
reporting system during the period of 20 trading
days ending on the day immediately before the
special meeting of Metropolitan shareholders.
</TABLE>
17
<PAGE>
SPECIAL MEETING OF SHAREHOLDERS
-------------------------------
Metropolitan is sending you this Proxy Statement-Prospectus to provide you
with information concerning the Merger and to solicit your proxy for use at the
special meeting of shareholders. At the special meeting, shareholders of
Metropolitan will be asked to approve the Merger.
DATE, TIME AND PLACE OF SPECIAL MEETING
The date, time and place of the special meeting are as follows:
FRIDAY, FEBRUARY 19, 1999
9:00 A.M., LOCAL TIME
Suite 777
3600 Yosemite Street
Denver, Colorado 80237
RECORD DATE
Metropolitan's board of directors has established February 5, 1999 as the
record date for the meeting. Only shareholders of record on that date are
entitled to attend and vote at the special meeting.
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
On the record date, there were 42,550 shares of Metropolitan common stock
outstanding and entitled to vote at the special meeting. The holders of
Metropolitan common stock are entitled to one vote per share. The presence, in
person or by proxy, at the special meeting of the holders of a majority of the
outstanding shares is necessary for a quorum. Approval of the Merger requires
the affirmative vote, in person or by proxy, of the holders of a majority of the
outstanding shares of Metropolitan common stock on the record date.
VOTING AGREEMENTS
Certain individuals and entities have entered into voting agreements with
Wells Fargo under which they have agreed to vote in favor of the Merger all
shares of Metropolitan directly or beneficially owned by them or that they have
the sole or shared power to vote or direct the vote at the record date for the
special meeting, as follows:
Name Shares
---- ------
Robert W. Graf 10,000
Steven M. Cohen 5,000
Murray Hayutin 2,500
Raskin & Friedlob P/S Plan 1,300
Friedlob Sanderson Raskin Paulson &
Tourtillott, LLC 450
Lester Gold 5,000
Norman J. Gray 500
Harold Guzofsky 250
======
TOTAL 25,000
PERCENTAGE OF OUTSTANDING 58.8%
18
<PAGE>
VOTING AND REVOCATION OF PROXIES
All shares of Metropolitan common stock represented at the special meeting by
a properly executed proxy will be voted in accordance with the instructions
indicated on the proxy, unless the proxy is revoked before a vote is taken. IF
YOU SIGN AND RETURN A PROXY WITHOUT VOTING INSTRUCTIONS, AND DO NOT REVOKE THE
PROXY, THE PROXY WILL BE VOTED FOR THE MERGER.
You may revoke your proxy at any time before it is voted by (a) filing either
an instrument revoking the proxy or a duly executed proxy bearing a later date
with the corporate secretary of Metropolitan before or at the special meeting or
(b) voting the shares subject to the proxy in person at the special meeting.
Attendance at the special meeting will not by itself result in your proxy being
revoked.
A proxy may indicate that all or a portion of the shares represented by the
proxy are not being voted with respect to a specific proposal. This could
occur, for example, when a broker is not permitted to vote shares held in the
name of a nominee on certain proposals in the absence of instructions from the
beneficial owner. Shares that are not voted with respect to a specific proposal
will be considered as not present for that proposal, even though the shares will
be considered present for purposes of determining a quorum and voting on other
proposals. Abstentions on a specific proposal will be considered as present but
will not be counted as voting in favor of the proposal.
The proposal to approve the Merger must be approved by the holders of a
majority of the outstanding shares of Metropolitan common stock. Because
approval of the Merger requires the affirmative vote of a specified percentage
of outstanding shares, not voting on the proposal will have the same effect as
voting against the proposal.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
Metropolitan may solicit proxies from Metropolitan 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. Metropolitan will bear its own expenses in connection with any
solicitation of proxies for the special meeting.
OTHER MATTERS
If an insufficient number of votes for the Merger is received before the
scheduled meeting date, Wells Fargo and Metropolitan 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.
Metropolitan'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
Metropolitan.
19
<PAGE>
THE MERGER
PURPOSE AND EFFECT OF THE MERGER
Wells Fargo is using the Merger to acquire Metropolitan. As a result of the
Merger, Metropolitan will become a wholly-owned subsidiary of Wells Fargo and
shareholders of Metropolitan will receive shares of Wells Fargo common stock for
their shares of Metropolitan common stock. Wells Fargo will own all of the
outstanding shares of Metropolitan common stock. Shareholders of Metropolitan
will become stockholders of Wells Fargo, and their rights will be governed by
Wells Fargo's restated certificate of incorporation and bylaws rather than
Metropolitan's articles of association and bylaws. See "Comparison of Rights of
Holders of Metropolitan Common Stock and Wells Fargo Common Stock."
BACKGROUND OF AND REASONS FOR THE MERGER
Background. On February 25, 1998, The Wallach Company, Inc. ("Wallach") met
with the board of directors of Metropolitan (the "Metropolitan Board") to
present its analysis of the valuation of Metropolitan and strategic options for
Metropolitan. Wallach was formally engaged on March 31, 1998 to approach a
selected group of prospective purchasers and to assist in structuring and
negotiating a possible business combination transaction.
Wallach contacted twelve potential merger candidates to determine their
interest in Metropolitan. Based on discussions with Wallach, seven parties
elected to receive additional information about Metropolitan. Three parties met
with management and three parties submitted indications of interest. An
analysis of the proposals was presented to the Metropolitan Board on July 12,
1998. The Metropolitan Board engaged in a comprehensive discussion and analysis
of the following factors in determining with which merger candidate to proceed:
(a) the Metropolitan Board's obligation to maximize the benefit to
Metropolitan's shareholders; (b) the market risk and opportunity associated with
a stock-for-stock transaction; (c) the wherewithal of the parties to complete
the transactions; (d) the tax consequences of the transaction to Metropolitan's
shareholders; (e) the proposed terms of a definitive agreement; and (f) the
effect of the proposed transaction on employees, customers and the community.
After completing its analysis, the Metropolitan Board authorized moving forward
with negotiations with Wells Fargo.
After negotiating the terms of a definitive agreement, the Metropolitan Board
met again on August 24, 1998 to review the proposed agreement and plan of
reorganization and consider the transaction with Wells Fargo. The Metropolitan
Board determined that the Wells Fargo offer would produce the maximum benefit to
Metropolitan's shareholders based primarily upon it being a stock exchange in
which income taxes could be deferred, it being the highest value in nominal
terms, the good prospects for long-term growth in Wells Fargo's stock, and Wells
Fargo's history of completing acquisitions. As a result, the Metropolitan Board
authorized the execution of the Reorganization Agreement on September 1, 1998.
Metropolitan Board's Reasons for the Merger. The Board believes that the
Merger is fair to, and in the best interests of, Metropolitan and its
shareholders. In reaching its determination that the Merger is fair to, and in
the best interests of, Metropolitan and its shareholders, the Board considered a
number of factors including, without limitation, the following:
. the current condition and growth prospects of Metropolitan and the Bank,
their historical results of operations and their prospective results of
operations if Metropolitan were to remain independent;
. the economic, business and competitive climate for banking and financial
institutions in Colorado, with special consideration given to recent
transactions that have increased the competitive environment in the
financial services and banking industry;
20
<PAGE>
. the monetary value of the stock offered to Metropolitan shareholders by
Wells Fargo (i) in absolute terms, (ii) as compared to the value of other
offers received by Metropolitan by qualified and informed potential
acquirers, whose offers were each less than Wells Fargo's offer, and (iii)
as compared to recent mergers and acquisitions involving other banking and
financial institutions in Colorado;
. the potential market value, liquidity and dividend yield of Metropolitan
common stock if Metropolitan were to remain independent;
. the historically greater liquidity and dividend yield represented by the
Wells Fargo common stock to be received in the Merger;
. the greater financial and management resources and customer product
offerings of Wells Fargo which could increase competitiveness of the
combined institution in Metropolitan's market area and its ability to serve
the depositors, customers and communities currently served by Metropolitan;
. the historical results of operations and financial condition of Wells Fargo
and the future prospects for Wells Fargo, including anticipated benefits of
the Merger;
. the future growth prospects of Wells Fargo following the Merger; and
. the fact that the Merger will generally be a tax-free reorganization to
Metropolitan shareholders for federal income tax purposes with respect to
shareholders of Metropolitan who receive shares of Wells Fargo common stock
in the Merger (but not with respect to any cash received pursuant to the
Merger).
Accordingly, the Board unanimously approved the Reorganization Agreement and
recommends that Metropolitan shareholders vote FOR the approval and adoption of
the Reorganization Agreement.
THE METROPOLITAN BOARD HAS UNANIMOUSLY APPROVED THE REORGANIZATION AGREEMENT
AND RECOMMENDS THAT METROPOLITAN'S SHAREHOLDERS APPROVE AND ADOPT THE
REORGANIZATION AGREEMENT.
ADDITIONAL INTERESTS OF METROPOLITAN'S MANAGEMENT IN THE MERGER
Employment and Non-Compete Agreement. Robert W. Graf, Chairman, President,
Treasurer and Chief Executive Officer of Metropolitan, has entered into an
employment and non-competition agreement with Wells Fargo. Under this
agreement, the Bank will employ Mr. Graf as a regular, full-time employee for a
term of one year beginning on the Effective Date of the Merger. The Bank will
pay Mr. Graf base compensation at the rate of $90,000 per annum. Mr. Graf will
also be eligible to participate in Wells Fargo's employee benefit plans
available to regular, full-time employees of Wells Fargo in similar positions.
In consideration for his base compensation and other benefits he will receive
during the term of his employment, and in exchange for a lump sum payment of
$90,000, Mr. Graf has agreed not to engage in the business of banking, directly
or indirectly, in the Colorado counties of Douglas, Arapahoe, Denver and Elbert.
The lump sum is in addition to Mr. Graf's base compensation and is payable on
the first anniversary of the end of his employment with the Bank under the
agreement.
Indemnification and Insurance. Wells Fargo has agreed to ensure that all
rights to indemnification and all limitations of liability existing in favor of
the present and former directors and officers of
21
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Metropolitan with respect to all liabilities arising out of actions or omissions
occurring prior to the Effective Date of the Merger shall survive the Merger and
continue in full force and effect. Wells Fargo has agreed for a period of three
years after the Effective Date of the Merger to use its best efforts to maintain
in effect Metropolitan's current directors' and officers' liability insurance
policies with respect to claims arising from facts or events which occurred
before the Effective Date of the Merger. Wells Fargo may substitute therefor
policies of at least the same coverage and amount and containing terms and
conditions which are substantially no less advantageous.
DISSENTERS' RIGHTS
Shareholders of Metropolitan are entitled to assert dissenters' rights under
Article 113 of the Colorado Business Corporation Act in connection with the
Merger. A copy of Article 113 is included as Appendix B. The following
discussion of dissenters' rights is qualified in its entirety by reference to
the provisions of Article 113.
Notice of Intent to Demand Payment. Any shareholder who wishes to assert
dissenters' rights must do both of the following:
1. Cause Metropolitan to receive, before the vote on the Merger is taken at
the special meeting, written notice of the shareholder's intention to
demand payment for the shareholder's shares if the Merger is effectuated;
and
2. Not vote the shares in favor of the Merger.
Any shareholder who does not satisfy the requirements of Items 1 and 2 above
is not entitled to demand payment for the shareholder's shares under Article
113.
Demanding Payment for Shares. If the Merger is approved, Metropolitan will
give a written dissenters' notice to all shareholders who have satisfied the
requirements of Items 1 and 2 above and are entitled to demand payment for their
shares. The notice will be given no later than 10 days after the Effective Date
of the Merger and will describe the procedures dissenting shareholders must
follow to demand payment for their shares. The notice will also inform
dissenting shareholders of any restrictions on the transfer of their shares
after the payment demand is received by Metropolitan. Subject to very limited
exceptions, the demand for payment and deposit of share certificates are
irrevocable.
Shareholders who demand payment for their shares retain all rights of a
shareholder, except the right to transfer the shares, until the Effective Date
of the Merger. After the Effective Date of the Merger, these shareholders have
only the right to receive payment for their shares.
Shareholders who do not demand payment and do not deposit their share
certificates in the manner required, and by the date or dates set forth in the
dissenters' notice given by Metropolitan, are not entitled to payment for their
shares under Article 113.
Payment for Shares. Subject to certain limited exceptions, upon the later of
the Effective Date of the Merger or the receipt of a payment demand,
Metropolitan will pay to the dissenting shareholder the amount Metropolitan
estimates to be the fair value of the dissenting shareholder's shares, plus
accrued interest. The payment will be accompanied by, among other things,
financial statements of Metropolitan, a statement of Metropolitan's estimate of
the fair value of the shares, and an explanation of how interest was calculated.
Procedure if Dissatisfied with Payment Amount. If a dissenting shareholder
believes that the amount paid or offered by Metropolitan is less than the fair
value of the shares or that interest due was incorrectly calculated, the
shareholder may give written notice to Metropolitan of the shareholder's
estimate of the
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fair value of the shares and the amount of interest due and may demand payment
of such estimate, less any payment made by Metropolitan. A dissenting
shareholder waives this right unless the shareholder causes Metropolitan to
receive the notice within 30 days after Metropolitan pays or offers to pay the
shareholder for the shares.
Court Action to Resolve Payment Amount. If any dissenting shareholder demands
payment as provided in the immediately preceding paragraph, Metropolitan may,
within 60 days after receiving the payment demand, commence a proceeding and
petition a court to determine the fair value of the shares and accrued interest.
If Metropolitan does not commence the proceeding within this 60-day period, it
must pay to each dissenting shareholder whose demand remains unresolved the
amount demanded by the shareholder.
Each dissenting shareholder who is made a party to the court action is
entitled to the amount, if any, by which the court finds the fair value of the
dissenting shareholder's shares, plus interest, exceeds the amount paid by
Metropolitan.
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 Metropolitan common stock a form of letter of transmittal, together
with instructions for the exchange of the holder's Metropolitan stock
certificates for a certificate representing Wells Fargo common stock.
METROPOLITAN 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 Metropolitan common stock until after the certificates have been
surrendered for exchange.
When the exchange agent receives a surrendered certificate or certificates
from a shareholder, together with a properly completed letter of transmittal, it
will issue and mail to the shareholder a certificate representing the number of
shares of Wells Fargo common stock to which the shareholder is entitled, plus
the amount in cash of any remaining fractional share and any cash dividends that
are payable with respect to the shares of 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.
The exchange agent will issue stock certificates for Wells Fargo common stock
in exchange for lost, stolen or destroyed certificates for Metropolitan 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
Metropolitan. If, after completion of the Merger, certificates for Metropolitan
common stock are presented for transfer to the exchange agent, they will be
canceled and exchanged for certificates representing Wells Fargo common stock.
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None of Wells Fargo, Metropolitan, the exchange agent or any other person will
be liable to any former holder of Metropolitan common stock for any amount
delivered in good faith to a public official pursuant to applicable abandoned
property, escheat or similar laws.
REGULATORY APPROVALS
The Merger is subject to the prior approval of the Federal Reserve Board. The
approval of the Federal Reserve Board is required because Wells Fargo is a bank
holding company registered under the Bank Holding Company Act. Wells Fargo has
filed an application with the Federal Reserve Board requesting approval of the
Merger. The Federal Reserve Board approved the application effective as of
November 25, 1998.
Because the Merger will result in the acquisition by Wells Fargo of the Bank,
Wells Fargo must give notice of the Merger to the Colorado Division 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 Metropolitan
shareholders is fair. Regulatory approval does not constitute an endorsement or
recommendation of the Merger.
Wells Fargo and Metropolitan 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 Metropolitan
intend to seek any other approval and to take any other action that may be
required to effect the Merger. There can be no assurance that any required
approval or action can be obtained or taken prior to the special meeting.
The Merger cannot be completed unless all necessary regulatory approvals are
granted. In addition, 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 Reorganization AgreementConditions to the
Completion of The Merger" and "Termination of the Reorganization Agreement."
EFFECT ON METROPOLITAN'S EMPLOYEE BENEFIT PLANS
The Reorganization Agreement provides that, subject to any eligibility
requirements applicable to such plans, employees of Metropolitan will be
entitled to participate in those Wells Fargo employee benefit and welfare plans
specified in the Reorganization Agreement. Eligible employees of Metropolitan
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.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO METROPOLITAN
SHAREHOLDERS
The following is a summary of the anticipated material U.S. federal income tax
consequences of the Merger to Metropolitan shareholders who are citizens or
residents of the United States and who, on the date of disposition of their
shares of Metropolitan common stock, hold such shares as capital assets. This
summary 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 taxpayers
subject to alternative minimum tax. The summary is based on the U.S. federal
income tax laws as currently in effect and as currently interpreted. It does
not cover issues of state, local or foreign taxation. Nor does it address all
aspects of U.S. federal income taxation that may be important to particular
shareholders in light of their personal circumstances
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or to shareholders subject to special rules under U.S. federal income tax laws.
Future legislation, regulations, administrative rulings and court decisions may
alter the tax consequences summarized below.
The anticipated U.S. federal income tax consequences to Metropolitan
shareholders are as follows:
. A shareholder who receives shares of Wells Fargo common stock in
exchange for shares of Metropolitan common stock will not recognize
any gain or loss on the receipt of the shares of Wells Fargo common
stock, except for cash received in lieu of a fractional share. The
shareholder's gain or loss on the receipt of cash in lieu of a
fractional share will equal the difference between the cash received
and the basis of the fractional share exchanged.
. A shareholder's tax basis in the shares of Wells Fargo common stock
received will be the same as the shareholder's tax basis in the shares
of Metropolitan common stock exchanged in the Merger, less any cash
received in lieu of fractional shares.
. The holding period of the shares of Wells Fargo common stock received
by a shareholder will include the holding period of the shareholder's
shares of Metropolitan common stock exchanged in the Merger, but only
if the shares of Metropolitan common stock were held as a capital
asset at the time the Merger is completed.
Metropolitan is not required to complete the Merger unless it receives an
opinion of its counsel that these will be the U.S. federal income tax
consequences of the Merger. The opinion may make certain assumptions and may
rely on representations of the parties to the Merger as to factual matters. It
will represent counsel's judgment as to the tax status of the Merger under the
Code and will not be binding on the IRS. There is no assurance that the IRS
will not take a contrary position regarding the tax consequences of the Merger.
Nor is there any assurance that the IRS would not prevail in the event the tax
consequences of the Merger were litigated.
THE U.S. FEDERAL INCOME TAX SUMMARY SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY OR MAY NOT BE APPLICABLE DEPENDING UPON A SHAREHOLDER'S
PARTICULAR SITUATION. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAW.
RESALE OF WELLS FARGO COMMON STOCK
The Wells Fargo common stock issued in the Merger will be freely transferable
under the Securities Act, except for shares issued to Metropolitan shareholders
who are considered to be "affiliates" of Metropolitan 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 Metropolitan 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.
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Metropolitan 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
Metropolitan 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 Metropolitan.
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.
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
Metropolitan. 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
Metropolitan'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."
FINDER'S FEE
Wallach provided services in connection with preparing a plan for obtaining
acquisition offers for Metropolitan, soliciting and negotiating such acquisition
offers and for certain other related advisory services. Metropolitan has agreed
to pay Wallach certain fees. Wallach will receive a transaction fee at the
Effective Date of the Merger equal to 2.5% of the first $15.0 million and 4.0%
of the amount in excess of $15.0 million received by Metropolitan's shareholders
pursuant to the Reorganization Agreement. From March 1998 to the Effective Date
of the Merger, Wallach has or will receive a monthly retainer of $7,500, which
amount in the aggregate will be credited against the transaction fee due at the
Effective Date of the Merger. Metropolitan has agreed to indemnify Wallach
against certain liabilities, including liabilities under state and federal
securities laws.
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THE REORGANIZATION AGREEMENT
The following is a summary of certain provisions of the Reorganization
Agreement, a copy of which is attached to this Proxy Statement-Prospectus as
Appendix A. The Reorganization Agreement is incorporated by reference into this
Proxy Statement-Prospectus.
This summary is qualified in its entirety by reference to the full text of the
Reorganization Agreement. Metropolitan shareholders are encouraged to read the
Reorganization Agreement carefully and in its entirety. Parenthetical
references are to the relevant paragraph or paragraphs of the Reorganization
Agreement.
BASIC PLAN OF REORGANIZATION
Structure. Wells Fargo will acquire Metropolitan pursuant to a merger of
Metropolitan with a newly-formed, wholly-owned subsidiary of Wells Fargo.
Metropolitan will be the surviving company in the Merger. Wells Fargo will
exchange shares of Wells Fargo common stock for all of the outstanding shares of
Metropolitan common stock, so that after the Merger Metropolitan will be a
wholly-owned subsidiary of Wells Fargo. (paragraph 1(a))
Consideration.
Wells Fargo common stock. As part of the Merger, each share of
Metropolitan common stock outstanding immediately before the Merger will be
converted into and exchanged for the number of shares of Wells Fargo common
stock determined by dividing the Adjusted Wells Fargo Shares by the number of
shares of Metropolitan common stock then outstanding. The number of Adjusted
Wells Fargo Shares will equal $24,500,000 divided by the Wells Fargo Measurement
Price. The Wells Fargo Measurement Price will be the average of the closing
prices of a share of Wells Fargo common stock as reported on the New York Stock
Exchange Composite Transaction reporting system during the period of 20
consecutive trading days ending on the day immediately before the special
meeting of Metropolitan shareholders. (paragraph 1(a))
Effect of Exercise of Options on the Exchange Ratio. Robert W. Graf,
pursuant to the Graf Option Agreement, and four other officers of the Bank,
pursuant to the Option Agreements, received options to purchase a total of 6,300
shares of Metropolitan common stock. Though fully vested, some of these options
may not have been exercised as of the date of this Proxy Statement-Prospectus.
The options terminate as of the Effective Time of the Merger if they have not
been exercised before then.
If one or more of the options have not been exercised as of the Effective
Time of the Merger, the Adjusted Wells Fargo Shares will be divided by a smaller
number, resulting in Metropolitan shareholders receiving more shares of Wells
Fargo common stock than they otherwise would have received if the options had
been exercised. For example, a Wells Fargo Measurement Price of $35 would result
in 700,000 Adjusted Wells Fargo Shares. If there are 47,550 shares of
Metropolitan common stock outstanding immediately before the Effective Time of
the Merger, the Exchange Ratio would be approximately 14.72 shares (700,000
divided by 47,550) of Wells Fargo common stock for each share of Metropolitan
common stock. If because of unexercised options there are only 42,550 shares of
Metropolitan common stock outstanding immediately before the Effective Time of
the Merger, the Exchange Ratio would be 16.45 shares (700,000 divided by 42,550)
of Wells Fargo common stock for each share of Metropolitan common stock.
The option holders have advised Metropolitan that they intend to exercise all
of their options. The exercise of all outstanding options will result in 47,550
shares of Metropolitan common stock outstanding immediately before the Effective
Time of the Merger.
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Norwest Bank Minnesota, National Association, acting as exchange agent for
Wells Fargo, will send each Metropolitan shareholder a form of letter of
transmittal, which will, among other things, specify the Exchange Ratio in
accordance with the Reorganization Agreement. See "The Merger--Exchange of
Certificates."
THE PRICE OF WELLS FARGO COMMON STOCK ON THE EFFECTIVE DATE OF THE MERGER
MAY BE HIGHER OR LOWER THAN THE WELLS FARGO MEASUREMENT PRICE. 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 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 Wells Fargo Measurement Price. (paragraph 1(c))
Completion of the Merger. Wells Fargo and Metropolitan expect the Merger to
be completed promptly after approval of the Merger by Metropolitan shareholders
and the satisfaction (or waiver) of the other conditions to completion contained
in the Reorganization Agreement, including the receipt of all required
regulatory approvals. (paragraph 1(d))
REPRESENTATIONS AND WARRANTIES
The Reorganization Agreement contains various representations and warranties
by Wells Fargo and Metropolitan as to, among other things, (a) their
organization and legal authority to engage in their respective businesses, (b)
their capitalization, (c) their corporate authority to enter into the
Reorganization Agreement and complete the Merger, (d) the absence of certain
material changes, (e) compliance with laws, (f) material contracts, (g) absence
of certain litigation, and (h) undisclosed liabilities. (paragraphs 2 and 3)
Because the representations and warranties do not survive completion of the
Merger, they function primarily as a due diligence device and a closing
condition (that is, they must continue to be true in all material respects until
the Merger is completed).
CERTAIN COVENANTS
The Reorganization Agreement has a number of covenants and agreements that
govern the actions of Metropolitan and Wells Fargo pending completion of the
Merger. Some of the covenants and agreements are summarized below.
Conduct of Business.
Metropolitan. Under the Reorganization Agreement, Metropolitan and the Bank
is each 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, and extend credit in accordance with existing lending policies.
Subject to certain exceptions, Metropolitan and the Bank is each required to
obtain the consent of Wells Fargo before it makes (a) any new loan if it would
exceed $100,000 or (b) modifies, restructures or renews any existing loan if the
amount of the resulting loan, when combined with all other loans to the
customer, would exceed $150,000. The Reorganization Agreement places
restrictions on the ability of Metropolitan to take certain actions without
Wells Fargo's consent, including (u) incurring indebtedness, (v) granting rights
to acquire shares of its capital stock, (w) issuing shares of its capital stock
except in connection with the Option Agreements and the Graf Stock Option
Agreement, (x) declaring dividends or purchasing its capital stock, (y) selling
its assets and (z) raising the compensation of its officers and directors.
(paragraphs 4(a) and (b)) Some of these restrictions apply only if the amount
in question exceeds a threshold dollar value.
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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. Wells Fargo is also required to loan to
Metropolitan an amount that is sufficient to pay in full all of Metropolitan's
indebtedness to US Bank.
Competing Transactions. Neither Metropolitan nor the Bank nor any director,
officer, representative or agent of either 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
Metropolitan (b) make a tender or exchange offer for any shares of its common
stock or other equity security of Metropolitan, (c) purchase, lease or otherwise
acquire the assets of Metropolitan except in the ordinary course of business or
(d) merge, consolidate or otherwise combine with Metropolitan. Metropolitan 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))
Satisfaction of US Bank Loan. Immediately before the Effective Date of the
Merger, Metropolitan is required to apply funds loaned to it by Wells Fargo to
pay in full the indebtedness of Metropolitan to US Bank.
Other Covenants. The Reorganization Agreement contains various other
covenants, including covenants relating to the preparation and distribution of
this Proxy Statement-Prospectus, access to information, and the listing on the
New York Stock Exchange and Chicago Stock Exchange of the shares of Wells Fargo
common stock to be issued in the Merger. In addition, Metropolitan has agreed
to (a) establish such additional accruals and reserves as are necessary to
conform its accounting and credit loss reserve practices and methods to those of
Wells Fargo and Wells Fargo's plans with respect to the conduct of
Metropolitan'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 Reorganization Agreement
from each executive officer, director or shareholder of Metropolitan who may
reasonably be deemed an "affiliate" of Metropolitan within the meaning of each
term 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."
CONDITIONS TO THE COMPLETION OF THE MERGER
Under the Reorganization Agreement, various conditions are required to be met
before the parties are obligated to complete the Merger. These conditions are
customary and include such items as the receipt of shareholder, regulatory and
listing approval, and the receipt by Metropolitan of a favorable tax opinion.
(paragraphs 6 and 7) See "The Merger--Material U.S. Federal Income Tax
Consequences of the Merger to Metropolitan Shareholders."
The obligations of the parties are also subject to the continued accuracy of
the other party's representations and warranties, the performance by the other
party of its obligations under the Reorganization Agreement, and, subject to
certain exceptions, the absence of any changes that have had or might be
reasonably expected to have an adverse effect on Metropolitan. Some of the
conditions to the Merger are subject to exceptions and/or a "materiality"
standard. Certain conditions to the Merger may be waived by the party seeking
to assert the condition. (paragraphs 6 and 7)
TERMINATION OF THE REORGANIZATION AGREEMENT
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Termination by Mutual Consent. Wells Fargo and Metropolitan can agree to
terminate the Reorganization Agreement at any time before completion of the
Merger. (paragraph 9(a)(i))
Termination by Either Wells Fargo or Metropolitan. Either Wells Fargo or
Metropolitan can terminate the Reorganization Agreement if any of the following
occurs:
. The Merger has not been completed by March 31, 1999 (provided this right to
terminate will not be available to a party whose failure to perform in all
material respects any obligation under the Reorganization Agreement
resulted in the failure of the Merger to occur on or before that date).
(paragraph 9(a)(ii))
. A court or governmental authority of competent jurisdiction has issued a
final order restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Reorganization Agreement. (paragraph
9(a)(iii))
EFFECT OF TERMINATION
Generally, if either party terminates the Reorganization Agreement, it becomes
void without any liability to either party other than for willful and material
breaches occurring before termination; however, the provisions of the
Reorganization Agreement governing confidential information and expenses
incurred in connection with the Merger continue in effect after termination of
the Reorganization Agreement. (paragraph 9(b))
WAIVER AND AMENDMENT
Either Wells Fargo or Metropolitan may waive any inaccuracies in the
representations and warranties of the other party or compliance by the other
party with any of the covenants or conditions contained in the Reorganization
Agreement. (paragraph 16)
Wells Fargo and Metropolitan can amend the Reorganization Agreement at any
time before the Merger is completed; however, the Reorganization Agreement
prohibits them from amending the Reorganization Agreement after Metropolitan
shareholders approve the Merger if the amendment would change in a manner
adverse to Metropolitan shareholders the consideration to be received by
Metropolitan shareholders in the Merger. (paragraph 17)
EXPENSES
Wells Fargo and Metropolitan will each pay their own expenses in connection
with the Merger, including fees and expenses of their respective independent
auditors and counsel. (paragraph 10)
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COMPARISON OF RIGHTS OF HOLDERS OF METROPOLITAN
COMMON STOCK AND WELLS FARGO COMMON STOCK
The rights of Metropolitan shareholders are currently governed by the Colorado
Business Corporation Act and Metropolitan's articles of incorporation and
bylaws. Wells Fargo is incorporated under the laws the state of Delaware. The
rights of Wells Fargo stockholders are governed by the Delaware General
Corporation Law (DGCL) and Wells Fargo's restated certificate of incorporation
and bylaws. Upon completion of the Merger, Metropolitan shareholders will
become stockholders of Wells Fargo. As a result, their rights will be governed
by the DGCL and Wells Fargo's governing documents.
The following discussion compares certain rights of the holders of
Metropolitan common stock to the rights of the holders of Wells Fargo common
stock. You can find additional information concerning the rights of Wells Fargo
stockholders in Wells Fargo's restated certificate of incorporation and bylaws,
in Wells Fargo's current report on Form 8-K filed October 13, 1997, containing a
description of Wells Fargo common stock, and in Wells Fargo's registration
statement on Form 8-A dated October 21, 1998, containing a description of
preferred stock purchase rights attached to shares of common stock.
To the extent that information in the current report on Form 8-K filed October
13, 1997 is inconsistent with the information below, you should rely on the
information below, as it is as of a more recent date. Also, the rights plan
described in the current report on Form 8-K filed October 13, 1997 expired
November 23, 1998. A new rights plan was adopted in its place. The new rights
plan is described in the registration statement on Form 8-A dated October 21,
1997.
Wells Fargo's restated certificate of incorporation and its bylaws, as well as
its current report on Form 8-K filed October 13, 1997 and its Form 8-A
registration statement dated October 21, 1998, are incorporated into this Proxy
Statement-Prospectus by reference. See "Where You Can Find More Information."
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 December 31,
1998, there were 1,644,057,803 shares of Wells Fargo common stock outstanding,
6,535,362 shares of Wells Fargo preferred stock outstanding, and no shares of
Wells Fargo preference stock outstanding.
Metropolitan. Metropolitan's articles of incorporation currently authorize
the issuance of 1,000,000 shares of Metropolitan common stock, par value $1.00.
At February 5, 1999, there were 42,550 shares of Metropolitan common stock
outstanding.
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.
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Metropolitan. Metropolitan has no comparable share purchase rights plan.
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. The number of directors
of Wells Fargo is currently fixed at 24. 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.
Metropolitan. The bylaws of Metropolitan provide that the number of directors
of Metropolitan will be fixed by the resolution of the board of directors. The
current number of directors is fixed at seven. All directors are elected
annually and serve until the next annual meeting and until the director's
successor is elected and qualified. Cumulative voting is not permitted for the
election of directors. Directors of Metropolitan may be removed, with or
without cause, by the shareholders of Metropolitan at a meeting called for such
purpose. Vacancies on Metropolitan's board of directors may be filled by a
majority vote of the remaining directors or by the shareholders of Metropolitan.
AMENDMENT OF CHARTER DOCUMENT AND BYLAWS
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.
Metropolitan. Under the Colorado Business Corporation Act, amendment of
Metropolitan's articles of incorporation may be recommended by the board of
directors or by shareholders representing at least ten percent of all shares
entitled to vote on an amendment to the articles of incorporation. The
amendment must be approved by a majority of the shares present at a shareholders
meeting at which a quorum is present in person or by proxy.
APPROVAL OF MERGERS AND ASSET 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 mergers 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.
32
<PAGE>
Metropolitan. The Colorado Business Corporation Act provides that the
affirmative vote of a majority of the shares of Metropolitan common stock
entitled to vote thereon is required to approve a merger or share exchange
involving Metropolitan or the sale of all or substantially all of the assets of
Metropolitan. The articles of incorporation or bylaws may require a greater
vote. The Metropolitan articles of incorporation and bylaws do not require a
greater vote.
PREEMPTIVE RIGHTS
Wells Fargo. Neither Wells Fargo's restated certificate of incorporation nor
its bylaws grants preemptive rights to its stockholders.
Metropolitan. Metropolitan's articles of incorporation grants preemptive
rights to its 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.
Metropolitan. The Colorado Business Corporation Act provides shareholders
with dissenters' rights in connection with consolidations and mergers. For a
specific discussion of the appraisal rights available to shareholders of
Metropolitan, see "The MergerDissenters' Rights."
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.
Metropolitan. The Colorado Business Corporation Act and the bylaws of
Metropolitan provide that a special shareholders meeting may be called by the
board of directors, the president or pursuant to the written demand of one or
more shareholders representing not less than one-tenth of all of the votes
entitled to be cast on any issue at the 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.
33
<PAGE>
Metropolitan. The Colorado Business Corporation Act provides that directors
shall discharge their duties in good faith, with the care an ordinarily prudent
person in a like position would exercise under similar circumstances, and in a
manner that the director reasonably believes to be in the best interests of the
corporation.
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.
Metropolitan. As permitted by Section 7-107-104 of the Colorado Business
Corporation Act and Metropolitan's articles of incorporation, any action
required or permitted to be taken at a shareholders meeting may be taken without
a meeting pursuant to the written consent of all of the shareholders entitled to
vote thereon consent to such action n writing.
LIMITATION OF DIRECTOR 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.
Metropolitan. Metropolitan's articles of incorporation provides that a
director shall not be personally liable to Metropolitan or its shareholders for
monetary damages for breach of fiduciary duty as a director, except for (i)
breach of the director's duty of loyalty to Metropolitan or to its shareholders;
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) payment of a dividend in violation of
Section 7-108-403 of the Colorado Business Corporation Act and (iv) any
transaction from which the director directly or indirectly derived any improper
personal benefit.
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 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
34
<PAGE>
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.
Metropolitan. Metropolitan's articles of incorporation provide that
Metropolitan must indemnify, to the fullest extent permitted by applicable law,
any person, against liability and expense (including attorney's fees) incurred
by reason of the fact that he is or was a director or officer of Metropolitan or
was serving at the request of Metropolitan as a director, officer, trustee,
employee, fiduciary, or agent of, or in any similar managerial or fiduciary
position of another entity. Metropolitan's bylaws provide that Metropolitan may
maintain insurance, at its expense, on behalf of a person who is or was a
director, officer, employee, fiduciary, or agent of Metropolitan, or who was
serving in such capacity at the request of Metropolitan of another entity,
against liability asserted against or incurred by such person in that capacity
or arising from his or her status as a director, officer, employee, fiduciary or
agent, whether or not Metropolitan would have power to indemnify the person
under the Colorado Business Corporation Act. Metropolitan may not indemnify a
director or officer who was adjudged liable to Metropolitan in a proceeding by
or in the right of Metropolitan or who derived an improper personal benefit
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 "Certain
Regulatory and Other Considerations Pertaining to Wells Fargo."
Metropolitan. The Colorado Business Corporation Act permits the board of
directors of a corporation to authorize the payment of dividends to its
shareholders provided, however, that no dividend may be paid if (i) after giving
effect to the payment of such dividend by the corporation, it would not be able
to pay its debts as they become due in the usual course of business, or (ii) if
such corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
receiving the distribution. Metropolitan is also subject to Federal Reserve
Board policies regarding payment of dividends, which generally limit dividends
to operating earnings. Metropolitan has not paid dividends since 1995.
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 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.
35
<PAGE>
Metropolitan. Metropolitan's articles of incorporation and bylaws do not
contain any specific provisions regarding nomination of directors or shareholder
proposals for items of business at a special shareholders' meeting.
Metropolitan's bylaws provide that meetings of shareholders may be called by the
board of directors, the president or pursuant to the written demand of one or
more shareholders representing not less than one-tenth of all of the votes
entitled to be cast on any issue at the meeting.
36
<PAGE>
INFORMATION ABOUT METROPOLITAN
GENERAL
Metropolitan is a bank holding company, registered under the Bank Holding
Company Act, whose sole activity is the ownership and operation of the Bank.
Metropolitan was formed in 1995 for the sole purpose of acquiring the stock of
Wally Bancorp, Inc., the past holding company of the Bank.
THE BANK
The Bank is a Colorado chartered bank that is a member of the Federal Reserve
System. The Bank was founded in 1982 as an industrial savings bank. The Bank
was subsequently converted to a state-chartered bank. In 1993, the Bank was
acquired by Wally Bancorp, Inc., a bank holding company incorporated in the
state of Colorado to acquire the common stock of the Bank.
In 1996, Wally Bancorp was acquired and merged into Metropolitan Bancshares,
Inc. After the change in ownership, the Bank was expanded from its original
locations in Parker and Franktown. Since 1996, the following branches have been
opened: i) the North Parker Drive-up Branch in July 1996, ii) the Elizabeth
Branch in April 1997, and iii) the Southeast Denver branch in July 1997. The
Bank is the sole subsidiary of Metropolitan. The Bank currently operates
through its main office and 4 branches in the Denver, Douglas and Elbert
counties.
The Bank conducts a general commercial and consumer banking business, which
includes the acceptance of deposits from consumers and the origination of
commercial and consumer real estate, installment and other loans. Deposit
services include certificates of deposit, individual retirement accounts and
other time deposits, checking and other demand deposit accounts, interest-
bearing accounts, savings accounts and money market accounts. Loans consist of
loans to individuals, commercial loans, commercial real estate loans,
residential mortgages and construction loans.
The Bank's operating policy is to maintain a full complement of services to
its commercial and consumer customers. The Bank's management strives for
operating efficiency and profitability and views banking services and the
quality with which they are provided to be a key in competing effectively in the
financial services industry.
COMPETITION
The banking industry in the Denver Metropolitan area is highly competitive.
Throughout the late 1980s and 1990s, major regional publicly-traded bank holding
companies such as Wells Fargo (formerly known as Norwest Corporation), U.S.
Bancorp, Bank One Corporation, KeyCorp, Commercial Federal, Community First
Bankshares and Zions Bancorporation established a presence in the Colorado
banking market by acquiring financial institutions in the Denver Metropolitan
area and throughout Colorado. Currently, the banking environment in the Denver
Metropolitan area can be characterized by three different groups of banks: (i)
regional bank holding companies headquartered outside of Colorado, (ii) one
large financial institution with local headquarters (First Bank Holding Company
of Colorado), and (iii) local banks.
The Bank has competition within its market from both the locally-owned
financial institutions and the major regional banks. Additionally, there is
competition from savings and loan companies, credit unions, investment companies
and other types of financial services companies. Many of the Bank's competitors
are larger and substantially more capitalized than the Bank and therefore have
more resources than the Bank for lending and to pay for mass advertising,
technology and physical facilities. The primary factors affecting competition
for deposits are interest rates, cost of services, the quality and range of
financial products offered and the convenience of locations and office hours.
The primary factors in competing for
37
<PAGE>
loans are interest rates, loan origination fees and the quality and range of
lending products offered. Other factors which affect competition include the
general availability and reliability of lendable funds/credit, general and local
economic conditions and the quality of service and loan approval turn-around
provided to the customers.
The Bank believes that it has been successful in developing a niche of
catering to the banking needs of its community by providing a comprehensive
banking relationship. It further believes that this success is attributable in
part to personal service and by striving to meet all of the customers' essential
banking needs.
REGULATION AND SUPERVISION
Banking is a complex and highly regulated industry. The primary goals of the
bank regulatory scheme are to maintain a safe and sound banking system and to
facilitate the conduct of monetary policy.
Regulation of Metropolitan. As a bank holding company under the Bank Holding
Company Act, Metropolitan is registered with and subject to regulation by the
Federal Reserve Board. Metropolitan is required to file annual and other
reports with, and furnish information to, the Federal Reserve Board, which may
make inspections of Metropolitan.
The Bank Holding Company Act provides that a bank holding company must obtain
the prior approval of the Federal Reserve Board for the acquisition of more than
5% of the voting stock or substantially all the assets of any bank or bank
holding company. In addition, the Bank Holding Company Act restricts the
extension of credit to any bank holding company by its subsidiary bank. The
Bank Holding Company Act also provides that, with certain exceptions, a bank
holding company may not (i) engage in any actitivites other than those of
banking or managing or controlling banks and other authorized subsidiaries or
(ii) own or control more than 5% of the voting shares of any company that is not
a bank. The Federal Reserve Board has deemed certain limited activities to be
closely related to banking and therefore permissible for a bank holding company
to engage. Metropolitan has no intention of engaging in any such activities at
this time.
The Federal Reserve Board has cease-and-desist powers over parent holding
companies and nonbanking subsidiaries where their actions would constitute a
serious threat to the safety, soundness or stability of a subsidiary bank.
Federal regulatory agencies also have authority to regulate debt obligations
(other than commercial paper) issued by bank holding companies. This authority
includes the power to impose interest ceilings and reserve requirements on such
debt obligations. A bank holding company and its subsidiaries are also
prohibited from engaging in certain tie-in arrangements in connection with any
extension of credit, lease or sale of property or furnishing of services.
Under the Federal Reserve Board's risk-based capital guidelines for bank
holding companies, Metropolitan is required to maintain minimum Tier 1 and total
capital to risk-adjusted assets ratios of 4% and 8%, respectively, and a minimum
of "leverage ratio" of 4%. At September 30, 1998 and December 31, 1997 and
1996, Metropolitan's Tier 1 and total capital to risk-weighted assets ratios and
its leverage ratio were as follows.
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997 1996
-------------- ------ ------
<S> <C> <C> <C>
Tier 1 to risk-weighted assets......... 11.4% 9.6% 9.9%
Total capital to risk-weighted assets.. 12.1% 10.4% 10.6%
Leverage Ratio......................... 9.5% 7.6% 7.7%
</TABLE>
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<PAGE>
For a general discussion of the Federal Reserve Board's risk-based capital
guidelines and the criteria applied to calculate the ratios, see "Certain
Regulatory Considerations Pertaining to Wells Fargo --Regulatory Capital
Standards and Related Matters."
Regulation of the Bank. The Bank is subject to various requirements and
restrictions under the laws of the United States and the State of Colorado, and
to regulation, supervision and regular examination by the Federal Reserve Board
and the Colorado Division of Banking. The Bank is subject to the power of the
Federal Reserve Board to enforce compliance with applicable banking statutes and
regulations. Such requirements and restrictions include requirements to
maintain adequate capital and reserves against deposits, restrictions on the
nature and amount of loans may be made and the interest that may be charged
thereon and restrictions relating to investments and other activities of the
Bank.
The capital classification of a bank affects the frequency of examinations of
the bank and impacts the ability of the bank to engage in certain activities and
affects the deposit insurance premiums paid by such bank. The Bank's deposits
are insured by the Bank Insurance Fund of the FDIC. Under applicable law, the
FDIC is authorized to assess insurance premiums on a bank's deposits at a
variable rate depending on the probability that the deposit insurance fund will
incur a loss with respect to the bank. (Under prior law, the deposit insurance
assessment was a flat rate, regardless of the likelihood of loss.) In this
regard, the FDIC determines the deposit insurance assessment rates on the basis
of the bank's capital classification and supervisory evaluations. Each of these
categories have three subcategories, resulting in nine assessment risk
classifications. The three subcategories with respect to capital are "well
capitalized," "adequately capitalized," and "less than adequately capitalized."
The three subcategories with respect to supervisory concerns are "healthy,"
"supervisory concern," and "substantial supervisory concern." A bank is deemed
"healthy" if it is financially sound with only a few minor weaknesses. A bank
is deemed subject to "supervisory concern" if it has weaknesses that, if not
corrected, could result in significant deterioration of the bank and increased
risk to the Bank Insurance Fund. A bank is deemed subject to "substantial
supervisory concern" if it poses a substantial probability of loss to the Bank
Insurance Fund.
On November 14, 1995, the FDIC approved assessment rates applicable to BIF-
insured institutions to a range of zero to 27 basis points from the previous
range of 4 to 31 points. Deposit insurance premiums for Subgroup A institutions
were reduced to zero beginning with the January 1, 1996 assessment period.
Banks within the Subgroup A category will be required to pay $1,000 per
semiannual period as mandated by statute. The Bank was within the Subgroup A
category as of December 31, 1997. For a general discussion concerning the
criteria applied by the FDIC to determine an institution's insurance premium
assessment rate, see "Certain Regulatory Considerations Pertaining to Wells
Fargo"--FDIC Insurance."
THE FOREGOING IS AN ATTEMPT TO SUMMARIZE SOME OF THE RELEVANT LAWS, RULES AND
REGULATIONS GOVERNING BANKS AND BANK HOLDING COMPANIES, BUT DOES NOT PURPORT TO
BE A COMPLETE SUMMARY OF ALL APPLICABLE LAWS, RULES AND REGULATIONS GOVERNING
BANKS AND BANK HOLDING COMPANIES.
EMPLOYEES
Metropolitan is a bank holding company and primarily conducts is operations
through its subsidiary, the Bank. Metropolitan does not have any full-time
employees, and all operations personnel are employed by the Bank. The Bank had
approximately 46 full-time equivalent employees as of September 30, 1998. None
of the employees are represented by any collective bargaining agreement, and
management believes its employee relations are good. Metropolitan and its
subsidiaries are equal opportunity employers and provide equal employment
opportunities to individuals without regard to race, sex, national origin,
religion, veteran status, handicap or familial status.
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<PAGE>
PROPERTIES
The operations of Metropolitan are conducted primarily at the offices of the
Bank located at 19590 E. Mainstreet, Parker, Colorado. The Bank currently
conducts business operations at 5 locations, including two locations in Parker
and locations in southeast Denver, Franktown and Elizabeth. A description of
these properties is presented below. The Bank owns the Parker drive-up facility
and the southeast Denver facility and leases its remaining facilities. In
addition to the four ATMs at the Bank's facilities, the Bank owns one free
standing ATM in the town of Kiowa.
<TABLE>
<CAPTION>
Property Location Description
- -------- -------- -----------
<S> <C> <C>
Parker - Main Bank 19590 E. Mainstreet 8,652 square foot two
Parker, CO 80138 story building with an attached
canopy and two drive-in
facilities.
Parker North Branch 10365 S. Parker Rd. Approximately 600 square
Drive-Up Parker, CO 80134 foot stand alone facility
with five drive-ups, including
one automated teller machine.
Franktown Branch 2195 N. Hwy. 83 1,928 square foot one story
Franktown, CO 80116 building with two drive-in
facilities and one automated
teller machine.
Southeast Denver Branch 3655 S. Monaco Pkwy. 2,000 square foot one
Denver, CO 80237 story building with three
drive-ups, including one
automated teller machine.
Elizabeth Branch 165 Main Street 350 square foot store front
Elizabeth, CO 80107 with one automated teller
machine.
</TABLE>
INDEBTEDNESS OF METROPOLITAN
Metropolitan has incurred indebtedness in connection with the acquisition of
the Bank (the "Metropolitan Loan"). The Metropolitan Loan is represented by a
note payable to US Bank (the "Lender"), which has an aggregate principal balance
of $1,125,000 as of September 30, 1998. The Metropolitan Loan is collateralized
by a pledge of all of the stock of the Bank. The Metropolitan Loan bears an
interest rate equal to, at Metropolitan's option, the prime rate less 0.5% or
the Eurodollar Rate plus 2.3%, as they may change from time to time. The
Metropolitan Loan matures on January 10, 2001 and payments of $37,500 in
principal, plus accrued interest, are due quarterly.
MATERIAL CONTRACTS
Under an arrangement with the Bank, Overline, LLC ("Overline") purchases
from the Bank the "overline" when a borrower exceeds the Bank's lending limit.
(The overline is the amount by which the loan exceeds the lending limit.)
Overline does not participate in the loan fees and earns the note rate on the
portion of the loan participated from the Bank.
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<PAGE>
Overline is owned equally by Messrs. Robert W. Graf and Murray Hayutin and
East Side Auto. Mr. Graf is an executive officer and a director of Metropolitan
and the beneficial owner of more than 5% of Metropolitan common stock. Mr.
Hayutin is a director of Metropolitan and the beneficial owner of more than 5%
of Metropolitan common stock. East Side Auto is owned and controlled by Lester
Gold and Steve Cohen, each of whom is a director of Metropolitan and the
beneficial owner of more than 5% of Metropolitan common stock.
HOLDERS AND MARKET
At September 30, 1998, 41,250 outstanding shares of Metropolitan common
stock were owned of record by 35 shareholders, and options to acquire 6,300
shares were held by five employees. There is no established public market for
Metropolitan common stock, nor any published quotations for such shares.
Metropolitan acts as its own transfer agent and registrar with respect to
Metropolitan common stock.
LEGAL PROCEEDINGS
The Bank periodically is involved in legal proceedings arising in the
normal course of business, such as claims to enforce liens, claims involving the
making and servicing of real property loans and other issues incident to the
Bank's business. Management of Metropolitan does not believe there is any
proceeding, threatened or pending against Metropolitan or the Bank which, if
determined adversely, would have a materially adverse effect on the financial
position or results of operation of Metropolitan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF METROPOLITAN
The following table sets forth, as of February 5, 1999, (i) the names and
addresses of each beneficial owner of more than 5% of Metropolitan common stock,
showing the amount and nature of such beneficial ownership, (ii) the names of
each director and executive officer of Metropolitan, and the number of shares of
Metropolitan common stock beneficially owned by each director and executive
officer and (iii) the number of shares of Metropolitan common stock owned
beneficially by all directors and executive officers as a group. None of the
shareholders listed herein would own, on a pro forma basis after giving effect
to the Merger, more than 1% of the issued and outstanding shares of Wells Fargo
common stock.
<TABLE>
<CAPTION>
Name and Address Metropolitan Common Stock Percent of
of Beneficial Owner Beneficially Owned Class
- ------------------- ------------------ -----
<S> <C> <C>
Robert W. Graf+(2) 15,000 31.5%
16289 E. Powers Pl.
Aurora, Colorado 80015
Steven M. Cohen+(3) 5,000 10.5%
3600 S. Yosemite St.
Denver, Colorado 80237
Lester Gold +(4) 5,000 10.5%
3600 S. Yosemite St.
Denver, Colorado 80237
Norman J. Gray + 500 1.0%
1600 S. Albion St.
Denver, Colorado 80222
</TABLE>
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<PAGE>
Harold Guzofsky + (5) 250 *
9400 E. Maplewood #13
Englewood, Colorado 80111
Murray Hayutin + 2,500 5.3%
455 Sherman St.
Denver, Colorado 80209
Emil Hecht 2,500 5.3%
6302 E. Radcliffe Ave.
Englewood, Colorado 80111
Walter F. Imhoff and 2,500 5.3%
Georgia R. Imhoff
1125 Seventeenth Street, Suite 1600
Denver, Colorado 80202
Raymond L. Friedlob+(6) 1,500 3.2%
1400 Glenarm, Suite 300
Denver, CO 80237
All directors and executive 29,750 62.6%
officers as a group (7 persons)
* Less than 1%
+ Director of Metropolitan
(1) Unless otherwise indicated, each individual is the record owner of, and has
sole voting and investment power with respect to all shares of Metropolitan
of which he is the beneficial owner. All percentages are based on 47,550
shares of Metropolitan common stock issued and outstanding.
(2) Mr. Graf serves as Chairman, Chief Executive Officer, President and
Treasurer of Metropolitan. Includes 10,000 shares owned by the Robert W.
Graf Family Partnership, over which Mr. Graf has voting power. Includes
5,000 shares issuable to Mr. Graf upon exercise of options that are fully
vested and exercisable as of the date of this Proxy Statement-Prospectus.
(3) Mr. Cohen serves as Secretary of Metropolitan.
(4) Includes 3,800 shares owned by Gold Family LLC, over which Mr. Gold has
voting power.
(5) Includes 250 shares owned by Polaris Partners LLC, over which Mr. Guzofsky
has voting power.
(6) Includes 1,300 shares owned by the Raskin & Friedlob Profit Sharing Plan.
Mr. Friedlob is one of four trustees of the plan who share voting and
investment power over such shares. Also includes 200 shares owned by the
law firm of Friedlob Sanderson Raskin Paulson & Tourtillott, LLC over which
Mr. Friedlob shares voting and investment power.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF METROPOLITAN'S FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of operations for the periods presented reflect a number of
significant events or factors. As discussed in more detail in the "Selected
Historical Financial Information" the financial information for December 31,
1995, 1994 and 1993 are that of the predecessor and were derived from the
financial statements of the Community Bank of Parker. Because the financial
information of the predecessor is presented on a cost basis different from that
of Metropolitan after the acquisition, the financial information for December
31, 1995, 1994 and 1993 is not comparable to the financial information for
December 31, 1997 and 1996. Additionally, during 1997 Metropolitan added two
new branches and a stand alone drive through facility which resulted in a
significant increase in its loans and deposits and an increase in operating
costs.
This section presents an analysis of the consolidated financial condition
of Metropolitan at September 30, 1998 and 1997, and December 31, 1997 and 1996
and that of the predecessor for December 31, 1995, and the consolidated results
of operations for the nine months ended September 30, 1998 and 1997, and for the
years ended December 31, 1997, 1996 and 1995. This analysis should be read in
conjunction with the consolidated financial statements and notes thereto and
financial data presented elsewhere in this Proxy Statement-Prospectus.
RESULTS OF OPERATIONS
For the Nine Months Ended September 30, 1998 and 1997 (unaudited)
Generally. Net income for the nine months ended September 30, 1998 was
$934,000 compared to $379,000 for the nine months ended September 30, 1997. The
increase in net income resulted primarily from two branches which opened in
April and July of 1997, and were operating for the entire nine month period
ended September 30, 1998.
A discussion of changes in the major components of net income for the nine
months ended September 30, 1998 and 1997 are as follows:
Net Interest Income. Net interest income is the principal source of
Metropolitan's net income and represents the difference between interest income
and interest expense. Net interest income increased approximately $734,000 in
1998 compared to 1997 as a result of an increase in average interest-earning
assets of $13,441,000 offset by an increase in average interest-bearing
liabilities of $5,280,000. Interest rate spread was 5.96% and 6.28%, and net
interest margin was 7.34% and 7.36% for 1998 and 1997, respectively.
The following schedules provide a summary of net interest income, average
earning asset balances and the related interest rates/yields for the nine-month
periods indicated. Nonaccruing loans are included in the interest-earning
assets; interest income on such loans is recorded when received.
43
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
----------------------------------------------------------
Percent Interest
Average of Total Income/ Average
Balance Assets Expense Yield/Rate/1/
------- -------- -------- -------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Interest-earning assets
Loans, including $687 in loan fees $46,538 63.16% $4,302 12.33%
Taxable securities 9,621 13.06% 400 5.54%
Nontaxable securities 909 1.23% 31 4.55%
Federal funds sold 7,767 10.54% 310 5.32%
Other interest earning assets 355 0.48% 8 3.00%
--------------------------------------
Total interest-earning assets 65,190 88.47% 5,051 10.33%
Non-interest-earning assets:
Cash and due from banks 4,132 5.61%
Premises and equipment 2,111 2.86%
Other assets 549 0.75%
Goodwill 2,048 2.78%
Allowance for possible loan losses (345) (0.47)%
Total assets $73,685 100.00%
-----------------------
Interest-bearing
liabilities:
NOW accounts $ 2,926 3.97% 39 1.78%
Savings accounts 6,459 8.77% 144 2.97%
Money market accounts 16,107 21.86% 440 3.64%
Certificates of deposits and IRA's 17,452 23.68% 748 5.71%
Short-term borrowings 476 0.65% 20 5.60%
Notes payable 1,163 1.58% 69 7.91%
--------------------------------------
Total interest-bearing liabilities 44,583 60.51% 1,460 4.37%
Non-interest bearing liabilities
Demand deposits 19,330 26.23%
Other liabilities 3,744 5.08%
-----------------------
Total liabilities 67,657 91.82%
Stockholders' equity 6,028 8.18%
-----------------------
Total liabilities and stockholders' equity $73,685 100.00%
-----------------------
Net interest income $3,591
------
Interest rate spread 5.96%
-----
Net interest margin 7.34%
-----
/1/ Annualized
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
----------------------------------------------------------
Percent Interest
Average of Total Income/ Average
Balance Assets Expense Yield/Rate/1/
------- -------- -------- -------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans, including $560 in loan fees $40,348 68.86% $3,708 12.25%
Taxable securities 9,250 15.79% 391 5.64%
Nontaxable securities 626 1.07% 22 4.69%
Federal funds sold 1,179 2.01% 45 5.09%
Other interest earning assets 346 0.59% 13 5.01%
--------------------------------------
Total interest-earning assets 51,749 88.32% 4,179 10.77%
Non-interest-earning assets:
Cash and due from banks 3,019 5.16%
Premises and equipment 1,654 2.82%
Other assets 276 0.47%
Goodwill 2,209 3.77%
Allowance for possible loan losses (317) (0.54)%
-----------------------
Total assets $58,590 100.00%
-----------------------
Interest-bearing liabilities:
NOW accounts $ 2,060 3.52% 25 1.62%
Savings accounts 5,843 9.97% 132 3.01%
Money market accounts 12,939 22.09% 345 3.56%
Certificates of deposits and IRA's 16,589 28.31% 724 5.82%
Short-term borrowings 541 0.92% 18 4.44%
Notes payable 1,331 2.27% 78 7.81%
--------------------------------------
Total interest-bearing 39,303 67.08% 1,322 4.49%
liabilities
Non-interest bearing liabilities
Demand deposits 12,323 21.03%
Other liabilities 1,896 3.24%
-----------------------
Total liabilities 53,522 91.35%
Stockholders' equity 5,068 8.65%
-----------------------
Total liabilities and stockholders' equity $58,590 100.00%
-----------------------
Net interest income $2,857
------
Interest rate spread 6.28%
-----
Net interest margin 7.36%
-----
</TABLE>
/1/ Annualized
45
<PAGE>
Net interest income is affected both by the interest rate earned and paid
and by changes in volume, principally in loans, investment securities, deposits
and borrowed funds. The following table depicts the dollar effect and rate
changes for interest-earning assets and interest-bearing liabilities and the
resulting change in interest income and interest expense:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 Compared to September 30, 1997
Increase (Decrease) due to
=============================================================
Rate/
Rate Volume Volume Net
---- ------ ------ ---
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Interest earning assets:
Loans receivable $ 22 $569 $ 3 $594
Taxable securities (6) 15 - 9
Nontaxable securities (1) 10 - 9
Federal funds sold 2 252 11 265
Other interest earning assets (5) - - (5)
-------------------------------------------------------------
Total net change in income on
interest earning assets 12 846 14 872
-------------------------------------------------------------
Interest bearing liabilities:
NOW accounts 2 11 1 14
Savings accounts (2) 14 - 12
Money market accounts 9 84 2 95
Certificates of deposit and IRA's (13) 37 - 24
Short-term borrowings 5 (2) (1) 2
Notes payable 1 (10) - (9)
-------------------------------------------------------------
Total net change in expense on
interest bearing liabilities 2 134 2 138
-------------------------------------------------------------
Net change in net interest income $ 10 $712 $12 $734
=============================================================
</TABLE>
Provision for Possible Loan Losses. The provision for possible loan losses
decreased by $100,000 for the nine months ended September 30, 1998 compared with
the nine months ended September 30, 1997; as management determined that the
current exposure for possible loan losses did not warrant an increase in the
allowance for possible loan losses.
Noninterest Income. Non-interest income increased by $74,000 in the nine
months ended September 30, 1998 compared with the nine months ended September
30, 1997. This included an increase of $39,000 in service charge income, an
increase of $58,000 in other income primarily resulting from a litigation
settlement, offset by a $23,000 decrease in credit card income.
Noninterest Expense. Non-interest expense increased by $17,000 for the nine
months ended September 30, 1998 compared with the nine months ended September
30, 1997. This increase resulted primarily from an aggregate increase of
$129,000 in salaries, occupancy, data processing and depreciation, as a result
of the costs associated with the two additional branches, offset by a $112,000
46
<PAGE>
decrease in other expenses primarily resulting from start up costs incurred in
1997 related to the opening of the branches.
Years Ended December 31, 1997, 1996 and 1995
Generally. Net income was $598,000, $835,000, and $567,000 for the years
ended December 31, 1997, 1996 and 1995, respectively.
The decrease in net income for 1997 compared to 1996 was caused primarily by
the start up costs associated with the opening of two branches in April and July
1997.
The increase in net income for 1996 compared to 1995 was caused primarily by
the increase in average interest earning-earning assets of $14,111,000 due to
the new management of Metropolitan resulting from the January 10, 1996
acquisition of the Community Bank of Parker by Metropolitan and nonrecurring
employee performance awards paid to the former employees of the Community Bank
of Parker of $220,000 in 1995.
Following is a discussion of changes in the major components of net income for
the years ending December 31, 1997, 1996 and 1995:
Net Interest Income. Net interest income is the principal source of
Metropolitan's net income and represents the difference between interest income
and interest expense. Net interest income increased approximately $635,000 in
1997 compared to 1996 as a result of an increase in average interest-earning
assets of $8,492,000 offset by an increase in average interest-bearing
liabilities of $7,288,000. Interest rate spread was 6.29% and 6.25%, and net
interest margin was 7.40% and 7.39%, for 1997 and 1996, respectively.
Net interest income increased approximately $744,000 in 1996 compared to 1995
as a result of an increase in average interest-earning assets of $14,111,000
offset by an increase in average interest-bearing liabilities of $12,180,000.
Interest rate spread was 6.25% and 7.16% for 1996 and 1995, respectively.
The following schedules provide a summary of net interest income, average
earning asset balances and the related interest rates/yields for the periods
indicated. Nonaccruing loans are included in the interest-earning assets;
interest income on such loans is recorded when received.
47
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1997
-----------------------------------------------------------------
Percent Interest
Average of Total Income/ Average
Balance Assets Expense Yield/Rate
------- -------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans, including $738 in loan fees $41,023 68.94% $5,044 12.30%
Taxable securities 9,222 15.50% 516 5.60%
Nontaxable securities 659 1.11% 32 4.86%
Federal funds sold 1,241 2.08% 73 5.88%
Other interest earning assets 346 0.58% 19 5.49%
------------------------------------------
Total interest-earning assets 52,491 88.21% 5,684 10.83%
Noninterest-earning assets:
Cash and due from banks 3,085 5.18%
Premises and equipment 1,784 3.00%
Other assets 278 0.47%
Goodwill 2,195 3.69%
Allowance for possible loan losses (329) (0.55)%
------------------------
Total assets $59,504 100.00%
========================
Interest-bearing liabilities:
NOW accounts $ 2,131 3.58% 38 1.78%
Savings accounts 5,895 9.91% 178 3.02%
Money market accounts 13,157 22.11% 476 3.62%
Certificates of deposits and IRA's 16,662 28.00% 976 5.86%
Short-term borrowings 534 0.90% 32 5.99%
Notes payable 1,294 2.17% 100 7.73%
------------------------------------------
Total interest-bearing liabilities 39,673 66.67% 1,800 4.54%
Noninterest-bearing liabilities:
Demand deposits 12,708 21.36%
Other liabilities 1,963 3.30%
------------------------
Total liabilities 54,344 91.33%
Stockholders' equity 5,160 8.67%
------------------------
Total liabilities and stockholders' equity $59,504 100.00%
========================
Net interest income $3,884
------
Interest rate spread 6.29%
-----
Net interest margin 7.40%
-----
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1996
---------------------------------------------------
Percent Interest
Average of Total Income/ Average
Balance Assets Expense Yield/Rate
------- -------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans, including $653 in loan fees $32,528 65.48% $4,047 12.44%
Taxable securities 9,501 19.13% 503 5.30%
Nontaxable securities 275 0.55% 14 4.95%
Federal funds sold 1,493 3.01% 75 5.05%
Other interest earning assets 202 0.41% 8 3.95%
------------------------------------
Total interest-earning assets 43,999 88.58% 4,647 10.56%
Noninterest-earning assets:
Cash and due from banks 2,222 4.47%
Premises and equipment 806 1.62%
Other assets 628 1.26%
Goodwill 2,253 4.54%
Allowance for possible loan losses (235) (0.47)%
-----------------------
Total assets $49,673 100.00%
=======================
Interest-bearing liabilities:
NOW accounts $ 1,127 2.27% 9 0.80%
Savings accounts 4,602 9.26% 137 2.98%
Money market accounts 13,167 26.51% 433 3.29%
Certificates of deposits and IRA's 11,654 23.46% 679 5.83%
Short-term borrowings 391 0.79% 21 5.37%
Notes payable 1,444 2.91% 119 8.24%
------------------------------------
Total interest-bearing liabilities 32,385 65.20% 1,398 4.32%
Noninterest-bearing liabilities:
Demand deposits 10,380 20.90%
Other liabilities 2,630 5.29%
-----------------------
Total liabilities 45,395 91.39%
Stockholders' equity 4,278 8.61%
-----------------------
Total liabilities and stockholders' equity $49,673 100.00%
=======================
Net interest income $3,249
========
Interest rate spread 6.25%
========
Net interest margin 7.39%
========
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995
--------------------------------------------------------
Percent Interest
Average of Total Income/ Average
Balance Assets Expense Yield/Rate
------- -------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans, including $286 in loan fees $24,391 74.82% $2,958 12.13%
Taxable securities 2,593 7.96% 132 5.09%
Nontaxable securities - - - -
Federal funds sold 2,879 8.83% 173 6.01%
Other interest earning assets 25 0.08% 2 8.00%
-------------------------------------
Total interest-earning assets 29,888 91.69% 3,265 10.92%
Non-interest-earning assets:
Cash and due from banks 1,721 5.28%
Premises and equipment 602 1.85%
Other assets 578 1.77%
Goodwill - -
Allowance for possible loan losses (191) (0.59)%
----------------------
Total assets $32,598 100.00%
======================
Interest-bearing liabilities:
NOW accounts $ 1,103 3.38% 11 1.00%
Savings accounts 3,517 10.79% 104 2.96%
Money market accounts 8,857 27.17% 287 3.24%
Certificates of deposits and IRA's 6,728 20.64% 358 5.32%
Short-term borrowings - - - -
Notes payable - - - -
-------------------------------------
Total interest-bearing liabilities 20,205 61.98% 760 3.76%
Non-interest bearing liabilities
Demand deposits 6,877 21.10%
Other liabilities 2,868 8.80%
----------------------
Total liabilities 29,950 91.88%
Stockholders' equity 2,648 8.12%
----------------------
Total liabilities and stockholders' equity $32,598 100.00%
======================
Net interest income $2,505
======
Interest rate spread 7.16%
=====
Net interest margin 8.38%
=====
</TABLE>
Net interest income is affected both by the interest rate earned and paid
and by changes in volume, principally in loans, investment securities, deposits
and borrowed funds. The following
50
<PAGE>
table depicts the dollar effect and rate changes for interest-earning assets and
interest-bearing liabilities and the resulting change in interest income and
interest expense:
<TABLE>
<CAPTION>
Year Ended December 31 Year Ended December 31,
1997 Compared to December 31, 1996 1996 Compared to December 31, 1995
Increase (Decrease) Due to Increase (Decrease) Due to
------------------------------------------ --------------------------------------
Rate/ Rate/
Rate Volume Volume Net Rate Volume Volume Net
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Interest earning assets:
Loans receivable $(48) $1,057 $(12) $ 997 $ 77 $ 986 $ 26 $1,089
Taxable securities 28 (15) - 13 5 352 14 371
Nontaxable securities - 19 (1) 18 - - 14 14
Federal funds sold 13 (13) (2) (2) (28) (83) 13 (98)
Other interest earning assets 3 6 2 11 (1) 14 (7) 6
------------------------------------------ --------------------------------------
Total net change in income on
interest earning assets (4) 1,054 (13) 1,037 53 1,269 60 1,382
------------------------------------------ --------------------------------------
Interest bearing liabilities:
NOW accounts 11 8 10 29 (2) - - (2)
Savings accounts 2 38 1 41 1 32 - 33
Money market accounts 43 - - 43 4 140 2 146
Certificates of deposit and IRA's 4 292 1 297 34 262 25 321
Short-term borrowings 2 8 1 11 - - 21 21
Notes payable (7) (12) - (19) - - 119 119
------------------------------------------ --------------------------------------
Total net change in expense on
interest bearing liabilities 55 334 13 402 37 434 167 638
-------- ------- ------ ------- ----- ------ ----- -------
Net change in net interest income $(59) $720 $(26) $635 $16 $835 $(107) $744
======== ======= ======= ======= ===== ====== ===== =======
</TABLE>
NonInterest Income. Noninterest income decreased by $22,000 for the year
ended December 31, 1997 compared with the year ended December 31, 1996. This
included a decrease of $38,000 in credit card and other income, offset by an
increase in service charge income of $16,000.
Noninterest income decreased by $23,000 for the year ended December 31, 1996
compared with the year ended December 31, 1995. This included an increase of
$242,000 in service charge income, as the new management focused on fee income
products, offset by a decrease in other income of $239,000 primarily as a result
of a reduction in SBA participation fees as the new management discontinued
substantially all of the SBA products and a $26,000 decrease in credit card
income.
Noninterest Expense. Noninterest expense increased by $861,000 for the year
ended December 31, 1997 compared with the year ended December 31, 1996. This
included an increase of $348,000 in salaries and employee benefits, an increase
in occupancy expense of $18,000, an increase in depreciation and amortization of
$110,000, and an increase in other expense of $157,000, all resulting from the
opening of two branches in April and July 1997 and a stand alone drive through
facility opened in January 1997. In addition data processing expense increased
$228,000 as a result of the increase in the volume of transactions due to the
growth of Metropolitan and an increase in costs associated with the use of a
service bureau beginning in November 1996. Through November 1996 data
processing was performed in-house.
51
<PAGE>
Noninterest expense increased by $281,000 for the year ended December 31,
1996 compared with the year ended December 31, 1995. This included an increase
of $166,000 in depreciation and amortization primarily as a result of the
increase in amortization on goodwill recorded on the acquisition of the
Community Bank of Parker by Metropolitan and an aggregate increase of $115,000
in other expenses primarily as a result of additional costs associated with the
new management of Metropolitan.
Financial Condition
Loans. Metropolitan's loan portfolio has increased by $28,162,000 from
December 31, 1993 to 1997. Metropolitan's market area has been positively
affected by significant growth in the residential real estate market.
Approximately 94% of the loan growth from December 31, 1993 to December 31, 1997
was from real estate loans. The increase in real estate loans has been offset
by a decrease in leases, credit card loans and SBA loans. The decreases in
these segments of the loan portfolio primarily began in 1996 after the
acquisition of the Community Bank of Parker by Metropolitan, as the new
management put less emphasis on these loan product types.
The following table sets forth the composition of the loan portfolio for the
periods presented:
52
<PAGE>
<TABLE>
<CAPTION>
Aggregate Principal Amount
-----------------------------------------------------------------------------------------------
September 30, December 31,
------------------------- ------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in
Thousands)
Type of loans:
Real estate $34,058 $30,758 $30,821 $20,414 $12,736 $ 7,312 $ 4,414
Commercial 4,531 3,016 3,197 2,198 2,761 1,924 2,121
Installment 2,201 2,358 2,419 2,870 2,885 3,262 2,567
Equity line of credit 1,363 2,612 2,378 4,558 - - -
Small Business Admin. 787 1639 2,249 1,650 2,219 1,638 -
Leases 1,275 1,767 1,915 3,619 4,913 5,726 3,474
Credit cards 1,110 1,483 1,399 1,877 2,278 2,832 3,028
Other 8 18 33 43 185 211 595
------------------------- ------------------------------------------------------------------
Total loans $45,333 $43,651 $44,361 $37,229 $27,977 $22,905 $16,199
========================= ==================================================================
Percentage of Loan Portfolio
Type of Loans:
Real estate 75.13% 70.46% 69.48% 54.83% 45.53% 31.92% 27.25%
Commercial 9.99% 6.91% 7.21% 5.91% 9.87% 8.40% 13.09%
Installment 4.85% 5.40% 5.45% 7.71% 10.31% 14.24% 15.85%
Equity Line of Credit 3.01% 5.98% 5.25% 12.24% - - -
Small Business Admin 1.74% 3.76% 5.07% 4.43% 7.93% 7.15% -
Leases 2.81% 4.05% 4.32% 9.72% 17.56% 25.00% 21.45%
Credit cards 2.45% 3.40% 3.15% 5.04% 8.14% 12.37% 18.69%
Other 0.02% 0.04% 0.07% 0.12% 0.66% 0.92% 3.67%
------------------------- ------------------------------------------------------------------
Total loans 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
========================= ==================================================================
</TABLE>
The following table sets forth the maturity composition and interest
sensitivity of total loans at September 30, 1998 and December 31, 1997:
September 30, 1998
Interest Sensitivity
--------------------------
Fixed Variable
Amount Percentage Rate Rate
------ ---------- ----- --------
(Dollars in Thousands)
Maturing:
In one year or less $37,441 82.59% $ 4,329 $33,112
After one through
five years 6,520 14.38% 6,520 -
After five years 1,372 3.03% 1,372 -
---------------------------------------------------
Total loans $45,333 100.00% $12,221 $33,112
===================================================
53
<PAGE>
December 31, 1997
Interest Sensitivity
------------------------------
Fixed Variable
Amount Percentage Rate Rate
------ ---------- ----- --------
(Dollars in Thousands)
Maturing:
In one year or less $37,666 84.91% $2,559 $35,107
After one through five years 6,449 14.54% 6,214 235
After five years 246 0.55% 246 -
-------------------------------------------
Total loans $44,361 100.00% $9,019 $35,342
===========================================
Provision for Loan Losses and Allowance for Loan Losses. Following is a
table of activity for loan losses for the periods presented:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
1998 1997 1997 1996 1995 1994 1993
----------- ----------- --------- -------- ---------- ---------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $ 367 $ 267 $ 267 $ 209 $ 170 $ 200 $ 122
Provision for possible loan losses 60 160 180 140 104 125 165
Charge-offs:
Real estate - 5 5 - - - -
Commercial 5 12 20 11 2 39 -
Installment 49 22 30 - 43 98 30
Leases 11 - - 44 2 - -
Credit cards 53 61 77 67 55 73 64
-----------------------------------------------------------------------------------
Total charge-offs 118 100 132 122 102 210 94
Recoveries:
Real estate - - - - - - -
Commercial 1 - - 2 9 5 -
Installment 19 11 14 22 5 26 2
Leases - 28 28 1 2 - -
Credit cards 14 9 10 15 21 24 5
-----------------------------------------------------------------------------------
Total recoveries 34 48 52 40 37 55 7
Net charge-offs 84 52 80 82 65 155 87
-----------------------------------------------------------------------------------
Balance at end of period $ 343 $ 375 $ 367 $ 267 $ 209 $ 170 $ 200
===================================================================================
Ratio of net charge-offs to
average loans outstanding
during the period 0.18% 0.13% 0.20% 0.25% 0.27% 0.79% 0.62%
</TABLE>
54
<PAGE>
The allowance for loan losses is not allocated to specific categories of
loans. However, based on Metropolitan's review of remaining collateral and/or
financial condition or identified loans with characteristically more than a
normal degree of risk, historical loans loss percentages, and economic
conditions, management believes the allowance for loan losses at September 30,
1998, is adequate to cover losses inherent in the portfolio.
The reserve for loan losses is established through a provision for loan losses
charged to operations. Loans are charged against the reserve for loan losses
when management believes that the collectibility of the principal is unlikely.
The reserve is an amount that management believes will be adequate to absorb
possible losses on existing loans that may become uncollectible, based on
evaluations of the collectibility of loans and prior loan loss experience. The
evaluations take into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect the borrower's
ability to pay. Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions and collection
efforts, that the borrower's financial condition is such that collection of
interest is doubtful. When interest accrual is discontinued, all unpaid accrued
interest is reversed. Interest income is subsequently recognized only to the
extent cash payments are received.
Non-performing assets. Non-performing assets are defined as loans delinquent
90 or more days, nonaccrual loans, restructured loans, and foreclosed loans.
Such assets do not necessarily represent future losses to Metropolitan since
underlying collateral can be sold and the financial condition of the borrowers
may improve. The following table sets forth the detail of nonperforming loans.
<TABLE>
<CAPTION>
September 30, December 31,
----------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- -------- ---------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Nonaccrual loans $ 250 $ 28 $ 76 $ 335 $ - $ - $ 24
Loans past due 90 days or more: 404 7 3 124 28 23 19
Total nonperforming loans $ 654 $ 35 $ 79 $ 459 $ 28 $ 23 $ 43
------------------- --------------------------------------------------------------
=================== ==============================================================
</TABLE>
Total non-performing loans as a percentage of total loans was 1.44% and 0.08%
for the nine months ended September 30, 1998 and 1997, respectively, and 0.18%,
1.23% and 0.10% for the years ended December 31, 1995, 1996 and 1997,
respectively. At September 30, 1998 the nonaccrual loans consisted of one real
estate loan and substantially all of the loans past due 90 days or more
consisted of two real estate loans. Management does not believe there will be
any losses associated with the loans as they have estimated that the underlying
collateral could be sold for in excess of the loan balances.
Metropolitan's policy is to discontinue accruing interest on loans when
principal or interest is due and remains unpaid for 90 days or more, unless the
loan is well secured and in the process of collection. The additional interest
income that Metropolitan would have recognized for the nine months ended
September 30, 1998 and for the period ended December 31, 1997, if contractual
interest on these loans has been recognized is insignificant.
At September 30, 1998, there were no commitments to lend additional funds to
borrowers whose loans were considered non-performing.
55
<PAGE>
Management is not aware of any loans which were not included as non-performing
loans where known information about possible credit problems causes serious
doubts as to the borrower's ability to comply with repayment terms which may
result in such loans becoming non-performing.
The loan portfolio does not include any loans to foreign countries or highly
leveraged transaction loans. Senior management closely monitors concentrations
to individual customers and actively participates within their lending areas.
Metropolitan has written policies that require security for loans including
liens on residential mortgage loans and certain of the other loans secured by
real estate. In addition, policies and procedures are in place to assess the
creditworthiness of borrowers for all loans and commitments. A borrower's
ability to honor loan contracts can be largely dependent upon economic
conditions within Metropolitan's market areas.
Investments. Metropolitan accounts for investments in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"). Under SFAS 115, each
security is classified as either trading, available for sale, or held to
maturity. All of Metropolitan's securities are classified as held to maturity
and are recorded at amortized cost.
The following table presents the composition of investment securities for the
periods presented:
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
-------------------------------- ------------------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Held to Maturity
U.S. Treasury and agency securities $9,004 $8,017 $8,015 $8,211 $2,556
State and county municipal bonds 925 755 825 480 -
Mortgage backed securities 36 1,038 1,039 1,040 -
Other securities - 46 39 163 148
-------------------------------- ------------------------------------------
Total $9,965 $9,856 $9,918 $9,894 $2,704
================================ ==========================================
</TABLE>
Investment Securities--Maturities and Yields. The following tables show the
maturities and yields of the various forms of investment securities at September
30, 1998 and December 31, 1997.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
---------------------------------------------------------------------
In one after one after five after
year or less to five years to ten years ten years
--------------------- --------------- ------------- --------------
Amount YIELD Amount Yield Amount Yield AMOUNT Yield
------------- ------ ------- ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Held to Maturity:
U.S. Treasury and agency securities $ 3,511 5.49% $5,493 5.65% $ - $ - -
------------- ----- ------ ---- ------ ----- ------ -----
- ----------------
State and county municipal bonds(1) - - 925 7.37% - - - -
------------- ----- ------ ---- ------ ----- ------ -----
Mortgage backed securities - - - - - - 36 8.94%
------------- ----- ------ ---- ------ ----- ------ -----
$ 3,511 5.49% $6,418 5.90% $ - - $ 36 8.94%
------------- ----- ------ ---- ------ ----- ------ -----
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
December 31, 1997
-------------------------------------------------------------------------------
In one After one After five After
year or less to five to ten ten years
------------ ------------ ---------- ---------
years years
----- -----
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Held to Maturity:
U.S. Treasury and agency securities $5,015 5.32% $3,000 5.77% $ - - $ -
State and county municipal bonds(1) - 825 7.48% - - - -
Mortgage backed securities - - 1,000 5.63% 39 8.95% 39 8.94%
------ ----- ------ ----- ------ ----- ------ -----
$5,015 5.32% $4,825 6.03% $ 39 8.95% $ 39 8.94%
------ ----- ------ ----- ------ ----- ------ -----
</TABLE>
(1) Yield presented on a tax-equivalent basis assuming a tax rate of 37.3%
(2) Included in maturity table based on their average remaining life or call
date, if applicable.
Other equity securities include FHLB stock of $177,000 at September 30, 1998
and $162,000 at December 31, 1997 and Federal Reserve Bank (FRB) stock of
$162,000 at September 30, 1998 and December 31, 1997. The dividends received on
the FHLB stock provided an annualized return of 7.50% and 7.31% for the nine
months ended September 30, 1998 and the year ended December 31, 1997,
respectively. The dividends received on the FRB stock provided an annualized
return of 6.00% for the nine months ended September 30, 1998 and the year ended
December 31, 1997, respectively
Deposits. The deposit base provides the major funding source for
Metropolitan's interest earning assets of Metropolitan. In general,
Metropolitan's deposits have increased during the period from December 31, 1995
to December 31, 1996. Management believes that demand, savings and certificates
of deposit less than $100,000 represent a core base of deposits while
certificates of deposit in excess of $100,000 and public funds are more interest
rate sensitive and, thus, not viewed as part of the core deposit base. Because
of these factors, management views the growth of demand, savings and time
certificates of deposit less than $100,000 as more stable growth.
57
<PAGE>
The following table reflects the average balance and average interest rate
paid on deposits for the period presented.
<TABLE>
<CAPTION>
Average AVERAGE
Balance RATE PAID
----------------------------
<S> <C> <C>
(Dollars in Thousands)
September 30, 1998
- ------------------
Demand deposits $19,330 -
NOW accounts 2,926 1.78%
Savings accounts 6,459 2.97%
Money market accounts 16,107 3.64%
Certificates of deposit and individual retirement accounts 17,452 5.71%
--------------
$62,274
==============
September 30, 1997
- ------------------
Demand deposits $12,323 -
NOW accounts 2,060 1.62%
Savings accounts 5,843 3.01%
Money market accounts 12,939 3.56%
Certificates of deposit and individual retirement accounts 16,589 5.82%
--------------
$49,754
==============
December 31, 1997
- -----------------
Demand deposits $12,708 -
NOW accounts 2,131 1.78%
Savings accounts 5,895 3.02%
Money market accounts 13,157 3.62%
Certificates of deposit and individual retirement accounts 16,662 5.86%
--------------
$50,553
==============
December 31, 1996
- -----------------
Demand deposits $10,380 -
NOW accounts 1,127 0.80%
Savings accounts 4,602 2.98%
Money market accounts 13,167 3.29%
Certificates of deposit and individual retirement accounts 11,654 5.83%
--------------
$40,930
==============
December 31, 1995
- -----------------
Demand deposits $ 6,877 -
NOW accounts 1,103 1.00%
Savings accounts 3,517 2.96%
Money market accounts 8,857 3.24%
Certificates of deposit and individual retirement accounts 6,728 5.32%
--------------
$27,082
==============
</TABLE>
58
<PAGE>
The following tables reflect the maturities of certificates of deposits
$100,000 or greater as of September 30, 1998 and December 31, 1997.
September 30, 1998
3 Months 3-12 Over
or less Months 12 Months Total
-------- ------ --------- -----
(Dollars in Thousands)
Certificates of deposit $2,759 $3,874 $904 $7,537
December 31, 1997
-----------------------------------------------------
3 Months 3-12 Over
or less Months 12 Months Total
-------- ------ --------- -----
(Dollars in Thousands)
Certificates of deposit $2,799 $3,366 $202 $6,367
Return on Equity and Assets. The following table sets forth Metropolitan's
ratios for the periods indicated.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
------------------------------- ----------------------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Return on average assets 1.69% 0.86% 1.00% 1.68% 1.74%
Return on average equity 20.66% 9.97% 11.59% 19.53% 21.41%
Dividend payout ratio on common shares -- -- -- -- 11.90%
Average equity to average assets 8.18% 8.65% 8.67% 8.61% 8.12%
</TABLE>
Short-term Borrowings. The amount and interest rates related to short-term
borrowings for the periods presented are as follows:
<TABLE>
<CAPTION>
At or for the Nine
Months Ended At or for the
September 30, Years Ended December 31,
----------------------------------- -------------------------------------
1998 1997 1997 1996
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Federal Home Loan Bank Advances:
Outstanding balance at period-end $ - $ 500 $ 500 $ -
Average interest rate at period-end - 5.57% 5.76% -
Average outstanding during the period $ 476 $ 180 $ 238 $ -
Weighted average interest rate 5.60% 5.70% 6.30% -
Highest outstanding balance at any $ 500 $ 500 $ 500 $ -
MONTH-END
Federal Funds Purchased:
Outstanding balance at period-end $ - $ - $ - $ -
Average interest rate at period-end - - - -
Average outstanding during the period $ - $ 361 $ 296 $ 391
Weighted average interest rate - 4.03% 5.57% 5.37%
Highest outstanding balance at any $ - $ - $ - $ -
month-end
</TABLE>
59
<PAGE>
Liquidity. Metropolitan's principal source of funds consists of dividends
from the Bank, which derives its funds from deposits, interest, and principal
payments on loans and investment securities, sales of investment securities and
borrowings. For the nine month period ended September 30, 1998, Metropolitan
realized proceeds from sales and maturities of investments of $5,040,000, a net
increase in deposits of $5,071,000 and net cash provided by operating activities
of $1,009,000. Funds were used to acquire investment securities of $5,103,000
and fund a net increase in loans to customers of $1,662,000. For the nine month
period ended September 30, 1997, Metropolitan realized proceeds from sales and
maturities of investments of $317,000, a net increase in deposits of $11,812,000
and net cash provided by operating activities of $1,580,000. Funds were used to
acquire investment securities of $326,000 and fund a net increase in loans to
customers of $6,407,000. For the year ended December 31, 1997, Metropolitan
realized proceeds from sales and maturities of investments of $1,322,000, a net
increase in deposits of $7,984,000 and net cash provided by operating activities
of $1,300,000. Funds were used to acquire investment securities of $1,393,000
and fund a net increase in loans to customers of $7,162,000. For the year ended
December 31, 1996, Metropolitan realized proceeds from sales and maturities of
investment securities of $3,376,000, net cash provided by operating activities
of $687,000 and a net increase in deposits of $14,881,000. These proceeds were
partially offset by a purchase of investment securities of $10,846,000 and a net
increase in loans to customers of $9,172,000.
Asset liquidity is provided by cash and federal funds sold. Liability
liquidity is provided by access to core funding sources, principally various
customers' interest-bearing accounts in Metropolitan's market areas.
Metropolitan does not have and does not solicit brokered deposits.
Federal funds purchased and short-term borrowings by Metropolitan are
additional sources of liquidity. These sources of liquidity are short-term in
nature and are used by Metropolitan as necessary to fund asset growth and meet
short-term liquidity needs. As of September 30, 1998 and 1997, and December 31,
1997, 1996 and 1995, Metropolitan had no federal funds purchased and no
borrowings on securities sold under repurchase agreements. As of December 31,
1997, Metropolitan had $500,000 of advances outstanding under a line of credit
agreement, while no advances were outstanding as of September 30, 1998 and 1997,
and December 31, 1996 and 1995.
Capital. Metropolitan's total shareholders' equity as of September 30, 1998
was $6,491,000, an increase of $933,000 or 17% compared with stockholders'
equity of $5,558,000 as of December 31, 1997.
Total shareholders' equity as of December 31, 1997 was $5,558,000, an increase
of $598,000 or 12% compared with shareholders' equity of $4,960,000 as of
December 31, 1996.
Total shareholders' equity as of December 31, 1996 was $4,960,000, an increase
of $2,045,000 or 70% compared with shareholders' equity of $2,915,000 as of
December 31, 1995. The increase in shareholder equity is due to the acquisition
of Wally on January 10, 1996.
Metropolitan is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on Metropolitan's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action,
Metropolitan must meet specific capital guidelines that involve quantitative
measures of Metropolitan's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. Metropolitan's
capital amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
60
<PAGE>
Quantitative measures established by regulation to ensure capital adequacy
require Metropolitan to maintain minimum amounts and ratios (set forth in the
table below of total and Tier I capital (as defined in the regulations) to risk-
weighted assets (as defined in the regulations), and of Tier I capital (as
defined in the regulations) to average assets (as defined in the regulations).
Management believes that Metropolitan meets, as of December 31, 1997, all
capital adequacy requirements to which it is subject.
As of December 31, 1997, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well as capitalized the Bank
must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage
ratios as set forth in the table. There are no conditions or events since that
notification that management believes have changed the Bank's category.
Metropolitan's actual capital amounts and ratios are also presented in the
following table:
61
<PAGE>
<TABLE>
<CAPTION>
For Minimum Capital
Actual Adequacy Purposes
-------------------------- ----------------------
Amount Ratio Amount Ratio
------ ----- ------ -----
<S> <C> <C> <C> <C>
(Dollars in Thousands)
As of September 30, 1998:
Total capital (to risk weighted assets) $5,869 12.1% $3,880 8.0%
Tier 1 capital (to risk weighted assets) $5,526 11.4% $1,940 4.0%
Tier 1 capital (to average assets) $5,526 9.5% $2,335 4.0%*
As of September 30, 1997:
Total capital (to risk weighted assets) $4,655 10.6% $3,505 8.0%
Tier 1 capital (to risk weighted assets) $4,348 9.9% $1,753 4.0%
Tier 1 capital (to average assets) $4,348 7.4% $2,340 4.0%*
As of December 31, 1997:
Total capital (to risk weighted assets) $4,903 10.4% $3,768 8.0%
Tier 1 capital (to risk weighted assets) $4,536 9.6% $1,884 4.0%
Tier 1 capital (to average assets) $4,536 7.6% $2,396 4.0%*
As of December 31, 1996:
Total capital (to risk weighted assets) $4,067 10.6% $3,068 8.0%
Tier 1 capital (to risk weighted assets) $3,800 9.9% $1,534 4.0%
Tier 1 capital (to average assets) $3,800 7.7% $1,977 4.0%*
As of December 31, 1995:
Total capital (to risk weighted assets) $3,124 10.8% $2,309 8.0%
Tier 1 capital (to risk weighted assets) $2,915 10.1% $1,155 4.0%
Tier 1 capital (to average assets) $2,915 7.7% $1,517 4.0%*
</TABLE>
* 3% under certain circumstances not applicable to Metropolitan
Impact of Inflation, Changing Prices and Monetary Policies
The financial statements and related financial data concerning Metropolitan
presented in this Proxy Statement-Prospectus have been prepared in accordance
with generally accepted accounting principles, which require the measurement of
financial position and operating results in terms of historical dollars without
considering changes in the relative purchasing power of money over time due to
inflation. The primary effect of inflation on the operation of Metropolitan is
reflected in increased operating costs. Unlike most industrial companies,
virtually all of the assets and liabilities of a financial institution are
monetary in nature. As a result, changes in interest rates have a more
significant effect on the performance of a financial institution than do the
effects of changes in the general rate of inflation and changes in prices.
Interest rates do not necessarily move in the same direction or in the same
magnitude as the prices of goods and services. Interest rates are highly
sensitive to many factors which are beyond the control of Metropolitan,
including the influence of domestic and foreign economic conditions and the
monetary and fiscal policies of the United States government and federal
agencies, particularly the Federal Reserve Board. The Federal Reserve Board
implements national monetary policy such as seeking to curb inflation and combat
recession by its open market operations in the United States government
securities, control of the discount rate applicable to borrowing by banks and
establishment of reserve requirements against bank deposits. The actions of the
Federal Reserve Board in these areas influence the growth of bank loans,
investments and deposits, and the affect the interest rates charged on loans and
paid
62
<PAGE>
on deposits. The nature, timing and impact of any future changes in
federal monetary and fiscal policies on Metropolitan and the Bank and their
results of operations are not predictable.
YEAR 2000 COMPLIANCE
Metropolitan is aware of the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date sensitive
informaiton when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
Metropolitan is utilizing both internal and external resources to identify,
correct and test the systems for the year 2000 compliance. To date,
confirmation has been received from Metropolitan's primary processing vendors
that plans are being developed to address processing of transactions in the year
2000. Management has not fully assessed the year 2000 compliance expense and
related potential effect on Metropolitan's earnings.
In addition, in connection with the acquisition of Metropolitan by Wells Fargo
it is anticipated that Metropolitan will convert its data processing to the
Wells Fargo system in April 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise." SFAS No. 131 establishes
standards for the way that public companies report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public. It also establishes standards for disclosures regarding products
and services, geographic areas and major customers. SFAS No. 131 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.
SFAS 131 is effective for annual financial statements for periods beginning
after December 15, 1997 and requires comparative information for earlier years
to be restated. Because of the recent issuance of the standard, management has
been unable to fully evaluate the impact, if any, the standard may have on
future financial statement disclosures. Results of operations and financial
position, however, will be unaffected by implementation of the standard.
In February 1998, the FASB issued Statement of Financial Accounting Standards
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits" ("SFAS No. 132") which standardizes the disclosure requirements for
pensions and other postretirement benefits and requires additional information
on changes in the benefit obligations and fair values of plan assets that will
facilitate financial analysis. SFAS No. 132 is effective for years beginning
after December 15, 1997 and requires comparative information for earlier years
to be restated, unless such information is not readily available. Management
believes the adoption of this statement will have no material impact on
Metropolitan's consolidated financial statements.
The FASB has recently issued Statement of Financial Accounting Standards No. 133
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133").
SFAS No. 133 established standards for recognizing all derivative instruments
including those for hedging activities as either assets or
63
<PAGE>
liabilities in the statement of financial position and measuring those
instruments at fair value. This Statement is effective for fiscal years
beginning after June 30, 1999. Metropolitan has not yet determined the effect of
SFAS No. 133 on its financial statements. Management believes the adoption of
this statement will have no material impact on Metropolitan's consolidated
financial statements.
The FASB recently issued Statement of Financial Accounting Standards No. 134
"Accounting for Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise" ("SFAS No. 134").
SFAS No. 134 establishes accounting and reporting standards for certain
activities of mortgage banking enterprises and other enterprises that conduct
operations that are substantially similar to the primary operations of a
mortgage banking enterprise.
This statement is effective for the first fiscal quarter beginning after
December 15, 1998. Metropolitan has not yet determined the effect of SFAS No.
134 on its financial statements. Management believes the adoption of this
statement will have no material impact on Metropolitan's consolidated financial
statements.
64
<PAGE>
CERTAIN REGULATORY AND OTHER
CONSIDERATIONS PERTAINING TO WELLS FARGO
Wells Fargo and its banking subsidiaries are subject to extensive regulation
by federal and state agencies. The regulation of bank holding companies and
their subsidiaries is intended primarily for the protection of depositors,
federal deposit insurance funds and the banking system as a whole and is not in
place to protect stockholders or other investors.
As discussed in more detail below, this regulatory environment, among other
things, may (a) restrict Wells Fargo's ability to pay dividends on Wells Fargo
common stock, (b) require Wells Fargo to provide financial support to one or
more of its banking subsidiaries, (c) require Wells Fargo and its banking
subsidiaries to maintain capital balances in excess of those desired by
management, and/or (d) require Wells Fargo to pay higher deposit insurance
premiums as a result of the deterioration in the financial condition of
depository institutions in general.
BANK REGULATORY AGENCIES
Wells Fargo & Company, as a bank holding company, is subject to regulation by
the Federal Reserve Board under the Bank Holding Company Act.
Wells Fargo's national banking subsidiaries are regulated by the OCC. Its
state-chartered banking subsidiaries are regulated primarily by the FDIC or the
Federal Reserve Board and applicable state banking agencies. Wells Fargo's
federally insured banking subsidiaries are also subject to regulation by the
FDIC.
Wells Fargo has other financial services subsidiaries that are subject to
regulation by the Federal Reserve Board and other applicable federal and state
agencies. For example, Wells Fargo's brokerage subsidiary is subject to
regulation 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; INTERSTATE BANKING
A bank holding company is generally prohibited under the Bank Holding Company
Act from engaging in nonbanking (i.e., commercial or industrial) activities,
subject to certain exceptions. Specifically, the activities of a bank holding
company, and those companies that it controls or in which it holds more than 5%
of the voting stock, are limited to banking or managing or controlling banks,
furnishing services to its subsidiaries and such other activities that the
Federal Reserve Board determines to be so closely related to banking as to be a
"proper incident thereto." In determining whether an activity is sufficiently
related to banking, the Federal Reserve Board will consider whether the
performance of such activity by the bank holding company can reasonably be
expected to produce benefits to the public (e.g., greater convenience, increased
competition or gains in efficiency) that outweigh possible adverse effects
(e.g., undue concentration of resources, decreased or unfair competition,
conflicts of interest or unsound banking practices).
Under the Interstate Banking Act, which became effective on September 29,
1995, a bank holding company may acquire banks in states other than its home
state, subject to any state requirement that the bank has been organized and
operating for a minimum period of time, not to exceed five years, and the
requirement that the bank holding company not control, prior to or following the
proposed acquisition, more than 10% of the total amount of deposits of insured
depository institutions nationwide or, unless
65
<PAGE>
the acquisition is the bank holding company's initial entry into the state, more
than 30% of such deposits in the state (or such lesser or greater amount set by
the state).
The Interstate Banking Act also authorizes banks to merge across state lines
(thereby creating interstate branches) effective June 1, 1997. States may opt
out of the Interstate Banking Act (thereby prohibiting interstate Mergers in the
state) or opt in early (thereby allowing interstate Mergers prior to June 1,
1997). 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 Interstate Banking Act. The state of Montana has opted out until at least
the year 2001.
Wells Fargo's acquisitions of banking institutions and other companies
generally are subject to the prior approval of the Federal Reserve Board and
other applicable federal or state regulatory authorities. In determining
whether to approve a proposed bank acquisition, federal banking regulators will
consider, among other factors, the effect of the acquisition on competition, the
public benefits expected to be received from the consummation of the
acquisition, the projected capital ratios and levels on a post-acquisition
basis, and the acquiring institution's record of addressing the credit needs of
the communities it serves, including the needs of low and moderate income
neighborhoods, consistent with the safe and sound operation of the bank, under
the Community Reinvestment Act of 1977, as amended.
DIVIDEND RESTRICTIONS
Wells Fargo & Company is a legal entity separate and distinct from its banking
and other subsidiaries. Its principal source of funds to pay dividends on its
common and preferred stock and debt service on its debt is dividends from its
subsidiaries. Various federal and state statutes and regulations limit the
amount of dividends that may be paid to Wells Fargo by its banking subsidiaries
without regulatory approval.
Most of Wells Fargo's banking subsidiaries are national banks. A national
bank must obtain the prior approval of the OCC to pay a dividend if the total of
all dividends declared by the bank in any calendar year would exceed the bank's
net income for that year combined with its retained net income for the preceding
two calendar years, less any required transfers to surplus or a fund for the
retirement of any preferred stock.
Wells Fargo's state-chartered banking subsidiaries also are subject to
dividend restrictions under applicable state law.
If, in the opinion of the applicable federal regulatory agency, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
bank, could include the payment of dividends), the regulator may require, after
notice and hearing, that such bank cease and desist from such practice. The OCC
has indicated that the payment of dividends would constitute an unsafe and
unsound practice if the payment would deplete a depository institution's capital
base to an inadequate level. Under the Federal Deposit Insurance Act, an
insured depository institution may not pay any dividend if the institution is
undercapitalized or if the payment of the dividend would cause the institution
to become undercapitalized. In addition, federal bank regulatory agencies have
issued policy statements which provide that depository institutions and their
holding companies should generally pay dividends only out of current operating
earnings.
The ability of Wells Fargo's banking subsidiaries to pay dividends to Wells
Fargo may also be affected by various minimum capital requirements for banking
organizations, as described below. In
66
<PAGE>
addition, the right of Wells Fargo to participate in the assets or earnings of a
subsidiary is subject to the prior claims of creditors of the subsidiary.
Wells Fargo Bank, N.A., with the express approval of the OCC, declared
dividends in 1997 and 1996 of $1.5 billion in excess of its net income of $2.0
billion for those years. As a result, before Wells Fargo Bank, N.A. may declare
dividends in 1998 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 desired to
be declared in 1998. Because it is not expected to have net income of $1.5
billion plus an amount equal to or greater than the dividends expected to be
declared in 1998, Wells Fargo Bank, N.A. must obtain the approval of the OCC
before any dividends are declared in 1998.
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 such subsidiaries to Wells Fargo
and its nonbanking subsidiaries (including Wells Fargo, "affiliates") in so-
called "covered transactions." In general, covered transactions include loans
and other extensions of credit, investments and asset purchases, as well as
other transactions involving the transfer of value from a banking subsidiary to
an affiliate or for the benefit of an affiliate. Unless an exemption applies,
covered transactions by a banking subsidiary with a single affiliate are limited
to 10% of the banking subsidiary's capital and surplus and, with respect to all
covered transactions with affiliates in the aggregate, to 20% of the banking
subsidiary's capital and surplus. Also, loans and extensions of credit to
affiliates generally are required to be secured in specified amounts.
Source of Strength Doctrine. The Federal Reserve Board has a policy that a
bank holding company is expected to act as a source of financial and managerial
strength to each of its subsidiary banks and, under appropriate circumstances,
to commit resources to support each such subsidiary bank. This support may be
required at times when the bank holding company may not have the resources to
provide it. Capital loans by a bank holding company to any of its subsidiary
banks are subordinate in right of payment to deposits and certain other
indebtedness of the subsidiary bank. In addition, in the event of a bank
holding company's bankruptcy, any commitment by the bank holding company to a
federal bank regulatory agency to maintain the capital of a subsidiary bank will
be assumed by the bankruptcy trustee and entitled to a priority of payment.
Depositor Preference. The FDI Act provides that, in the event of the
"liquidation or other resolution" of an insured depository institution, the
claims of depositors of the institution (including the claims of the FDIC as
subrogee of insured depositors) and certain claims for administrative expenses
of the FDIC as a receiver will have priority over other general unsecured claims
against the institution. If an insured depository institution fails, insured
and uninsured depositors, along with the FDIC, will have priority in payment
ahead of unsecured, nondeposit creditors, including the institution's parent
holding company.
Liability of Commonly Controlled Institutions. Under the FDI Act, an
insured depository institution is generally liable for any loss incurred, or
reasonably expected to be incurred, by the FDIC in connection with (a) the
default of a commonly controlled insured depository institution or (b) any
assistance provided by the FDIC to a commonly controlled insured depository
institution in danger of default. "Default" is defined generally as the
appointment of a conservator or receiver and "in danger of default" is defined
generally as the existence of certain conditions indicating that a default is
likely to occur in the absence of regulatory assistance.
REGULATORY CAPITAL STANDARDS AND RELATED MATTERS
67
<PAGE>
Risk-Based Capital. The Federal Reserve Board, the OCC and the FDIC have
adopted substantially similar risk-based and leverage capital guidelines for
banking organizations. The guidelines are intended to ensure that banking
organizations have adequate capital given the risk levels of their assets and
off-balance sheet commitments.
The risk-based capital ratio is determined by classifying assets and certain
off-balance sheet financial instruments into weighted categories, with higher
levels of capital being required for those categories perceived as representing
greater risk. Under the capital guidelines, a banking organization's total
capital is divided into tiers. "Tier 1 capital" consists of common equity,
retained earnings, qualifying noncumulative perpetual preferred stock, a limited
amount of qualifying cumulative perpetual preferred stock and minority interests
in the equity accounts of consolidated subsidiaries, less certain items such as
goodwill and certain other intangible assets. The remainder (Tier 2 and Tier 3
capital) consists of hybrid capital instruments, perpetual debt, mandatory
convertible debt securities, a limited amount of subordinated debt, preferred
stock that does not qualify as Tier 1 capital, and a limited amount of the
allowance for credit losses.
Under the Federal Reserve Board's risk-based capital guidelines for bank
holding companies, the minimum ratio of total capital (the sum of Tier 1, Tier 2
and Tier 3) to risk-adjusted assets (including certain off-balance sheet items,
such as stand-by letters of credit) is currently 8%. The minimum Tier 1 capital
to risk-adjusted assets is 4%. At December 31, 1998, Wells Fargo's total
capital and Tier 1 capital to risk-adjusted assets ratios were 10.9% and 8.1%,
respectively.
The Federal Reserve Board also requires bank holding companies to comply with
minimum leverage ratio guidelines. The leverage ratio is the ratio of a bank
holding company's Tier 1 capital to its total consolidated quarterly average
assets, less goodwill and certain other intangible assets. The guidelines
require a minimum leverage ratio of 3% for bank holding companies that meet
certain specified criteria, including having the highest supervisory rating.
All other bank holding companies are required to maintain a minimum leverage
ratio of 4% to 5%. The Federal Reserve Board has not advised Wells Fargo of any
specific leverage ratio applicable to it. At December 31, 1998, Wells Fargo's
leverage ratio was 6.6%.
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).
Wells Fargo's banking subsidiaries are subject to risk-based and leverage
capital guidelines substantially similar to those imposed by the Federal Reserve
Board on bank holding companies.
Other Measures of Capital Adequacy and Safety and Soundness. In assessing a
banking organization's capital adequacy, federal bank regulatory agencies will
also consider the organization's credit concentration risk and risks associated
with nontraditional activities, as well as the organization's ability to manage
those risks. This evaluation will be performed as part of the organization's
regular safety and soundness examination.
Federal bank regulatory agencies require banking organizations that engage in
significant trading activity to calculate a capital charge for market risk.
Significant trading activity means trading activity of at least 10% of total
assets or $1 billion, whichever is smaller, calculated on a consolidated basis
for bank holding companies. Federal bank regulators may apply the market risk
measure to other banks and
68
<PAGE>
bank holding companies as the agency deems necessary or appropriate for safe and
sound banking practices. Each agency may exclude organizations that it
supervises that otherwise meet the criteria under certain circumstances. The
market risk charge will be included in the calculation of an organization's
risk-based capital ratios.
As an additional means to identify problems in the financial management of
depository institutions, the FDI Act requires federal bank regulatory agencies
to establish certain non-capital safety and soundness standards for institutions
for which they are the primary federal regulator. The standards relate
generally to operations and management, asset quality, interest rate exposure
and executive compensation. The agencies are authorized to take action against
institutions that fail to meet such standards.
Prompt Corrective Action. The FDI Act requires federal bank regulatory
agencies to take "prompt corrective action" with respect to FDIC-insured
depository institutions that do not meet minimum capital requirements. A
depository institution's treatment for purposes of the prompt corrective action
provisions will depend upon how its capital levels compare to various capital
measures and certain other factors, as established by regulation.
Federal bank regulatory agencies have adopted regulations that classify
insured depository institutions into one of five capital-based categories. The
regulations use the total capital ratio, the Tier 1 capital ratio and the
leverage ratio as the relevant measures of capital. A depository institution is
(a) "well capitalized" if it has a risk-adjusted total capital ratio of at least
10%, a Tier 1 capital ratio of at least 6% and a leverage ratio of at least 5%
and is not subject to any order or written directive to maintain a specific
capital level; (b) "adequately capitalized" if it has a risk-adjusted total
capital ratio of at least 8%, a Tier 1 capital ratio of at least 4% and a
leverage ratio of at least 4% (3% in some cases) and is not well capitalized;
(c) "undercapitalized" if it fails to meet any of the required minimums for an
adequately capitalized institution; (d) "significantly undercapitalized" if it
has a risk-adjusted total capital ratio of less than 6%, a Tier 1 capital ratio
of less than 3% or a leverage ratio of less than 3%; and (e) "critically
undercapitalized" if its tangible equity is less than 2% of total assets. At
December 31, 1998, all of Wells Fargo's insured depository institutions met the
criteria for well capitalized institutions as set forth above.
A depository institution's primary federal bank regulator is authorized to
downgrade the institution's capital category to the next lower category upon a
determination that the institution is engaged in an unsafe or unsound condition
or is engaged in an unsafe or unsound practice. An unsafe or unsound practice
can include receipt by the institution of a less than satisfactory rating on its
most recent examination with respect to its asset quality, management, earnings
or liquidity.
The FDI Act generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would as a result be
undercapitalized. Undercapitalized depository institutions are subject to a
wide range of limitations on operations and activities (including asset growth)
and are required to submit a capital restoration plan. The federal banking
agencies may not accept a capital plan without determining, among other things,
that the plan is based on realistic assumptions and is likely to succeed in
restoring the depository institution's capital. In addition, for a capital
restoration plan to be acceptable, the depository institution's parent holding
company must guarantee that the institution will comply with the plan. The
aggregate liability of the parent holding company is limited to the lesser of
(a) 5% of the depository institution's total assets at the time it became
undercapitalized or (b) the amount which is necessary (or would have been
necessary) to bring the institution into compliance with all capital standards
applicable with respect to the institution as of the time it fails to comply
with the plan.
69
<PAGE>
If an undercapitalized depository institution fails to submit an acceptable
plan, it is treated as if it were significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator.
Under FDI Act regulations, a bank may not accept brokered deposits (that is,
deposits obtained through a person engaged in the business of placing deposits
with insured depository institutions or with interest rates significantly higher
than prevailing market rates) unless (a) it is well capitalized or (b) it is
adequately capitalized and receives a waiver from the FDIC. A bank that may not
receive brokered deposits also may not offer "pass-through" insurance on certain
employee benefit accounts, unless it provides certain notices to affected
depositors. Also, a bank that is adequately capitalized and that has not
received a waiver from the FDIC may not pay an interest rate on any deposits in
excess of 75 basis points over certain prevailing market rates. There are no
such restrictions on a bank that is well capitalized.
FDIC INSURANCE
Through the Bank Insurance Fund (BIF), the FDIC insures the deposits of Wells
Fargo's depository institution subsidiaries up to prescribed per depositor
limits. The amount of FDIC assessments paid by each BIF member institution is
based on its relative risk of default as measured by regulatory capital ratios
and other factors. Specifically, the assessment rate is based on the
institution's capitalization risk category and supervisory subgroup category.
An institution's capitalization risk category is based on the FDIC's
determination of whether the institution is well capitalized, adequately
capitalized or less than adequately capitalized. An institution's supervisory
subgroup category is based on the FDIC's assessment of the financial condition
of the institution and the probability that FDIC intervention or other
corrective action will be required. Subgroup A institutions are financially
sound institutions with few minor weaknesses; Subgroup B institutions are
institutions that demonstrate weaknesses which, if not corrected, could result
in significant deterioration; and Subgroup C institutions are institutions for
which there is a substantial probability that the FDIC will suffer a loss in
connection with the institution unless effective action is taken to correct the
areas of weakness.
The BIF assessment rate currently ranges from zero to 27 cents per $100 of
domestic deposits, with Subgroup A institutions assessed at a rate of zero and
Subgroup C institutions assessed at a rate of 27 cents. The FDIC may increase
or decrease the assessment rate schedule on a semiannual basis. An increase in
the BIF assessment rate could have a material adverse effect on 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 with
respect to 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
70
<PAGE>
depository institutions will continue to pay approximately 1.3 cents per $100 of
BIF-assessable deposits until the earlier of December 31, 1999 or the last
savings and loan association ceases to exist.
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's banking subsidiaries and, thus, those 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.
EXPERTS
The supplemental consolidated financial statements of Wells Fargo and
subsidiaries as of December 31, 1997 and 1996, and for each of the years in the
three-year period ended December 31, 1997, incorporated by reference herein,
have been incorporated herein in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. KPMG's
report contains an explanatory paragraph that states that the supplemental
consolidated financial statements give retroactive effect to the merger of Wells
Fargo & Company into Norwest Corporation on November 2, 1998 which has been
accounted for as a pooling-of-interests as described in Note 1 to the
supplemental consolidated financial statements.
The consolidated financial statements of Metropolitan Bancshares, Inc. and
Subsidiary as of and for the years ended December 31, 1997 and 1996 included in
this Proxy Statement-Prospectus are included herein in reliance on the report of
BDO Seidman, LLP, independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing.
71
<PAGE>
LEGAL MATTERS
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 Reorganization 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 number of shares Mr. Stroup owns or has the right to acquire
upon exercise of his options is, in the aggregate, less than 0.1% of the
outstanding shares of Wells Fargo common stock.
The material U.S. Federal income tax consequences of the Merger to
Metropolitan's shareholders and certain other legal matters will be passed upon
for Metropolitan by Davis, Graham, & Stubbs LLP, Denver, Colorado.
INFORMATION CONCERNING WELLS FARGO MANAGEMENT
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, 1997. Wells Fargo's
annual report is incorporated by reference into this Proxy Statement-Prospectus.
Metropolitan 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."
WHERE YOU CAN FIND MORE INFORMATION
Wells Fargo files annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements
or other information filed by Wells Fargo at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. You can request
copies of these documents, upon payment of a duplicating fee, by writing to the
SEC. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Wells Fargo's SEC filings are also available to the
public from commercial document retrieval services and on the SEC Internet site
(http://www.sec.gov).
Wells Fargo filed a registration statement on Form S-4 to register with the
SEC the Wells Fargo common stock to be issued to Metropolitan shareholders in
the Merger. This Proxy Statement-Prospectus is part of that registration
statement. As allowed by SEC rules, this Proxy Statement-Prospectus does not
contain all of the information you can find in the registration statement or the
exhibits to the registration statement.
Some of the information you may want to consider in deciding how to vote on
the Merger is not physically included in this Proxy Statement-Prospectus.
Instead, the information is "incorporated by reference" to documents filed as
appendixes to this Proxy Statement-Prospectus or to documents that have been
filed by Wells Fargo (formerly Norwest Corporation) with the SEC under SEC File
No. 1-2979.
The Wells Fargo documents that have been incorporated by reference consist of:
. Wells Fargo's annual report on Form 10-K for the year ended December 31,
1997;
72
<PAGE>
. Wells Fargo's quarterly reports on Form 10-Q for the quarters ended March
31, 1998, June 30, 1998 and September 30, 1998;
. Wells Fargo's current reports on Form 8-K filed January 22, 1998, April 20,
1998, April 22, 1998, June 8, 1998, June 9, 1998, June 12, 1998, July 22,
1998, August 5, 1998, October 21, 1998, October 22,1998 and November 16,
1998;
. Wells Fargo's registration statement on Form S-4 filed September 11, 1998
(Reg. No. 333-63247), containing the joint proxy statement-prospectus of
Wells Fargo and Wells Fargo;
. Wells Fargo's current report on Form 8-K filed October 13, 1997, containing
a description of the Wells Fargo common stock;
. Wells Fargo's registration statement on Form 8-A dated October 21, 1998,
containing a description of preferred stock purchase rights attached to
shares of Wells Fargo common stock; and
. Wells Fargo's current report on Form 8-K filed January 19, 1999, which
includes, as Exhibit 99a, the supplemental consolidated management's
discussion and analysis of results of operations and financial condition
and supplemental financial statements of Wells Fargo as of and for the
three years ended December 31, 1997, and, as Exhibit 99b, the supplemental
consolidated management's discussion and analysis of results of operations
and financial condition and supplemental financial statements of Wells
Fargo as of and for the nine months ended September 30, 1998.
All reports and proxy statements filed by Wells Fargo after the date of this
Proxy Statement-Prospectus and before the special meeting are automatically
incorporated by reference into this Proxy Statement-Prospectus.
This Proxy Statement-Prospectus may contain information that updates, modifies
or is contrary to information in one or more of the documents incorporated by
reference. Reports filed by Wells Fargo with the SEC after the date of this
Proxy Statement-Prospectus may also contain information that updates, modifies
or is contrary to information in the documents incorporated by reference. You
should review these reports, as they may disclose a change in the business
prospects, financial condition or other affairs of Wells Fargo since the date of
this Proxy Statement-Prospectus.
As explained above, you may read and copy all reports filed by Wells Fargo
with the SEC at the SEC's public reference rooms. Wells Fargo will provide,
without charge, copies of any report incorporated by reference into this Proxy
Statement-Prospectus, excluding exhibits other than those that are specifically
incorporated by reference to an exhibit in this Proxy Statement-Prospectus. You
may obtain a copy of any document incorporated by reference by writing or
calling Wells Fargo as follows:
Wells Fargo Corporation
Corporate Secretary
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-1026
(612) 667-8655
73
<PAGE>
To ensure delivery of the copies in time for the special meeting, your request
should be received by Wells Fargo by February 12, 1999.
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 Metropolitan 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 February 5,
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. This Proxy Statement-Prospectus does not constitute an offer to sell
or a solicitation of any offer to buy any securities, or the solicitation of a
proxy, in any jurisdiction in which, or to any person to whom, it is unlawful to
make any such offer or solicitation.
74
<PAGE>
FINANCIAL STATEMENTS
INDEX
Page
----
METROPOLITAN BANCSHARES, INC.:
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets at September 30, 1998 (Unaudited),
December 31, 1997 and December 31, 1996 F-3
Consolidated Statements of Income for the Nine Months Ended
September 30, 1998 and September 30, 1997 (Unaudited) and
for the Years Ended December 31, 1997 and December 31, 1996 F-5
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1996 and December 31, 1997 and for the Nine Months
Ended September 30, 1998 (Unaudited) F-6
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1998 and September 30, 1997 (Unaudited) and for
the Years Ended December 31, 1997 and December 31, 1996 F-7
Summary of Accounting Policies F-9
Notes to Consolidated Financial Statements F-13
COMMUNITY BANK OF PARKER (Unaudited):
Balance Sheet at December 31, 1995 F-27
Statement of Income for the Year Ended December 31, 1995 F-28
Statement of Stockholders' Equity for the Year Ended December 31, 1995 F-29
Statement of Cash Flows for the Year Ended December 31, 1995 F-30
Notes to Financial Statements F-31
F-1
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors of
Metropolitan Bancshares, Inc. and Subsidiary
Parker, Colorado
We have audited the accompanying consolidated balance sheets of Metropolitan
Bancshares, Inc. and Subsidiary as of December 31, 1997 and 1996 and the related
consolidated statements of income, stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Metropolitan
Bancshares, Inc. and Subsidiary at December 31, 1997 and 1996 and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
/S/ BDO SEIDMAN, LLP
Denver, Colorado
April 3, 1998
F-2
<PAGE>
================================================================================
December 31,
September 30, -------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
(Unaudited)
Assets
Cash and due from banks $ 4,515,372 $ 3,291,230 $ 3,765,376
Federal funds sold 11,990,000 2,720,000 1,050,000
Investment securities (Note 2) 10,328,881 10,266,755 10,194,570
Loans, net (Notes 3 and 10) 44,853,665 43,781,959 36,800,277
Accrued interest receivable 468,965 388,925 354,044
Property and equipment, net (Note 4) 2,012,561 2,188,869 1,207,903
Goodwill, net (Note 1) 1,981,068 2,102,357 2,264,067
Deferred income taxes (Note 7) 132,000 152,000 137,000
Other real estate owned 530,424 - -
Other assets, net 173,419 87,980 287,332
- --------------------------------------------------------------------------------
$76,986,355 $64,980,075 $56,060,569
================================================================================
F-3
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Consolidated Balance Sheets
================================================================================
December 31,
September 30, ------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
(Unaudited)
Liabilities and Stockholders' Equity
Liabilities:
Deposits (Note 5) $69,118,522 $57,306,563 $49,322,893
Note payable (Notes 1 and 6) 1,125,000 1,200,000 1,387,500
Other borrowed funds (Note 6) - 500,000 -
Accrued interest payable 226,299 225,218 182,989
Other liabilities 25,140 190,554 207,369
- --------------------------------------------------------------------------------
Total liabilities 70,494,961 59,422,335 51,100,751
- --------------------------------------------------------------------------------
Commitments and Contingencies (Notes 8, 9 and 12)
Stockholders' Equity (Notes 1, 6 and 8)
Common stock, $1 par value; 1,000,000
shares authorized, 41,250 issued and
outstanding 41,250 41,250 41,250
Additional paid-in capital 4,083,750 4,083,750 4,083,750
Retained earnings 2,366,394 1,432,740 834,818
- --------------------------------------------------------------------------------
Total stockholders' equity 6,491,394 5,557,740 4,959,818
- --------------------------------------------------------------------------------
$76,986,355 $64,980,075 $56,060,569
================================================================================
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-4
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Consolidated Statements of Income
================================================================================
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
September 30, December 31,
---------------------- ----------------------
1998 1997 1997 1996
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Unaudited)
Interest income:
Loans, including fees $4,301,586 $3,707,581 $5,044,297 $4,046,518
Investment securities 438,869 426,010 566,583 525,389
Federal funds sold 310,436 44,766 72,803 75,288
- ------------------------------------------------------------------------------------
Total interest income 5,050,891 4,178,357 5,683,683 4,647,195
- ------------------------------------------------------------------------------------
Interest expense:
Deposits 1,371,233 1,225,375 1,668,240 1,258,097
Federal funds purchased - 7,895 15,975 20,974
Other borrowed funds 20,043 10,697 15,422 -
Note payable 69,042 77,806 100,271 118,725
- ------------------------------------------------------------------------------------
Total interest expense 1,460,318 1,321,773 1,799,908 1,397,796
- ------------------------------------------------------------------------------------
Net interest income 3,590,573 2,856,584 3,883,775 3,249,399
Provision for possible
loan losses (Note 3) 60,000 160,000 180,000 140,000
- ------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 3,530,573 2,696,584 3,703,775 3,109,399
- ------------------------------------------------------------------------------------
Other income:
Service charges 483,132 444,468 601,132 585,214
Credit card income 89,080 111,516 153,972 188,999
Other 100,680 43,476 99,677 102,373
- ------------------------------------------------------------------------------------
Total other income 672,892 599,460 854,781 876,586
- ------------------------------------------------------------------------------------
Other expenses:
Salaries and employee benefits 1,165,410 1,177,618 1,581,576 1,233,533
Occupancy 181,478 152,471 209,529 191,804
Data processing 488,770 414,700 396,053 167,623
Depreciation and amortization 334,546 297,375 405,855 295,513
Other 490,107 602,217 940,621 784,052
- ------------------------------------------------------------------------------------
Total other expenses 2,660,311 2,644,381 3,533,634 2,672,525
- ------------------------------------------------------------------------------------
Income before taxes on income 1,543,154 651,663 1,024,922 1,313,460
Taxes on income (Note 7) 609,500 273,000 427,000 478,100
- ------------------------------------------------------------------------------------
Net Income $ 933,654 $ 378,663 $ 597,922 $ 835,360
====================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-5
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Consolidated Statements of Stockholders' Equity
================================================================================
<TABLE>
<CAPTION>
Years Ended December 31,
1996 and 1997 and
Nine Months Ended Common Stock Additional
September 30, 1998 --------------------- Paid-in Subscriptions Retained
(Unaudited) Shares Amount Capital Receivable Earnings Total
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 40,000 $ 40,000 $ 3,960,000 $ (3,803,750) $ (542) $ 195,708
Collection of subscriptions
receivable (Note 1) - - - 3,803,750 - 3,803,750
Common stock issued
for cash (Note 1) 1,250 1,250 123,750 - - 125,000
Net income - - - - 835,360 835,360
- -----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 41,250 41,250 4,083,750 - 834,818 4,959,818
Net income - - - - 597,922 597,922
- -----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 41,250 41,250 4,083,750 - 1,432,740 5,557,740
Net income (unaudited) - - - - 933,654 933,654
- -----------------------------------------------------------------------------------------------------------------
Balance, September 30, 1998
(unaudited) 41,250 $ 41,250 $ 4,083,750 $ - $2,366,394 $6,491,394
=================================================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-6
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Consolidated Statements of Cash Flows
================================================================================
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
September 30, December 31,
--------------------- -----------------------
1998 1997 1997 1996
- --------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Operating Activities:
Net income $ 933,654 $ 378,663 $ 597,922 $ 835,360
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 334,546 297,375 405,846 295,513
Provision for possible loan losses 60,000 160,000 180,000 140,000
Deferred income taxes 20,000 (38,000) (15,000) (55,000)
Amortization and accretion of
premiums and discounts, net 1,407 (1,188) (1,103) 34,251
Gain on sale of investments - - - (29,471)
Gain on sale of bank premises
and equipment - - (43,502) -
Changes in operating assets and
liabilities:
Accrued interest receivable (80,041) (82,061) (34,881) (139,412)
Accrued interest payable 1,081 29,925 42,229 70,032
Other assets (96,238) 207,471 184,952 (213,582)
Other liabilities (165,414) 628,030 (16,815) (250,223)
- --------------------------------------------------------------------------------------------
Net cash provided by operating
activities 1,008,995 1,580,215 1,299,648 687,468
- --------------------------------------------------------------------------------------------
Investing Activities:
Purchase of investment securities (5,103,057) (326,039) (1,393,100) (10,846,334)
Loans originated, net of principal
collections (1,662,130) (6,406,916) (7,161,682) (9,171,939)
Proceeds from sale and maturity of
investment securities 5,039,524 317,091 1,322,018 3,376,225
Purchase of property and equipment (26,149) (1,318,426) (1,381,545) (614,536)
Proceeds from sale of property
and equipment - 25,480 214,345 -
Purchase of bank, net of cash acquired - - - 666,748
Proceeds from cash surrender value of
life insurance - - - 375,200
- --------------------------------------------------------------------------------------------
Net cash used in investing activities (1,751,812) (7,708,810) (8,399,964) (16,214,636)
- --------------------------------------------------------------------------------------------
</TABLE>
F-7
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Consolidated Statements of Cash Flows (Concluded)
================================================================================
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
September 30, December 31,
---------------------- ----------------------
1998 1997 1997 1996
- ----------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Financing Activities:
Net increase in deposits 11,811,959 5,071,174 7,983,670 14,881,324
Proceeds from notes payable - - - 1,500,000
Principal payments on notes payable (75,000) (112,500) (187,500) (112,500)
Proceeds from other borrowed funds - 500,000 500,000 -
Principal payments on other borrowed
funds (500,000) - - -
Proceeds from issuance of common stock - - - 3,928,750
- ----------------------------------------------------------------------------------------------
Net cash provided by financing activities 11,236,959 5,458,674 8,296,170 20,197,574
- ----------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents 10,494,142 (669,921) 1,195,854 4,670,406
Cash and cash equivalents,
beginning of period 6,011,230 4,815,376 4,815,376 144,970
- ----------------------------------------------------------------------------------------------
Cash and cash equivalents,
end of period $16,505,372 $4,145,455 $6,011,230 $4,815,376
==============================================================================================
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-8
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Summary of Accounting Policies
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
Organization and Business
Metropolitan Bancshares, Inc. (the "Company"), is a bank holding company
incorporated in the state of Colorado whose principal asset is its wholly-owned
subsidiary, Community Bank of Parker (the "Bank")(see Note 1).
The Bank operates under a state bank charter and provides a full range of
banking services. As a state bank, the Bank is subject to the regulations of the
Federal Deposit Insurance Corporation and the Colorado Division of Banking. The
Bank serves customers located within Douglas County, Colorado, and surrounding
counties. Services are provided at its main office in Parker, Colorado and its
branch offices in North Parker, Franktown, Southeast Denver, and Elizabeth,
Colorado.
Principles of Consolidation
The consolidated financial statements include the accounts of Metropolitan
Bancshares, Inc. and Community Bank of Parker, its wholly-owned subsidiary. All
material intercompany accounts and transactions have been eliminated in the
consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Investment Securities
Investment securities are classified as either held-to-maturity, available-for-
sale or trading. Investment securities classified as held-to-maturity are stated
at cost, adjusted for amortization of premiums and accretion of discounts. It is
management's intention and it has the ability to hold investment securities
classified as held-to-maturity and, accordingly, adjustments are not made for
temporary declines in their market value below amortized cost. Investment
securities classified as available-for-sale are carried at their estimated
market value with unrealized holding gains and losses, net of tax, reported as a
separate component of stockholders' equity until realized. Investment securities
classified as trading are carried at estimated market value. Unrealized holding
gains and losses for trading securities are included in the statements of
income. Restricted equity
F-9
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Summary of Accounting Policies
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
securities are reported at the lower of cost or estimated fair value. Gains and
losses on securities sold are determined based on the specific identification of
the securities sold.
Loans and Allowance for Possible Loan Losses
Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or pay-off are reported at their outstanding principal
balance adjusted for any charge-offs, the allowance for possible loan losses,
and any deferred fees or costs on originated loans and unamortized premiums or
discounts on purchased loans. Loans consist primarily of commercial, consumer
and real estate loans to customers in the state of Colorado.
Interest on loans is accrued and credited to operations based on the principal
amount outstanding. The accrual of interest on loans is discontinued when, in
the opinion of management, there is an indication that the borrower may be
unable to meet payments as they become due.
The Bank defers loan origination and commitment fees on loans that mature more
than one year from the origination date and the net deferred fees are amortized
into interest income over the lives of the related loans as yield adjustments.
Any unamortized net fees on loans fully repaid or sold are recognized in income
in the year of repayment or sale.
The allowance for possible loan losses is maintained at a level considered by
management to be adequate to absorb future loan losses currently inherent in the
loan portfolio. Management's assessment of the adequacy of the allowance is
based upon type and volume of the loan portfolio, past loan loss experience,
existing and anticipated economic conditions, and other factors which deserve
current recognition in estimating future loan losses. Additions to the
allowance are charged to operations. Management's assessment of the adequacy of
the allowance is subject to evaluation and adjustment by the Bank's regulators.
F-10
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Summary of Accounting Policies
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
The allowance for possible loan losses related to impaired loans that are
identified for evaluation is based on discounted cash flows using the loan's
initial effective interest rate, or for collateral-dependent loans, the fair
value, less selling costs, of the collateral. By the time a loan becomes
probable of foreclosure it has been charged down to fair value, less estimated
cost to sell.
At September 30, 1998, December 31, 1997 and 1996, the Bank had no loans that
were considered as impaired.
Other Real Estate Owned
Other real estate owned is initially recorded at the lower of fair value less
estimated selling costs or the balance of the loan on the property at the date
of foreclosure. Costs related to capital additions or improvements are
capitalized, whereas those relating to holding the property are charged to
operations.
Valuations are periodically performed by management, and an allowance for losses
is established by a charge to operations if the carrying value of the property
exceeds its fair value.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. For financial reporting purposes, provisions for depreciation and
amortization are computed using the straight-line method over the estimated
useful lives of the individual assets or the terms of the related leases for
leasehold improvements.
Goodwill
The Company amortizes goodwill over a period of 15 years on the straight-line
method.
Income Taxes
Deferred income taxes are recognized for the tax consequences of "temporary
differences" between the financial statement carrying amounts and the tax basis
of existing assets and liabilities by applying enacted statutory rates
applicable to future years to those differences.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers cash on hand,
amounts due from banks and federal funds sold to be cash and cash equivalents.
F-11
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Summary of Accounting Policies
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
Unaudited Interim Financial Statements
In management's opinion, the interim financial statements contain all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation of financial position, results of operations and cash flows.
Operating results for the nine months ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998.
F-12
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
1. Business Combination
On January 10, 1996, the Company acquired all of the outstanding stock of Wally
Bancorp, Inc. ("Wally") the former parent company of the Bank for total
consideration of approximately $5,340,000 which was financed; $1,500,000 from
notes payable and the balance through the sale of 41,250 shares of common stock
of the Company. Simultaneously with the acquisition, Wally merged into the
Company and the Company assumed all of the assets of Wally consisting primarily
of the common stock of the Bank. The acquisition has been accounted for using
the purchase method of accounting. The results of operations of the Bank for
the nine day period ended January 9, 1996 are immaterial and have been included
in the accompanying consolidated statements of income. The excess of the
purchase price over the fair value of the net assets acquired amounted to
approximately $2,426,000.
2. Investment Securities
A summary of the amortized cost and estimated market value of investment
securities is as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
September 30, 1998 Cost Gains Losses Value
=========================================================================
Held to maturity:
U.S. Treasury and
agency securities $9,003,896 $47,227 $ - $9,051,123
State and county
municipal bonds 925,000 - (7,840) 917,160
Mortgage backed
securities 36,558 542 - 37,100
- -------------------------------------------------------------------------
9,965,454 47,769 (7,840) 10,005,383
- -------------------------------------------------------------------------
Other:
Restricted equity
securities 363,427 - - 363,427
- -------------------------------------------------------------------------
$10,328,881 $47,769 $(7,840) $10,368,810
=========================================================================
F-13
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1997 Cost Gains Losses Value
================================================================================
Held to maturity:
U.S. Treasury and
agency securities $ 8,015,152 $ 6,096 $ (27,163) $ 7,994,085
State and county
municipal bonds 825,000 - (9,520) 815,480
Mortgage backed
securities 1,038,552 - (1,012) 1,037,540
Other 39,524 - (1,739) 37,785
- --------------------------------------------------------------------------------
9,918,228 6,096 (39,434) 9,884,890
- --------------------------------------------------------------------------------
Other:
Restricted equity
securities 348,527 - - 348,527
- --------------------------------------------------------------------------------
$10,266,755 $ 6,096 $ (39,434) $10,233,417
================================================================================
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1996 Cost Gains Losses Value
================================================================================
Held to maturity:
U.S. Treasury and
agency securities $ 8,210,973 $ 6,250 $(101,705) $ 8,115,518
State and county
municipal bonds 480,000 - (6,500) 473,500
Mortgage backed
securities 1,040,274 6,408 - 1,046,682
Other 162,896 5,104 - 168,000
- --------------------------------------------------------------------------------
9,894,143 17,762 (108,205) 9,803,700
- --------------------------------------------------------------------------------
Other:
Restricted equity
securities 300,427 - (27) 300,400
- --------------------------------------------------------------------------------
$10,194,570 $ 17,762 $(108,232) $10,104,100
================================================================================
F-14
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
The amortized costs and estimated market values by contractual maturity, are as
follows:
Estimated
Amortized Market
September 30, 1998 Cost Value
================================================================================
Held to maturity:
Due in one year or less $ 3,510,950 $ 3,512,058
Due in one year through five years 6,417,946 6,456,225
Due after five years through ten years - -
Due after ten years 36,558 37,100
- --------------------------------------------------------------------------------
9,965,454 10,005,383
- --------------------------------------------------------------------------------
Other 363,427 363,427
- --------------------------------------------------------------------------------
$10,328,881 $10,368,810
================================================================================
At September 30, 1998, December 31, 1997 and 1996, securities with an amortized
cost of $1,500,000, $2,000,000 and $600,000 were pledged as collateral to secure
public funds and for other purposes as required by law.
Due to the unexpected withdrawal of approximately $1,200,000 in deposits, in
1996, relating to the previous owners of the Bank, management sold securities
classified as held to maturity with a book value of approximately $991,000. The
Bank realized a gain of approximately $7,000 as a result of this sale.
F-15
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
3. Loans
Loans are summarized as follows:
December 31,
September 30, ----------------------
1998 1997 1996
================================================================================
Real estate $34,057,663 $30,820,398 $20,414,023
Equity line of credit 1,363,169 2,328,227 4,558,067
Leases 1,274,551 1,914,699 3,619,079
Installment 2,201,382 2,418,944 2,869,721
Commercial 4,531,478 3,197,130 2,198,592
Credit cards 1,110,074 1,399,184 1,876,913
Small Business
Administration 786,976 2,249,389 1,649,885
Other 7,975 32,805 43,161
- --------------------------------------------------------------------------------
45,333,268 44,360,776 37,229,441
Less:
Deferred fees 136,384 212,155 161,984
Allowance for possible
loan losses 343,219 366,662 267,180
- --------------------------------------------------------------------------------
Loans, net $44,853,665 $43,781,959 $36,800,277
================================================================================
Changes in the allowance for possible loan losses are as follows:
Nine Months Ended Years Ended
September 30, December 31,
--------------------- --------------------
1998 1997 1997 1996
- --------------------------------------------------------------------------------
Balance, beginning of year $366,662 $267,180 $267,180 $208,920
Provision for loan losses 60,000 160,000 180,000 140,000
Charge-offs, net of
recoveries (83,443) (51,750) (80,518) (81,740)
- --------------------------------------------------------------------------------
Balance, end of year $343,219 $375,430 $366,662 $267,180
================================================================================
F-16
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
4. Property and Equipment
Property and equipment are summarized as follows:
December 31,
September 30, ----------------------------
1998 1997 1996
================================================================================
Land $ 847,654 $ 847,654 $ 743,361
Bank premises 520,909 519,325 -
Furniture and equipment 1,019,488 994,921 573,307
Leasehold improvements 444,201 444,201 290,732
- --------------------------------------------------------------------------------
2,832,252 2,806,101 1,607,400
Less accumulated depreciation
and amortization 819,691 617,232 399,497
- --------------------------------------------------------------------------------
$ 2,012,561 $ 2,188,869 $ 1,207,903
================================================================================
5. Deposits
Deposits are summarized as follows:
December 31,
September 30, ----------------------------
1998 1997 1996
================================================================================
Non interest-bearing
demand accounts $20,919,771 $17,429,396 $14,046,701
Interest-bearing
demand accounts 19,294,072 16,679,319 14,445,514
Savings accounts 12,701,539 8,029,865 6,779,125
Certificates of deposit 16,203,140 15,167,983 14,051,553
- --------------------------------------------------------------------------------
$69,118,522 $57,306,563 $49,322,893
================================================================================
Certificates of deposits with balances of $100,000 or more totaled approximately
$7,537,000, $6,367,000 and $6,536,000 at September 30, 1998, December 31, 1997
and 1996.
F-17
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
Certificates of deposits mature as follows:
Year Ending December 31, 1997
================================================================================
Within one year $13,399,706
One to two years 1,562,707
More than two years 205,570
- --------------------------------------------------------------------------------
$15,167,983
================================================================================
6. Note Payable and Unsecured Lines of Credit
The note payable is payable in quarterly installments of $37,500 plus interest
at the Reference Rate less 0.5% or at the Company's option, the Eurodollar Rate
plus 2.3% (for a rate of 7.75% and 8.0% at September 30, 1998 and December 31,
1997) through January 10, 2001; and is secured by the common stock of the Bank.
Under the terms of the loan agreement, the Company is subject to certain
covenant requirements that include, among other things, maintenance of various
financial ratios, limitations on the amount of indebtedness and the payment of
dividends, and also requires approval for changes in the corporate structure of
the Company.
The Bank has available unsecured lines of credit of $6,500,000, $6,600,000 and
$4,300,000 at September 30, 1998, December 31, 1997 and 1996. Interest rates
are determined at the time advances are made based on the term of the agreements
(5.756% at December 31, 1997). At September 30, 1998 no amounts were
outstanding. At December 31, 1997, $500,000 was outstanding and at December 31,
1996 no amounts were outstanding.
F-18
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
7. Taxes on Income
The provision for federal and state income taxes consisted of the following:
Nine Months Ended Years Ended
September 30, December 31,
------------------- ------------------
1998 1997 1997 1996
================================================================================
Current:
Federal $520,500 $279,000 $400,000 $470,000
State 69,000 32,000 42,000 63,100
- --------------------------------------------------------------------------------
589,500 311,000 442,000 533,100
- --------------------------------------------------------------------------------
Deferred (reduction):
Federal 18,00 (35,000) (14,000) (50,000)
State 2,000 (3,000) (1,000) (5,000)
- --------------------------------------------------------------------------------
20,000 (38,000) (15,000) (55,000)
- --------------------------------------------------------------------------------
$609,500 $273,000 $427,000 $478,100
================================================================================
The types of temporary differences between the tax basis of assets and
liabilities that give rise to a significant portion of the net deferred tax
asset and their approximate tax effects are as follows:
December 31,
September 30, --------------------------
1998 1997 1996
================================================================================
Deferred loans fees $ 51,000 $ 92,000 $ 84,000
Property and equipment - 2,000 19,000
Allowance for loan losses 81,000 58,000 34,000
- --------------------------------------------------------------------------------
Deferred tax asset $ 132,000 $ 152,000 $ 137,000
================================================================================
F-19
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
A reconciliation of income taxes computed at the federal statutory rate to the
effective rate is shown below:
Nine Months Ended Years Ended
September 30, December 31,
--------------------- ------------------
1998 1997 1997 1996
================================================================================
Federal income tax
computed at statutory
rate $524,000 $221,000 $349,000 $447,000
State tax, net of
federal effect 51,000 22,000 33,000 43,000
Goodwill amortization 45,000 45,000 60,000 60,000
Other, net (10,500) (15,000) (15,000) (71,900)
- --------------------------------------------------------------------------------
Taxes on income $609,500 $273,000 $427,000 $478,100
================================================================================
8. Stockholders' Equity
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classifications are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of Total Capital and Tier 1 Capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 Capital (as defined) to average
assets (as defined). Management believes, as of September 30, 1998, that the
Bank meets all capital adequacy requirements to which it is subject.
F-20
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
As of September 30, 1998, the most recent notification from the Primary
Regulatory Agency categorized the Bank as well-capitalized under the regulatory
framework for corrective action. To be categorized as well-capitalized the Bank
must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 capital
ratios as set forth in the table. There are no conditions or events since the
notification that management believes have changed the institution's category.
The Bank's actual capital amounts and ratios are also represented in the table
below.
<TABLE>
<CAPTION>
To be well
Capitalized under
For Capital Prompt Correction
Actual Adequacy Purposes Action Provisions
- -----------------------------------------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
===================================================================================================================================
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
September 30, 1998
Total Capital Greater than Greater than Greater than Greater than
(to Risk-Weighted Assets) $5,869 12.1% or equal to $3,880 or equal to 8.0% or equal to $4,850 or equal to 10.0%
Tier 1 capital Greater than Greater than Greater than Greater than
(to Risk-Weighted Assets) 5,526 11.4% or equal to 1,940 or equal to 4.0% or equal to 2,910 or equal to 6.0%
Tier 1 capital Greater than Greater than Greater than Greater than
(to Average Assets) 5,526 9.5% or equal to 2,335 or equal to 4.0% or equal to 2,919 or equal to 5.0%
December 31, 1997
Total Capital Greater than Greater than Greater than Greater than
(to Risk-Weighted Assets) $4,903 10.4% or equal to $3,768 or equal to 8.0% or equal to $4,710 or equal to 10.0%
Tier 1 capital Greater than Greater than Greater than Greater than
(to Risk-Weighted Assets) 4,536 9.6% or equal to 1,884 or equal to 4.0% or equal to 2,826 or equal to 6.0%
Tier 1 capital Greater than Greater than Greater than Greater than
(to Average Assets) 4,536 7.6% or equal to 2,396 or equal to 4.0% or equal to 2,995 or equal to 5.0%
December 31, 1996
Total Capital Greater than Greater than Greater than Greater than
(to Risk-Weighted Assets) $4,067 10.6% or equal to $3,068 or equal to 8.0% or equal to $3,835 or equal to 10.0%
Tier 1 capital Greater than Greater than Greater than Greater than
(to Risk-Weighted Assets) 3,800 9.9% or equal to 1,534 or equal to 4.0% or equal to 2,301 or equal to 6.0%
Tier 1 capital Greater than Greater than Greater than Greater than
(to Average Assets) 3,800 7.7% or equal to 1,977 or equal to 4.0% or equal to 2,471 or equal to 5.0%
</TABLE>
F-21
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
Banking regulations place various restrictions which limit the extent to which
dividends may be paid by the Bank without approval of these regulatory agencies.
The approval of the Colorado Banking Board is required for the Bank to pay
dividends in any calendar year which exceed the Bank's net profits for that year
combined with its retained profits for the preceding two years.
Stock Option Plan
The Company has a Non-Qualified Stock Option Agreement (the "Stock Option
Agreement") with its Chairman. Under the terms of the Stock Option Agreement,
the Chairman has the option to purchase up to 5,000 shares of common stock. The
maximum term of the option is seven years and the option fully vested on January
9, 1996, the date of grant.
The Company has a Non-Qualified Stock Option Plan (the "Plan") for certain of
its key employees. Under the terms of the Plan the options vest over a five to
seven year period beginning one to two years from the date of grant.
The Company applies APB Opinion 25, Accounting for Stock Issued to Employees,
and related Interpretations in accounting for the Stock Option Agreement. Under
APB Opinion, 25, because the exercise price of the stock option equaled the
market price of the underlying stock on the date of grant, no compensation cost
is recognized.
FASB Statement 123, Accounting for Stock-Based Compensation, requires the
Company to provide pro forma information regarding net income as if compensation
cost for the Company's Stock Option Agreement and Plan had been determined in
accordance with the fair value based method prescribed in FASB Statement 123.
The Company estimated the fair value of the stock options at the grant date by
using the present value approach with the following weighted-average
assumptions; dividend yield of 0 percent, risk-free interest rate of 6.0 percent
and 5.5 percent in 1997 and 1996, respectively and an expected lives of five to
seven years.
F-22
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
Under the accounting provisions of FASB Statement 123, the Company's net income
would have been reduced to the pro forma amount indicated below:
Years Ended December 31, 1997 1996
================================================================================
Net income:
As reported $598,000 $835,000
Pro forma $596,000 $735,000
A summary of the status of the stock options and changes during the year is
presented below:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
------------------------ ------------------------
Weighted- Weighted-
Average Average
Shares Exercise Price Shares Exercise Price
=====================================================================================================================
<S> <C> <C> <C> <C>
Outstanding at
beginning of year 5,000 $ 100 - $ -
Granted 1,300 118 5,000 100
- ----------------------------------------------------------------------------------------------------------------------
Outstanding at
end of year 6,300 $ 104 5,000 $ 100
======================================================================================================================
Options exercis-
able at year-end 5,060 $ 100 5,000 $ 100
======================================================================================================================
Weighted-average
fair value of
options granted
during the year 1,300 $ 43 5,000 $ 31
======================================================================================================================
Weighted-average 6 years $ 118
Remaining con-
tractual life 5 years $ 100
======================================================================================================================
</TABLE>
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
9. Commitments and Contingencies
Financial Instruments with Off-Balance-Sheet Risk
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. Those instruments involve, to varying degrees, elements of credit
risk in excess of the amount recognized on the balance sheet. Financial
instruments with off-balance-sheet risk are summarized as follows:
December 31,
September 30, --------------------------
1998 1997 1996
================================================================================
Financial instruments whose
contract amounts represent
credit risk:
Commitments to extend
credit $10,225,000 $ 8,644,000 $ 5,770,000
================================================================================
Standby letters of credit $ 174,000 $ 166,000 $ 143,000
================================================================================
The Bank's exposure to credit loss, in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit, is represented by the contractual notional amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. The Bank evaluates each customer's creditworthiness on
a case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Bank upon extension of credit, is based on management's credit evaluation of
the counterparty. Collateral held varies but may include personal property,
commercial property, residential property, land and accounts receivable.
F-24
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loans to customers.
Profit-Sharing Plan
The Bank has a 401(k) profit-sharing plan (the "Plan") covering substantially
all employees. Participants may contribute up to 20% of their compensation to
the Plan. The Bank contributes 100% of the participant's contribution, up to 5%
of the participant's compensation, as a matching contribution. Contributions to
the Plan by the Bank were approximately $26,800 and $17,300; $24,100 and $22,400
for the nine months ended September 30, 1998 and 1997 and for the years ended
December 31, 1997 and 1996.
Operating Leases
The Bank leases land, tenant space and certain equipment under operating leases
expiring at various dates to 2006. Rental expense amounted to approximately
$112,000 and $107,000 for the nine months ended September 30, 1998 and 1997;
$142,000 in 1997 and $127,000 in 1996. At December 31, 1997, minimum annual
lease commitments in the aggregate were as follows:
Years Ending December 31,
================================================================================
1998 $ 131,000
1999 136,000
2000 141,000
2001 146,000
2002 148,000
Thereafter 476,000
================================================================================
$ 1,178,000
================================================================================
F-25
<PAGE>
Metropolitan Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Information as of September 30, 1998 and 1997 is Unaudited)
================================================================================
10. Related Parties
The Bank has entered into transactions with its directors, significant
shareholders, and their affiliates ("Related Parties"). The aggregate amount of
loans to such Related Parties at September 30, 1998, December 31, 1997 and 1996
was $300,000, $100,000 and $0. Management believes the terms extended to
Related Parties are similar to those extended to unrelated parties.
Certain directors of the Company are owners of an entity which has participated
in loans totaling approximately $578,000 and $214,000 at September 30, 1998 and
December 31, 1997. No loan was participated with the related entity at December
31, 1996.
11. Supplemental Disclosures of Cash Flow Information
Nine Months Ended Years Ended
September 30, December 31,
----------------------- -----------------------
1998 1997 1997 1996
================================================================================
Cash paid during the
year for:
Interest $1,460,000 $1,294,000 $1,760,000 $1,335,000
================================================================================
Income taxes $ 635,300 $ 278,000 $ 535,000 $ 603,500
================================================================================
Assets acquired
through foreclosure $ 530,424 $ - $ - $ -
================================================================================
12. Subsequent Events
On September 1, 1998, the Company entered into an Agreement and Plan of
Reorganization. Under the terms of the Agreement all of the Company's common
stock shall be exchanged for $24.5 million in common stock of the acquiring
company. The merger is scheduled to be consummated in February 1999.
F-26
<PAGE>
COMMUNITY BANK OF PARKER
Balance Sheet
December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and due from banks $ 2,107,032
Federal funds sold 3,900,000
-------------------------
Total cash and cash equivalents 6,007,031
Investment securities 2,729,241
Loans, net 27,768,338
Premises and equipment, net 712,761
Accrued interest receivable 214,632
Cash surrender value of life insurance 375,200
Other assets 119,412
-------------------------
$ 37,926,615
=========================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities
Deposits $ 34,441,569
Accrued interest payable 112,957
Other liabilities 457,593
-------------------------
Total liabilities 35,012,119
=========================
Stockholder's equity
Common stock:
Class A; $50 par value; 13,900 shares authorized,
issued and outstanding 695,000
Class B; nonvoting, $100 par value; 750 shares authorized,
issued and outstanding 75,000
Surplus 605,000
Retained earnings 1,539,496
-------------------------
Total stockholder's equity 2,914,496
-------------------------
$ 37,926,615
=========================
</TABLE>
The accompanying notes are an integral part
of these financial statements
F-27
<PAGE>
COMMUNITY BANK OF PARKER
Statement of Income
Year Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Interest income
Loans, including fees $ 2,958,062
Investments 133,759
Other 173,465
-------------------------
3,265,286
-------------------------
Interest expense
Deposits 759,991
-------------------------
Net interest income 2,505,295
-------------------------
Provision for loan losses 103,684
-------------------------
Net interest income after provision
for loan losses 2,401,611
-------------------------
Other income
Service charges 343,589
Credit card income 215,277
Other 340,899
-------------------------
899,765
-------------------------
Other expenses
Salaries and employee benefits 1,149,173
Occupancy 181,083
Furniture and equipment 129,869
Data processing 248,439
Other 683,283
-------------------------
2,391,847
-------------------------
Income before income taxes 909,529
Income tax expense 342,900
-------------------------
Net income $ 566,629
=========================
</TABLE>
The accompanying notes are an integral part
of these financial statements
F-28
<PAGE>
COMMUNITY BANK OF PARKER
Statement of Stockholder's Equity
Year Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Class A Class B
Common Common Retained
Stock Stock Surplus Earnings Total
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 $600,000 $75,000 $400,000 $1,040,287 $2,115,287
Issuance of 1,900 shares
of Class A Common
stock 95,000 - 205,000 - 300,000
Net income - - - 566,629 566,629
Dividends - - - (67,420) (67,420)
-------------------------------------------------------------------------------------------
Balance at
December 31, 1995 $695,000 $75,000 $605,000 $1,539,496 $2,914,496
===========================================================================================
</TABLE>
The accompanying notes are an integral part
of these financial statements
F-29
<PAGE>
COMMUNITY BANK OF PARKER
Statement of Cash Flows
Year Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
1995
---------------------------
<S> <C>
Cash flows from operating activities
Net income $ 566,629
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 103,684
Amortization of premiums 1,920
Accretion of discounts (30,894)
Depreciation and amortization expense 117,521
Change in:
Accrued interest receivable 4,400
Cash surrender value of life insurance (375,000)
Other assets (5,829)
Accrued interest payable 77,983
Other liabilities 127,886
---------------------------
Net cash provided by operating activities 588,300
---------------------------
Cash flows from investing activities
Loans originated, net of principal collections (5,173,096)
Proceeds from maturities and paydowns of held-to-maturity securities 2,454,143
Purchases of held-to-maturity securities (2,129,019)
Net additions to premises and equipment (265,332)
Recoveries of loans previously charged-off 36,154
---------------------------
Net cash used in investing activities (5,077,150)
---------------------------
Cash flows from financing activities
Increase in demand, savings and interest checking accounts 532,173
Increase in time deposits 5,589,866
Proceeds from issuance of common stock 300,000
Dividends paid (67,420)
---------------------------
Net cash provided by financing activities 6,354,619
---------------------------
Increase in cash and cash equivalents 1,865,769
Cash and cash equivalents, beginning of year 4,141,262
---------------------------
Cash and cash equivalents, end of year $ 6,007,031
===========================
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 682,008
===========================
Cash paid during the year for income taxes $ 519,229
===========================
</TABLE>
The accompanying notes are an integral part
of these financial statements
F-30
<PAGE>
COMMUNITY BANK OF PARKER
Notes to Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
a. Ownership
Community Bank of Parker, Parker, Colorado (Bank) is a wholly-owned
subsidiary of Wally Bancorp, Inc. (Company), a bank holding company
incorporated in the state of Colorado, February 8, 1993.
b. Nature of Operations
The Bank operates under a state bank charter and provides full banking
services. As a state bank, the Bank is subject to regulation of the
Federal Deposit Insurance Corporation and the Colorado Division of
Banking. The Community Bank of Parker serves customers located within
Douglas County, Colorado, and contiguous counties. Services are provided
at its main office in Parker, Colorado and its branch office in
Franktown, Colorado.
c. Cash and Cash Equivalents
For purposes of the statements of cash flows, Community Bank of Parker
considers cash on hand, amounts due from banks and Federal funds sold to
be cash and cash equivalents.
d. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
e. Investment Securities
Effective January 1, 1994, the Bank adopted Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain Investments
----------------------------------
in Debt and Equity Securities which requires that investments be
-----------------------------
classified in three categories and accounted for as follows: held-to-
maturity securities reported at amortized cost, trading securities
reported at fair value, with unrealized gains and losses included in
earnings, and available-for-sale securities reported at fair value, with
unrealized gains and losses shown as a separate component of
stockholder's equity. The Bank has classified all investments in debt
securities as held-to-maturity.
Restricted equity securities are reported at the lower of cost or
estimated fair value.
Gains and losses on sales of securities are determined on a specific
identification method.
F-31
<PAGE>
COMMUNITY BANK OF PARKER
Notes to Financial Statements, continued
(Unaudited)
1. Summary of Significant Accounting Policies (continued)
f. Loans
Loans are stated at principal balance adjusted for the allowance for
loan losses and deferred fees. Interest income on loans is accrued and
credited to operations based on the principal amount outstanding.
Interest accrual is discontinued when, in the opinion of management,
collection becomes doubtful.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield on the related
loan.
g. Allowance for Loan Losses
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the allowance
for loan losses when management believes the collectibility of the
principal is unlikely. The allowance is an amount management believes
will be adequate to absorb probable losses on existing loans that may
become uncollectible, based on evaluations of the collectibility of
loans and prior loan loss experience. The evaluations take into
consideration such factors as changes in the nature and volume of the
loan portfolio, overall portfolio quality, review of specific problem
loans, and current economic conditions and trends that may affect the
borrowers' ability to pay.
h. Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization are computed using
straight-line and accelerated methods based on the estimated useful
lives of the related assets. Leasehold improvements are amortized over
the related lease term.
i. Income Taxes
The Bank accounts for income taxes in accordance with the provisions of
SFAS No. 109, Accounting for Income Taxes. Amounts provided for income
---------------------------
taxes are based on income reported for financial statement purposes at
current tax rates after excluding non-taxable income and non-deductible
expenses. Such amounts include deferred income taxes which result from
temporary differences in the recognition of income and expenses in
different accounting periods for tax and financial reporting purposes.
These deferred taxes are computed using the asset and liability method
as prescribed by SFAS No. 109. The Company and the Bank file a
consolidated Federal income tax return. The parent company is reimbursed
from its subsidiary for any current income tax benefits derived.
F-32
<PAGE>
COMMUNITY BANK OF PARKER
Notes to Financial Statements, continued
(Unaudited)
2. Investment Securities
The amortized cost and estimated fair value of investment securities are
summarized as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1995 Cost Gains Losses Value
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury and agency
securities $2,555,847 $1,457 $(1,900) $2,555,404
Mortgage-backed securities 148,394 3,649 (420) 151,623
Restricted equity securities 25,000 - - 25,000
---------------------------------------------------------------------------------
Totals $2,729,241 $5,106 $(2,320) $2,732,027
=================================================================================
</TABLE>
The amortized cost and estimated fair value of investment securities at
December 31, 1995, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
-------------------------------------------
<S> <C> <C>
Due in one year or less $2,355,847 $2,355,592
Due after one year through five years 200,000 199,812
Due after five years through ten years - -
Due after ten years - -
-------------------------------------------
2,555,847 2,555,404
Mortgage-backed securities 148,394 151,263
Restricted equity securities (no maturity) 25,000 25,000
-------------------------------------------
$2,729,241 $2,732,027
===========================================
</TABLE>
At December 31, 1995 investment securities with a carrying value of
approximately $392,000 were pledged to secure public deposits and for other
purposes.
F-33
<PAGE>
COMMUNITY BANK OF PARKER
Notes to Financial Statements, continued
(Unaudited)
3. Loans
Loans are summarized as follows:
<TABLE>
<CAPTION>
1995
-----------------------
<S> <C>
Real estate $12,735,963
Commercial 2,761,520
Small Business Administration 2,218,985
Installment 2,884,806
Leases 4,913,341
Credit cards 2,277,797
Other 184,846
-----------------------
27,977,258
Allowance after loan losses (208,920)
-----------------------
$27,768,338
=======================
</TABLE>
Changes in the allowance for loan losses during 1995 are as follows:
<TABLE>
<CAPTION>
1995
-----------------------
<S> <C>
Balance, beginning of year $ 170,154
Provision for loan losses 103,684
Charge-offs, net of recoveries (64,918)
-----------------------
$ 208,920
=======================
</TABLE>
4. Premises and Equipment
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
1995
-----------------------
<S> <C>
Real estate acquired for future expansion $ 362,963
Leasehold improvements 280,188
Furniture, fixtures and equipment 618,574
Bank automobile 26,148
-----------------------
1,287,873
Accumulated depreciation and amortization (575,112)
-----------------------
$ 712,761
=======================
</TABLE>
F-34
<PAGE>
COMMUNITY BANK OF PARKER
Notes to Financial Statements, continued
(Unaudited)
5. Deposits
Deposits are summarized as follows:
<TABLE>
<CAPTION>
1995
---------------------
Demand
Non-interest-bearing
<S> <C>
Checking $ 8,199,391
Credit card security deposits 2,233,947
Interest-bearing
NOW 1,056,336
Money market 8,978,123
---------------------
20,467,797
---------------------
Savings 4,255,197
Time 9,718,575
---------------------
$34,441,569
=====================
</TABLE>
Time deposits, include certificates of deposit and individual retirement
accounts of $100,000 and over, totaled approximately $4,034,000 at December
31, 1995. Interest expense on these accounts totaled $163,000 during 1995.
Remaining maturities of time deposits at December 31, 1995 are as follows:
<TABLE>
<S> <C>
Less than one year $8,941,505
One to two years 275,618
Two to three years 483,807
Three to four years 17,645
---------------------
$9,718,575
=====================
</TABLE>
F-35
<PAGE>
COMMUNITY BANK OF PARKER
Notes to Financial Statements, continued
(Unaudited)
6. Income Taxes
Income tax expense (benefit) is summarized as follows:
<TABLE>
<CAPTION>
1995
---------------------
<S> <C>
Current tax expense:
Federal $ 333,189
State 45,962
---------------------
Total current expense 379,151
Deferred tax expense:
Federal (32,201)
State (4,050)
---------------------
Total deferred expense (36,251)
---------------------
Total income tax expense $ 342,900
=====================
</TABLE>
The sources of the deferred tax asset are summarized as follows:
<TABLE>
<CAPTION>
1995
---------------------
<S> <C>
Deferred loan fees $41,000
Premises and equipment 14,000
Allowance for loan losses 14,000
Other 13,000
---------------------
$82,000
=====================
</TABLE>
A reconciliation of expected Federal tax expense to actual tax expense is
summarized as follows:
<TABLE>
<CAPTION>
1995
----
Amount %
-------------------------------------------
<S> <C> <C>
Expected Federal income tax expense $309,250 34.0
State taxes, net of Federal income tax benefit 27,400 3.0
Other 6,250 0.7
-------------------------------------------
$342,900 37.7
===========================================
</TABLE>
F-36
<PAGE>
COMMUNITY BANK OF PARKER
Notes to Financial Statements, continued
(Unaudited)
7. Financial Instruments with Off-Balance Sheet Risk
Financial instruments which represent off-balance-sheet credit risk consist
of open commitments to extend credit. Open commitments to extend credit
amounted to approximately $7,880,000 at December 31, 1995. Such agreements
require the Bank to lend to a customer as long as there is no violation of
any condition established in the contract. Commitments generally have
fixed expiration dates or other termination clauses. Since many of the
commitments are expected to expire without being fully drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained (if deemed necessary
by the Bank upon extension of credit) is based on management's credit
evaluation of the customer. Collateral held varies, but may include
accounts receivable, inventory, property, plant and equipment, and income-
producing commercial properties. Commitments which are in excess of the
Bank's legal lending limit are made only upon confirmation of acceptance by
a participating bank.
8. Concentration of Credit Risk
The Bank grants commercial, consumer and real estate loans to customers in
the Douglas/Elbert County area. Although the Bank has a diversified loan
portfolio, a substantial portion of the Bank's debtors' ability to honor
their contracts is dependent upon the real estate economic sector. The
concentrations of credit by type are set forth in Note 3.
9. Interest Rate Risk
Changes in prevailing interest rates can cause changes in the Bank's net
interest margin, and in the market value of assets. Changes in interest
rates cannot be predicted and, historically, interest rates have sometimes
been subject to periodic, volatile changes. There can be no assurance that
such interest rate changes will not occur in the future.
F-37
<PAGE>
COMMUNITY BANK OF PARKER
Notes to Financial Statements, continued
(Unaudited)
10. Related Party Transactions
The Bank leases its main and branch facilities from a company related
through common ownership. The leases are classified as operating leases
and expire at various dates through January 2002. The leases on these
facilities require the Bank to pay related taxes, insurance and
maintenance. The Bank is obligated under these and other operating leases
which require minimum rental payments. Total rental expense for 1995
amounted to approximately $125,000. Future minimum rental payments under
operating leases with terms of one year or more at December 31, 1995 are as
follows:
<TABLE>
Year ending December 31, Amount
------------------------ ---------------------
<S> <C>
1996 $115,000
1997 109,000
1998 108,000
1999 63,000
Thereafter 131,000
---------------------
$526,000
=====================
</TABLE>
The Bank has sold certain loan participations to a director/shareholder of
the Bank and members of his family. At December 31, 1995 the total loan
participations sold to related parties was $319,000. These loans had terms
similar to loans sold to other participants.
The Bank makes loans to officers, directors and stockholders in the normal
course of business under substantially the same terms as it does to others.
At December 31, 1995 direct loans to such parties aggregated approximately
$228,000. During 1995, new loans to related parties amounted to $173,000
and repayments amounted to $49,000. At December 31, 1995, normal
depository arrangements of such parties with the Bank amounted to
approximately $1,388,000.
The Bank operates a lease brokering company. During 1995 the director
presented leases to the Bank. The director was paid a fee for each lease
that the Bank accepted. Total fees received by the director were
approximately $78,000 for 1995.
F-38
<PAGE>
COMMUNITY BANK OF PARKER
Notes to Financial Statements, continued
(Unaudited)
11. Dividends
Banking regulations place various restrictions which limit the extent to
which dividends may be paid by the Bank without approval of these
regulatory agencies. The approval of the Colorado Banking Board is
required for the Bank to pay dividends in any calendar year which exceed
the Bank's net profits for that year combined with its retained profits for
the preceding two years.
12. Regulatory Capital Requirements
The Bank is subject to various regulatory capital requirements administered
by the Federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain off-
balance-sheet items as calculated under regulatory accounting practices.
The Bank's capital amounts and classifications are also subject to
qualitative judgments by the regulators about components, risk weightings,
and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum ratios of total and Tier I capital (as
defined in the regulations) to risk-weighted assets (as defined) of 8% and
4%, respectively, and Tier I capital (as defined) to average assets (as
defined) of 4%. As of December 31, 1995, the Bank meets all capital
adequacy requirements to which it is subject. The Bank's total capital to
risk-weighted assets was 10.82%, Tier I capital to risk-weighted assets was
10.09% and the Tier I capital ratio was 7.68%.
As of December 31, 1995, the Bank was categorized as well capitalized under
the regulatory framework for prompt corrective action. To be categorized
as well capitalized the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I capital ratios of 10%, 6% and 5%, respectively.
There are no conditions or events since December 31, 1995 that management
believes have changed the institution's category.
13. Stockholder's Equity
Each outstanding share of Class A Common Stock shall be entitled to one
vote and each fractional share of Class A Common Stock shall be entitled to
a corresponding fractional vote on each matter submitted to a vote of
stockholders. Cumulative voting shall not be allowed in the election of
directors of the Bank and every stockholder entitled to vote at such
election shall have the right to vote the number of shares owned by him for
as many persons as there are directors to be elected, and for whose
election he has a right to vote.
F-39
<PAGE>
COMMUNITY BANK OF PARKER
Notes to Financial Statements, continued
(Unaudited)
13. Stockholder's Equity (continued)
Except as otherwise provided by law, the holders of Class B Common Stock
shall not be entitled to vote at any meeting of stockholders for the
election of directors or for any other purpose or otherwise participate in
any action taken by the Bank or the stockholders thereof, or to receive
notice of any meeting of stockholders.
14. Subsequent Events
On July 12, 1995, the Company entered into a Stock Purchase Agreement, as
amended August 14, 1995 and December 19, 1995. The acquisition of the
Company's stock was consummated on January 10, 1996, resulting in the Bank
recording approximately $2,426,000 in goodwill.
15. Disclosures About the Fair Value of Financial Instruments
The following disclosures of the estimated fair value of financial
instruments are made in accordance with the requirements of SFAS No. 107,
Disclosures about Fair Value of Financial Instruments. The estimated fair
-----------------------------------------------------
value amounts have been determined by the Bank using available market
information and valuation methodologies. However, considerable judgment is
necessarily required to interpret market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Bank could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material impact on the estimated fair value
amounts.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:
CASH AND CASH EQUIVALENTS
The current carrying amount is a reasonable estimate of fair value.
INVESTMENT SECURITIES
An estimate of the fair value for investment securities, including
mortgage-backed securities, is made utilizing quoted market data for
publicly traded securities, where available. A third-party pricing service
that specializes in "matrix pricing" and modeling techniques provides
estimated fair values for securities not actively traded.
F-40
<PAGE>
COMMUNITY BANK OF PARKER
Notes to Financial Statements, continued
(Unaudited)
15. Disclosures About the Fair Value of Financial (continued)
LOANS
The fair value of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.
CASH SURRENDER VALUE OF LIFE INSURANCE
The current carrying amount is a reasonable estimate of fair value.
DEPOSITS
The fair value of demand deposits, savings accounts and money market
deposits is the amount payable on demand at the reporting date. The fair
value of fixed-maturity certificates of deposit is estimated by discounting
the future cash flows using the rates currently offered for deposits of
similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair value of commitments is estimated using the fees currently charged
to enter into similar agreements, taking into account the remaining terms
of the agreements and the present creditworthiness of the customers. For
fixed-rate loan commitments, fair value also considers the difference
between current levels of interest rates and the committed rates. The
estimated fair value of letters of credit is based on the fees currently
charged for similar agreements. These instruments were determined to have
no positive or negative market value adjustments and are not listed in the
following table.
<TABLE>
<CAPTION>
December 31, 1995
-----------------------------------------
Carrying Fair
Amount Value
-----------------------------------------
(In thousands)
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 6,007 $ 6,007
Investment securities 2,729 2,732
Loans, net of allowance 27,768 27,740
Cash surrender value of life insurance 375 375
Financial liabilities:
Deposits 34,442 34,456
</TABLE>
F-41
<PAGE>
COMMUNITY BANK OF PARKER
Notes to Financial Statements, continued
(Unaudited)
15. Disclosures About the Fair Value of Financial (continued)
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT (CONTINUED)
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1995. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of the financial statements since that date and,
therefore, current estimates of fair value may differ significantly from
the amounts presented.
F-42
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
<PAGE>
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as of
the 1st day of September, 1998, by and between METROPOLITAN BANCSHARES, INC.
("Metropolitan"), a Colorado corporation, and NORWEST CORPORATION ("Norwest"), a
Delaware corporation.
WHEREAS, the parties hereto desire to effect a reorganization whereby a
wholly-owned subsidiary of Norwest will merge with and into Metropolitan (the
"Merger") pursuant to an agreement and plan of merger (the "Merger Agreement")
in substantially the form attached hereto as Exhibit A, which provides, among
other things, for the conversion and exchange of the shares of Common Stock of
Metropolitan of the par value of $1.00 per share ("Metropolitan Common Stock")
outstanding immediately prior to the time the Merger becomes effective in
accordance with the provisions of the Merger Agreement into shares of voting
Common Stock of Norwest of the par value of $1-2/3 per share ("Norwest Common
Stock"),
NOW, THEREFORE, to effect such reorganization and in consideration of the
premises and the mutual covenants and agreements contained herein, the parties
hereto do hereby represent, warrant, covenant and agree as follows:
1. BASIC PLAN OF REORGANIZATION
(a) Merger. Subject to the terms and conditions contained herein, a
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wholly-owned subsidiary of Norwest (the "Merger Co.") will be merged by
statutory merger with and into Metropolitan pursuant to the Merger Agreement,
with Metropolitan as the surviving corporation, in which merger each share of
Metropolitan Common Stock outstanding immediately prior to the Effective Time of
the Merger (as defined below) (other than shares as to which statutory
dissenters' appraisal rights have been exercised) will be converted into and
exchanged for that number of shares of Norwest Common Stock determined by
dividing the Adjusted Norwest Shares by the number of shares of Metropolitan
Common Stock then outstanding. The "Adjusted Norwest Shares" shall be a number
equal to $24,500,000 divided by the Norwest Measurement Price. The "Norwest
Measurement Price" is defined as the average of the closing prices of a share of
Norwest Common Stock as reported on the consolidated tape of the New York Stock
Exchange during the period of 20 trading days ending on the day immediately
preceding the meeting of shareholders required by paragraph 4(c) of this
Agreement.
(b) Norwest Common Stock Adjustments. If, between the date hereof and the
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Effective Time of the Merger, shares of Norwest Common Stock shall be changed
into a different number of shares or a different class of shares by reason of
any reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or if a stock dividend thereon shall be declared with a
record date within such period (a "Common Stock Adjustment"), then the number of
shares of Norwest Common Stock into which a
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share of Metropolitan Common Stock shall be converted pursuant to subparagraph
(a), above, will be appropriately and proportionately adjusted so that the
number of such shares of Norwest Common Stock into which a share of Metropolitan
Common Stock shall be converted will equal the number of shares of Norwest
Common Stock which holders of shares of Metropolitan Common Stock would have
received pursuant to such Common Stock Adjustment had the record date therefor
been immediately following the Effective Time of the Merger.
(c) Fractional Shares. No fractional shares of Norwest Common Stock and
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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 Norwest Measurement Price.
(d) Mechanics of Closing Merger. Subject to the terms and conditions set
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forth herein, the Merger Agreement shall be executed and it or Articles of
Merger or a Certificate of Merger shall be filed with the Secretary of State of
the State of Colorado within ten (10) business days following the satisfaction
or waiver of all conditions precedent set forth in Sections 6 and 7 of this
Agreement or on such other date as may be agreed to by the parties (the "Closing
Date"). Each of the parties agrees to use its best efforts to cause the Merger
to be completed as soon as practicable after the receipt of final regulatory
approval of the Merger and the expiration of all required waiting periods. The
time that the filing referred to in the first sentence of this paragraph is made
is herein referred to as the "Time of Filing." The day on which such filing is
made and accepted is herein referred to as the "Effective Date of the Merger."
The "Effective Time of the Merger" shall be 11:59 p.m. Denver, Colorado 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 Metropolitan pursuant to the Merger
Agreement.
The closing of the transactions contemplated by this Agreement and the
Merger Agreement (the "Closing") shall take place on the Closing Date at the
offices of Norwest, Norwest Center, Sixth and Marquette, Minneapolis, Minnesota.
2. REPRESENTATIONS AND WARRANTIES OF METROPOLITAN. Metropolitan
represents and warrants to Norwest as follows:
(a) Organization and Authority. Metropolitan is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Colorado, 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 Metropolitan and the Metropolitan 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. Metropolitan
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").
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Metropolitan has furnished Norwest true and correct copies of its articles of
incorporation and by-laws, as amended.
(b) Metropolitan's Subsidiaries. Schedule 2(b) sets forth a complete and
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correct list of all of Metropolitan's subsidiaries as of the date hereof
(individually a "Metropolitan Subsidiary" and collectively the "Metropolitan
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
Metropolitan. No equity security of any Metropolitan 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 Metropolitan Subsidiary is bound to issue additional
shares of its capital stock, or any option, warrant or right to purchase or
acquire any additional shares of its capital stock. Subject to 12 U.S.C. (S) 55
(1982) and the Colorado Business Corporation Act, all of such shares so owned by
Metropolitan are fully paid and nonassessable and, except as set forth on
Schedule 2(b), are owned by it free and clear of any lien, claim, charge,
option, encumbrance or agreement with respect thereto. Each Metropolitan
Subsidiary is a corporation or a bank chartered under the Colorado Banking Act
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), Metropolitan 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 Metropolitan consists
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of 1,000,000 shares of common stock, $1.00 par value, of which as of the close
of business on June 30, 1998, 41,250 shares were outstanding, and no shares were
held in the treasury. The maximum number of shares of Metropolitan Common Stock
(assuming for this purpose that phantom shares and other share-equivalents
constitute Metropolitan 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 47,550 shares. All of the
outstanding shares of capital stock of Metropolitan 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 Metropolitan or any Metropolitan Subsidiary to issue, sell or
otherwise dispose of, or to purchase, redeem or otherwise acquire, any shares of
capital stock of Metropolitan or any Metropolitan Subsidiary. Since June 30,
1998, no shares of Metropolitan capital stock have been purchased, redeemed or
otherwise acquired, directly or indirectly, by Metropolitan or any Metropolitan
Subsidiary and no dividends or other distributions have been declared, set
aside, made or paid to the shareholders of Metropolitan.
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(d) Authorization. Metropolitan has the corporate power and authority to
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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 Metropolitan and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Metropolitan. Subject to such approvals of shareholders and of
government agencies and other governing boards having regulatory authority over
Metropolitan as may be required by statute or regulation, this Agreement and the
Merger Agreement are valid and binding obligations of Metropolitan enforceable
against Metropolitan in accordance with their respective terms.
Except as set forth on Schedule 2(d), neither the execution, delivery and
performance by Metropolitan of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor compliance
by Metropolitan 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 Metropolitan or any Metropolitan
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 Metropolitan or any Metropolitan Subsidiary is a party or by which it may
be bound, or to which Metropolitan or any Metropolitan Subsidiary or any of the
properties or assets of Metropolitan or any Metropolitan 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 Metropolitan,
violate any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to Metropolitan or any Metropolitan Subsidiary or any of
their respective properties or assets.
Other than in connection or in compliance with the provisions of the
Securities Act of 1933 and the rules and regulations thereunder (the "Securities
Act"), the Securities Exchange Act of 1934 and the rules and regulations
thereunder (the "Exchange Act"), the securities or blue sky laws of the various
states or filings, consents, reviews, authorizations, approvals or exemptions
required under the BHC Act or the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 ("HSR Act"), and filings required to effect the Merger under Colorado
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 Metropolitan of the transactions contemplated by this Agreement
and the Merger Agreement.
(e) Metropolitan Financial Statements. The consolidated balance sheets of
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Metropolitan and the Metropolitan Subsidiaries as of December 31, 1996 and 1997
and related consolidated statements of income, shareholders' equity and cash
flows for the two (2) years ended December 31, 1997, together with the notes
thereto, certified by BDO Seidman, LLP, and the unaudited statements of
financial condition of Metropolitan
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and the Metropolitan Subsidiaries as of June 30, 1998 and the related unaudited
statements of income, for the six (6) months then ended (collectively, the
"Metropolitan Financial Statements"), have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as may otherwise be disclosed therein) and present fairly the consolidated
financial position of Metropolitan and the Metropolitan Subsidiaries and the
consolidated results of operations and cash flows of Metropolitan and the
Metropolitan Subsidiaries as of, and for the periods ending, December 31, 1996
and 1997 and (subject, in the case of financial statements for interim periods,
to normal recurring adjustments) the financial position of Metropolitan and the
Metropolitan Subsidiaries and the results of operations of Metropolitan and the
Metropolitan Subsidiaries, as of, and for the period ending, June 30, 1998.
(f) Reports. Since December 31, 1993, Metropolitan (or its predecessor)
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and each Metropolitan 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 Federal Deposit
Insurance Corporation (the "FDIC"), (iv) the United States Comptroller of the
Currency (the "Comptroller") and (v) any applicable state securities or banking
authorities. All such reports and statements filed with any such regulatory
body or authority are collectively referred to herein as the "Metropolitan
Reports." As of their respective dates, the Metropolitan Reports complied in
all material respects with all the rules and regulations promulgated by the SEC,
the Federal Reserve Board, the FDIC, the Comptroller and applicable state
securities or banking authorities, as the case may be, and did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Copies of all
the Metropolitan Reports have been made available to Norwest by Metropolitan.
(g) Properties and Leases. Except as may be reflected in the Metropolitan
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Financial Statements and except for any lien for current taxes not yet
delinquent, Metropolitan and each Metropolitan 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
Metropolitan's balance sheet as of June 30, 1998 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 Metropolitan or any
Metropolitan Subsidiary pursuant to which Metropolitan or such Metropolitan
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 Metropolitan or such Metropolitan Subsidiary or any event which, with
notice or lapse of time or both, would constitute such a material default.
Substantially all Metropolitan's and each Metropolitan Subsidiary's buildings
and equipment in regular use have been well maintained and are in good and
serviceable condition, reasonable wear and tear excepted.
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(h) Taxes. Each of Metropolitan and the Metropolitan Subsidiaries has
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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 Metropolitan
and the Metropolitan Subsidiaries for the fiscal year ended December 31, 1994,
and for all fiscal years prior thereto, are for the purposes of routine audit by
the Internal Revenue Service closed because of the statute of limitations, and
no claims for additional taxes for such fiscal years are pending. Except only
as set forth on Schedule 2(h), (i) neither Metropolitan nor any Metropolitan
Subsidiary is a party to any pending action or proceeding, nor, to the best
knowledge of Metropolitan, 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 Metropolitan or any
Metropolitan Subsidiary which has not been settled, resolved and fully
satisfied. Except for amounts not yet due and payable, each of Metropolitan and
the Metropolitan Subsidiaries has paid all taxes owed or which it is required to
withhold from amounts owing to employees, creditors or other third parties. The
balance sheet as of June 30, 1998, 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
Metropolitan and the Metropolitan Subsidiaries with respect to all periods
through the date thereof.
(i) Absence of Certain Changes. Since December 31, 1997, there has been
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no change in the business, financial condition or results of operations of
Metropolitan or any Metropolitan 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 Metropolitan and the Metropolitan Subsidiaries taken
as a whole.
(j) Commitments and Contracts. Except as set forth on Schedule 2(j),
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neither Metropolitan nor any Metropolitan Subsidiary is a party or subject to
any of the following (whether written or oral, express or implied):
(i) any employment contract or understanding (including any
understandings or obligations with respect to severance or termination pay
liabilities or fringe benefits) with any present or former officer,
director, employee or consultant (other than those which are terminable at
will by Metropolitan or such Metropolitan 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;
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(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 Metropolitan or any
Metropolitan 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, Metropolitan or any Metropolitan Subsidiary may carry
on its business (other than as may be required by law or applicable
regulatory authorities);
(v) any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K; or
(vi) any lease with annual rental payments aggregating $10,000 or
more; or
(vii) any agreement or commitment with respect to the Community
Reinvestment Act with any state or federal bank regulatory authority or any
other party; or
(viii) any current or past agreement, contract or understanding with any
current or former director, officer, employee, consultant, financial
adviser, broker, dealer, or agent providing for any rights of
indemnification in favor of such person or entity.
(k) Litigation and Other Proceedings. Metropolitan has furnished Norwest
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copies of (i) all attorney responses to the request of the independent auditors
for Metropolitan with respect to loss contingencies as of December 31, 1997 in
connection with the Metropolitan Financial Statements for the annual period then
ended, and (ii) a written list of legal and regulatory proceedings filed against
Metropolitan or any Metropolitan Subsidiary since said date or currently
pending. Neither Metropolitan nor any Metropolitan Subsidiary is a party to any
pending or, to the best knowledge of Metropolitan, 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 Metropolitan and the
Metropolitan Subsidiaries taken as a whole.
(l) Insurance. Metropolitan and each Metropolitan Subsidiary is presently
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insured, and since January 10, 1996, (or during such lesser period of time as
Metropolitan has owned such Metropolitan 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.
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(m) Compliance with Laws. Metropolitan and each Metropolitan Subsidiary
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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 Metropolitan or
such Metropolitan Subsidiary; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to the best
knowledge of Metropolitan, no suspension or cancellation of any of them is
threatened; and all such filings, applications and registrations are current.
The conduct by Metropolitan and each Metropolitan 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
Metropolitan nor any Metropolitan Subsidiary is in default under any order,
license, regulation or demand of any federal, state, municipal or other
governmental agency or with respect to any order, writ, injunction or decree of
any court. Except for statutory or regulatory restrictions of general
application and except as set forth on Schedule 2(m), no federal, state,
municipal or other governmental authority has placed any restriction on the
business or properties of Metropolitan or any Metropolitan Subsidiary which
reasonably could be expected to have a material adverse effect on the business
or properties of Metropolitan and the Metropolitan Subsidiaries taken as a
whole.
(n) Labor. No work stoppage involving Metropolitan or any Metropolitan
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Subsidiary is pending or, to the best knowledge of Metropolitan, threatened.
Neither Metropolitan nor any Metropolitan Subsidiary is involved in, affected by
or, to the best knowledge of Metropolitan, threatened with, any labor dispute,
arbitration, lawsuit or administrative proceeding which could materially and
adversely affect the business of Metropolitan or such Metropolitan Subsidiary.
Employees of Metropolitan and the Metropolitan 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
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Schedule 2(o), to the best knowledge of Metropolitan no officer or director of
Metropolitan or any Metropolitan 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 Metropolitan or
any Metropolitan Subsidiary.
Schedule 2(o) sets forth a correct and complete list of any loan from
Metropolitan or any Metropolitan 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 Metropolitan's or such Metropolitan Subsidiary's Board of Directors.
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(p) Metropolitan Benefit Plans.
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(i) The only "employee benefit plans" within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), for which Metropolitan or any Metropolitan Subsidiary acts as
the plan sponsor as defined in ERISA Section 3(16)(B), and with respect to
which any liability under ERISA or otherwise exists or may be incurred by
Metropolitan or any Metropolitan Subsidiary are those set forth on Schedule
2(p) (the "Plans"). No Plan is a "multi-employer plan" within the meaning
of Section 3(37) of ERISA.
(ii) Each Plan is and has been in all material respects operated and
administered in accordance with its provisions and applicable law. Except
as set forth on Schedule 2(p), Metropolitan or the Metropolitan
Subsidiaries have received favorable determination letters from the
Internal Revenue Service under the provisions of the Tax Reform Act of 1986
("TRA `86") for each of the Plans to which the qualification requirements
of Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), apply. Metropolitan knows of no reason that any Plan which is
subject to the qualification provisions of Section 401(a) of the Code is
not "qualified" within the meaning of Section 401(a) of the Code and that
each related trust is not exempt from taxation under Section 501(a) of the
Code.
(iii) The present value of all benefits vested and all benefits
accrued under each Plan which is subject to Title IV of ERISA did not, in
each case, as determined for purposes of reporting on Schedule B to the
Annual Report on Form 5500 of each such Plan as of the end of the most
recent Plan year exceed the value of the assets of the Plan allocable to
such vested or accrued benefits.
(iv) Except as disclosed in Schedule 2(p), and to the best knowledge
of Metropolitan, no Plan or any trust created thereunder, nor any trustee,
fiduciary or administrator thereof, has engaged in a "prohibited
transaction," as such term is defined in Section 4975 of the Code or
Section 406 of ERISA or violated any of the fiduciary standards under Part
4 of Title I of ERISA which could subject, to the best knowledge of
Metropolitan, such Plan or trust, or any trustee, fiduciary or
administrator thereof, or any party dealing with any such Plan or trust, to
the tax or penalty on prohibited transactions imposed by said Section 4975
or would result in material liability to Metropolitan and the Metropolitan
Subsidiaries taken as a whole.
(v) No Plan which is subject to Title IV of ERISA or any trust
created thereunder has been terminated, nor have there been any "reportable
events" as that term is defined in Section 4043 of ERISA, with respect to
any Plan, other than those events which may result from the transactions
contemplated by this Agreement and the Merger Agreement.
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(vi) No Plan or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is defined in Section 412 of
the Code (whether or not waived), since the effective date of ERISA.
(vii) Except as disclosed in Schedule 2(p), neither the execution and
delivery of this Agreement and the Merger Agreement nor the consummation of
the transactions contemplated hereby and thereby will (i) result in any
material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director
or employee or former employee of Metropolitan or any Metropolitan
Subsidiary under any Plan or otherwise, (ii) materially increase any
benefits otherwise payable under any Plan or (iii) result in the
acceleration of the time of payment or vesting of any such benefits to any
material extent.
(q) Proxy Statement, etc. None of the information regarding Metropolitan
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and the Metropolitan Subsidiaries supplied or to be supplied by Metropolitan for
inclusion in (i) a Registration Statement on Form S-4 to be filed with the SEC
by Norwest for the purpose of registering the shares of Norwest Common Stock to
be exchanged for shares of Metropolitan Common Stock pursuant to the provisions
of the Merger Agreement (the "Registration Statement"), (ii) the proxy statement
to be mailed to Metropolitan'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.
(r) Registration Obligations. Except as set forth on Schedule 2(r),
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neither Metropolitan nor any Metropolitan Subsidiary is under any obligation,
contingent or otherwise, which will survive the Merger by reason of any
agreement to register any of its securities under the Securities Act.
(s) Brokers and Finders. Except for The Wallach Company, Inc., neither
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Metropolitan nor any Metropolitan 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
Metropolitan or any Metropolitan Subsidiary in connection with this Agreement
and the Merger Agreement or the transactions contemplated hereby and thereby.
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(t) Administration of Trust Accounts. Each of Metropolitan and the
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Metropolitan Subsidiaries has properly administered in all respects material and
which could reasonably be expected to be material to the financial condition of
Metropolitan and the Metropolitan 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 Metropolitan, any Metropolitan Subsidiary, nor any director, officer or
employee of Metropolitan or any Metropolitan 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
Metropolitan and the Metropolitan 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 Metropolitan nor any Metropolitan Subsidiary is
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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 Metropolitan and the Metropolitan Subsidiaries,
taken as a whole. To the best of Metropolitan's knowledge, all parties with
whom Metropolitan or any Metropolitan Subsidiary has material leases, agreements
or contracts or who owe to Metropolitan or any Metropolitan Subsidiary material
obligations other than with respect to those arising in the ordinary course of
the banking business of the Metropolitan Subsidiaries are in compliance
therewith in all material respects.
(v) Environmental Liability. There is no legal, administrative, or other
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proceeding, claim, or action of any nature seeking to impose, or that could
result in the imposition of, on Metropolitan or any Metropolitan 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 Metropolitan's knowledge, threatened against Metropolitan or any
Metropolitan Subsidiary the result of which has had or could reasonably be
expected to have a material adverse effect upon Metropolitan and the
Metropolitan Subsidiaries taken as a whole; to the best of Metropolitan's
knowledge there is no reasonable basis for any such proceeding, claim or action;
and to the best of Metropolitan's knowledge neither Metropolitan nor any
Metropolitan 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. Metropolitan has provided Norwest with copies of all
environmental assessments, reports, studies and other related information in its
possession with respect to each bank facility and each non-residential OREO
property.
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(w) Compliance with Year 2000 Requirements. Except as set forth in
--------------------------------------
Schedule 2(w), Metropolitan 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"). Metropolitan
has made its Year 2000 project assessment and remediation plan available to
Norwest for review and has furnished Norwest with copies of all communications
between Metropolitan or any Metropolitan Subsidiary and regulators having
responsibility for overseeing compliance with such current FFIEC Requirements.
3. REPRESENTATIONS AND WARRANTIES OF NORWEST. Norwest represents and
warrants to Metropolitan as follows:
(a) Organization and Authority. Norwest is a corporation duly organized,
--------------------------
validly existing and in good standing under the laws of the State of Delaware,
is duly qualified to do business and is in good standing in all jurisdictions
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and failure to be so qualified would have a
material adverse effect on Norwest and its subsidiaries taken as a whole and has
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted. Norwest is registered as a bank
holding company with the Federal Reserve Board under the BHC Act.
(b) Norwest Subsidiaries. Schedule 3(b) sets forth a complete and correct
--------------------
list as of December 31, 1997, of Norwest's Significant Subsidiaries (as defined
in Regulation S-X promulgated by the SEC) (individually a "Norwest Subsidiary"
and collectively the "Norwest Subsidiaries"), all shares of the outstanding
capital stock of each of which, except as set forth in Schedule 3(b), are owned
directly or indirectly by Norwest. No equity security of any Norwest Subsidiary
is or may be required to be issued to any person or entity other than Norwest by
reason of any option, warrant, scrip, right to subscribe to, call or commitment
of any character whatsoever relating to, or security or right convertible into,
shares of any capital stock of such subsidiary, and there are no contracts,
commitments, understandings or arrangements by which any Norwest Subsidiary is
bound to issue additional shares of its capital stock, or options, warrants or
rights to purchase or acquire any additional shares of its capital stock.
Subject to 12 U.S.C. (S) 55 (1982), all of such shares so owned by Norwest are
fully paid and nonassessable and are owned by it free and clear of any lien,
claim, charge, option, encumbrance or agreement with respect thereto. Each
Norwest Subsidiary is a corporation or national banking association duly
organized, validly existing, duly qualified to do business and in good standing
under the laws of its jurisdiction of incorporation, and has corporate power and
authority to own or lease its properties and assets and to carry on its business
as it is now being conducted.
(c) Norwest Capitalization. As of March 31, 1998, the authorized capital
----------------------
stock of Norwest consists of (i) 5,000,000 shares of Preferred Stock, without
par value, of which as of the close of business on March 31, 1998, 980,000
shares of Cumulative Tracking Preferred Stock, at $200 stated value, and 9,956
shares of ESOP Cumulative Convertible
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<PAGE>
Preferred Stock, at $1,000 stated value, 20,510 shares of 1995 ESOP Cumulative
Convertible Preferred Stock, at $1,000 stated value, 22,644 shares of 1996 ESOP
Cumulative Convertible Preferred Stock, at $1,000 stated value, and 20,220
shares of 1997 ESOP Cumulative Convertible Preferred Stock, at $1,000 stated
value, and 29,498 shares of 1998 ESOP Cumulative Convertible Preferred Stock at
$1,000 stated value were outstanding; (ii) 4,000,000 shares of Preference Stock,
without par value, of which as of the close of business on March 31, 1998, no
shares were outstanding; and (iii) 1,000,000,000 shares of Common Stock, $1-2/3
par value, of which as of the close of business on March 31, 1998, 769,113,149
shares were outstanding and 11,502,502 shares were held in the treasury. All of
the outstanding shares of capital stock of Norwest have been duly and validly
authorized and issued and are fully paid and nonassessable. On June 7, 1998,
Norwest entered into an Agreement and Plan of Merger (the "Wells Merger
Agreement") by and between Norwest and Wells Fargo & Company ("Wells Fargo"), a
Delaware corporation, under which it is contemplated that Wells Fargo will merge
with and into Norwest, with Norwest as the surviving corporation (the "Wells
Merger"). The Wells Merger Agreement provides that, prior to consummation of the
Wells Merger, Norwest will amend its Restated Certificate of Incorporation to
provide that Norwest shall have authority to issue an aggregate 20,000,000
shares of Preferred Stock without par value, 4,000,000 of Preference Stock
without par value, and 4,000,000,000 shares of Common Stock of the par value of
$1-2/3 per share. Effective as of June 8, 1998, Norwest amended its Restated
Certificate of Incorporation to increase its authorized Common Stock to
2,000,000,000 shares of Common Stock, $1-2/3 par value per share.
(d) Authorization. Norwest has the corporate power and authority to enter
-------------
into this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance of this Agreement by Norwest and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of Norwest. No approval or consent by the stockholders of Norwest is
necessary for the execution and delivery of this Agreement and the Merger
Agreement and the consummation of the transactions contemplated hereby and
thereby. Subject to such approvals of government agencies and other governing
boards having regulatory authority over Norwest as may be required by statute or
regulation, this Agreement is a valid and binding obligation of Norwest
enforceable against Norwest in accordance with its terms.
Neither the execution, delivery and performance by Norwest of this
Agreement or the Merger Agreement, nor the consummation of the transactions
contemplated hereby and thereby, nor compliance by Norwest with any of the
provisions hereof or thereof, will (i) violate, conflict with, or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration of, or result in the creation of, any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Norwest or any Norwest Subsidiary under any of the terms, conditions or
provisions of (x) its certificate of incorporation or by-laws or (y) any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Norwest or any Norwest
Subsidiary is a party or by which it may be bound, or to which Norwest or any
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<PAGE>
Norwest Subsidiary or any of the properties or assets of Norwest or any Norwest
Subsidiary may be subject, or (ii) subject to compliance with the statutes and
regulations referred to in the next paragraph, to the best knowledge of Norwest,
violate any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to Norwest or any Norwest Subsidiary or any of their
respective properties or assets.
Other than in connection with or in compliance with the provisions of the
Securities Act, the Exchange Act, the securities or blue sky laws of the various
states or filings, consents, reviews, authorizations, approvals or exemptions
required under the BHC Act or the HSR Act, and filings required to effect the
Merger under Colorado law, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or authority is necessary
for the consummation by Norwest of the transactions contemplated by this
Agreement and the Merger Agreement.
(e) Norwest Financial Statements. The consolidated balance sheets of
----------------------------
Norwest and Norwest's subsidiaries as of December 31, 1996 and 1997 and related
consolidated statements of income, stockholders' equity and cash flows for the
three years ended December 31, 1997, together with the notes thereto, certified
by KPMG Peat Marwick and included in Norwest's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 (the "Norwest 10-K") as filed with the
SEC, and the unaudited consolidated balance sheets of Norwest and its
subsidiaries as of June 30, 1998 and the related unaudited consolidated
statements of income and cash flows for the six (6) months then ended included
in Norwest's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1998, as filed with the SEC (collectively, the "Norwest Financial Statements"),
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis and present fairly (subject, in the case of
financial statements for interim periods, to normal recurring adjustments) the
consolidated financial position of Norwest and its subsidiaries at the dates and
the consolidated results of operations, changes in financial position and cash
flows of Norwest and its subsidiaries for the periods stated therein.
(f) Reports. Since December 31, 1993, Norwest and each Norwest Subsidiary
-------
has filed all reports, registrations and statements, together with any required
amendments thereto, that it was required to file with (i) the SEC, including,
but not limited to, Forms 10-K, Forms 10-Q and proxy statements, (ii) the
Federal Reserve Board, (iii) the FDIC, (iv) the Comptroller and (v) any
applicable state securities or banking authorities. All such reports and
statements filed with any such regulatory body or authority are collectively
referred to herein as the "Norwest Reports." As of their respective dates, the
Norwest Reports complied in all material respects with all the rules and
regulations promulgated by the SEC, the Federal Reserve Board, the FDIC, the
Comptroller and any applicable state securities or banking authorities, as the
case may be, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
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<PAGE>
(g) Properties and Leases. Except as may be reflected in the Norwest
---------------------
Financial Statements and except for any lien for current taxes not yet
delinquent, Norwest and each Norwest Subsidiary has good title free and clear of
any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Norwest's
consolidated balance sheet as of June 30, 1998 included in Norwest'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 Norwest or any Norwest Subsidiary
pursuant to which Norwest or such Norwest Subsidiary, as lessee, leases real or
personal property, are valid and effective in accordance with their respective
terms, and there is not, under any such lease, any material existing default by
Norwest or such Norwest Subsidiary or any event which, with notice or lapse of
time or both, would constitute such a material default. Substantially all
Norwest's and each Norwest Subsidiary's buildings and equipment in regular use
have been well maintained and are in good and serviceable condition, reasonable
wear and tear excepted.
(h) Taxes. Each of Norwest and the Norwest Subsidiaries has filed all
-----
material federal, state, county, local and foreign tax returns, including
information returns, required to be filed by it, and paid or made adequate
provision for the payment of all taxes owed by it, including those with respect
to income, withholding, social security, unemployment, workers compensation,
franchise, ad valorem, premium, excise and sales taxes, and no taxes shown on
such returns to be owed by it or assessments received by it are delinquent. The
federal income tax returns of Norwest and the Norwest Subsidiaries for the
fiscal year ended December 31, 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 Norwest nor any Norwest Subsidiary is a party to any pending action or
proceeding, nor to Norwest's knowledge is any such action or proceeding
threatened by any governmental authority, for the assessment or collection of
taxes, interest, penalties, assessments or deficiencies which could reasonably
be expected to have any material adverse effect on Norwest and its subsidiaries
taken as a whole, and (ii) no issue has been raised by any federal, state, local
or foreign taxing authority in connection with an audit or examination of the
tax returns, business or properties of Norwest or any Norwest Subsidiary which
has not been settled, resolved and fully satisfied, or adequately reserved for.
Each of Norwest and the Norwest Subsidiaries has paid all taxes owed or which it
is required to withhold from amounts owing to employees, creditors, or other
third parties.
(i) Absence of Certain Changes. Since December 31, 1997, there has been
--------------------------
no change in the business, financial condition or results of operations of
Norwest or any Norwest Subsidiary which has had, or may reasonably be expected
to have, a material adverse effect on the business, financial condition or
results of operations of Norwest and its subsidiaries taken as a whole.
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<PAGE>
(j) Commitments and Contracts. Except as set forth on Schedule 3(j), as
-------------------------
of December 31, 1997 neither Norwest nor any Norwest Subsidiary is a party or
subject to any of the following (whether written or oral, express or implied):
(i) any labor contract or agreement with any labor union;
(ii) any contract not made in the ordinary course of business
containing covenants which materially limit the ability of Norwest or any
Norwest Subsidiary to compete in any line of business or with any person or
which involve any material restriction of the geographical area in which,
or method by which, Norwest or any Norwest Subsidiary may carry on its
business (other than as may be required by law or applicable regulatory
authorities);
(iii) any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K.
(k) Litigation and Other Proceedings. Neither Norwest nor any Norwest
--------------------------------
Subsidiary is a party to any pending or, to the best knowledge of Norwest,
threatened, claim, action, suit, investigation or proceeding, or is subject to
any order, judgment or decree, except for matters which, in the aggregate, will
not have, or cannot reasonably be expected to have, a material adverse effect on
the business, financial condition or results of operations of Norwest and its
subsidiaries taken as a whole.
(l) Insurance. Norwest and each Norwest Subsidiary is presently insured or
---------
self insured, and during each of the past five calendar years (or during such
lesser period of time as Norwest has owned such Norwest Subsidiary) has been
insured or self-insured, for reasonable amounts with financially sound and
reputable insurance companies against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured and has maintained all insurance required by applicable law and
regulation.
(m) Compliance with Laws. Norwest and each Norwest Subsidiary has all
--------------------
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties or assets and to carry on its business as presently
conducted and that are material to the business of Norwest or such Subsidiary;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect, and to the best knowledge of Norwest, no suspension or
cancellation of any of them is threatened; and all such filings, applications
and registrations are current. The conduct by Norwest and each Norwest
Subsidiary of its business and the condition and use of its properties does not
violate or infringe, in any respect material to any such business, any
applicable domestic (federal, state or local) or foreign law, statute,
ordinance, license or regulation. Neither Norwest nor any Norwest Subsidiary is
in default under any order, license, regulation or demand of any federal, state,
municipal or other governmental agency or with respect to any order, writ,
injunction, or decree of any court. Except for statutory or regulatory
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<PAGE>
restrictions of general application, no federal, state, municipal or other
governmental authority has placed any restrictions on the business or properties
of Norwest or any Norwest Subsidiary which reasonably could be expected to have
a material adverse effect on the business or properties of Norwest and its
subsidiaries taken as a whole.
(n) Labor. No work stoppage involving Norwest or any Norwest Subsidiary
-----
is pending or, to the best knowledge of Norwest, threatened. Neither Norwest
nor any Norwest Subsidiary is involved in, or threatened with or affected by,
any labor dispute, arbitration, lawsuit, or administrative proceeding which
could materially and adversely affect the business of Norwest or such Norwest
Subsidiary. Except as set forth on Schedule 3(j), employees of Norwest and the
Norwest Subsidiaries are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees.
(o) Norwest Benefit Plans.
---------------------
(i) As of December 31, 1997, the only "employee benefit plans"
within the meaning of Section 3(3) of ERISA for which Norwest or any
Norwest Subsidiary acts as plan sponsor as defined in ERISA Section
3(16)(B) with respect to which any liability under ERISA or otherwise
exists or may be incurred by Norwest or any Norwest Subsidiary are those
set forth on Schedule 3(o) (the "Norwest Plans"). No Norwest Plan is a
"multi-employer plan" within the meaning of Section 3(37) of ERISA.
(ii) Each Norwest Plan is and has been in all material respects
operated and administered in accordance with its provisions and applicable
law. Except as set forth on Schedule 3(o), Norwest or the Norwest
Subsidiaries have received favorable determination letters from the
Internal Revenue Service under the provisions of TRA `86 for each of the
Norwest Plans to which the qualification requirements of Section 401(a) of
the Code apply. Norwest knows of no reason that any Norwest Plan which is
subject to the qualification provisions of Section 401(a) of the Code is
not "qualified" within the meaning of Section 401(a) of the Code and that
each related trust is not exempt from taxation under Section 501(a) of the
Code.
(iii) The present value of all benefits vested and all benefits
accrued under each Norwest Plan which is subject to Title IV of ERISA did
not, in each case, as determined for purposes of reporting on Schedule B to
the Annual Report on Form 5500 of each such Norwest Plan as of the end of
the most recent Plan year, exceed the value of the assets of the Norwest
Plans allocable to such vested or accrued benefits.
(iv) Except as set forth on Schedule 3(o), and to the best knowledge
of Norwest, no Norwest Plan or any trust created thereunder, nor any
trustee, fiduciary or administrator thereof, has engaged in a "prohibited
transaction," as such term is defined in Section 4975 of the Code or
Section 406 of ERISA or
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<PAGE>
violated fiduciary standards under Part 4 of Title I of ERISA, which could
subject, to the best knowledge of Norwest, such Norwest Plan or trust, or
any trustee, fiduciary or administrator thereof, or any party dealing with
any such Norwest Plan or trust, to the tax or penalty on prohibited
transactions imposed by said Section 4975 or would result in material
liability to Norwest and its subsidiaries taken as a whole.
(v) Except as set forth on Schedule 3(o), no Norwest Plan which is
subject to Title IV of ERISA or any trust created thereunder has been
terminated, nor have there been any "reportable events" as that term is
defined in Section 4043 of ERISA with respect to any Norwest Plan, other
than those events which may result from the transactions contemplated by
this Agreement and the Merger Agreement.
(vi) No Norwest Plan or any trust created thereunder has incurred any
"accumulated funding deficiency," as such term is defined in Section 412 of
the Code (whether or not waived), during the last five Norwest Plan years
which would result in a material liability.
(vii) Neither the execution and delivery of this Agreement and the
Merger Agreement nor the consummation of the transactions contemplated
hereby and thereby will (i) result in any material payment (including,
without limitation, severance, unemployment compensation, golden parachute
or otherwise) becoming due to any director or employee or former employee
of Norwest under any Norwest Plan or otherwise, (ii) materially increase
any benefits otherwise payable under any Norwest Plan or (iii) result in
the acceleration of the time of payment or vesting of any such benefits to
any material extent.
(p) Registration Statement, etc. None of the information regarding
---------------------------
Norwest and its subsidiaries supplied or to be supplied by Norwest for inclusion
in (i) the Registration Statement, (ii) the Proxy Statement, or (iii) any other
documents to be filed with the SEC or any regulatory authority in connection
with the transactions contemplated hereby or by the Merger Agreement will, at
the respective times such documents are filed with the SEC or any regulatory
authority and, in the case of the Registration Statement, when it becomes
effective and, with respect to the Proxy Statement, when mailed, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading or, in the case
of the Proxy Statement or any amendment thereof or supplement thereto, at the
time of the meeting of shareholders referred to in paragraph 4(c), be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for such meeting. All documents which Norwest and
the Norwest Subsidiaries are responsible for filing with the SEC and any other
regulatory authority in connection with the Merger will comply as to form in all
material respects with the provisions of applicable law.
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<PAGE>
(q) Brokers and Finders. Neither Norwest nor any Norwest Subsidiary nor
-------------------
any of their respective officers, directors or employees has employed any broker
or finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted directly
or indirectly for Norwest or any Norwest Subsidiary in connection with this
Agreement and the Merger Agreement or the transactions contemplated hereby and
thereby.
(r) No Defaults. Neither Norwest nor any Norwest Subsidiary is in
-----------
default, nor has any event occurred which, with the passage of time or the
giving of notice, or both, would constitute a default under any material
agreement, indenture, loan agreement or other instrument to which it is a party
or by which it or any of its assets is bound or to which any of its assets is
subject, the result of which has had or could reasonably be expected to have a
material adverse effect upon Norwest and its subsidiaries taken as a whole. To
the best of Norwest's knowledge, all parties with whom Norwest or any Norwest
Subsidiary has material leases, agreements or contracts or who owe to Norwest or
any Norwest Subsidiary material obligations other than with respect to those
arising in the ordinary course of the banking business of the Norwest
Subsidiaries are in compliance therewith in all material respects.
(s) Environmental Liability. There is no legal, administrative, or other
-----------------------
proceeding, claim, or action of any nature seeking to impose, or that could
result in the imposition, on Norwest or any Norwest Subsidiary of any liability
relating to the release of hazardous substances as defined under any local,
state or federal environmental statute, regulation or ordinance including,
without limitation, CERCLA, pending or to the best of Norwest's knowledge,
threatened against Norwest or any Norwest Subsidiary, the result of which has
had or could reasonably be expected to have a material adverse effect upon
Norwest and its subsidiaries taken as a whole; to the best of Norwest's
knowledge there is no reasonable basis for any such proceeding, claim or action;
and to the best of Norwest's knowledge neither Norwest nor any Norwest
Subsidiary is subject to any agreement, order, judgment, or decree by or with
any court, governmental authority or third party imposing any such environmental
liability.
(t) Merger Co. As of the Closing Date, Merger Co. will be a corporation
---------
duly organized, validly existing, duly qualified to do business and in good
standing under the laws of the State of Colorado, and will have corporate power
and authority to own or lease its properties and assets and to carry on its
business. Merger Co. will have the corporate power and authority to enter into
the Merger Agreement and to carry out its obligations thereunder and the
execution, delivery and performance of the Merger Agreement by Merger Co. and
the consummation of the transactions contemplated thereby will be duly
authorized by the Board of Directors of Merger Co. Subject to such approvals of
government agencies and other governing boards having regulatory authority over
Merger Co. as may be required by statute or regulation, the Merger Agreement
when executed by Merger Co. will be a valid and binding obligation of Merger Co.
enforceable against Merger Co. in accordance with its terms.
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<PAGE>
4. COVENANTS OF METROPOLITAN. Metropolitan covenants and agrees with
Norwest as follows:
(a) Except as otherwise permitted or required by this Agreement, from the
date hereof until the Effective Time of the Merger, Metropolitan, and each
Metropolitan Subsidiary will: maintain its corporate existence in good
standing; maintain the general character of its business and conduct its
business in its ordinary and usual manner; extend credit in accordance with
existing lending policies, except that it shall not, without the prior written
consent of Norwest (which consent requirement shall be deemed to be waived as to
any loan approval request to which Norwest has made no response by the end of
the second business day following the receipt of the request), make any new loan
(except pursuant to commitments made prior to the date of this Agreement) to any
borrower if the amount of the resulting loan, when aggregated with all other
loans or extensions of credit to such person, would be in excess of $100,000, or
modify, restructure or renew any existing loan (except pursuant to commitments
made prior to the date of this Agreement) to any borrower if the amount of the
resulting loan, when aggregated with all other loans or extensions of credit to
such person, would be in excess of $150,000; maintain proper business and
accounting records in accordance with generally accepted principles; maintain
its properties in good repair and condition, ordinary wear and tear excepted;
maintain in all material respects presently existing insurance coverage; use its
best efforts to preserve its business organization intact, to keep the services
of its present principal employees and to preserve its good will and the good
will of its suppliers, customers and others having business relationships with
it; use its best efforts to obtain any approvals or consents required to
maintain existing leases and other contracts in effect following the Merger;
comply in all material respects with all laws, regulations, ordinances, codes,
orders, licenses and permits applicable to the properties and operations of
Metropolitan and each Metropolitan Subsidiary the non-compliance with which
reasonably could be expected to have a material adverse effect on Metropolitan
and the Metropolitan Subsidiaries taken as a whole, and correct or remedy any
material violation of any law or regulation upon identification thereof and at
Norwest's request; promptly upon request, provide access to Norwest and its
representatives of Metropolitan's and any Metropolitan Subsidiary's bank
application computer files and provide or cause to be provided any vendor
deconversion tape from vendor along with any related support data and
documentation; and permit Norwest and its representatives (including KPMG Peat
Marwick) to examine its and its subsidiaries books, records and properties and
to interview officers, employees and agents at all reasonable times when it is
open for business. No such examination by Norwest or its representatives either
before or after the date of this Agreement shall in any way affect, diminish or
terminate any of the representations, warranties or covenants of Metropolitan
herein expressed.
(b) Except as otherwise contemplated or required by this Agreement, from
the date hereof until the Effective Time of the Merger, Metropolitan and each
Metropolitan Subsidiary will not (without the prior written consent of Norwest):
amend or otherwise change its articles of incorporation or association or by-
laws; issue or sell or authorize for issuance or sale, or grant any options or
make other agreements with respect to the
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<PAGE>
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 for the
exercise of stock options pursuant to the Option Agreements and Graf Stock
Option Agreement described in paragraphs 4(q) and 4(r); authorize or incur any
long-term debt (other than deposit liabilities); mortgage, pledge or subject to
lien or other encumbrance any of its properties, except in the ordinary course
of business; enter into any material agreement, contract or commitment in excess
of $10,000 except banking transactions in the ordinary course of business and in
accordance with policies and procedures in effect on the date hereof; make any
investments except investments made by bank subsidiaries in the ordinary course
of business for terms of up to one (1) year and in amounts of $100,000 or less;
amend or terminate any Plan except as required by law; make any contributions to
any Plan except as required by the terms of such Plan in effect as of the date
hereof; declare, set aside, make or pay any dividend or other distribution with
respect to its capital stock except any dividend declared by a subsidiary's
Board of Directors in accordance with applicable law and regulation; redeem,
purchase or otherwise acquire, directly or indirectly, any of the capital stock
of Metropolitan; increase the compensation of any officers, directors or
executive employees, except pursuant to existing compensation plans and
practices; sell or otherwise dispose of any shares of the capital stock of any
Metropolitan 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 Metropolitan will duly call, and will cause
to be held not later than twenty-five (25) business days following the effective
date of the Registration Statement referred to in paragraph 5(c) hereof, a
meeting of its shareholders and will direct that this Agreement and the Merger
Agreement be submitted to a vote at such meeting. The Board of Directors of
Metropolitan will (i) cause proper notice of such meeting to be given to its
shareholders in compliance with the Colorado 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) Metropolitan will furnish or cause to be furnished to Norwest all the
information concerning Metropolitan and the Metropolitan Subsidiaries required
for inclusion in the Registration Statement referred to in paragraph 5(c)
hereof, or any statement or application made by Norwest to any governmental body
in connection with the transactions contemplated by this Agreement. Any
financial statement for any fiscal year provided under this paragraph must
include the audit opinion and the consent of BDO Seidman, LLP to use such
opinion in such Registration Statement.
(e) Metropolitan 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 Metropolitan to carry out the transactions
contemplated by this Agreement and will cooperate with Norwest to obtain all
such approvals and consents required of Norwest.
A-21
<PAGE>
(f) Metropolitan 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) Metropolitan will hold in confidence all documents and information
concerning Norwest and its subsidiaries furnished to Metropolitan 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 Metropolitan's outside professional
advisers in connection with this Agreement, with the same undertaking from such
professional advisers. If the transactions contemplated by this Agreement shall
not be consummated, such confidence shall be maintained and such information
shall not be used in competition with Norwest (except to the extent that such
information can be shown to be previously known to Metropolitan, in the public
domain, or later acquired by Metropolitan from other legitimate sources) and,
upon request, all such documents, any copies thereof and extracts therefrom
shall immediately thereafter be returned to Norwest.
(h) Neither Metropolitan, nor any Metropolitan Subsidiary, nor any
director, officer, representative or agent thereof, will, directly or
indirectly, solicit, authorize the solicitation of or enter into any discussions
with any corporation, partnership, person or other entity or group (other than
Norwest) concerning any offer or possible offer (i) to purchase any shares of
common stock, any option or warrant to purchase any shares of common stock, any
securities convertible into any shares of such common stock, or any other equity
security of Metropolitan or any Metropolitan Subsidiary, (ii) to make a tender
or exchange offer for any shares of such common stock or other equity security,
(iii) to purchase, lease or otherwise acquire the assets of Metropolitan or any
Metropolitan Subsidiary except in the ordinary course of business, or (iv) to
merge, consolidate or otherwise combine with Metropolitan or any Metropolitan
Subsidiary. If any corporation, partnership, person or other entity or group
makes an offer or inquiry to Metropolitan or any Metropolitan Subsidiary
concerning any of the foregoing, Metropolitan or such Metropolitan Subsidiary
will promptly disclose such offer or inquiry, including the terms thereof, to
Norwest.
(i) Metropolitan shall consult with Norwest as to the form and substance
of any proposed press release or other proposed public disclosure of matters
related to this Agreement or any of the transactions contemplated hereby.
(j) Metropolitan and each Metropolitan Subsidiary will take all action
necessary or required (i) to terminate or amend, if requested by Norwest, all
qualified pension and welfare benefit plans and all non-qualified benefit plans
and compensation arrangements as of the Effective Date of the Merger, and (ii)
to submit application to the Internal Revenue Service for a favorable
determination letter for each of the Plans which is subject to the qualification
requirements of Section 401(a) of the Code prior to the Effective Date of the
Merger.
(k) Reserved.
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<PAGE>
(l) Metropolitan 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 Norwest by each executive officer, director
or shareholder of Metropolitan who may reasonably be deemed an "affiliate" of
Metropolitan within the meaning of such term as used in Rule 145 under the
Securities Act.
(m) Metropolitan shall establish such additional accruals and reserves as
may be necessary to conform Metropolitan's accounting and credit loss reserve
practices and methods to those of Norwest and Norwest's plans with respect to
the conduct of Metropolitan's business following the Merger and to provide for
the costs and expenses relating to the consummation by Metropolitan of the
Merger and the other transactions contemplated by this Agreement.
(n) Metropolitan shall obtain, at its sole expense, Phase I environmental
assessments for each bank facility owned by Metropolitan or the Metropolitan
Subsidiaries and each non-residential OREO property. Oral reports of such
environmental assessments shall be delivered to Norwest no later than four (4)
weeks and written reports shall be delivered to Norwest no later than eight (8)
weeks from the date of this Agreement. Metropolitan shall obtain, at its sole
expense, Phase II environmental assessments for properties identified by Norwest
on the basis of the results of such Phase I environmental assessments.
Metropolitan shall obtain a survey and assessment of all potential asbestos
containing material in owned or leased properties (other than OREO property)
and a written report of the results shall be delivered to Norwest within four
weeks of execution of the definitive agreement.
(o) Metropolitan shall obtain, at its sole expense, commitments for title
insurance and real estate surveys for each bank facility owned by Metropolitan
or the Metropolitan Subsidiaries which shall be delivered to Norwest no later
than four (4) weeks from the date of this Agreement.
(p) Metropolitan will cooperate with Norwest to assess the impact of the
transactions contemplated by this Agreement on Metropolitan's continued actions
to comply with the FFIEC Year 2000 requirements and Metropolitan will take such
action, in consultation with Norwest, as may be necessary to amend
Metropolitan's Year 2000 project assessment and remediation plan in order to
comply with FFIEC Year 2000 requirements. Metropolitan will prepare a
contingency plan to be used in the event the transactions contemplated by this
Agreement are not consummated. Metropolitan will consult and cooperate with
Norwest concerning credit, customer, and vendor assessments and criteria for
FFIEC Year 2000 requirements.
(q) The Board of Directors of Metropolitan shall take such action as is
necessary to provide not less than 30 days' written notice that the Options
granted pursuant to the Option Agreements, including shares as to which such
option would not otherwise be exercisable, described on Schedule 4(q) ("Option
Agreements"), shall terminate as of the Effective Date if not exercised in
accordance with the terms of the Option Agreements
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<PAGE>
during the 30-day period ending on the last calendar day preceding the Effective
Date, all as contemplated by Section 8(b) of the Option Agreements.
(r) The Board of Directors shall take such action as is necessary to
provide Robert W. Graf not less than 45 days prior notice of the record date of
the shareholders meeting required by paragraph 4(c) hereof that the options
granted pursuant to the Non-Qualified Stock Option Agreement dated as of the 9th
day of January 1996 ("Graf Option Agreement") between Metropolitan and Robert W.
Graf shall terminate as of such date if not exercised prior to such date in
accordance with the terms of the Graf Option Agreement; provided that
Metropolitan shall neither loan Robert W. Graf amounts necessary to exercise
such options nor fund the exercise of such options by a compensatory payment or
other extraordinary compensation.
(s) Metropolitan shall use its best efforts to terminate the Stock
Redemption Agreement and Cross Purchase Agreement dated January 2, 1996 among
Metropolitan and the shareholder signatories thereto (the "Redemption
Agreement") effective no later than immediately prior to the Effective Date of
the Merger.
(t) In exchange for termination effective as of the Closing Date of the
benefit granting Robert W. Graf use of an automobile, Metropolitan shall provide
Robert W. Graf with the option of acquiring such automobile for its fair market
value prior to the Closing Date.
(u) Immediately prior to the Closing, Metropolitan shall apply the funds
to be loaned to it by Norwest pursuant to paragraph 5(o) hereof to pay in full
all indebtedness of Metropolitan to US Bank.
5. COVENANTS OF NORWEST. Norwest covenants and agrees with Metropolitan as
follows:
(a) From the date hereof until the Effective Time of the Merger, Norwest
will maintain its corporate existence in good standing; conduct, and cause the
Norwest Subsidiaries to conduct, their respective businesses in compliance with
all material obligations and duties imposed on them by all laws, governmental
regulations, rules and ordinances, and judicial orders, judgments and decrees
applicable to Norwest or the Norwest Subsidiaries, their businesses or their
properties; maintain all books and records of it and the Norwest Subsidiaries,
including all financial statements, in accordance with the accounting principles
and practices consistent with those used for the Norwest Financial Statements,
except for changes in such principles and practices required under generally
accepted accounting principles.
(b) Norwest will furnish to Metropolitan all the information concerning
Norwest required for inclusion in a proxy statement or statements to be sent to
the shareholders of Metropolitan, or in any statement or application made by
Metropolitan to any governmental body in connection with the transactions
contemplated by this Agreement.
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<PAGE>
(c) As promptly as practicable after the execution of this Agreement,
Norwest will file with the SEC a registration statement on Form S-4 (the
"Registration Statement") under the Securities Act and any other applicable
documents, relating to the shares of Norwest Common Stock to be delivered to the
shareholders of Metropolitan pursuant to the Merger Agreement, and will use its
best efforts to cause the Registration Statement to become effective. At the
time the Registration Statement becomes effective, the Registration Statement
will comply in all material respects with the provisions of the Securities Act
and the published rules and regulations thereunder, and will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not false or
misleading, and at the time of mailing thereof to the Metropolitan shareholders,
at the time of the Metropolitan shareholders' meeting referred to in paragraph
4(c) hereof and at the Effective Time of the Merger the prospectus included as
part of the Registration Statement, as amended or supplemented by any amendment
or supplement filed by Norwest (hereinafter the "Prospectus"), will not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not false or misleading; provided,
--------
however, that none of the provisions of this subparagraph shall apply to
- -------
statements in or omissions from the Registration Statement or the Prospectus
made in reliance upon and in conformity with information furnished by
Metropolitan or any Metropolitan Subsidiary for use in the Registration
Statement or the Prospectus.
(d) Norwest will file all documents required to be filed to list the
Norwest Common Stock to be issued pursuant to the Merger Agreement on the New
York Stock Exchange and the Chicago Stock Exchange and use its best efforts to
effect said listings.
(e) The shares of Norwest Common Stock to be issued by Norwest to the
shareholders of Metropolitan pursuant to this Agreement and the Merger Agreement
will, upon such issuance and delivery to said shareholders pursuant to the
Merger Agreement, be duly authorized, validly issued, fully paid and
nonassessable. The shares of Norwest Common Stock to be delivered to the
shareholders of Metropolitan pursuant to the Merger Agreement are and will be
free of any preemptive rights of the stockholders of Norwest.
(f) Norwest will file all documents required to obtain, prior to the
Effective Time of the Merger, all necessary Blue Sky permits and approvals, if
any, required to carry out the transactions contemplated by this Agreement, will
pay all expenses incident thereto and will use its best efforts to obtain such
permits and approvals.
(g) Norwest will promptly take all necessary corporate and other action
and promptly 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 Metropolitan to obtain all such approvals and consents
required by Metropolitan. Norwest will endeavor to furnish Metropolitan with
copies of the non-confidential portions of all such filings contemporaneously
with their submission to the applicable authorities, and will furnish
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<PAGE>
Metropolitan with copies of the non-confidential portions of all documents
evidencing such consents and approvals, and the non-confidential portions of all
correspondence received from such authorities with respect thereto, promptly
upon receipt thereof.
(h) Norwest will hold in confidence all documents and information
concerning Metropolitan and the Metropolitan 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 Metropolitan (except to the extent that such
information can be shown to be previously known to Norwest, in the public
domain, or later acquired by Norwest from other legitimate sources) and, upon
request, all such documents, copies thereof or extracts therefrom shall
immediately thereafter be returned to Metropolitan.
(i) Norwest will file any documents or agreements required to be filed in
connection with the Merger under the Colorado Business Corporation Act.
(j) Norwest will use its best efforts to deliver to the Closing all
opinions, certificates, and other documents required to be delivered by it at
the Closing.
(k) Norwest shall consult with Metropolitan as to the form and substance
of any proposed press release or other proposed public disclosure of matters
related to this Agreement or any of the transactions contemplated hereby.
(l) Norwest shall give Metropolitan notice of receipt of the regulatory
approvals referred to in paragraph 7(e).
(m) For a period not exceeding fifteen (15) days prior to the Closing
Date, Norwest will permit Metropolitan and its representatives to examine its
books, records and properties and interview officers, employees and agents of
Norwest at all reasonable times when it is open for business. No such
examination by Metropolitan or its representatives shall in any way affect,
diminish or terminate any of the representations, warranties or covenants of
Norwest herein expressed.
(n) With respect to the indemnification of directors and officers and with
respect to directors' and officers' insurance, Norwest agrees as follows:
(i) Norwest shall ensure that all rights to indemnification and all
limitations of liability existing in favor of any person who is now, or has
been at any time prior to the date hereof, or who becomes prior to the
Effective Time of the Merger, a director or officer of Metropolitan or any
Metropolitan Subsidiary (an "Indemnified Party" and, collectively, the
"Indemnified Parties"), in Metropolitan's Articles of Incorporation or
Bylaws or similar governing
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<PAGE>
documents of any Metropolitan 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 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(n)(i) shall be
deemed to preclude the liquidation, consolidation or merger of Metropolitan
or any Metropolitan 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 Metropolitan,
Norwest shall guarantee, to the extent of the net asset value of
Metropolitan or any Metropolitan Subsidiary as of the Effective Date of the
Merger, the indemnification obligations of Metropolitan or any Metropolitan
Subsidiary to the extent of indemnification obligations of Metropolitan and
the Metropolitan Subsidiaries described above. Notwithstanding anything to
the contrary contained in this paragraph 5(n)(i), nothing contained herein
shall require Norwest to indemnify any person who was a director or officer
of Metropolitan or any Metropolitan Subsidiary to a greater extent than
Metropolitan or any Metropolitan 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(n)(i), upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Norwest thereof, but the
failure to so notify shall not relieve Norwest of any liability it may have
to such Indemnified Party. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time of the Merger), (A) Norwest shall have the right to assume the defense
thereof and Norwest shall not be liable to any Indemnified Party for any
legal expenses of other counsel or any other expenses subsequently incurred
by such Indemnified Party in connection with the defense thereof, except
that if Norwest elects not to assume such defense or counsel for the
Indemnified Party advises that there are issues which raise conflicts of
interest between Norwest and the Indemnified Party, the Indemnified Party
may retain counsel satisfactory to them, and Norwest shall pay the
reasonable fees and expenses of such counsel for the Indemnified Party
promptly as statements therefor are received; provided, however, that
Norwest shall be obligated pursuant to this subparagraph (ii) to pay for
only one firm of counsel for all Indemnified Parties in any jurisdiction
unless the use of one counsel for such Indemnified Parties would present
such counsel with a conflict of interest and (B) such Indemnified Party
shall cooperate in the defense of any such matter.
(iii) for a period of three years after the Effective Time of the
Merger, Norwest shall use its best efforts to cause to be maintained in
effect the current policies of directors' and officers' liability insurance
maintained by Metropolitan (provided that Norwest may substitute therefor
policies of at least the same
A-27
<PAGE>
coverage and amount containing terms and conditions which are substantially
no less advantageous) with respect to claims arising from facts or events
which occurred before the Effective Time of the Merger, excluding claims
relating to "employment practices" or "lender liability" or covering
employees who are not officers or directors of Metropolitan or the
Metropolitan Subsidiaries; provided, however, that in no event shall
Norwest be obligated to expend, in order to maintain or provide insurance
coverage pursuant to this paragraph 5(n)(iii), any amount per annum in
excess of 125% of the amount of the annual premiums paid as of the date
hereof by Metropolitan for such insurance (the "Maximum Amount") and
provided further that, prior to the Effective Time of the Merger,
Metropolitan shall notify the appropriate directors' and officers'
liability insurers of the Merger and of all pending or threatened claims,
actions, suits, proceedings or investigations asserted or claimed against
any Indemnified Party, or circumstances likely to give rise thereto, in
accordance with terms and conditions of the applicable policies. If the
amount of the annual premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, Norwest shall use reasonable
efforts to maintain the most advantageous policies of directors' and
officers' insurance obtainable for an annual premium equal to the Maximum
Amount;
(iv) if Norwest or any of its successors or assigns (A) shall
consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such
consolidation or merger or (B) shall transfer all or substantially all of
its properties and assets to any individual, corporation or other entity,
then and in each such case, proper provision shall be made so that the
successors and assigns of Norwest shall assume the obligations set forth in
this paragraph 5(n); and
(v) the provisions of this paragraph 5(n) are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
(o) Immediately prior to the Closing, Norwest shall loan to Metropolitan
funds sufficient to enable Metropolitan to pay in full all of its indebtedness
to US Bank.
6. CONDITIONS PRECEDENT TO OBLIGATION OF METROPOLITAN. The obligation of
Metropolitan 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 Metropolitan:
(a) Except as they may be affected by transactions contemplated hereby and
except to the extent such representations and warranties are by their express
provisions made as of a specified date and except for activities or transactions
after the date of this Agreement made in the ordinary course of business and not
expressly prohibited by this Agreement, the representations and warranties
contained in paragraph 3 hereof shall be
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<PAGE>
true and correct in all respects material to Norwest and its subsidiaries taken
as a whole as if made at the Time of Filing.
(b) Norwest shall have, or shall have caused to be, performed and observed
in all material respects all covenants, agreements and conditions hereof to be
performed or observed by it and Merger Co. at or before the Time of Filing.
(c) Metropolitan shall have received a favorable certificate, dated as of
the Effective Date of the Merger, signed by the Chairman, the President or any
Executive Vice President or Senior Vice President and by the Secretary or
Assistant Secretary of Norwest, as to the matters set forth in subparagraphs (a)
and (b) of this paragraph 6.
(d) This Agreement and the Merger Agreement shall have been approved by
the affirmative vote of the holders of the percentage of the outstanding shares
of Metropolitan required for approval of a plan of merger in accordance with the
provisions of Metropolitan's Articles of Incorporation and the Colorado Business
Corporation Act.
(e) Norwest shall have received approval by the Federal Reserve Board and
by such other governmental agencies as may be required by law of the
transactions contemplated by this Agreement and the Merger Agreement and all
waiting and appeal periods prescribed by applicable law or regulation shall have
expired.
(f) No court or governmental authority of competent jurisdiction shall
have issued an order restraining, enjoining, or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(g) The shares of Norwest Common Stock to be delivered to the stockholders
of Metropolitan 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) Metropolitan shall have received an opinion, dated the Closing Date,
of counsel to Metropolitan, 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 Metropolitan Common Stock upon receipt
of Norwest Common Stock except for cash received in lieu of fractional shares;
(iii) the basis of the Norwest Common Stock received by the shareholders of
Metropolitan will be the same as the basis of Metropolitan Common Stock
exchanged therefor; and (iv) the holding period of the shares of Norwest Common
Stock received by the shareholders of Metropolitan will include the holding
period of the Metropolitan Common Stock, provided such shares of Metropolitan
Common Stock were held as a capital asset as of the Effective Time of the
Merger. In rendering its opinion, counsel to Metropolitan may require the
parties to deliver certificates relating to, and may rely upon representations
and warranties of the parties as to, certain factual matters and, in connection
with such opinion, Norwest agrees to deliver a certificate substantially in the
form attached as Exhibit C.
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<PAGE>
(i) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order, and no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened and be unresolved. Norwest shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATION OF NORWEST. The obligation of
Norwest to effect the Merger shall be subject to the satisfaction at or before
the Time of Filing of the following conditions, which may be waived in writing
by Norwest:
(a) Except as they may be affected by transactions contemplated hereby and
except to the extent such representations and warranties are by their express
provisions made as of a specified date and except for activities or transactions
or events occurring after the date of this Agreement made in the ordinary course
of business and not expressly prohibited by this Agreement, the representations
and warranties contained in paragraph 2 hereof shall be true and correct in all
respects material to Metropolitan and the Metropolitan Subsidiaries taken as a
whole as if made at the Time of Filing.
(b) Metropolitan 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 Metropolitan required for approval of a plan of merger in accordance with the
provisions of Metropolitan's Articles of Incorporation and the Colorado Business
Corporation Act.
(d) Norwest shall have received a favorable certificate dated as of the
Effective Date of the Merger signed by the Chairman or President and by the
Secretary or Assistant Secretary of Metropolitan, as to the matters set forth in
subparagraphs (a) through (c) of this paragraph 7.
(e) Norwest shall have received approval by all governmental agencies as
may be required by law of the transactions contemplated by this Agreement and
the Merger Agreement and all waiting and appeal periods prescribed by applicable
law or regulation shall have expired. No approvals, licenses or consents
granted by any regulatory authority shall contain any condition or requirement
relating to Metropolitan or any Metropolitan Subsidiary that, in the good faith
judgment of Norwest, is unreasonably burdensome to Norwest.
(f) Metropolitan and each Metropolitan Subsidiary shall have obtained any
and all material consents or waivers from other parties to loan agreements,
leases or other contracts material to Metropolitan's or such subsidiary's
business required for the consummation of the Merger, and Metropolitan and each
Metropolitan Subsidiary shall
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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) Reserved.
(i) At any time since the date hereof the total number of shares of
Metropolitan Common Stock outstanding and subject to issuance upon exercise
(assuming for this purpose that phantom shares and other share-equivalents
constitute Metropolitan Common Stock) of all warrants, options, conversion
rights, phantom shares or other share-equivalents, other than any option held by
Norwest, shall not have exceeded 47,550.
(j) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order, and no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened or be unresolved. Norwest shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
(k) Norwest shall have received from the Chief Executive Officer of
Metropolitan and the cashier of Community Bank of Parker (the "Bank") a letter,
dated as of the effective date of the Registration Statement and updated through
the date of Closing, in form and substance satisfactory to Norwest, to the
effect that:
(i) the interim quarterly financial statements of Metropolitan
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
Metropolitan;
(ii) the amounts reported in the interim quarterly financial
statements of Metropolitan agree with the general ledger of Metropolitan;
(iii) the annual and quarterly financial statements of Metropolitan
and the Metropolitan 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 June 30, 1998 (or, if later, since the date of the most
recent unaudited financial statements of Metropolitan and the Metropolitan
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
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decreases in stockholders' equity of Metropolitan and the Metropolitan
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 net interest income, net interest income after provision for
credit losses, income before income taxes, consolidated net income and net
income per share amounts of Metropolitan and the Metropolitan 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 Metropolitan and the Metropolitan Subsidiaries, which appear in
the Registration Statement under the certain captions to be specified by
Norwest, and have compared certain of such amounts, percentages, numbers
and financial information with the accounting records of Metropolitan and
the Metropolitan Subsidiaries and have found them to be in agreement with
financial records and analyses prepared by Metropolitan included in the
annual and quarterly financial statements, except as disclosed in such
letters.
(l) Metropolitan and the Metropolitan Subsidiaries considered as a whole
shall not have sustained since December 31, 1997 any material loss or
interference with their business from any civil disturbance or any fire,
explosion, flood or other calamity, whether or not covered by insurance.
(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
Metropolitan or any Metropolitan 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 Metropolitan and its subsidiaries taken as a whole.
(n) Since December 31, 1997, no change shall have occurred and no
circumstances shall exist which has had or might reasonably be expected to have
a material adverse effect on the financial condition, results of operations, or
business of Metropolitan and the Metropolitan 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).
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(o) Either Metropolitan shall be in full compliance with current FFIEC
Year 2000 requirements or there shall be no feature of Metropolitan's data
processing, operating or platform systems that would prevent those systems from
being successfully converted to Norwest systems.
(p) Metropolitan shall have taken the actions required by paragraph 4(q).
The Option Agreements shall have been exercised in full and all other rights
terminated effective prior to the Effective Date. Metropolitan shall have
collected all federal and state income and payroll taxes from the optionees of
said options attributable to the exercise of said options. In addition,
Metropolitan shall have complied with all income tax reporting and deposit
obligations with respect to the exercise of said options.
(q) Metropolitan shall have taken the actions required by paragraph 4(r).
The Graf Option Agreement shall have been exercised in full and all other rights
terminated effective prior to the Effective Date. Metropolitan shall have
collected all federal and state income and payroll taxes from the optionee of
said options attributable to the exercise of said options. In addition,
Metropolitan shall have complied with all income tax reporting and deposit
obligations with respect to the exercise of said options.
(r) Metropolitan shall have taken the actions required by paragraph 4(s).
The Redemption Agreement shall have been terminated effective prior to the
Effective Date.
(s) Norwest shall have received the signed resignations effective as of
the Effective Date of such officers and directors of Metropolitan and the
Metropolitan Subsidiaries as Norwest may request.
(t) The buy-back provisions of the subscription agreements related to the
Option Agreements shall have been terminated prior to the Effective Date.
(u) The employment agreement, dated as of the date hereof, between
Norwest, Robert W. Graf and the Bank shall not have been amended and shall be in
full force and effect.
(v) At the Closing, Metropolitan shall own, directly, and shall deliver to
Norwest at the Closing stock certificates evidencing, all of the outstanding
capital stock of the Metropolitan Subsidiaries free and clear of any lien,
claim, charge option, encumbrance or agreement with respect thereto.
8. EMPLOYEE BENEFIT PLANS. Each person who is an employee of Metropolitan
or any Metropolitan Subsidiary as of the Effective Date of the Merger
("Metropolitan Employees") shall be eligible for participation in the employee
welfare and retirement plans of Norwest, as in effect from time to time, as
follows:
(a) Employee Welfare Benefit Plans. Each Metropolitan Employee shall be
-------------------------------
eligible for participation in the employee welfare benefit plans of Norwest
listed below subject to any eligibility requirements applicable to such plans
(and not subject to pre-existing condition exclusions, except with respect to
the Norwest Long Term Care Plan)
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<PAGE>
and shall enter each plan not later than the first day of the calendar quarter
which begins at least 32 days after the Effective Date of the Merger (provided,
however, that it is Norwest's intent that the transition from the Metropolitan
plans to the Norwest plans be facilitated without gaps in coverage to the
participants and without duplication in costs of Norwest):
Medical Plan
Dental Plan
Vision Plan
Short Term Disability Plan
Long Term Disability Plan
Long Term Care Plan
Flexible Benefits Plan
Basic Group Life Insurance Plan
Group Universal Life Insurance Plan
Dependent Group Life Insurance Plan
Business Travel Accident Insurance Plan
Accidental Death and Dismemberment Plan
Severance Pay Plan
Vacation Program
For the purpose of determining each Metropolitan Employee's benefit for the year
in which the Merger occurs under the Norwest vacation program, vacation taken by
an Metropolitan Employee in the year in which the Merger occurs will be deducted
from the total Norwest benefit. Metropolitan Employees shall receive credit for
years of service to Metropolitan, the Metropolitan Subsidiaries and any
predecessors of the Metropolitan Subsidiaries (to the extent credited under the
vacation, short term disability and severance pay programs of Metropolitan) for
the purpose of determining benefits under the Norwest Vacation Program, Short
Term Disability Plan and the Norwest Severance Pay Plan.
(b) Employee Retirement Benefit Plans. Each Metropolitan Employee shall
---------------------------------
be eligible for participation in the Norwest Savings-Investment Plan (the
"SIP"), subject to any eligibility requirements applicable to the SIP (with full
credit for years of past service to Metropolitan and the Metropolitan
Subsidiaries for the purpose of satisfying any eligibility and vesting periods
applicable to the SIP), and shall enter the SIP not later than the first day of
the calendar quarter which begins at least 32 days after the Effective Date of
the Merger.
Each Metropolitan Employee shall be eligible for participation, as a new
employee, in the Norwest Pension Plan under the terms thereof.
9. TERMINATION OF AGREEMENT.
(a) This Agreement may be terminated at any time prior to the Time of
Filing:
(i) by mutual written consent of the parties hereto;
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(ii) by either of the parties hereto upon written notice to the other
party if the Merger shall not have been consummated by March 31, 1999
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 Metropolitan or Norwest upon written notice to the other
party if any court or governmental authority of competent jurisdiction
shall have issued a final order restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this
Agreement.
(b) Termination of this Agreement under this paragraph 9 shall not
release, or be construed as so releasing, either party hereto from any liability
or damage to the other party hereto arising out of the breaching party's willful
and material breach of the warranties and representations made by it, or willful
and material failure in performance of any of its covenants, agreements, duties
or obligations arising hereunder, and the obligations under paragraphs 4(g),
5(h) and 10 shall survive such termination.
10. EXPENSES. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by Metropolitan and Metropolitan Subsidiaries shall be
borne by Metropolitan, and all such expenses incurred by Norwest shall be borne
by Norwest.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, but shall not be assignable by either party hereto without the prior
written consent of the other party hereto.
12. THIRD PARTY BENEFICIARIES. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto, except as otherwise provided
in paragraph 5(n)(v).
13. NOTICES. Any notice or other communication provided for herein or
given hereunder to a party hereto shall be in writing and shall be delivered in
person or shall be mailed by first class registered or certified mail, postage
prepaid, addressed as follows:
If to Norwest:
Norwest Corporation
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Attention: Secretary
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<PAGE>
If to Metropolitan:
Metropolitan Bancshares, Inc.
19590 E. Main Street
Parker, Colorado 80138
Attention: Robert W. Graf
With a copy to:
Charles D. Bybee
Davis, Graham & Stubbs LLP
370 17th Street, Suite 4700
Denver, Colorado 80202
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, and the
exhibits and schedules hereto, 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 and the summaries of
representations and warranties and other terms of this Agreement contained in
the Schedules are for convenience of reference only and do not form a part of
this Agreement or the Schedules and do not, in any way, modify the
representations, and warranties, or any of the other terms, 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
Metropolitan shall be made which changes in a manner adverse to such
shareholders the consideration to be provided to said shareholders pursuant to
this Agreement and the Merger Agreement.
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
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<PAGE>
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NORWEST CORPORATION
By /s/ John E. Ganoe
------------------------------
Its Executive Vice President
--------------------------
METROPOLITAN BANCSHARES,
INC.
By /s/ Robert W. Graf
------------------------------
Its President
-----------------------------
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<PAGE>
EXHIBIT A
TO AGREEMENT AND PLAN
OF REORGANIZATION
AGREEMENT AND PLAN OF MERGER
BETWEEN
METROPOLITAN BANCSHARES, INC.
a Colorado corporation
(the surviving corporation)
AND
NORWEST METROPOLITAN MERGER CO.
a Colorado corporation
(the merged corporation)
This Agreement and Plan of Merger dated as of __________, 1998,
between Metropolitan Bancshares, Inc., a Colorado corporation (hereinafter
sometimes called "Metropolitan" and sometimes called the "surviving
corporation") and Norwest Metropolitan Merger Co., a Colorado corporation
("Merger Co.")(said corporations being hereinafter sometimes referred to as the
"constituent corporations"),
WHEREAS, Merger Co., a wholly-owned subsidiary of Norwest Corporation,
was incorporated by Articles of Incorporation filed in the office of the
Secretary of State of the State of Colorado on _______, 199__, and said
corporation is now a corporation subject to and governed by the provisions of
the Colorado Business Corporation Act. Merger Co. has authorized capital stock
of 10,000 shares of common stock having a par value of $1.00 per share ("Merger
Co. Common Stock"), of which 1,000 shares were outstanding and no shares were
held in treasury as of the date hereof; and
WHEREAS, Metropolitan was incorporated by Articles of Incorporation
filed in the office of the Secretary of State of the State of Colorado on August
14, 1995, and said corporation is now a corporation subject to and governed by
the provisions of the Colorado Business Corporation Act. Metropolitan has
authorized capital stock of 1,000,000 shares of common stock, par value $1.00
per share, of which 47,550 shares were outstanding and no shares were held in
the treasury as of the date hereof (the "Metropolitan Common Stock"); and
WHEREAS, Norwest Corporation and Metropolitan are parties to an
Agreement and Plan of Reorganization, dated as of __________, 1998 (the
"Reorganization Agreement"), setting forth certain representations, warranties
and covenants in connection with the merger provided for herein; and
WHEREAS, the directors, or a majority of them, of each of the
constituent corporations respectively deem it advisable for the welfare and
advantage of said corporations and for the best interests of the respective
shareholders of said corporations that said corporations merge and that Merger
Co. be merged with and into Metropolitan,
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<PAGE>
with Metropolitan continuing as the surviving corporation, on the terms and
conditions hereinafter set forth in accordance with the provisions of the
Colorado Business Corporation Act, which statute permits such merger; and
WHEREAS, it is the intent of the parties to effect a merger which
qualifies as a tax-free reorganization pursuant to Sections 368(a)(1)(A) and
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, the parties hereto, subject to the approval of the
shareholders of Metropolitan and Merger Co., in consideration of the premises
and of the mutual covenants and agreements contained herein and of the benefits
to accrue to the parties hereto, have agreed and do hereby agree that Merger Co.
shall be merged with and into Metropolitan pursuant to the laws of the State of
Colorado, and do hereby agree upon, prescribe and set forth the terms and
conditions of the merger of Merger Co. with and into Metropolitan, the mode of
carrying said merger into effect, the manner and basis of converting the shares
of Metropolitan Common Stock into shares of common stock of Norwest Corporation
of the par value of $1-2/3 per share ("Norwest Common Stock"), and such other
provisions with respect to said merger as are deemed necessary or desirable, as
follows:
FIRST: At the time of merger, Merger Co. shall be merged with and
into Metropolitan, one of the constituent corporations, which shall be the
surviving corporation, and the separate existence of Merger Co. shall cease and
the name of the surviving corporation shall be Metropolitan Bancshares, Inc.
SECOND: The Articles of Incorporation of Metropolitan at the time of
merger shall be and remain the Articles of Incorporation of the surviving
corporation until further amended according to law.
THIRD: The By-Laws of Metropolitan at the time of merger shall be and
remain the By-Laws of the surviving corporation until amended according to the
provisions of the Articles of Incorporation of the surviving corporation or of
said By-Laws.
FOURTH: The number of directors of the surviving corporation shall be
three and the persons named below shall become the directors of the surviving
corporation and shall hold office from the time of merger until their respective
successors are elected and qualify:
Stanley S. Stroup
John T. Thornton
James G. Vanasek
FIFTH: The persons named below shall become the officers of the
surviving corporation and shall hold office from the time of merger until their
respective successors are elected or appointed and qualify:
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<PAGE>
John T. Thornton President
Charles D. White Senior Vice President and Treasurer
Stanley S. Stroup Senior Vice President
J. Daniel Vandermark Vice President
Robert J. Murphy Vice President
James A. Horton Vice President
Michael A. Graf Vice President
David M. Stautz Vice President
Ginny Wahman Vice President
Diana Lea-Kahle Secretary
Margaret M. Weber Assistant Secretary
Rachelle M. Graham Assistant Secretary
SIXTH: The manner and basis of converting the shares of Metropolitan Common
Stock into shares of Norwest Common Stock shall be as follows:
1. Each of the shares of Metropolitan Common Stock outstanding immediately
prior to the time of merger (other than shares as to which statutory
dissenters' rights have been exercised) shall, at the time of merger, by
virtue of the merger and without any action on the part of the holder or
holders thereof, be converted into and exchanged for the number of shares
of Norwest Common Stock as set forth in the Reorganization Agreement.
2. As soon as practicable after the merger becomes effective, each holder
of a certificate for shares of Metropolitan Common Stock outstanding
immediately prior to the time of merger shall be entitled, upon surrender
of such certificate for cancellation to the surviving corporation or to
Norwest Bank Minnesota, National Association, as the designated agent of
the surviving corporation (the "Agent"), to receive a new certificate for
the number of whole shares of Norwest Common Stock to which such holder
shall be entitled on the basis set forth in paragraph 1 above. Until so
surrendered each certificate which, immediately prior to the time of
merger, represented shares of Metropolitan Common Stock shall not be
transferable on the books of the surviving corporation but shall be deemed
to evidence (except for the payment of dividends as provided below)
ownership of the number of whole shares of Norwest Common Stock into which
such shares of Metropolitan Common Stock have been converted on the basis
above set forth; provided, however, until the holder of such certificate
for Metropolitan Common Stock shall have surrendered the same for exchange
as above set forth, no dividend payable to holders of record of Norwest
Common Stock as of any date subsequent to the effective date of merger
shall be paid to such holder with respect to the Norwest Common Stock, if
any, represented by such certificate, but, upon surrender and exchange
thereof as herein provided, there shall be paid by the surviving
corporation or the Agent to the record holder of such certificate for
Norwest Common Stock issued in exchange therefor an amount with respect to
such shares of Norwest Common Stock equal to all dividends that shall have
been
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<PAGE>
paid or become payable to holders of record of Norwest Common Stock between
the effective date of merger and the date of such exchange.
3. If, between the date of the Reorganization Agreement and the time of
merger, shares of Norwest Common Stock shall be changed into a different
number of shares or a different class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or if a stock dividend thereon shall be declared
with a record date within such period (a "Common Stock Adjustment"), then
the number of shares of Norwest Common Stock, if any, into which a share of
Metropolitan Common Stock shall be converted pursuant to paragraph 1 above,
will be appropriately and proportionately adjusted so that the number of
such shares of Norwest Common Stock into which a share of Metropolitan
Common Stock shall be converted will equal the number of shares of Norwest
Common Stock which the holders of shares of Metropolitan Common Stock would
have received pursuant to such Common Stock Adjustment had the record date
therefor been immediately following the time of merger.
4. No fractional shares of Norwest Common Stock and no certificates or
scrip certificates therefor shall be issued to represent any such
fractional interest, and any holder 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 Norwest
Measurement Price as defined in the Reorganization Agreement.
5. Each share of Merger Co. Common Stock issued and outstanding at the
time of merger shall be converted into and exchanged for one share of the
surviving corporation after the time of merger.
SEVENTH: The merger provided for by this Agreement shall be effective as
follows:
1. The effective date of merger shall be the date on which Articles of
Merger (as described in subparagraph 1(b) of this Article Seventh) shall be
delivered to and filed by the Secretary of State of the State of Colorado;
provided, however, that all of the following actions shall have been taken
in the following order:
a. This Agreement shall be approved and adopted by Merger Co. and
Metropolitan in accordance with the Colorado Business Corporation Act;
and
b. Articles of Merger (with this Agreement attached as a part
thereof) with respect to the merger, setting forth the information
required by the Colorado Business Corporation Act, shall be executed
by the President or a Vice President of Merger Co. and by the
President or a Vice President of Metropolitan and shall be filed in
the office of the Secretary of State of the
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<PAGE>
State of Colorado in accordance with the Colorado Business Corporation
Act.
2. The merger shall become effective as of 11:59 p.m. Denver, Colorado
time (the "time of merger") on the effective date of merger.
EIGHTH: At the time of merger:
1. The separate existence of Merger Co. shall cease, and the corporate
existence and identity of Metropolitan shall continue as the surviving
corporation.
2. The merger shall have the other effects prescribed by Section 7-111-106
of the Colorado Business Corporation Act.
NINTH: The following provisions shall apply with respect to the merger
provided for by this Agreement:
1. The registered office of the surviving corporation in the State of
Colorado shall be 1675 Broadway, Denver, Colorado, 80202, and the name of
the registered agent of Metropolitan at such address is The Corporation
Company.
2. If at any time the surviving corporation shall consider or be advised
that any further assignment or assurance in law or other action is
necessary or desirable to vest, perfect or confirm in the surviving
corporation the title to any property or rights of Merger Co. acquired or
to be acquired as a result of the merger provided for herein, the proper
officers and directors of Metropolitan and Merger Co. may execute and
deliver such deeds, assignments and assurances in law and take such other
action as may be necessary or proper to vest, perfect or confirm title to
such property or right in the surviving corporation and otherwise carry out
the purposes of this Agreement.
3. 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.
4. This Agreement and the legal relations between the parties hereto shall
be governed by and construed in accordance with the laws of the State of
Colorado without regard to the conflicts of laws provisions thereof.
5. This Agreement cannot be altered or amended except pursuant to an
instrument in writing signed by both of the parties hereto.
6. At any time prior to the filing of Articles of Merger with the
Secretary of State of Colorado, subject to the provisions of the
Reorganization Agreement, this Agreement may be terminated upon approval by
the Boards of Directors of either
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<PAGE>
of the constituent corporations notwithstanding the approval of the
shareholders of either constituent corporation.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be signed in their respective corporate names by the undersigned
officers pursuant to authority duly given by their respective Boards of
Directors, all as of the day and year first above written.
METROPOLITAN BANCSHARES, INC.
By:_________________________________
Name:_________________________
Title:________________________
NORWEST METROPOLITAN MERGER CO.
By:_________________________________
Name:_________________________
Title:________________________
A-43
<PAGE>
EXHIBIT B
TO AGREEMENT AND
PLAN OF REORGANIZATION
Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-1026
Attn: Secretary
Ladies and 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
Metropolitan Bancshares, Inc., a Colorado corporation ("Metropolitan").
Pursuant to an Agreement and Plan of Reorganization, dated as of
________, 1998 (the "Reorganization Agreement"), between Metropolitan and
Norwest Corporation, a Delaware corporation ("Norwest"), it is contemplated that
a wholly-owned subsidiary of Norwest will merge with and into Metropolitan (the
"Merger") and, as a result, I will receive, in exchange for each share of common
stock, par value $1.00 per share, of Metropolitan ("Metropolitan 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 Norwest ("Norwest 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 Norwest 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 Norwest Corporation 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."
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<PAGE>
Norwest'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) any such shares of Stock are
sold at a time when I am not at the time an affiliate of Norwest and have been
the beneficial owner of the Stock for at least two years (or such other period
as may be prescribed thereunder) and Norwest 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 Norwest and have been the
beneficial owner of the Stock for at least three years (or such other period as
may be prescribed by the Securities Act, and the rules and regulations
promulgated thereunder), or (v) Norwest shall have received an opinion of
counsel acceptable to Norwest 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
Metropolitan Common Stock, Norwest Common Stock or the Stock, to the extent I
felt necessary, with my counsel or counsel for Metropolitan.
Dated:___________________, 199_
Sincerely,
By:_________________________
Name:_______________________
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<PAGE>
APPENDIX B
COLORADO BUSINESS CORPORATION ACT
ARTICLE 113 - DISSENTERS' RIGHTS
<PAGE>
PART I. RIGHT OF DISSENT-PAYMENT FOR SHARES
(S) 7-113-101. Definitions
For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares held in a
voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter before the
corporate action, or the surviving or acquiring domestic or foreign
corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from corporate
action under section 7-113-102 and who exercises that right at the time and
in the manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the value of the
shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action except to the extent that exclusion
would be inequitable.
(5) "Interest" means interest from the effective date of the corporate action
until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are registered
in the records of a corporation or the beneficial owner of shares that are
registered in the name of a nominee to the extent such owner is recognized
by the corporation as the shareholder as provided in section 7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
(S) 7-113-102. Right to dissent
(1) A shareholder, whether or not entitled to vote, is entitled to dissent and
obtain payment of the fair value of the shareholder's shares in the event
of any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a party
if:
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<PAGE>
(i) Approval by the shareholders of that corporation is required for
the merger by section 7-111-103 or 7-111-104 or by the articles of
incorporation; or
(ii) The corporation is a subsidiary that is merged with its parent
corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102(1); and
(d) Consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to
vote upon the consent of the corporation to the disposition pursuant
to section 7-112-102(2).
(1.3) A shareholder is not entitled to dissent and obtain payment, under
subsection (1) of this section, of the fair value of the shares of any
class or series of shares which either were listed on a national
securities exchange registered under the federal "Securities Exchange Act
of 1934", as amended, or on the national market system of the national
association of securities dealers automated quotation system, or were held
of record by more than two thousand shareholders, at the time of:
(a) The record date fixed under section 7-107-107 to determine the
shareholders entitled to receive notice of the shareholders' meeting
at which the corporate action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the corporate
action; or
(c) The effective date of the corporate action if the corporate action is
authorized other than a vote of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this section shall not
apply if the shareholder will receive for the shareholder's shares,
pursuant to the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of the plan of
merger or share exchange:
(b) Shares of any other corporation which at the effective date of the
plan of merger or share exchange either will be listed on a national
securities
B-2
<PAGE>
exchange registered under the federal "Securities Exchange Act of
1934", as amended, or on the national market system of the national
association of securities dealers automated quotation system, or will
be held of record by more than two thousand shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash in lieu of
fractional shares.
(2) Deleted by Laws 1996, H.B.96-1285, (S) 30, eff. June 1, 1996.
(2.5) A shareholder, whether or not entitled to vote, is entitled to dissent and
obtain payment of the fair value of the shareholder's shares in the event
of a reverse split that reduces the number of shares owned by the
shareholder to a fraction of a share or to scrip if the fractional share
or scrip so created is to be acquired for cash or the scrip is to be
voided under section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair value
of the shareholder's shares in the event of any corporate action to the
extent provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the shareholder's
shares under this article may not challenge the corporate action creating
such entitlement unless the action is unlawful or fraudulent with respect
to the shareholder or the corporation.
(S) 7-113-103. Dissent by nominees and beneficial owners
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any
one person and causes the corporation to receive written notice which
states such dissent and the name, address, and federal taxpayer
identification number, if any, of each person on whose behalf the record
shareholder asserts dissenters' rights. The rights of a record shareholder
under this subsection (1) are determined as if the shares as to which the
record shareholder dissents and the other shares of the record shareholder
were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than
the time the beneficial shareholder asserts dissenters' rights; and
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<PAGE>
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a shareholder dissents with respect
to the shares held by any one or more beneficial shareholders, each such
beneficial shareholder must certify to the corporation that the beneficial
shareholder and the record shareholder or record shareholders of all
shares owned beneficially by the beneficial shareholder have asserted, or
will timely assert, dissenters' rights as to all such shares as to which
there is no limitation on the ability to exercise dissenters' rights. Any
such requirement shall be stated in the dissenters' notice given pursuant
to section 7-113-203.
B-4
<PAGE>
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
(S) 7-113-201. Notice of dissenters' rights
(1) If a proposed corporate action creating dissenters' rights under section
7-113-102 is submitted to a vote at a shareholders' meeting, the notice of
the meeting shall be given to all shareholders, whether or not entitled to
vote. The notice shall state that shareholders are or may be entitled to
assert dissenters' rights under this article and shall be accompanied by a
copy of this article and the materials, if any, that, under articles 101
to 117 of this title, are required to be given to shareholders entitled to
vote on the proposed action at the meeting. Failure to give notice as
provided by this subsection (1) shall not effect any action taken at the
shareholders' meeting for which the notice was to have been given, but any
shareholder who was entitled to dissent but who was not given such notice
shall not be precluded from demanding payment for the shareholder's shares
under this article by reason of the shareholder's failure to comply with
the provisions of section 7-113-202(1).
(2) If a proposed corporate action creating dissenters' rights under section
7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to
execute a writing consenting to such action contemplated in section 7-107-
104 shall be accompanied or preceded by a written notice stating that
shareholders are or may be entitled to assert dissenters' rights under
this article, by a copy of this article, and by the materials, if any,
that, under articles 101 to 117 of this title, would have been required to
be given to shareholders entitled to vote on the proposed action if the
proposed action were submitted to a vote at a shareholders' meeting.
Failure to give notice as provided by this subsection (2) shall not affect
any action taken pursuant to section 7-107-104 for which the notice was to
have been given, but any shareholder who was entitled to dissent but who
was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the
shareholder's failure to comply with the provisions of section 7-113-
202(2).
(S) 7-113-202. Notice of intent to demand payment
(1) If a proposed corporate action creating dissenters' rights under section
7-113-102 is submitted to a vote at a shareholders' meeting and if notice
of dissenters' rights has been given to such shareholder in connection
with the action pursuant to section 7-113-201(1), a shareholder who wishes
to assert dissenters' rights shall:
B-5
<PAGE>
(a) Cause the corporation to receive, before the vote is taken, written
notice of the shareholder's intention to demand payment for the
shareholder's shares if the proposed corporate action is effectuated;
and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under section
7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104 and if notice of dissenters' rights has been given to
such shareholder in connection with the action pursuant to section 7-113-
202(2) a shareholder who wishes to assert dissenters' rights shall not
execute a writing consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection (1) or
(2) of this section is not entitled to demand payment for the
shareholder's shares under this article.
(S) 7-113-203. Dissenters' notice
(1) If a proposed corporate action creating dissenters' rights under section
7-113-102 is authorized, the corporation shall give a written dissenters'
notice to all shareholders who are entitled to demand payment for their
shares under this article.
(2) The dissenters' notice required by subsection (1) of this section shall be
given no later than ten days after the effective date of the corporate
action creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for
certificated shares must be deposited;
(c) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment demand
and certificates for certificated shares, which date shall not be
less than thirty days after the date the notice required by
subsection (1) of this section is given;
B-6
<PAGE>
(f) State the requirement contemplated in section 7-113-103(3), if such
requirement is imposed; and
(g) Be accompanied by a copy of this article.
(S) 7-113-204. Procedure to demand payment
(1) A shareholder who is given a dissenters' notice pursuant to section 7-113-
203 and who wishes to assert dissenters' rights shall, in accordance with
the terms of the dissenters' notice:
(a) Cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in section 7-113-203(2)(d), duly
completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1) of
this section retains all rights of a shareholder, except the right to
transfer the shares, until the effective date of the proposed corporate
action giving rise to the shareholder's exercise of dissenters' rights and
has only the right to receive payment for the shares after the effective
date of such corporate action.
(3) Except as provided in section 7-113-207 or 7-113-209(1)(b), the demand for
payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the shareholder's
share certificates as required by the date or dates set in the dissenters'
notice is not entitled to payment for the shares under this article.
(S) 7-113-206. Payment
(1) Except as provided in section 7-113-208, upon the effective date of the
corporate action creating dissenters' rights under secction7-113-102 or
upon receipt of a payment demand pursuant to section 7-113-204, whichever
is later, the corporation shall pay each dissenter who complied with
section 7-113-204, at the address stated in the payment demand, or if no
such address is stated in the payment demand, at the address shown on the
corporation's current record of shareholders for the record shareholder
holding the dissenter's shares, the amount the corporation estimates to be
the fair value of the dissenter's shares, plus accrued interest.
B-7
<PAGE>
(2) The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance
sheet as of the end of a fiscal year ending not more than sixteen
months before the date of payment, an income statement for that year,
and, if the corporation customarily provides such statements to
shareholders, a statement of changes in shareholders' equity for that
year and a statement of cash flow for that year, which balance sheet
and statements shall have been audited if the corporation customarily
provides audited financial statements to shareholders, as well as the
latest available financial statements, if any, for the interim or
full-year period, which financial statements need not be audited.
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under section
7-113-209; and
(e) A copy of this article.
(S) 7-113-207. Failure to take action
(1) If the effective date of the corporate action creating dissenters' rights
under section 7-113-102 does not occur within sixty days after the date
set by the corporation by which the corporation must receive the payment
demand as provided in section 7-113-203, the corporation shall return the
deposited certificates and release the transfer restrictions imposed on
uncertificated shares.
(2) If the effective date of the corporate action creating dissenters' rights
under section 7-113-102 occurs more than sixty days after the date set by
the corporation by which the corporation must receive the payment demand
as provided in section 7-113-203, then the corporation shall send a new
dissenters' notice, as provided in section 7-113-203, and the provisions
of sections 7-113-204 to 7-113-209 shall again be applicable.
(S) 7-113-208. Special provisions relating to shares acquired after
announcement of proposed corporate action
(1) The corporation may, in or with the dissenters' notice given pursuant to
section 7-113-203, state the date of the first announcement to news media
or to shareholders
B-8
<PAGE>
of the terms of the proposed corporate action creating dissenters' rights
under section 7-113-102 and state that the dissenter shall certify in
writing, in or with the dissenter's payment demand under section
7-113-204, whether or not the dissenter (or the person on whose behalf
dissenters' rights are asserted) acquired beneficial ownership of the
shares before that date. With respect to any dissenter who does not so
certify in writing, in or with the payment demand, that the dissenter or
the person on whose behalf the dissenter asserts dissenters' rights
acquired beneficial ownership of the shares before such date, the
corporation may, in lieu of making the payment provided in section 7-113-
206, offer to make such payment if the dissenter agrees to accept it in
full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section
7-113-206(2).
(S) 7-113-209. Procedure if dissenter is dissatisfied with payment or offer
(1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of
the amount of interest due and may demand payment of such estimate, less
any payment made under section 7-113-206, or reject the corporation's
offer under section 7-113-208 and demand payment of the fair value of the
shares and interest due, if:
(a) The dissenter believes that the amount paid under section 7-113-206
or offered under section 7-113-208 is less than the fair value of the
shares or that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206 within
sixty days after the date set by the corporation by which the
corporation must receive the payment demand; or
(c) The corporation does not return the deposited certificates or release
the transfer restrictions imposed on uncertificated shares as
required by section 7-113-207(1).
(2) A dissenter waives the right to demand payment under this section unless
the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation
made or offered payment for the dissenter's shares.
B-9
<PAGE>
PART 3. JUDICIAL APPRAISAL OF SHARES
(S) 7-113-301. Court action
(1) If a demand for payment under section 7-113-209 remains unresolved, the
corporation may, within sixty days after receiving the payment demand,
commence a proceeding and petition the court to determine the fair value
of the shares and accrued interest. If the corporation does not commence
the proceeding within the sixty-day period, it shall pay to each dissenter
whose demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in subsection (1)
of this section in the district court of the county in this state where
the corporation's principal office is located or, if the corporation has
no principal office in this state, in the district court of the county in
which its registered office is located. If the corporation is a foreign
corporation without a registered office, it shall commence the proceeding
in the county where the registered office of the domestic corporation
merged into, or whose shares were acquired by, the foreign corporation was
located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unresolved parties to the proceeding
commenced under subsection (2) of this section as in an action against
their shares, and all parties shall be served with a copy of the petition.
Service on each dissenter shall be by registered or certified mail, to the
address stated in such dissenter's payment demand, or if no such address
is states in the payment demand, at the address shown on the corporation's
current record of shareholders for the record shareholder holding the
dissenter's shares, or as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced under
subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and
recommend a decision on the question of fair value. The appraisers have
the powers described in the order appointing them, or in any amendment to
such order. The parties to the proceeding are entitled to the same
discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under subsection
(2) of this section is entitled to judgment for the amount, if any, by
which the court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the corporation, or for the fair
value, plus interest, of the dissenter's shares for which the corporation
elected to withhold payment under section 7-113-208.
B-10
<PAGE>
(S) 7-113-302. Court costs and counsel fees
(1) The court in an appraisal proceeding commenced under section 7-113-301
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court
shall assess the costs against the corporation; except that the court may
assess costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously, or not in good faith demanding payment under
section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and experts for
the respective parties, in amounts the court finds equitable.
(a) Against the corporation and in favor of any dissenters if the court
finds the corporation did not substantially comply with the
requirements of part 2 of this article; or
(b) Against either the corporation or one or more dissenters, in favor of
any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not
in good faith with respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation,
the court may award to said counsel reasonable fees to be paid out of
amounts awarded to the dissenters who were benefited.
B-11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes indemnification
of directors and officers of a Delaware corporation under certain circumstances
against expenses, judgments and the like in connection with an action, suit or
proceeding. Article Fourteenth of Wells Fargo & Company'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 and 8.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
posteffective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
posteffective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
((S)230.424(b) of this chapter) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the maximum
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(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.
<PAGE>
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a post-
effecctive 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 the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Francisco, State of
California, on January 20, 1999.
WELLS FARGO & COMPANY
By: /s/ Richard M. Kovacevich
-------------------------
Richard M. Kovacevich
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement has been signed on January 20, 1999 by the following persons in the
capacities indicated:
/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
LES S. BILLER )
J.A. BLANCHARD III )
DAVID A. CHRISTENSEN )
SUSAN E. ENGEL )
RODNEY L. JACOBS )
WILLIAM A. HODDER )
REATHA CLARK KING ) A majority of the
RICHARD M. KOVACEVICH ) Board of Directors*
RICHARD D. McCORMICK )
CYNTHIA H. MILLIGAN )
BENJAMIN F. MONTOYA )
IAN M. ROLLAND )
MICHAEL W. WRIGHT )
- -------------
*Richard M. Kovacevich, by signing his name hereto, does hereby sign this
document on behalf of each of the directors named above pursuant to powers of
attorney duly executed by such persons.
/s/ Richard M. Kovacevich
-------------------------
Richard M. Kovacevich
Attorney-in-Fact
II-3
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit Form of
Number Description Filing
- ------- ----------- ------
<S> <C> <C>
2 Agreement and Plan of Reorganization dated September 1, 1998 between
Metropolitan Bancshares, Inc. and Norwest Corporation (now named Wells
Fargo & Company) (included in Proxy Statement-Prospectus as Appendix A).
3.1 Restated Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 3(b) to Wells Fargo's Current Report on Form 8-K
dated June 28, 1993, Exhibit 3 to Wells Fargo's Current Report on Form 8-
K dated July 3, 1995, Exhibit 3 to Wells Fargo's Current Report on Form
8-K dated June 3, 1997, Exhibit 3 to Wells Fargo's Current Report on
Form 8-K dated June 8, 1998 and Exhibits 3(b) and 3(c) to Wells Fargo's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
3.1.1 Certificate of Designations of Powers, Preferences, and Rights of ESOP
Cumulative Convertible Preferred Stock (incorporated by reference to
Exhibit 4 to Wells Fargo's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994).
3.1.2 Certificate of Designations of Powers, Preferences, and Rights of Wells
Fargo Cumulative Tracking Preferred Stock (incorporated by reference to
Exhibit 3 to Wells Fargo's Current Report on Form 8-K dated January 9,
1995).
3.1.3 Certificate of Designations of Powers, Preferences, and Rights of 1995
ESOP Cumulative Convertible Preferred Stock (incorporated by reference to
Exhibit 4 to Wells Fargo's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995).
3.1.4 Certificate of Designations with respect to the 1996 ESOP Cumulative
Convertible Preferred Stock (incorporated by reference to Exhibit 3 to
Wells Fargo's Current Report on Form 8-K dated November 26, 1996).
3.1.5 Certificate of Designations with respect to the 1997 ESOP Cumulative
Convertible Preferred Stock (incorporated by reference to Exhibit 3 to
Wells Fargo's Current Report on Form 8-K dated April 14, 1997).
3.1.6 Certificate of Designations with respect to the 1998 ESOP Cumulative
Convertible Preferred Stock (incorporated by reference to Exhibit 3 to
Wells Fargo's Current Report on Form 8-K dated April 20, 1998).
3.1.7 Certificate of Designations for Adjustable Cumulative Preferred Stock,
Series B (incorporated by reference to Exhibit 3(j) to Wells Fargo's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998).
3.1.8 Certificate of Designations for Fixed/Adjustable Rate Noncumulative
Preferred Stock, Series H (incorporated by reference to Exhibit 3(k) to
Wells Fargo's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Form of
Number Description Filing
- ------ ----------- ------
<S> <C> <C>
3.2 By-Laws (incorporated by reference to Exhibit 3(l) to Wells Fargo's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
4 Rights Agreement, dated as of October 21, 1998, between Norwest
Corporation (now named Wells Fargo & Company) and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent (incorporated by reference to Exhibit
4.1 to Wells Fargo's Form 8-A dated October 21, 1998).
5 Opinion of Stanley S. Stroup. Electronic
Transmission
8 Opinion of Davis, Graham & Stubbs LLP.
23.1 Consent of Stanley S. Stroup (included as part of Exhibit 5).
23.2 Consent of KPMG LLP. Electronic
Transmission
23.3 Consent of BDO Seidman, LLP. Electronic
Transmission
23.4 Consent of Davis, Graham & Stubbs LLP
(included as part of Exhibit 8).
24 Powers of Attorney. Electronic
Transmission
99 Form of proxy for Special Meeting of Shareholders of Metropolitan Electronic
Bancshares, Inc. Transmission
</TABLE>
<PAGE>
EXHIBIT 5
[LETTERHEAD OF WELLS FARGO & COMPANY]
January 20, 1999
Board of Directors
Wells Fargo & Company
633 Folsom Street
7/th/ Floor
San Francisco, California 94107-3600
Ladies and Gentlemen:
In connection with the proposed registration under the Securities Act of
1933, as amended, of a maximum of 910,000 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 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 Metropolitan 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.
Very truly yours,
/s/ Stanley S. Stroup
<PAGE>
[LETTERHEAD OF DAVIS, GRAHAM & STUBBS LLP APPEARS HERE]
January 21, 1999
To the Stockholders
Metropolitan Bancshares, Inc.
19590 E. Mainstreet
Parker, Colorado 80138
Ladies and Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences of the merger (the "Merger") of Norwest Metropolitan Merger Co., a
Colorado corporation ("Merger Sub"), with and into Metropolitan Bancshares,
Inc., a Colorado corporation ("Metropolitan"), pursuant to that Agreement and
Plan of Reorganization, dated as of September 1, 1998 (the "Agreement"), by and
between Metropolitan and Norwest Corporation, a Delaware corporation now called
Wells Fargo & Company ("Wells Fargo"). Capitalized terms used, but not defined,
in this letter shall have the meaning ascribed to them in the Agreement.
FACTS
-----
At December 31, 1998, (i) Metropolitan had outstanding 41,250 shares of
common stock and also had reserved for issuance upon the exercise of outstanding
stock options 6,300 shares of common stock, and (ii) Wells Fargo had outstanding
1,644,057,803 shares of common stock, 6,535,362 shares of preferred stock and no
other outstanding shares of capital stock. Prior to the Effective Time of the
Merger, all of the outstanding stock options of Metropolitan will be exercised
by the holders thereof. Merger Sub has been organized for purposes of the
Merger and has not conducted any business operations and has only nominal
assets.
The Merger is intended to qualify as a reorganization within the meaning of
Sections 368(a)(1)(A) and (a)(2)(E) of the Internal Revenue Code of 1986, as
amended (the "Code"). Pursuant to the Agreement and in accordance with
applicable state law, the Merger will be effected by means of the merger of
Merger Sub with and into Metropolitan, with Metropolitan being the surviving
corporation. As the surviving corporation, Metropolitan will acquire all of
Merger Sub's assets and assume all of Merger Sub's liabilities. At the
Effective Time of the Merger, the
<PAGE>
Stockholders of
Metropolitan Bancshares, Inc.
January 21, 1999
Page 2
outstanding shares of Metropolitan common stock (excluding shares held by
Metropolitan and shares held by Metropolitan stockholders who exercise and do
not subsequently withdraw or otherwise lose statutory dissenters rights) will be
converted into Wells Fargo common stock having a fair market value of
$24,500,000 in the aggregate. The exchange ratio will be determined by dividing
the share value of the Metropolitan common stock (approximately $515.25) by the
average of the closing prices of a share of Wells Fargo common stock as reported
on the New York Stock Exchange composite transaction reporting system for the 20
trading day period ending on the date before the meeting of the Metropolitan
stockholders to consider and vote upon the Merger. Metropolitan stockholders
will receive cash (without interest) in lieu of fractional shares.
For purposes of our opinion, we have examined executed counterparts of the
following documents, together with all schedules and exhibits attached thereto:
(a) the Agreement; and
(b) the Registration Statement on Form S-4 containing the Proxy
Statement/Prospectus prepared by Wells Fargo and Metropolitan in
connection with the Merger and filed with the Securities and
Exchange Commission on January 21, 1999, pursuant to the
Securities Act of 1933, as amended (the "Registration Statement").
In addition, you have permitted us to assume that (a) the Merger will be
consummated in accordance with the terms, conditions, and other provisions of
the Agreement and applicable state law, and (b) all of the factual information,
descriptions, representations and assumptions set forth in the Agreement or this
letter and in the Certificates to Counsel of Wells Fargo and Metropolitan (the
"Certificates") are accurate and complete and will be accurate and complete at
the Effective Time of the Merger. We have not independently verified any
factual matters relating to the Merger in connection with or apart from our
preparation of this opinion and, accordingly, our opinion does not take into
account any matters not set forth in this letter which might have been disclosed
by independent verification.
OPINION
-------
Provided that the Merger is consummated in accordance with the terms and
conditions set forth in the Agreement, and based on the facts and
representations set forth in the Certificates and this letter, and subject to
the qualifications and other matters set forth in this letter, it is our opinion
that for federal income tax purposes:
<PAGE>
Stockholders of
Metropolitan Bancshares, Inc.
January 21, 1999
Page 3
(a) The Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code.
(b) No gain or loss will be recognized by the Metropolitan
stockholders who exchange all of their Metropolitan common stock solely for
Wells Fargo common stock pursuant to the Merger (except with respect to
cash received in lieu of a fractional share of Wells Fargo common stock).
(c) The aggregate tax basis of the Wells Fargo common stock received
by the Metropolitan stockholders who, pursuant to the Merger, exchange all
of their Metropolitan common stock solely for Wells Fargo common stock will
be the same as the aggregate tax basis of the Metropolitan common stock
surrendered in exchange (reduced by any amount allocable to a fractional
share interest in Wells Fargo common stock for which cash is received).
(d) Any cash received by a holder of Metropolitan common stock in lieu
of a fractional share interest in Wells Fargo common stock shall be treated
as received in exchange for such fractional share. Such gain or loss
generally will be recognized for federal income tax purposes measured by
the difference between the amount of cash received and the portion of the
stockholder's tax basis allocable to such fractional share.
(e) The holding period of the Wells Fargo common stock received
pursuant to the Merger in exchange for Metropolitan common stock will
include the holding period of the Metropolitan common stock surrendered in
exchange if such Metropolitan common stock was a capital asset in the hands
of the exchanging stockholder at the Effective Time of the Merger.
Our opinion is limited to the foregoing federal income tax consequences of
the Merger as a reorganization within the meaning of Section 368(a) of the Code,
which is the only matter as to which you have requested our opinion. We do not
address any other federal income tax consequences of the Merger, any
transactions undertaken incident to the Merger (including the exercise of stock
options by certain employees or former employees of Metropolitan) or other
matters of federal law. Additionally, we have not considered matters (including
state or local tax consequences) arising under the laws of any jurisdiction
other than matters of federal law arising under the law of the United States.
<PAGE>
Stockholders of
Metropolitan Bancshares, Inc.
January 21, 1999
Page 4
Our opinion is based on the understanding that the relevant facts are, and
will be as of the Effective Time of the Merger, as set forth or referred to in
this letter and in the Certificates. If this understanding is incorrect or
incomplete in any respect, our opinion could be affected. Our opinion is also
based upon the existing provisions of United States federal income tax law,
including the Internal Revenue Code of 1986, as amended, the Treasury Department
Regulations promulgated thereunder (final, temporary and proposed), published
revenue rulings and procedures of the Internal Revenue Service, judicial
decisions, reports and statements of congressional committees and members and
such other matters as we have considered relevant, all as in effect on the date
hereof. Any of such authorities could be changed at any time (possibly
retroactively), and any such changes could alter the statements and opinions
expressed herein. In rendering this opinion, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
U.S. federal income tax laws.
This letter is intended for the sole benefit of the Metropolitan
stockholders and may not be relied upon by any other party without our prior
written consent. We hereby consent to the filing of this opinion with the
Securities and Exchange Commission as an exhibit to the Registration Statement.
Sincerely,
/s/ DAVIS, GRAHAM & STUBBS LLP
DAVIS, GRAHAM & STUBBS LLP
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF KPMG LLP]
Independent Auditors' Consent
-----------------------------
The Board of Directors
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 supplemental consolidated
balance sheet of Wells Fargo & Company and Subsidiaries as of December 31, 1997
and 1996, and the related supplemental consolidated statements of income,
changes in stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1997, which report appears in the Form 8-K
of Wells Fargo & Company dated January 19, 1999, and to the reference to our
firm under the heading "Experts" in the Proxy Statement-Prospectus. Our report
contains an explanatory paragraph that states that the supplemental consolidated
financial statements give retroactive effect to the merger of Wells Fargo &
Company and Norwest Corporation on November 2, 1998, which has been accounted
for as a pooling-of-interests as described in Note 1 to the supplemental
consolidated financial statements.
/s/ KPMG LLP
San Francisco, California
January 20, 1999
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF BDO SEIDMAN, LLP]
INDEPENDENT AUDITORS' CONSENT
-----------------------------
Metropolitan Bancshares, Inc.
Parker, Colorado
We hereby consent to the use in the Proxy Statement-Prospectus constituting a
part of this Registration Statement of our report dated April 3, 1998 relating
to the consolidated financial statements of Metropolitan Bancshares, Inc. for
the years ended December 31, 1997 and 1996.
We also consent to the reference to us under the caption "Experts" in the Proxy
Statement-Prospectus.
/s/ BDO SEIDMAN, LLP
Denver, Colorado
January 20, 1999
<PAGE>
EXHIBIT 24
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer
of NORWEST CORPORATION, a Delaware corporation, does hereby make, constitute and
appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP, JOHN T. THORNTON,
and LAUREL A. HOLSCHUH, and each or any one of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director and/or officer of said Corporation to a Registration
Statement on Form S-4 or other applicable form, and all amendments, including
post-effective amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection with the
registration under the Securities Act of 1933, as amended, of up to 910,000
shares of Common Stock of the Corporation, adjusted for any change in the number
of outstanding shares of Common Stock resulting from stock splits, reverse stock
splits or stock dividends occurring after the date hereof, which may be issued
in connection with the acquisition by the Corporation of Metropolitan
Bancshares, Inc., located in Parker, Colorado, 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
28th day of July, 1998.
/s/ Les S. Biller
-------------------------
Les S. Biller
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer
of NORWEST CORPORATION, a Delaware corporation, does hereby make, constitute and
appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP, JOHN T. THORNTON,
and LAUREL A. HOLSCHUH, and each or any one of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director and/or officer of said Corporation to a Registration
Statement on Form S-4 or other applicable form, and all amendments, including
post-effective amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection with the
registration under the Securities Act of 1933, as amended, of up to 910,000
shares of Common Stock of the Corporation, adjusted for any change in the number
of outstanding shares of Common Stock resulting from stock splits, reverse stock
splits or stock dividends occurring after the date hereof, which may be issued
in connection with the acquisition by the Corporation of of Metropolitan
Bancshares, Inc., located in Parker, Colorado,, 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
28th day of July, 1998.
/s/J.A. Blanchard
----------------------------
J.A. Blanchard III
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer
of NORWEST CORPORATION, a Delaware corporation, does hereby make, constitute and
appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP, JOHN T. THORNTON,
and LAUREL A. HOLSCHUH, and each or any one of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director and/or officer of said Corporation to a Registration
Statement on Form S-4 or other applicable form, and all amendments, including
post-effective amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection with the
registration under the Securities Act of 1933, as amended, of up to 910,000
shares of Common Stock of the Corporation, adjusted for any change in the number
of outstanding shares of Common Stock resulting from stock splits, reverse stock
splits or stock dividends occurring after the date hereof, which may be issued
in connection with the acquisition by the Corporation of Metropolitan
Bancshares, Inc., located in Parker, Colorado, 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
28th day of July, 1998.
/s/ David A. Christensen
-----------------------------
David A. Christensen
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer
of NORWEST CORPORATION, a Delaware corporation, does hereby make, constitute and
appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP, JOHN T. THORNTON,
and LAUREL A. HOLSCHUH, and each or any one of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director and/or officer of said Corporation to a Registration
Statement on Form S-4 or other applicable form, and all amendments, including
post-effective amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection with the
registration under the Securities Act of 1933, as amended, of up to 910,000
shares of Common Stock of the Corporation, adjusted for any change in the number
of outstanding shares of Common Stock resulting from stock splits, reverse stock
splits or stock dividends occurring after the date hereof, which may be issued
in connection with the acquisition by the Corporation of Metropolitan
Bancshares, Inc., located in Parker, Colorado, 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
28th day of July, 1998.
/s/ Susan E. Engel
-------------------------
Susan E. Engel
<PAGE>
WELLS FARGO & COMPANY
(formerly known as NORWEST CORPORATION)
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 (formerly known as NORWEST CORPORATION), a Delaware
corporation, does hereby make, constitute and appoint RICHARD M. KOVACEVICH, LES
BILLER, 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 910,000 shares of Common Stock of the Company, 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 Metropolitan
Bancshares, Inc. located in Parker, Colorado, 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
11th day of January, 1999.
/s/ Rodney L. Jacobs
-----------------------------
Rodney L. Jacobs
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer
of NORWEST CORPORATION, a Delaware corporation, does hereby make, constitute and
appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP, JOHN T. THORNTON,
and LAUREL A. HOLSCHUH, and each or any one of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director and/or officer of said Corporation to a Registration
Statement on Form S-4 or other applicable form, and all amendments, including
post-effective amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection with the
registration under the Securities Act of 1933, as amended, of up to 910,000
shares of Common Stock of the Corporation, adjusted for any change in the number
of outstanding shares of Common Stock resulting from stock splits, reverse stock
splits or stock dividends occurring after the date hereof, which may be issued
in connection with the acquisition by the Corporation of Metropolitan
Bancshares, Inc., located in Parker, Colorado, 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
28th day of July, 1998.
/s/ William A. Hodder
------------------------------
William A. Hodder
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer
of NORWEST CORPORATION, a Delaware corporation, does hereby make, constitute and
appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP, JOHN T. THORNTON,
and LAUREL A. HOLSCHUH, and each or any one of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director and/or officer of said Corporation to a Registration
Statement on Form S-4 or other applicable form, and all amendments, including
post-effective amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection with the
registration under the Securities Act of 1933, as amended, of up to 910,000
shares of Common Stock of the Corporation, adjusted for any change in the number
of outstanding shares of Common Stock resulting from stock splits, reverse stock
splits or stock dividends occurring after the date hereof, which may be issued
in connection with the acquisition by the Corporation of Metropolitan
Bancshares, Inc., located in Parker, Colorado, 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
28th day of July, 1998.
/s/ Reatha Clark King
-----------------------------
Reatha Clark King
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer
of NORWEST CORPORATION, a Delaware corporation, does hereby make, constitute and
appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP, JOHN T. THORNTON,
and LAUREL A. HOLSCHUH, and each or any one of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director and/or officer of said Corporation to a Registration
Statement on Form S-4 or other applicable form, and all amendments, including
post-effective amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection with the
registration under the Securities Act of 1933, as amended, of up to 910,000
shares of Common Stock of the Corporation, adjusted for any change in the number
of outstanding shares of Common Stock resulting from stock splits, reverse stock
splits or stock dividends occurring after the date hereof, which may be issued
in connection with the acquisition by the Corporation of Metropolitan
Bancshares, Inc., located in Parker, Colorado, 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
28th day of July, 1998.
/s/ Richard M. Kovacevich
-------------------------------
Richard M. Kovacevich
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer
of NORWEST CORPORATION, a Delaware corporation, does hereby make, constitute and
appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP, JOHN T. THORNTON,
and LAUREL A. HOLSCHUH, and each or any one of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director and/or officer of said Corporation to a Registration
Statement on Form S-4 or other applicable form, and all amendments, including
post-effective amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection with the
registration under the Securities Act of 1933, as amended, of up to 910,000
shares of Common Stock of the Corporation, adjusted for any change in the number
of outstanding shares of Common Stock resulting from stock splits, reverse stock
splits or stock dividends occurring after the date hereof, which may be issued
in connection with the acquisition by the Corporation of Metropolitan
Bancshares, Inc., located in Parker, Colorado, 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
28th day of July, 1998.
/s/ Richard D. McCormick
---------------------------------
Richard D. McCormick
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer
of NORWEST CORPORATION, a Delaware corporation, does hereby make, constitute and
appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP, JOHN T. THORNTON,
and LAUREL A. HOLSCHUH, and each or any one of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director and/or officer of said Corporation to a Registration
Statement on Form S-4 or other applicable form, and all amendments, including
post-effective amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection with the
registration under the Securities Act of 1933, as amended, of up to 910,000
shares of Common Stock of the Corporation, adjusted for any change in the number
of outstanding shares of Common Stock resulting from stock splits, reverse stock
splits or stock dividends occurring after the date hereof, which may be issued
in connection with the acquisition by the Corporation of Metropolitan
Bancshares, Inc., located in Parker, Colorado, 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
28th day of July, 1998.
/s/ Cynthia H. Milligan
-------------------------------
Cynthia H. Milligan
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer
of NORWEST CORPORATION, a Delaware corporation, does hereby make, constitute and
appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP, JOHN T. THORNTON,
and LAUREL A. HOLSCHUH, and each or any one of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director and/or officer of said Corporation to a Registration
Statement on Form S-4 or other applicable form, and all amendments, including
post-effective amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection with the
registration under the Securities Act of 1933, as amended, of up to 910,000
shares of Common Stock of the Corporation, adjusted for any change in the number
of outstanding shares of Common Stock resulting from stock splits, reverse stock
splits or stock dividends occurring after the date hereof, which may be issued
in connection with the acquisition by the Corporation of Metropolitan
Bancshares, Inc., located in Parker, Colorado, 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
28th day of July, 1998.
/s/ Benjamin F. Montoya
--------------------------------
Benjamin F. Montoya
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer
of NORWEST CORPORATION, a Delaware corporation, does hereby make, constitute and
appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP, JOHN T. THORNTON,
and LAUREL A. HOLSCHUH, and each or any one of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director and/or officer of said Corporation to a Registration
Statement on Form S-4 or other applicable form, and all amendments, including
post-effective amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection with the
registration under the Securities Act of 1933, as amended, of up to 910,000
shares of Common Stock of the Corporation, adjusted for any change in the number
of outstanding shares of Common Stock resulting from stock splits, reverse stock
splits or stock dividends occurring after the date hereof, which may be issued
in connection with the acquisition by the Corporation of Metropolitan
Bancshares, Inc., located in Parker, Colorado, 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
28th day of July, 1998.
/s/ Ian M. Rolland
--------------------------
Ian M. Rolland
<PAGE>
NORWEST CORPORATION
POWER OF ATTORNEY
OF DIRECTOR AND/OR OFFICER
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer
of NORWEST CORPORATION, a Delaware corporation, does hereby make, constitute and
appoint RICHARD M. KOVACEVICH, LES BILLER, STANLEY S. STROUP, JOHN T. THORNTON,
and LAUREL A. HOLSCHUH, and each or any one of them, the undersigned's true and
lawful attorneys-in-fact, with power of substitution, for the undersigned and in
the undersigned's name, place and stead, to sign and affix the undersigned's
name as such director and/or officer of said Corporation to a Registration
Statement on Form S-4 or other applicable form, and all amendments, including
post-effective amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection with the
registration under the Securities Act of 1933, as amended, of up to 910,000
shares of Common Stock of the Corporation, adjusted for any change in the number
of outstanding shares of Common Stock resulting from stock splits, reverse stock
splits or stock dividends occurring after the date hereof, which may be issued
in connection with the acquisition by the Corporation of Metropolitan
Bancshares, Inc., located in Parker, Colorado, 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
28th day of July, 1998.
/s/ Michael W. Wright
------------------------------
Michael W. Wright
<PAGE>
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS OF METROPOLITAN BANCSHARES, INC.
The undersigned hereby appoints Robert W. Graf and Lester Gold, 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 Metropolitan
Bancshares, Inc. ("Metropolitan") to be held on February 19, 1999 at Suite 777,
3600 S. Yosemite Street, Denver, Colorado 80237, 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
September 1, 1998 (the "Reorganization Agreement") between Metropolitan
Bancshares, Inc. and Norwest Corporation (now named Wells Fargo & Company
("Wells Fargo") pursuant to which a wholly-owned subsidiary of Wells Fargo will
merge with Metropolitan and Metropolitan will become a wholly-owned subsidiary
of Wells Fargo (the "Merger"), all upon the terms and subject to the conditions
set forth in the Reorganization Agreement, a copy of which is included as
Appendix A in the accompanying Proxy Statement-Prospectus; and to authorize such
further action by the Board of Directors and officers of Metropolitan as may be
necessary or appropriate to carry out the intent and purposes of the Merger.
FOR [_] AGAINST [_] ABSTAIN [_]
2. In the discretion of the persons appointed proxies hereby on such
other matters as may properly come before the Special Meeting.
Shares represented by this proxy will be voted as directed by the
shareholder. The Board of Directors recommends a vote "FOR" proposal 1. If no
direction is supplied, the proxy will be voted "FOR" proposal 1.
Dated:_______________________________, 199_.
______________________________________________
(Please sign exactly as name appears at left.)
______________________________________________
(If stock is owned by more than one person,
all owners should sign. Persons signing as
executors administrators, trustees, or in
similar capacities should so indicate.)
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF METROPOLITAN BANCSHARES, INC.
