<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 25, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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)
<TABLE>
<S> <C> <C>
DELAWARE 6712 41-0449260
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
WELLS FARGO & COMPANY
420 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94163
(800) 411-4932
(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:
<TABLE>
<S> <C> <C>
BRAD D. HARDY, ESQ. EDWARD D. HERLIHY, ESQ. ROBERT J. KAUKOL, ESQ.
EXECUTIVE VICE PRESIDENT AND WACHTELL, LIPTON, ROSEN & KATZ WELLS FARGO & COMPANY
CHIEF FINANCIAL OFFICER 51 WEST 52(ND) STREET 1050 17(TH) STREET
FIRST SECURITY CORPORATION NEW YORK, NEW YORK 10019 SUITE 120
79 SOUTH MAIN (212) 403-1000 DENVER, CO 80265
SALT LAKE CITY, UTAH 84111 (303) 899-5802
(801) 246-5976
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE (1) OFFERING PRICE FEE (2)
<S> <C> <C> <C> <C>
Common Stock, par value $1 2/3 per share
(and associated Preferred Stock Purchase
Rights) 90,000,000 $34.35 $3,091,500,000 $816,156
</TABLE>
(1) Calculated in accordance with Rule 457(f)(1) under the Securities Act based
on the aggregate market value on May 19, 2000 of the shares of First
Security Corporation common stock expected to be canceled in connection with
the merger described herein and computed by dividing (i) the product of
(A) the average of the high and low sales prices of First Security
Corporation common stock as reported on Nasdaq on May 19, 2000 ($14.72) and
(B) 210,000,000, representing the estimated maximum number of shares of
First Security Corporation common stock expected to be canceled in
connection with the merger, by (ii) 90,000,000, representing the maximum
number of shares of Wells Fargo & Company common stock to be issued in
connection with the merger.
(2) The registration fee of $816,156 was calculated pursuant to Rule 457(f)
under the Securities Act, as follows: 0.000264 multiplied by 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, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FIRST SECURITY CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
, 2000
To the Stockholders of First Security Corporation:
A special meeting of stockholders of First Security Corporation ("First
Security") will be held on , June , 2000, at a.m./p.m., Salt
Lake City, Utah time, at . The purposes of the meeting are to:
1. Vote on a proposal to approve the Agreement and Plan of Reorganization,
entered into as of the 9th day of April 2000, by and between First Security
and Wells Fargo & Company ("Wells Fargo"); and a related Agreement and Plan
of Merger, dated as of , 2000, by and between First Security and
Merger Co., a wholly-owned subsidiary of Wells Fargo, included as
Exhibit A-1 to the Agreement and Plan of Reorganization (collectively, the
"Merger Agreement"), pursuant to which, among other things, a wholly-owned
subsidiary of Wells Fargo will merge with and into First Security (the
"Merger") upon the terms and subject to the conditions set forth in the
Merger Agreement, as more fully described in the proxy statement-prospectus
that follows this notice. As a result of the Merger, each outstanding share
of First Security common stock will be converted into the right to receive
0.355 of a share of Wells Fargo common stock.
2. Act on any other matters that may properly come before the meeting.
Only First Security stockholders of record at the close of business on
, 2000 may vote at the special meeting. A list of stockholders of
record who may vote at the meeting will be available during business hours for
any First Security stockholder to examine and copy for any purpose relevant to
the meeting. The list will be available from , 2000, through the
adjournment of the meeting at the offices of First Security, 79 South Main, Salt
Lake City, Utah 84111, and at the meeting.
By Order of the Board of Directors
[signature]
Spencer F. Eccles
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
June , 2000
PLEASE PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING. FAILURE TO RETURN A PROPERLY EXECUTED
PROXY OR TO VOTE AT THE MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE
MERGER AGREEMENT AND THE MERGER. YOU MAY STILL VOTE IN PERSON AT THE MEETING
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
[FSCO LOGO]
The board of directors of First Security Corporation has approved the sale
of First Security to Wells Fargo & Company. The sale will be accomplished
through the merger of a wholly-owned subsidiary of Wells Fargo with First
Security. The sale requires the approval of First Security's stockholders and
will be voted on at a special meeting. The time and place of the meeting are set
forth in the notice of special meeting that precedes this proxy
statement-prospectus.
If the sale to Wells Fargo is completed, each share of First Security common
stock will be converted into the right to receive 0.355 of a share of Wells
Fargo common stock. On May , 2000, Wells Fargo common stock closed at $ a
share, making 0.355 of a share of Wells Fargo common stock equal on that date to
$ .
If the total number of shares of Wells Fargo common stock you will receive
in the merger does not equal a whole number, you will receive cash instead of
the fractional share.
The merger is expected to be generally tax free to stockholders of First
Security, except for cash received instead of fractional shares.
This document provides detailed information about the proposed sale. Please
read this entire document carefully. You can find additional information about
Wells Fargo and First Security from documents filed with the Securities and
Exchange Commission.
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 sale.
If you fail to return your proxy card, or if you fail to instruct your broker
how to vote shares held for you in the broker's name, the effect will be the
same as a vote against the sale.
The common stock of Wells Fargo is listed on the New York and Chicago Stock
Exchanges under the symbol "WFC," and the common stock of First Security trades
on Nasdaq under the symbol "FSCO."
Approval of the sale of First Security to Wells Fargo & Company requires the
affirmative vote of a majority of the outstanding shares of First Security
common stock and First Security preferred stock, voting as one class. No vote of
Wells Fargo's stockholders is required to approve the transaction.
/s/ Spencer F. Eccles
Spencer F. Eccles
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE WELLS FARGO COMMON STOCK TO BE
ISSUED OR DETERMINED IF THIS PROXY STATEMENT-PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF WELLS FARGO COMMON STOCK TO BE ISSUED IN THE MERGER ARE NOT
SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK
SUBSIDIARY OF WELLS FARGO, AND THEY ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
------------------------
PROXY STATEMENT-PROSPECTUS DATED JUNE , 2000.
FIRST MAILED TO FIRST SECURITY STOCKHOLDERS ON OR ABOUT JUNE , 2000.
<PAGE>
ADDITIONAL INFORMATION
This document incorporates important business and financial information
about Wells Fargo and First Security that is not included in or delivered with
this document. See "Where You Can Find More Information" on page for a list of
the documents that Wells Fargo and First Security have incorporated into this
document. These documents are available to you without charge upon written or
oral request made as follows:
<TABLE>
<S> <C>
WELLS FARGO DOCUMENTS: FIRST SECURITY DOCUMENTS:
Corporate Secretary Corporate Secretary
Wells Fargo & Company First Security Corporation
MAC N9305-173 79 South Main
Sixth and Marquette 2nd Floor
Minneapolis, Minnesota 55479 Salt Lake City, Utah 84111
(612) 667-8655 (801) 246-5976
</TABLE>
TO OBTAIN DOCUMENTS IN TIME FOR THE SPECIAL MEETING, YOUR REQUEST SHOULD BE
RECEIVED BY JUNE , 2000.
i
<PAGE>
QUESTIONS AND ANSWERS ABOUT THIS DOCUMENT
WHAT IS THE PURPOSE OF THIS PROXY STATEMENT-PROSPECTUS?
This document serves as both a proxy statement of First Security and a
prospectus of Wells Fargo. As a PROXY STATEMENT, it's being provided to you by
First Security because the board of directors of First Security is soliciting
your proxy to vote to approve the proposed merger of First Security and Wells
Fargo. As a PROSPECTUS, it's being provided to you by Wells Fargo because Wells
Fargo is offering you shares of its common stock in exchange for your shares of
First Security common stock if the merger is completed.
DO I NEED TO READ THE ENTIRE DOCUMENT?
ABSOLUTELY. Parts of this document summarize information that is presented
in greater detail elsewhere in this document or in the appendices to this
document. Each summary discussion is qualified by reference to the full text.
For example, the summary of the terms of the merger agreement is qualified by
the actual terms of the merger agreement, a copy of which is included as
Appendix A.
IS THERE OTHER INFORMATION I SHOULD CONSIDER?
YES. Much of the business and financial information about Wells Fargo and
First Security that may be important to you is not included directly in this
document. Instead, this information is incorporated into this document by
references to documents separately filed by Wells Fargo and First Security with
the Securities and Exchange Commission. This means that Wells Fargo and First
Security may satisfy their disclosure obligations to you by referring you to one
or more documents separately filed by them with the SEC. See "Where You Can Find
More Information" on page for a list of documents that Wells Fargo and First
Security have incorporated by reference into this proxy statement-prospectus and
for instructions on how to obtain copies of these documents. The documents are
available to you without charge.
WHAT IF THERE IS A CONFLICT BETWEEN DOCUMENTS?
You should rely on the MOST RECENTLY FILED DOCUMENT. Information in this
proxy statement-prospectus may update information contained in the Wells Fargo
or First Security documents incorporated by reference. Similarly, information in
documents that Wells Fargo or First Security may file after the date of this
proxy statement-prospectus may update information contained in this proxy
statement-prospectus or information contained in previously filed documents.
WHAT IF I CHOOSE NOT TO READ THE INCORPORATED DOCUMENTS?
Information contained in a document that is incorporated by reference is
part of this proxy statement-prospectus, unless it is superseded by information
contained directly in this proxy statement-prospectus or in documents filed with
the SEC after the date of this proxy statement-prospectus. Information that is
incorporated from another document is considered to have been disclosed to you
WHETHER OR NOT YOU CHOOSE TO READ THE DOCUMENT.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY..................................................... 1
The Merger................................................ 1
The Companies............................................. 1
What You Will Receive in the Merger....................... 1
The Market Price of Wells Fargo Stock Will Fluctuate...... 2
Merger Generally Tax Free to Stockholders of First
Security................................................ 2
First Security's Board Recommends Approval of the
Merger.................................................. 2
First Security's Financial Advisor Believes the Merger is
Fair to First Security Stockholders..................... 3
Additional Merger Benefits to First Security's
Management.............................................. 3
You Have No Dissenters' Rights............................ 3
Surrender of Shares of First Security..................... 3
First Security Special Meeting............................ 3
Record Date; Vote Required to Approve Merger.............. 3
We Must Obtain Regulatory Approvals to Complete the
Merger.................................................. 4
Other Conditions to Completing the Merger................. 4
Termination of the Merger Agreement....................... 4
Stock Option Agreement.................................... 4
Your Rights Will Differ as a Wells Fargo Stockholder...... 5
Wells Fargo Expects to Use Pooling-of-Interests
Accounting.............................................. 5
Financial Modernization Will Increase Competition......... 5
Forward-Looking Statements May Prove Inaccurate........... 5
Selected Financial Data................................... 6
Comparative Per Common Share Data......................... 7
FIRST SECURITY SPECIAL MEETING.............................. 8
Time and Place of the Meeting............................. 8
Matters to be Considered at the Meeting................... 8
Record Date............................................... 8
Outstanding Shares........................................ 8
Quorum.................................................... 8
Vote Required............................................. 9
Share Ownership........................................... 9
Voting and Revocation of Proxies.......................... 9
Solicitation of Proxies................................... 9
Other Matters Considered at the Meeting................... 10
THE MERGER.................................................. 11
Effect of the Merger...................................... 11
Background of and Reasons for the Merger.................. 11
Opinion of Financial Advisor.............................. 13
Interests in the Merger That May Be Different From
Yours................................................... 19
Dissenters' Rights........................................ 19
Exchange of Certificates.................................. 19
Regulatory Approvals...................................... 20
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Effect of Merger on First Security's Employee Benefit
Plans................................................... 21
U.S. Federal Income Tax Consequences of the Merger........ 22
Resale of Wells Fargo Common Stock Issued in the Merger... 23
Stock Exchange Listing.................................... 24
Accounting Treatment...................................... 24
THE MERGER AGREEMENT........................................ 25
Basic Plan of Merger...................................... 25
Representations and Warranties............................ 26
Certain Covenants......................................... 27
Conditions to the Merger.................................. 29
Termination of the Merger Agreement....................... 30
Effect of Termination..................................... 31
Waiver and Amendment...................................... 31
Expenses.................................................. 31
STOCK OPTION AGREEMENT...................................... 32
General................................................... 32
Exercise of the Option.................................... 32
Registration Rights....................................... 34
Repurchase of Option or Option Shares..................... 34
Surrender of Option for Cash Payment...................... 34
Substitute Option......................................... 34
INFORMATION ABOUT WELLS FARGO............................... 36
General................................................... 36
Management and Additional Information..................... 36
Competition............................................... 36
Information On Wells Fargo's Web Site..................... 37
REGULATION AND SUPERVISION OF WELLS FARGO................... 38
Introduction.............................................. 38
Regulatory Agencies....................................... 38
Bank Holding Company Activities........................... 39
Dividend Restrictions..................................... 39
Holding Company Structure................................. 40
Capital Requirements...................................... 41
Deposit Insurance Assessments............................. 42
Fiscal and Monetary Policies.............................. 43
Future Legislation........................................ 43
INFORMATION ABOUT FIRST SECURITY............................ 44
WELLS FARGO CAPITAL STOCK................................... 45
Wells Fargo Common Stock.................................. 45
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Wells Fargo Preferred Stock............................... 46
Wells Fargo Rights Plan................................... 47
COMPARISON OF SHAREHOLDER/STOCKHOLDER RIGHTS................ 50
Authorized Capital Stock.................................. 50
Size of Board of Directors................................ 50
Cumulative Voting......................................... 50
Classes of Directors...................................... 50
Qualifications of Directors............................... 51
Filling Vacancies on the Board............................ 51
Removal of Directors...................................... 51
Nomination of Directors for Election...................... 52
Anti-Takeover Provisions.................................. 52
Stockholder Rights Plan................................... 53
Stockholder Action Without a Meeting...................... 53
Calling Special Meetings of Stockholders.................. 53
Submission of Stockholder Proposals....................... 54
Notice of Stockholder Meetings............................ 54
Stockholder Vote Required for Mergers..................... 54
Dividends................................................. 55
Dissenters' Appraisal Rights.............................. 55
Stockholder Preemptive Rights............................. 55
Stockholder Class Voting Rights........................... 56
Indemnification........................................... 56
Limitations on Directors' Liability....................... 57
Amendment of Certificate of Incorporation................. 58
Amendment of Bylaws....................................... 58
PRICE RANGE OF COMMON STOCK AND DIVIDENDS................... 59
Wells Fargo Share Prices and Dividends.................... 59
First Security Share Prices and Dividends................. 60
EXPERTS..................................................... 61
Wells Fargo's Independent Accountants..................... 61
First Security's Independent Accountants.................. 61
OPINIONS.................................................... 61
Share Issuance............................................ 61
Tax Matters............................................... 61
DEADLINES FOR SUBMITTING SHAREHOLDER PROPOSALS.............. 62
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION......................... 63
Registration Statement.................................... 63
Other SEC Filings......................................... 63
Documents Incorporated By Reference....................... 63
Documents Available Without Charge From the Companies..... 64
FORWARD-LOOKING STATEMENTS.................................. 65
</TABLE>
APPENDIX A: Agreement and Plan of Reorganization (including the Agreement
and Plan of
Merger as Exhibit A-1)
APPENDIX B: Stock Option Agreement
APPENDIX C: Opinion of J.P. Morgan Securities Inc.
vi
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE
MERGER FULLY, AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE
MERGER, YOU SHOULD CAREFULLY READ THIS DOCUMENT AND THE OTHER DOCUMENTS TO WHICH
THIS DOCUMENT REFERS YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE .
EACH ITEM IN THIS SUMMARY INCLUDES A PAGE REFERENCE TO A MORE COMPLETE
DESCRIPTION OF THAT ITEM.
THE MERGER (PAGE )
In the proposed transaction, a Wells Fargo subsidiary will merge with First
Security. First Security will survive the merger and become a subsidiary of
Wells Fargo. Wells Fargo will exchange shares of its common stock, par value
$1 2/3 per share, for all of the outstanding First Security common stock, par
value $1.25 per share. After the merger is completed, you will own shares of
Wells Fargo common stock and Wells Fargo will own all of the outstanding First
Security common stock.
THE AGREEMENT AND PLAN OF REORGANIZATION, WHICH INCLUDES THE AGREEMENT AND
PLAN OF MERGER AS EXHIBIT A-1, IS INCLUDED IN THIS DOCUMENT AS APPENDIX A. WHEN
USED IN THIS DOCUMENT, THE TERM "MERGER AGREEMENT" REFERS TO THE AGREEMENT AND
PLAN OF REORGANIZATION AND THE AGREEMENT AND PLAN OF MERGER TOGETHER. PLEASE
READ THE MERGER AGREEMENT, AS IT IS THE DOCUMENT THAT GOVERNS THE MERGER.
THE COMPANIES (PAGES AND )
WELLS FARGO & COMPANY
420 Montgomery Street
San Francisco, California 94163
(800) 411-4932
Wells Fargo & Company is a diversified financial services company whose
subsidiaries and affiliates provide banking, insurance, investments, and
mortgage and consumer finance through stores located across North America. At
March 31, 2000, Wells Fargo had assets of $222 billion, seventh largest among
U.S. bank holding companies.
FIRST SECURITY CORPORATION
79 South Main
Salt Lake City, Utah 84111
(801) 246-5976
First Security Corporation is a multi-bank holding company for four
commercial bank subsidiaries, a mortgage company and an asset management
company. At March 31, 2000, First Security had assets of $23 billion.
WHAT YOU WILL RECEIVE IN THE MERGER (PAGE )
If the merger is completed, each share of First Security common stock will
be converted into the right to receive 0.355 of a share of Wells Fargo common
stock at the time of closing. Since the price of Wells Fargo common stock will
fluctuate prior to the completion of the merger, First Security cannot assure
you as to what the value of the Wells Fargo common stock you receive in the
merger will be. Wells Fargo will not issue fractional shares in the merger. If
the total number of shares of Wells Fargo common stock you will receive in the
merger does not equal a whole number, you will receive cash instead of the
fractional share. First Security has agreed to redeem its outstanding preferred
stock immediately prior to completion of the merger.
1
<PAGE>
THE MARKET PRICE OF WELLS FARGO STOCK WILL FLUCTUATE (PAGE )
Wells Fargo common stock is listed on the New York and Chicago Stock
Exchanges under the symbol "WFC." First Security common stock trades on Nasdaq
under the symbol "FSCO." The following table shows the closing prices of Wells
Fargo common stock and First Security common stock on April 7, 2000, the last
trading day before the merger was announced, and on May , 2000. The table also
shows the implied value to be received by you, had the merger been completed on
those dates, for each share of First Security common stock that you own.
<TABLE>
<CAPTION>
VALUE OF MERGER
CONSIDERATION
FIRST SECURITY PER SHARE OF
WELLS FARGO COMMON FIRST SECURITY
COMMON STOCK STOCK COMMON STOCK
------------ -------------- ---------------
<S> <C> <C> <C>
April 7, 2000........................................ $39.75 $12.19 $14.11
May , 2000......................................... -- --
</TABLE>
In addition, recently declared per share dividend information for Wells
Fargo common stock and First Security common stock is as follows:
<TABLE>
<CAPTION>
FIRST SECURITY WELLS FARGO
COMMON STOCK COMMON STOCK
-------------- ------------
<S> <C> <C>
Quarter ended December 31, 1999................... $0.14 $0.20
Quarter ended March 31, 2000...................... 0.14 0.22
Quarter ended June 30, 2000....................... 0.14 0.22
</TABLE>
NO ADJUSTMENTS TO THE EXCHANGE RATIO WILL BE MADE TO REFLECT FLUCTUATIONS IN
THE PRICE OF WELLS FARGO COMMON STOCK.
MERGER GENERALLY TAX FREE TO STOCKHOLDERS OF FIRST SECURITY (PAGE )
Stockholders of First Security generally will not recognize gain or loss for
U.S. federal income tax purposes from the exchange of their shares of First
Security common stock for shares of Wells Fargo common stock. Stockholders of
First Security will be taxed on cash they receive instead of fractional shares.
THE U.S. FEDERAL TAX TREATMENT DESCRIBED ABOVE MAY NOT APPLY TO EVERY
STOCKHOLDER OF FIRST SECURITY. IN ADDITION, THIS DOCUMENT DOES NOT ADDRESS ANY
STATE, LOCAL OR FOREIGN TAX LAWS THAT MAY APPLY TO THE MERGER. DETERMINING THE
TAX CONSEQUENCES OF THE MERGER TO YOU MAY BE COMPLICATED. YOU SHOULD CONSULT
YOUR OWN ADVISOR FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER.
First Security is not obligated to complete the merger unless it receives an
opinion of counsel that no gain or loss will be recognized for U.S. federal
income tax purposes by the holders of First Security common stock upon receipt
of Wells Fargo common stock except for cash received instead of fractional
shares.
FIRST SECURITY'S BOARD RECOMMENDS APPROVAL OF THE MERGER (PAGE )
First Security's board of directors believes that the merger is in the best
interests of First Security stockholders and recommends that First Security
stockholders approve the merger. First Security's board believes that the merger
will provide First Security stockholders with the potential for greater stock
value appreciation than on a stand-alone basis.
2
<PAGE>
FIRST SECURITY'S FINANCIAL ADVISOR BELIEVES THE MERGER IS FAIR TO FIRST SECURITY
STOCKHOLDERS (PAGE )
Among other factors considered in deciding to approve the merger, the First
Security board of directors received the oral opinion, subsequently confirmed in
writing, of its financial advisor, J.P. Morgan Securities Inc. ("J.P. Morgan"),
that, as of April 9, 2000 (the date the First Security board voted on the
merger) and updated through the date of this document, the merger consideration
was fair to the holders of First Security common stock from a financial point of
view. The opinion is attached to this document as Appendix C. You should read
this opinion completely to understand the assumptions made, matters considered
and limitations of the review undertaken by J.P. Morgan in providing its
opinion.
ADDITIONAL MERGER BENEFITS TO FIRST SECURITY'S MANAGEMENT (PAGE )
First Security's directors and executive officers have interests in the
merger that are different from yours.
- Spencer F. Eccles, Morgan J. Evans, L. Scott Nelson, J. Pat McMurray, Brad
D. Hardy, Scott C. Ulbrich, Michael P. Caughlin, Mark D. Howell and David
R. Golden, all of whom are officers of First Security, have entered into
agreements with Wells Fargo that provide for their employment after the
merger.
- A number of First Security executive officers will receive benefits as a
result of the change in control of First Security that will occur upon
completion of the merger.
- The merger agreement provides for rights to indemnification and continued
insurance coverage for the benefit of directors and officers of First
Security.
The board of directors of First Security was aware of these additional
interests when it approved the merger agreement.
YOU HAVE NO DISSENTERS' RIGHTS (PAGE )
Under Delaware law, you do not have dissenters' rights. See "Dissenters'
Rights."
SURRENDER OF SHARES OF FIRST SECURITY (PAGE )
To receive certificates for your shares of Wells Fargo common stock, you
will need to surrender your share certificates of First Security common stock.
After the merger is completed, Wells Fargo's stock transfer agent will send you
written instructions for exchanging your stock certificates. PLEASE DO NOT SEND
IN YOUR CERTIFICATES UNTIL YOU RECEIVE THESE INSTRUCTIONS.
FIRST SECURITY SPECIAL MEETING (PAGE )
First Security will hold its special meeting of stockholders at
a.m./p.m., Salt Lake City, Utah time, on June , 2000, at .
The purposes of the meeting are to:
1. Vote on the merger agreement.
2. Act on any other matters that may properly come before the meeting.
RECORD DATE; VOTE REQUIRED TO APPROVE MERGER (PAGE )
The record date for the special meeting is , 2000. You can vote
at the meeting if you owned First Security common or preferred stock at the
close of business on that date. On the record date, there were
shares of First Security common stock and shares of preferred stock
outstanding and entitled to vote. You can cast one vote for each share of First
Security common stock or preferred stock that you owned on the record date.
3
<PAGE>
Approval of the merger agreement requires the affirmative vote of a majority
of the outstanding shares of First Security common and preferred stock voting as
one class. Not voting, or failing to instruct your broker how to vote shares
held for you in the broker's name, will have the same effect as voting against
the merger.
WE MUST OBTAIN REGULATORY APPROVALS TO COMPLETE THE MERGER (PAGE )
The Board of Governors of the Federal Reserve System must approve the merger
before it can be completed. Although Wells Fargo expects that the Federal
Reserve Board will approve the merger, it cannot be certain when or if, or on
what terms and conditions, the required approval will be given. It is
anticipated that certain divestitures may be required in connection with
obtaining Federal Reserve Board approval of the merger. Approval of the merger
must also be obtained from Nevada.
OTHER CONDITIONS TO COMPLETING THE MERGER (PAGE )
In addition to the receipt of the approval of the Federal Reserve Board and
the State of Nevada, there are a number of other conditions that must be met
before the merger can be completed. These conditions include:
- approval of the merger agreement by the holders of First Security common
stock;
- receipt by First Security of an opinion of counsel concerning the tax
consequences of the merger;
- authorization for listing on the New York and Chicago Stock Exchanges of
the shares of Wells Fargo common stock to be issued in the merger to First
Security stockholders;
- receipt of all necessary governmental approvals, and the absence of an
order of any court or governmental authority prohibiting the merger; and
- material compliance by each party with the terms and provisions of the
merger agreement.
Wells Fargo or First Security may waive a condition it is entitled to assert
so long as the law does not require the condition to be met.
TERMINATION OF THE MERGER AGREEMENT (PAGE )
Wells Fargo and First Security can agree to terminate the merger agreement
at any time without completing the merger. Also, either company can terminate
the merger agreement without the consent of the other under the following
circumstances:
- there is a material breach by the other party which has not been cured
within 30 days;
- the merger is not completed by December 31, 2000, unless the failure to
complete the merger on or before that date is the fault of the company
seeking to terminate; or
- a governmental authority issues a final and nonappealable order
permanently prohibiting the merger.
STOCK OPTION AGREEMENT (PAGE )
The stock option agreement is attached to this proxy statement-prospectus as
Appendix B. Please read it carefully.
In connection with the merger agreement, First Security and Wells Fargo have
entered into a stock option agreement in which First Security has granted to
Wells Fargo an option to purchase up to 19.9% of First Security's outstanding
shares of common stock in the event of certain circumstances. The exercise price
under the option is $12.78.
4
<PAGE>
Wells Fargo cannot exercise the option unless certain events occur. These
events can generally be described as business combinations or acquisition
transactions involving First Security and certain related events. In addition to
the option to purchase First Security common stock, Wells Fargo may, under
certain circumstances, require First Security to repurchase the option for an
agreed upon cash price. Neither Wells Fargo nor First Security knows of any
event that has occurred as of the date of this proxy statement-prospectus that
would allow Wells Fargo to exercise the option.
First Security agreed to grant the option in order to induce Wells Fargo to
enter into the merger agreement. The option could have the effect of
discouraging other companies from trying to acquire First Security.
YOUR RIGHTS WILL DIFFER AS A WELLS FARGO STOCKHOLDER (PAGE )
Your rights as a First Security stockholder are currently governed by First
Security's certificate of incorporation and bylaws. Upon completion of the
merger, you will become a Wells Fargo stockholder, and your rights will be
governed by Wells Fargo's restated certificate of incorporation and bylaws.
WELLS FARGO EXPECTS TO USE POOLING-OF-INTERESTS ACCOUNTING (PAGE )
Wells Fargo expects to account for the merger using the pooling-of-interests
method of accounting.
FINANCIAL MODERNIZATION WILL INCREASE COMPETITION (PAGE )
Bank holding companies that elect to become financial holding companies may
affiliate with securities firms and insurance companies and engage in other
activities that are financial in nature. "Financial in nature" includes:
- securities underwriting, dealing and market making;
- sponsoring mutual funds and investment companies;
- insurance underwriting and agency;
- merchant banking activities; and
- activities that the Federal Reserve Board has determined to be closely
related to banking.
Wells Fargo and First Security are financial holding companies. Securities
firms and insurance companies that are financial holding companies may acquire
banks and other financial institutions. This may significantly change the
competitive environment in which Wells Fargo and its subsidiaries conduct
business.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE (PAGE )
This document, including information incorporated by reference into this
document, may contain forward-looking statements about Wells Fargo and First
Security. There are a number of factors that may cause actual conditions, events
or results to differ significantly from those described in the forward-looking
statements. Some of these factors are described or referenced in
"Forward-Looking Statements" on page .
5
<PAGE>
SELECTED FINANCIAL DATA
The following financial information is to aid you in your analysis of the
financial aspects of the merger. The Wells Fargo balance sheet data for 1995
through 1999 is derived from Wells Fargo's audited consolidated balance sheets
as of December 31, 1999, 1998, 1997 and 1996 and its unaudited financial
information for 1995. The Wells Fargo income statement data for 1995 through
1999 is derived from Wells Fargo's audited consolidated statement of income for
each of the years in the five-year period ended December 31, 1999. The First
Security data as of and for the years ended December 31, 1999, 1998, 1997, 1996,
and 1995 is derived from its audited consolidated financial statements for 1995
through 1999. Interim financial data as of and for the three months ended
March 31, 2000 and 1999 for both Wells Fargo and First Security is derived from
unaudited financial information, which includes all normal recurring adjustments
deemed necessary by management. You should not rely on the information for the
three months ended March 31, 2000 as being indicative of the results expected
for the entire year. The information in the table is only a summary and should
be read with the full financial statements and related notes of Wells Fargo and
First Security, incorporated into this document by reference. See "Where You Can
Find More Information" on page .
------------------------
WELLS FARGO & COMPANY AND SUBSIDIARIES
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income............ $ 2,440 $ 2,266 $ 9,355 $ 8,990 $ 8,648 $ 8,222 $ 5,923
Net income..................... 1,010 884 3,747 1,950 2,499 2,228 1,988
Diluted earnings per share..... 0.61 0.53 2.23 1.17 1.48 1.36 1.62
Cash dividends per share....... 0.22 0.185 0.785 0.700 0.615 0.525 0.450
Book value per share........... 14.35 12.60 13.44 12.35 11.92 11.66 10.27
Total assets................... 222,276 201,430 218,102 202,475 185,685 188,633 122,200
Long-term debt................. 24,768 20,363 23,375 19,709 17,335 18,142 16,726
</TABLE>
------------------------
FIRST SECURITY CORPORATION AND SUBSIDIARIES
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income............ $ 198 $ 182 $ 786 $ 704 $ 626 $ 554 $ 504
Net income..................... 35 65 273 248 215 184 125
Diluted earnings per share..... 0.17 0.34 1.38 1.28 1.14 1.00 0.69
Cash dividends per share....... 0.14 0.14 0.56 0.52 0.44 0.38 0.33
Book value per share........... 8.96 8.77 9.03 8.54 7.59 6.72 6.13
Total assets................... 23,337 21,959 22,993 21,689 18,152 15,457 13,530
Long-term debt................. 2,475 2,706 2,586 2,610 1,304 944 721
</TABLE>
6
<PAGE>
COMPARATIVE PER COMMON SHARE DATA
The following table shows comparative per share data for Wells Fargo common
stock on a historical and pro forma combined basis and for First Security common
stock on a historical and pro forma equivalent basis. The information in the
table assumes that Wells Fargo will account for the merger using the
pooling-of-interests method of accounting. The pro forma equivalent information
for First Security is calculated by multiplying the pro forma basic and diluted
earnings per share, the historical cash dividends declared per share of Wells
Fargo common stock and the pro forma book value per share by the exchange ratio
of 0.355. This information reflects the fact that you will receive a fraction of
a share of Wells Fargo common stock for each First Security share you hold.
You should read the data with the historical financial statements and
related notes of Wells Fargo and First Security. Wells Fargo's and First
Security's historical financial statements are included in documents filed with
the SEC. See "Where You Can Find More Information" on page .
<TABLE>
<CAPTION>
WELLS FARGO FIRST SECURITY
---------------------- -----------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL EQUIVALENT
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE
Basic
Three months ended March 31, 2000.......... $0.62 $0.61 $0.18 $ 0.22
Year ended December 31, 1999............... 2.26 2.33 1.42 0.83
Year ended December 31, 1998............... 1.18 1.28 1.32 0.45
Year ended December 31, 1997............... 1.50 1.57 1.18 0.56
Diluted
Three months ended March 31, 2000.......... $0.61 $0.61 $0.17 $ 0.22
Year ended December 31, 1999............... 2.23 2.30 1.38 0.82
Year ended December 31, 1998............... 1.17 1.26 1.28 0.45
Year ended December 31, 1997............... 1.48 1.55 1.14 0.55
CASH DIVIDENDS DECLARED PER SHARE
Three months ended March 31, 2000.......... $0.220 $0.220 $0.14 $ 0.08
Year ended December 31, 1999............... 0.785 0.785 0.56 0.28
Year ended December 31, 1998............... 0.700 0.700 0.52 0.25
Year ended December 31, 1997............... 0.615 0.615 0.44 0.22
BOOK VALUE PER SHARE
March 31, 2000............................. 1$4.35 $14.79 $8.96 $ 5.25
December 31, 1999.......................... 13.44 13.93 9.03 4.95
December 31, 1998.......................... 12.35 12.80 8.54 4.54
December 31, 1997.......................... 11.92 12.29 7.59 4.36
</TABLE>
7
<PAGE>
FIRST SECURITY SPECIAL MEETING
The board of directors of First Security is soliciting proxies from the
holders of First Security common stock and preferred stock for use at the
special meeting of First Security stockholders and at any adjournments of the
meeting. This document, together with the form of proxy, is expected to be
mailed to holders of First Security common stock on or about May , 2000.
TIME AND PLACE OF THE MEETING
The time and place of the special meeting of First Security stockholders is:
, June , 2000
a.m./p.m., Salt Lake City, Utah time
Salt Lake City, Utah
MATTERS TO BE CONSIDERED AT THE MEETING
The special meeting of First Security stockholders will be held to:
1. Vote on a proposal to approve the agreement and plan of reorganization,
entered into as of the 9th day of April, 2000, by and between First Security
and Wells Fargo; and a related agreement and plan of merger, dated as of
, 2000, by and between First Security and Wells Fargo FSCO Merger Co.,
a wholly-owned subsidiary of Wells Fargo. The agreement and plan of
reorganization, which includes the agreement and plan of merger as
Exhibit A-1, is included in this proxy statement-prospectus as Appendix A.
When used in this document, the term "MERGER AGREEMENT" refers to the
agreement and plan of reorganization and the agreement and plan of merger
together. The merger agreement provides for the merger of a wholly-owned
subsidiary of Wells Fargo with and into First Security upon the terms and
subject to the conditions set forth in the merger agreement. See "The Merger
Agreement."
2. Act on any other matters that may properly come before the meeting.
RECORD DATE
First Security's board of directors has established , 2000 as
the record date for the meeting. Only holders of record of First Security common
stock and preferred stock on that date are entitled to attend and vote at the
meeting or at any adjournment of the meeting.
OUTSTANDING SHARES
On , 2000, there were shares of First Security
common stock and shares of Series A Preferred Stock outstanding.
Each outstanding share of First Security common and preferred stock is entitled
to one vote.
QUORUM
A quorum consisting of the holders of a majority of the shares of First
Security common and preferred stock outstanding at the record date must be
present in person or represented by proxy for the transaction of business at the
special meeting. Shares of First Security common or preferred stock present in
person at the meeting that are not voted, and shares of First Security common or
preferred stock for which proxies have been received but that abstain from
voting, are counted in determining whether a quorum is present. Shares held in
street name that have been designated by brokers on proxy cards as not voted
will be counted for purposes of determining whether a quorum exists.
8
<PAGE>
VOTE REQUIRED
Approval of the merger agreement and the merger requires the affirmative
vote of a majority of the outstanding First Security common stock and First
Security preferred stock, voting as one class. Because approval of the merger
requires the affirmative vote of a specified percentage of outstanding shares,
not voting on the proposal, or failing to instruct your broker how to vote
shares held for you by the broker, will have the same effect as voting against
the proposal.
SHARE OWNERSHIP
FIRST SECURITY. At the record date for the meeting, all of First Security's
directors and executive officers as a group beneficially owned a total of
shares of First Security common stock, representing approximately
of the shares of common stock entitled to vote at the special meeting and
shares of First Security preferred stock, representing approximately of
the shares of preferred stock entitled to vote at the special meeting. Each of
these directors and officers is expected to vote the First Security common stock
beneficially owned by him or her in favor of the merger.
WELLS FARGO. At the record date, Wells Fargo and its subsidiaries
beneficially owned a total of approximately shares of First Security
common stock, representing approximately % of the shares of common stock
entitled to vote at the special meeting. At the same date, all of Wells Fargo's
directors and executive officers as a group beneficially owned a total of
shares of First Security common stock, representing [less than 0.1%] of
the shares of the common stock entitled to vote at the special meeting. Neither
Wells Fargo and its subsidiaries nor any of Wells Fargo's directors and
executive officers owned at the record date any shares of First Security
preferred stock.
VOTING AND REVOCATION OF PROXIES
All shares of First Security common and preferred 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 proposal to approve
the merger agreement and the merger, and "FOR" any other matters that may
properly come before the meeting. You may revoke your proxy at any time before
it is voted.
Votes cast by proxy or in person at the special meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether or
not a quorum is present. The election inspectors will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum, but as unvoted for purposes of determining the approval of
any matter submitted to the stockholders for a vote. If a broker indicates on
the proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
First Security and its subsidiaries may solicit proxies from First Security
stockholders, 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. First Security does not anticipate that any other
persons will be specifically engaged to solicit proxies or that special
compensation will be paid for that purpose, but First Security reserves the
right to do so should it conclude that such efforts are necessary or advisable.
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
9
<PAGE>
to beneficial owners. First Security will bear its own expenses in connection
with any solicitation of proxies for the special meeting.
OTHER MATTERS CONSIDERED AT THE MEETING
If an insufficient number of votes for the merger is received before the
scheduled meeting date, First Security 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.
First Security's board of directors is not aware of any business to be
brought before the special meeting other than the proposal 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
First Security.
10
<PAGE>
THE MERGER
This summary of the material terms and provisions of the merger agreement is
qualified in its entirety by reference to the merger agreement, which is
attached as Appendix A to this document and is incorporated into this summary by
reference.
EFFECT OF THE MERGER
The First Security board and the Wells Fargo board have each unanimously
approved the merger agreement, which provides for the merger of a wholly-owned
subsidiary of Wells Fargo into First Security at the time the merger becomes
effective, with First Security surviving as a wholly-owned subsidiary of Wells
Fargo. As a result of the merger:
- Wells Fargo will exchange shares of its common stock for shares of First
Security common stock.
- Wells Fargo will acquire all of the outstanding common stock of First
Security, resulting in First Security becoming a wholly-owned subsidiary
of Wells Fargo.
- First Security stockholders will become Wells Fargo stockholders, with
their rights governed by Wells Fargo's restated certificate of
incorporation and bylaws and Delaware law. See "Comparison of Stockholder
Rights."
At the completion of the merger, each outstanding share of First Security
common stock, with a par value of $1.25 per share, will be converted into the
right to receive 0.355 of a share of Wells Fargo common stock, with a par value
of $1 2/3 per share. When used in this document, this number is referred to as
the "EXCHANGE RATIO." Since the price of Wells Fargo common stock will fluctuate
after the special meeting and the completion of the merger, First Security
cannot assure you as to what the value of the Wells Fargo common stock you
receive in the merger will be.
When used in this document, a "share" of Wells Fargo common stock in this
document generally refers to that share together with one Series C Junior
Participating Preferred Stock Purchase Right issued to Wells Fargo stockholders
under a rights agreement, dated as of October 21, 1998, between Wells Fargo and
ChaseMellon Stockholder Services, L.L.C., as rights agent. When you surrender
your shares of First Security common stock in exchange for Wells Fargo common
stock after the merger is completed, each share of Wells Fargo common stock you
receive in exchange will include one Wells Fargo stockholder right. The Wells
Fargo stockholder rights are described in more detail under "Wells Fargo Capital
Stock--Wells Fargo Rights Plan."
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER
On several occasions over a number of years, representatives of Norwest
Corporation (now Wells Fargo) informally contacted representatives of First
Security regarding a possible merger or acquisition. On June 6, 1999, First
Security entered into a merger agreement with Zions Bancorporation. On April 1,
2000, First Security terminated the Zions merger agreement in accordance with
its terms. On April 1, 2000, Spencer F. Eccles, Chairman and Chief Executive
Officer of First Security, contacted and subsequently met with Richard M.
Kovacevich, President and Chief Executive Officer of Wells Fargo for exploratory
discussions regarding a possible transaction. Also during this period, First
Security entered into a confidentiality agreement with Wells Fargo and provided
Wells Fargo with information concerning First Security. First Security consulted
with J.P. Morgan Securities Inc., its financial advisor, and Wachtell, Lipton,
Rosen & Katz, its legal advisor, throughout this period.
11
<PAGE>
At a meeting held on April 3, 2000, Messrs. Eccles and Kovacevich agreed
upon the terms of the proposed transaction, subject to completion of mutually
satisfactory due diligence by each party, agreement on certain employment
arrangements, negotiation of a definitive merger agreement and approvals of the
First Security and Wells Fargo boards. The parties completed their due diligence
on April 9, 2000.
On April 9, 2000, the First Security board met to discuss the terms of the
proposed merger. At that meeting, J.P. Morgan outlined the proposed transaction,
discussed its financial terms, and gave its oral opinion, subsequently confirmed
in writing, to the board of directors that, as of that date and subject to
certain considerations stated therein, the exchange ratio in the proposed merger
was fair, from a financial point of view, to the holders of First Security
common stock. First Security's legal counsel, Wachtell, Lipton, Rosen & Katz,
reviewed the terms of the merger agreement and related agreements, the stock
option agreement, and the employment and non-competition agreements, and other
relevant legal issues. After discussion of these matters, the First Security
board unanimously determined that the merger was fair to, and in the best
interests of, First Security and its stockholders and approved the merger and
the merger agreement and related agreements. Subject to the resolution of the
unresolved issues, the First Security board also resolved to submit the merger
agreement to First Security stockholders for their approval, and authorized
senior management to take such action as was needed to finalize the documents
and, if satisfactorily finalized, to execute the documents and to effectuate the
transactions contemplated in them.
The merger agreement and stock option agreement were entered into on
April 9, 2000.
FIRST SECURITY'S BOARD OF DIRECTORS' REASONS FOR THE MERGER
The First Security board believes that the proposed merger with Wells Fargo
is in the best interests of First Security and its stockholders. In making its
determination, the board considered a number of factors, including the
following:
- the consideration First Security stockholders will receive if the merger
is effected and the likelihood that it will deliver greater value to First
Security stockholders than on a stand-alone basis;
- the board's consideration of J.P. Morgan's April 9, 2000 presentation,
including J.P. Morgan's opinion that the exchange ratio was fair to First
Security stockholders from a financial point of view as of that date;
- the complementary nature of First Security's business, services and
products with Wells Fargo's, and the opportunity to create a combined
business that offers a wider variety of services to First Security's
clients and enhances the ability to attract new clients;
- the historical performance of Wells Fargo's common stock and Wells Fargo's
historical financial performance;
- the board's review of other strategic alternatives potentially available
to First Security;
- the opinion of First Security's advisors that the merger will be
accomplished on a tax-free basis for First Security stockholders for U.S.
federal income tax purposes (except for cash received instead of
fractional shares);
- the likelihood of a smooth integration of First Security's business with
that of Wells Fargo;
- retention arrangements with key employees of First Security in connection
with the merger;
- the terms and conditions of the merger agreement and the stock option
agreement;
- the judgment and advice of First Security's senior management; and
- the board's conclusion that the merger would provide First Security
stockholders with an opportunity for continued equity participation in a
larger enterprise.
12
<PAGE>
OPINION OF FIRST SECURITY'S FINANCIAL ADVISOR
First Security retained J.P. Morgan to act as its financial advisor in
connection with the proposed merger. At the meeting of First Security's board of
directors on April 9, 2000, J.P. Morgan gave its oral opinion, subsequently
confirmed in writing, to the board that, as of that date and based upon and
subject to the various considerations set forth in the opinion, the exchange
ratio pursuant to the merger agreement was fair, from a financial point of view,
to First Security's stockholders. J.P. Morgan has confirmed its April 9, 2000
opinion by delivering its written opinion to the First Security board, dated as
of the date of this document, to the same effect. In connection with its written
opinion dated as of the date of this document, J.P. Morgan confirmed the
appropriateness of its reliance on the analyses used to render its earlier
opinion. It also performed procedures to update certain of its analyses and
reviewed the assumptions used in its analyses and the factors considered in
connection with its earlier opinion. First Security's board of directors did not
limit J.P. Morgan in any way in the investigations it made or the procedures it
followed in giving its opinion.
The full text of the J.P. Morgan opinion which describes, among other
things, the assumptions made, matters considered, and qualifications and
limitations on the review undertaken by J.P. Morgan is attached as Appendix C to
this document and is incorporated in this document by reference. First Security
stockholders should read J.P. Morgan's opinion carefully and in its entirety.
J.P. Morgan's opinion is directed to the board of directors of First
Security and addresses only the fairness, from a financial point of view, of the
exchange ratio to the First Security stockholders. The opinion does not address
any other aspect of the merger or any related transaction, nor does it
constitute a recommendation to any stockholder as to how to vote at the First
Security special meeting. The summary of the fairness opinion set forth in this
document is qualified in its entirety by reference to the full text of the
opinion.
In arriving at its opinion, J.P. Morgan reviewed:
- the merger agreement;
- in the case of its updated opinion, this proxy statement-prospectus;
- various publicly available information concerning the businesses of First
Security and Wells Fargo and of several other companies engaged in
businesses comparable to those of First Security and Wells Fargo, and the
reported market prices for other companies' securities deemed comparable;
- publicly available terms of various transactions involving companies
comparable to First Security and Wells Fargo and the consideration
received for such companies;
- current and historical market prices of First Security's and Wells Fargo's
common stock;
- the audited financial statements of First Security for the fiscal years
ended December 31, 1995, 1996, 1997, 1998 and 1999 and the audited
financial statements of Wells Fargo for the fiscal years ended
December 31, 1998 and 1999;
- in the case of its updated opinion, the unaudited financial statements of
First Security and Wells Fargo for the period ended March 31, 2000;
- certain other communications from First Security to its stockholders,
including communications (and related documents) relating to the proposed
merger with Zions Bancorporation which was terminated on April 1, 2000;
- certain internal financial analyses and forecasts prepared by First
Security and its management; and
- the terms of other business combinations that J.P. Morgan deemed relevant.
13
<PAGE>
J.P. Morgan also held discussions with the managements of First Security and
Wells Fargo on numerous aspects of the merger, the past and current business
operations of First Security and Wells Fargo, the financial condition and future
prospects and operations of First Security and Wells Fargo, the effects of the
merger on the financial condition and future prospects of First Security and
Wells Fargo, and other matters that J.P. Morgan believed necessary or
appropriate to its inquiry. In addition, J.P. Morgan reviewed other financial
studies and analyses and considered such other information that it deemed
appropriate for the purposes of its opinion.
J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or that
was furnished to it by First Security and Wells Fargo or otherwise reviewed by
J.P. Morgan. J.P. Morgan is not responsible or liable for that information or
its accuracy. J.P. Morgan did not conduct any valuations or appraisal of any
assets or liabilities, and valuations or appraisals were not provided to J.P.
Morgan. J.P. Morgan was not requested to review individual credit files or make
any independent assessment as to the future performance or non-performance of
First Security's or Wells Fargo's assets. J.P. Morgan assumed that current
allowances and reserves for loan losses for both First Security and Wells Fargo
are sufficient to cover all such losses. In relying on financial analyses and
forecasts provided to it, J.P. Morgan has assumed that they were reasonably
prepared based on assumptions reflecting the best currently available estimates
and judgments by management as to the expected future results of operations and
financial conditions of First Security and Wells Fargo to which those analyses
or forecasts relate. J.P. Morgan also assumed that, in the course of obtaining
regulatory and third party consents for the merger and the other transactions
contemplated by the merger agreement, no restriction will be imposed that will
have a material adverse effect on the future results of operations or financial
conditions of First Security or Wells Fargo. J.P. Morgan also assumed that the
merger will be accounted for as a pooling-of-interests under generally accepted
accounting principles and that it will qualify as a tax-free reorganization for
U.S. federal income tax purposes. J.P. Morgan relied as to all legal matters
relevant to rendering its opinion upon the advice of counsel.
The projections relied upon by J.P. Morgan for First Security and Wells
Fargo were prepared or confirmed by their respective managements. Neither First
Security nor Wells Fargo publicly discloses internal management projections of
the type relied upon by J.P. Morgan in connection with J.P. Morgan's analysis of
the merger, and the projections were not prepared with a view toward public
disclosure. The projections were based on numerous variables and assumptions
that are inherently uncertain and may be beyond the control of management,
including, without limitation, factors related to general economic and
competitive conditions and prevailing interest rates. Accordingly, actual
results could vary significantly from those set forth in the projections.
As is customary in the rendering of fairness opinions, J.P. Morgan based its
opinion on economic, market and other conditions as in effect on, and the
information made available to J.P. Morgan as of the date of its opinion.
Subsequent developments may affect the opinion, and J.P. Morgan does not have
any obligation to update, revise, or reaffirm its opinion. J.P. Morgan expressed
no opinion as to the price at which Wells Fargo's stock will trade at any future
time.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses that J.P. Morgan
utilized in providing its opinion. We have presented some of the summaries of
financial analyses in tabular format. In order to understand the financial
analyses used by J.P. Morgan more fully, you should read the tables together
with the text of each summary. The tables alone do not constitute a complete
description of J.P. Morgan's financial analyses.
OFFER VALUATION: J.P. Morgan reviewed the terms of the proposed merger,
including the historical relationship between the stock prices of First Security
and Wells Fargo and the aggregate transaction value. J.P. Morgan also reviewed
the value of the consideration offered based upon the $39.75 closing price of
Wells Fargo's common stock on April 7, 2000, the last trading day prior to the
April 9, 2000 meeting of
14
<PAGE>
First Security's board of directors. This analysis indicated that the implied
value of Wells Fargo's proposal was approximately $14.11 per share of First
Security's common stock. J.P. Morgan calculated that, based on this proposal,
First Security's common stockholders would receive a premium of 15.8% to the
$12.19 closing price of First Security's common stock on April 7, 2000. J.P.
Morgan also calculated the premiums implied by the exchange ratio to the
respective market prices of First Security's and Wells Fargo's common stock on
April 3, 2000 and the respective average market prices for the period from
March 3, 2000 to April 7, 2000, and determined that the implied premiums were
28.6% and 10.5%, respectively.
For each of April 7, 2000, April 3, 2000, and the period from March 3, 2000
to April 7, 2000, J.P. Morgan also calculated the premium that First Security's
common stockholders would receive based on an assumed price of First Security's
common stock. The assumed price for each period was determined by multiplying
the adjusted I/B/E/S estimate for First Security's earnings per share in 2000 by
the median price-to-earnings ratio for that period of the bottom quartile of
First Security's regional bank peers. The adjusted I/B/E/S estimate for First
Security was calculated based on analyst estimates that were updated after
March 2, 2000. Regional bank peers were selected because of their operating,
organizational and overall business similarities with First Security and ranked
on the basis of their respective ratios of price to I/B/E/S estimates of
earnings per share in 2000. The companies in the bottom quartile of the regional
bank peers were:
<TABLE>
<S> <C>
AmSouth Bancorporation Hibernia Corporation
Compass Bancshares, Inc. Summit Bancorp
FirstMerit Corporation UnionBanCal Corporation
</TABLE>
Based upon a review of such information, J.P. Morgan determined that the
implied premiums as of April 7, 2000, April 3, 2000, and the period from
March 3, 2000 to April 7, 2000, were 44.2%, 47.6%, and 41.9%, respectively.
J.P. Morgan further calculated that Wells Fargo's proposal implied the
following premiums based upon Wells Fargo's closing stock price on April 7,
2000:
<TABLE>
<CAPTION>
FIRST SECURITY BASIS VALUE
- -------------------- --------
<S> <C>
2000 estimated earnings per share (adjusted I/B/E/S
estimate)................................................... 12.3x
2000 estimated earnings per share (First Security
estimate)................................................... 11.8x
Tangible book value (as of December 31, 1999)............... 2.0x
</TABLE>
I/B/E/S is a data service that monitors and publishes compilations of
earnings estimates by selected research analysts. Finally, J.P. Morgan
determined that First Security's stockholders would own approximately 4.1% of
the combined company immediately following the merger.
PRO FORMA MERGER ANALYSIS: J.P. Morgan analyzed pro forma earnings per
share forecasts for 2000 and 2001 based upon estimates provided by I/B/E/S and
the managements of the companies. J.P. Morgan assumed in its analysis that
transaction synergies would phase in 25% in 2000, 75% in 2001 and 100%
thereafter. The analysis showed that the merger would be accretive (excluding
merger-related charges) to Wells Fargo's GAAP earnings per share, cash earnings
per share and tangible book value per share in 2000 and 2001.
CONTRIBUTION ANALYSIS. J.P. Morgan reviewed and analyzed the relative
contributions to be made by First Security and Wells Fargo to the combined
entity. These contributions were compared to the approximately 4.1% continuing
ownership stake that First Security's stockholders would have in the combined
company following the merger.
15
<PAGE>
The following table illustrates the relative contribution by First Security
to a combined First Security/ Wells Fargo entity as of December 31, 1999,
excluding transaction synergies:
<TABLE>
<CAPTION>
FIRST SECURITY BASIS CONTRIBUTION
- -------------------- ------------
<S> <C>
Assets...................................................... 9.2%
Gross loans................................................. 9.7%
Deposits.................................................... 9.1%
Common equity............................................... 7.1%
Tangible common equity...................................... 9.3%
2000 GAAP net income (First Security estimate).............. 5.2%
2001 GAAP net income (First Security estimate).............. 5.0%
2000 cash net income (First Security estimate).............. 4.9%
2001 cash net income (First Security estimate).............. 4.8%
</TABLE>
J.P. Morgan also determined the market value contributed by First Security
and Wells Fargo to the pro forma entity on a fully diluted basis. This analysis
indicated that as of April 7, 2000, First Security contributed 3.6% of the
combined entity based on its closing price of $12.19 that day.
PUBLIC TRADING MULTIPLES. Using publicly available information, J.P. Morgan
compared selected financial data of First Security with similar data for
selected publicly traded companies engaged in businesses which J.P. Morgan
judged to be reasonably comparable to those of First Security. These companies
were:
<TABLE>
<S> <C>
AmSouth Bancorporation M & T Bank Corp.
BancWest Corporation Old Kent Financial Corp.
Commerce Bancshares, Inc. Old National Bancorp
Compass Bancshares, Inc. Pacific Century Financial Corporation
FirstMerit Corporation Regions Financial Corp.
First Tennessee National SouthTrust Corporation
First Virginia Banks Inc. Summit Bancorp
Hibernia Corporation UnionBanCal Corporation
Huntington Bancshares Union Planters Corp.
Marshall & Ilsley Corp. Zions Bancorporation
Mercantile Bankshares
</TABLE>
These companies were selected because of their operating, organizational and
overall business similarities with First Security. Based upon a review of such
information and closing stock prices on April 7, 2000, J.P. Morgan determined
the following:
<TABLE>
<CAPTION>
REGIONAL BANK PEERS
------------------------------
BOTTOM TOP
PRICE AS A MULTIPLE OF: FIRST SECURITY MEDIAN QUARTILE QUARTILE
- ----------------------- -------------- -------- -------- --------
<S> <C> <C> <C> <C>
2000E EPS (adjusted I/B/E/S estimate)... 10.6x 10.2x 8.5x 14.3x
2000E EPS (First Security estimate)..... 10.2x 10.2x 8.5x 14.3x
Tangible book value..................... 1.7x 2.2x 1.9x 3.3x
</TABLE>
J.P. Morgan also calculated a range of imputed values for a share of First
Security's common stock based on the ratios for the regional bank peers. This
analysis resulted in a range of imputed values for First Security's common stock
of between $9.79 and $23.35.
16
<PAGE>
SELECTED TRANSACTION ANALYSIS. Using publicly available information, J.P.
Morgan examined the following bank transactions, each of which had a value
greater than $900 million and was announced since January 1, 1999:
<TABLE>
<CAPTION>
BUYER SELLER
- ------------------------------------ ------------------------------------
<S> <C>
National Commerce Bancorporation CCB Financial Corp.
BB&T Corporation One Valley Bancorp Inc.
Wells Fargo & Company National Bancorp of Alaska Inc.
Citizens Financial Group Inc. UST Corp.
Fifth Third Bancorp CNB Bancshares Inc.
AmSouth Bancorporation First American Corp.
U.S. Bancorp Western Bancorp
Firstar Corporation Mercantile Bancorporation Inc.
Fleet Financial Group Inc. BankBoston Corp.
</TABLE>
J.P. Morgan calculated the high, median and low premiums represented by the
purchase price paid in such acquisitions to the market price one day prior to
announcement, estimates of the next twelve months' projected earnings per share
and tangible book value per share. J.P. Morgan also calculated the median
premiums represented by the purchase price paid in the acquisitions announced in
1999 and those announced in 2000 to the market price one day prior to
announcement, estimates of the next twelve months' projected earnings per share
and tangible book value per share. Based upon a review of such information, J.P.
Morgan determined the following:
<TABLE>
<CAPTION>
COMPARABLE TRANSACTIONS
--------------------------------------------------------
HIGH MEDIAN LOW 2000 DEALS 1999 DEALS
-------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1-day premium...................... 44% 29% (9)% 28% 29%
12-month est. forward EPS.......... 21.0x 17.2x 13.1x 13.4x 18.4x
Tangible book value................ 4.5x 3.7x 2.1x 2.5x 3.9x
</TABLE>
J.P. Morgan also calculated a range of imputed values for a share of First
Security's common stock based on the ratios for the comparable transactions.
This analysis resulted in a range of imputed values for First Security's common
stock of between $11.12 and $32.19.
DISCOUNTED CASH FLOW ANALYSIS. Using a discounted cash flow analysis, J.P.
Morgan estimated the net present value of the future streams of after-tax cash
flows that First Security could produce on a stand-alone basis from 2000 through
2009 and distribute to First Security's stockholders. In this analysis, J.P.
Morgan used earnings estimates provided by First Security's management for 2000
and 2001 and assumed that First Security's earnings were grown thereafter at an
annual rate ranging from 6% to 10%. For each growth rate, J.P. Morgan calculated
the sum of: (i) the estimated 2000-2009 distributable income streams per share,
projected such that First Security's dividend payout ratio would be maintained
at 46.7%, and discounted to present values at an assumed discount rate of 11%,
and (ii) the terminal values per share of First Security's common stock based on
assumed multiples of First Security's projected 2009 earnings ranging from 8.0x
to 10.0x. This discounted cash flow analysis indicated a reference range of
$10.79 to $16.22 per share of First Security's common stock.
J.P. Morgan also used a discounted cash flow analysis to estimate the net
present value of transaction synergies assumed to result from the merger. These
synergies were assumed to produce cash flows resulting from: (i) cost savings,
which were assumed to be phased in 25% in 2000, 75% in 2001 and 100% thereafter,
grown at 5% annually; (ii) a restructuring charge based on fully phased-in cost
savings; and (iii) an assumed amount of deposit divestitures, with associated
assumptions for return on deposits (i.e., return on assets) and a deposit sale
premium. The transaction synergy cash flows were discounted to present values at
an assumed discount rate of 11%, and terminal values were based on assumed
multiples
17
<PAGE>
of projected 2009 transaction synergies ranging from 8.0x to 10.0x. This
discounted cash flow analysis indicated a reference range for total transaction
synergies of $2.62 to $2.96 per share of First Security's common stock.
In addition, J.P. Morgan tested the sensitivity of the values for First
Security on a stand-alone basis and for transaction synergies by varying certain
assumptions. The reference ranges were not materially changed by reasonable
variations of key assumptions.
This summary does not purport to be a complete description of the analyses
or data presented by J.P. Morgan. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. J.P. Morgan believes that one must consider its opinion,
the summary and its analyses as a whole. Selecting portions of this summary and
these analyses, without considering the analyses as a whole, would create an
incomplete view of the processes underlying the analyses and opinion. In
arriving at its opinion, J.P. Morgan considered the results of all of the
analyses as a whole. No single factor or analysis was determinative of J.P.
Morgan's fairness determination. Rather, the totality of the factors considered
and analyses performed operated collectively to support its determination. J.P.
Morgan based its analyses on assumptions that it deemed reasonable, including
those concerning general business and economic conditions and industry-specific
factors. This summary sets forth under the description of each analysis the
other principal assumptions upon which J.P. Morgan based that analysis. J.P.
Morgan's analyses are not necessarily indicative of actual values or actual
future results that either company or the combined company might achieve, which
values may be higher or lower than those indicated. Analyses based upon
forecasts of future results are inherently uncertain, as they are subject to
numerous factors or events beyond the control of the parties and their advisors.
Accordingly, these forecasts and analyses are not necessarily indicative of
actual future results, which may be significantly more or less favorable than
suggested by those analyses. Therefore, none of First Security, Wells Fargo,
J.P. Morgan or any other person assumes responsibility if future results are
materially different from those forecasted. Moreover, J.P. Morgan's analyses are
not and do not purport to be appraisals or otherwise reflective of the prices at
which businesses actually could be bought or sold.
As a part of its investment banking business, J.P. Morgan and its affiliates
are continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, investments for passive and control
purposes, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. First Security selected J.P. Morgan to advise it and deliver
a fairness opinion with respect to the merger on the basis of such experience
and its familiarity with First Security.
J.P. Morgan acted as financial advisor to First Security with respect to the
proposed merger with Wells Fargo and will receive a fee from First Security for
its services equal to 0.45% of the aggregate purchase price paid in the merger
upon consummation of the merger. This fee will be reduced by the $250,000
engagement fee that J.P. Morgan received in connection with the financial advice
it provided to First Security relative to First Security's proposed merger with
Zions Bancorporation, which transaction was terminated on April 1, 2000. First
Security also agreed to reimburse J.P. Morgan for its reasonable expenses,
including the fees and disbursements of counsel, and to indemnify J.P. Morgan
against various liabilities, including liabilities which might arise under the
federal securities laws. In providing financial advisory services to First
Security relative to the proposed merger with Wells Fargo, J.P. Morgan was not
requested to, and did not, solicit third party indications of interest in
acquiring all or any portion of First Security.
In the past, J.P. Morgan Securities Inc. and its affiliates have provided
financial advisory, capital markets and commercial banking services to First
Security, for which they have received customary fees. In the ordinary course of
their businesses, J.P. Morgan Securities Inc. and its affiliates may actively
trade the debt and equity securities of First Security or Wells Fargo for their
own account or for the accounts of customers and, accordingly, they may at any
time hold long or short positions in such securities.
18
<PAGE>
INTERESTS IN THE MERGER THAT MAY BE DIFFERENT FROM YOURS
First Security's directors and executive officers may be considered to have
interests in the merger that are in addition to their interests as stockholders
of First Security generally. First Security's board of directors was aware of
these interests and considered them, among other things, when it approved the
merger agreement. In addition, upon a change of control of First Security, each
option holder will have the right to elect, during the 60-day period following
shareholder approval of the merger, to exercise each outstanding option and
receive in respect thereof the number of shares of First Security common stock
with a fair market value equal to the difference between (a) the higher of the
merger price or the highest reported sales price during the 60-day period prior
to and including the date of shareholder approval and (b) the exercise price.
The transactions provided for by the merger agreement will constitute a change
of control under the First Security stock-based plans.
EMPLOYMENT AGREEMENTS
In connection with the signing of the merger agreement, Wells Fargo entered
into employment agreements with Spencer F. Eccles, the current Chairman of the
Board and Chief Executive Officer of First Security, and Morgan J. Evans, the
current President and Chief Operating Officer of First Security. In addition,
Wells Fargo entered into employment agreements with the following four executive
vice presidents of First Security: Brad D. Hardy, J. Pat McMurray, L. Scott
Nelson and Scott C. Ulbrich and with three other officers of First Security.
EMPLOYMENT AGREEMENTS WITH FIRST SECURITY EXECUTIVE OFFICERS. The term of
Mr. Eccles' employment agreement begins on the effective date of the merger and
expires on the last day of the month in which he attains age 70. Pursuant to
Mr. Eccles' employment agreement, Mr. Eccles will serve as Chairman of Wells
Fargo's Intermountain Region banking activities. During the employment period,
Mr. Eccles will serve as a member of Wells Fargo's board of directors, subject
to Wells Fargo's retirement policy.
Pursuant to Mr. Eccles' employment agreement, for each year until the annual
stockholders' meeting in 2002, he will receive (1) an annual base salary no less
than the annual base salary in effect immediately prior to the date of the
merger agreement, and (2) an annual cash bonus no less than the annual bonus
earned by Mr. Eccles in respect of the 1998 calendar year (pro-rated for the
2002 calendar year). After the annual stockholders' meeting in 2002 and until
the month in which Mr. Eccles attains age 70, he will receive an annual base
salary of $800,000.
Upon completion of the merger, Wells Fargo will grant Mr. Eccles an option
to acquire 85,000 shares of Wells Fargo's common stock which will vest in three
equal installments over the period ending with the annual stockholders' meeting
in 2002, will have an exercise price equal to the fair market value of Wells
Fargo common stock on the date of grant and will have a term of ten years from
the date of grant without regard to Mr. Eccles' earlier termination of
employment. Mr. Eccles will also be granted an additional option to acquire
100,000 shares of Wells Fargo common stock in calendar year 2001, which will
vest on the day before the annual stockholders' meeting in 2002, will have an
exercise price equal to the fair market value of Wells Fargo common stock on the
date of grant and will have a term of ten years from the date of grant without
regard to Mr. Eccles' earlier termination of employment.
Mr. Eccles' employment agreement provides for an annual retirement benefit
of $1,000,000, less any amounts accrued under qualified and non-qualified
defined benefit retirement plans, commencing upon his 70(th) birthday. Upon the
death of Mr. Eccles, his current spouse (if she survives him) will receive an
annual benefit in an amount equal to 50% of the retirement benefit determined in
accordance with the preceding sentence. Mr. Eccles will receive a special bonus
of $1.5 million on his 70(th) birthday. Mr. Eccles will also be entitled to
participate in Wells Fargo's medical and dental benefit plans until the annual
stockholders' meeting in 2002, and thereafter, Mr. Eccles will be entitled to
receive post-retirement welfare benefits based on the greater of the benefits
that he would have been eligible to receive if he had retired at
19
<PAGE>
the completion of the merger and the benefits that are provided to retired
executive officers of Wells Fargo at any time thereafter.
In the event that Mr. Eccles' employment is terminated prior to the annual
stockholders' meeting in 2002 by Wells Fargo other than for cause or disability,
or by Mr. Eccles for good reason (each as defined in Mr. Eccles' employment
agreement), Mr. Eccles will be entitled to receive the following payments and
benefits:
- annual base salary through the date of termination and a pro-rata annual
bonus through the date of termination;
- an amount equal to the product of (1) the number of months and portions
thereof from the date of termination until the annual stockholders'
meeting in 2002, divided by 12, and (2) the sum of Mr. Eccles' annual base
salary and the bonus paid to Mr. Eccles for the 1998 calendar year;
- continued medical and dental benefits for Mr. Eccles and his spouse
through the last day of the month in which Mr. Eccles attains age 70, on
the same basis such benefits were provided immediately prior to the date
of termination;
- the special $1.5 million bonus will become immediately payable; and
- the stock options granted to Mr. Eccles as described above will vest
immediately;
In the event that Mr. Eccles' employment is terminated for cause or
Mr. Eccles' terminates his employment agreement without good reason prior to the
annual stockholders' meeting in 2002, Wells Fargo will provide continued medical
benefits to Mr. Eccles and his current spouse through the month in which he
attains age 70 and the retirement benefit will commence (at a rate of $800,000
per year until his 70(th) birthday).
If any amounts payable to Mr. Eccles under the employment agreement or
otherwise would be subject to the excise tax under section 4999 of the Code, an
additional payment will be made so that after the payment of all income and
excise taxes, Mr. Eccles will be in the same after-tax position as if no excise
tax under section 4999 had been imposed. However, if these additional payments
(excluding any additional amounts payable due to the excise tax) do not exceed
110% of the greatest amount that could be paid without requiring payment of the
excise tax, no additional payments will be made on account of the excise tax.
Instead, the payments otherwise due will be reduced as necessary to prevent the
application of the excise tax. On completion of the merger, Mr. Eccles' new
employment agreement will supersede his change of control severance agreement
described below. See "--Existing First Security Change of Control Severance
Agreements".
The term of Mr. Evans' employment agreement is six months and the term of
each employment agreement with the other executives is one year, in each case
commencing on the completion of the merger. Pursuant to the employment
agreements, Mr. Evans and the other executives will serve in the following
positions:
<TABLE>
<S> <C>
Mr. Evans................ Transition Manager
Mr. Caughlin............. Operations Manager
Loan Supervisor--Commercial Banking--Wholesale
Banking
Mr. Golden...............
Mr. Hardy................ Transition Manager
Executive Vice President
Mr. Howell...............
Mr. McMurray............. Regional President, Idaho
Mr. Nelson............... Regional President, Utah and SW Wyoming
Mr. Ulbrich.............. Private Client Services Manager
</TABLE>
20
<PAGE>
Pursuant to the employment agreements, each of Mr. Evans and the other
executives will receive an annual base salary of no less than the annual base
salary in effect on the date of the merger agreement. Mr. Evans will receive an
annual cash bonus equal to the annual bonus he earned for 1998, and each of the
other executives will receive an annual cash bonus equal to his annual bonus
opportunity for the 2000 calendar year under the First Security Management
Annual Cash Incentive Bonus Plan. The employment agreements for the other
executives also provide for the payment of a retention bonus on the first
anniversary of the completion of the merger, in an amount equal to 35% of the
sum of the executive's annual base salary and 1998 annual bonus. Mr. Evans'
employment agreement provides that at the time that his retirement benefit
commences under First Security's tax-qualified defined benefit retirement plan,
he will receive an additional annual retirement benefit of $135,000. Upon the
death of Mr. Evans, his current spouse (if she survives him) will receive an
annual benefit for her life in an amount equal to 50% of the additional
retirement benefit.
Pursuant to Mr. Evans' employment agreement, upon the first to occur of the
termination of Mr. Evans' employment or the expiration of six months following
the merger, Mr. Evans will serve as a consultant to Wells Fargo for two years,
provided that his employment is not terminated as a result of death, disability,
by Wells Fargo for cause or by Mr. Evans other than for good reason (each as
defined in Mr. Evans' employment agreement). During the two-year consulting
period, Mr. Evans will be available to perform consulting services for Wells
Fargo on a basis reasonably acceptable to both parties, will receive as
compensation for such services an annual consulting fee of $500,000 and will
receive continued welfare benefits and outplacement services. Upon the
termination of Mr. Evans' consulting services other than for cause, Mr. Evans
will be entitled to receive a lump-sum payment in an amount equal to the
consulting fees for the remainder of the two year consulting period and will
continue to receive the welfare benefits and outplacement benefits for the
remainder of the periods provided in Mr. Evans' existing change of control
severance agreement with First Security.
The employment agreements for the other executives provide that upon the
completion of the merger, each other executive will be granted an option to
acquire 37,500 shares of Wells Fargo common stock. The stock option will vest in
full on the first anniversary of the completion of the merger, subject to
accelerated vesting upon a change of control of Wells Fargo as defined in Wells
Fargo's stock incentive plan, will have an exercise price equal to the fair
market value of Wells Fargo common stock on the date of grant and will have a
term of ten years from the date of grant without regard to the earlier
termination of employment of an other executive.
In the event that, prior to the expiration of the term of the relevant
employment agreement, the employment of Mr. Evans or of the other executives is
terminated by Wells Fargo other than for cause or disability, or by the
executive for good reason (each as defined in the respective employment
agreement), the terminated executive will be entitled to receive the following
payments and benefits:
- annual base salary through the date of termination and a pro-rata annual
bonus through the date of termination;
- an amount equal to the product of (1) the sum of the annual base salary
and the target annual bonus in respect of calendar year 2000 (1998 annual
bonus in the case of Mr. Evans), and (2) the number of months and portions
thereof from the date of termination through the expiration of the term of
the employment agreement, divided by 12;
- in the case of the executives other than Mr. Evans, the grant of 37,500
stock options described above will immediately vest;
- in the case of the executives other than Mr. Evans, payment of the
retention bonus described above;
- welfare benefits and outplacement services for the periods provided in the
other executives' existing change of control severance agreements with
First Security (and for Mr. Evans, continued medical and dental benefits
through the expiration of the term of the employment agreement and,
21
<PAGE>
thereafter, the welfare benefits and outplacement services provided for
under his change of control severance agreement with First Security); and
- in the case of Mr. Evans, payment of the additional annual retirement
benefit described above, commencing when otherwise payable.
If any amounts payable to Mr. Evans or the other executives under the
employment agreements or otherwise would be subject to the excise tax under
section 4999 of the Code, an additional payment will be made so that after the
payment of all income and excise taxes, the executive will be in the same
after-tax position as if no excise tax under section 4999 had been imposed.
However, if these additional payments (excluding any additional amounts payable
due to the excise tax) do not exceed 110% of the greatest amount that could be
paid without requiring payment of the excise tax, no additional payments will be
made on account of the excise tax. Instead, the payments otherwise due will be
reduced as necessary to prevent the application of the excise tax. On completion
of the merger, Mr. Evans' and the other executives' new employment agreements
will supersede their change of control severance agreements described below. See
"--Existing First Security Change of Control Severance Agreements".
EXISTING FIRST SECURITY CHANGE OF CONTROL SEVERANCE AGREEMENTS. Change of
control severance agreements are in effect between First Security and a number
of its executive officers, including Mr. Eccles, Mr. Evans and each of the other
executives.
Under the change of control severance agreements, if, during the three-year
period following a change of control, the employment of a covered executive is
terminated other than for cause or due to death or disability, or by the covered
executive for good reason, the covered executive will be entitled to receive a
payment consisting of:
- a PRO RATA annual bonus through the date of termination, based on the
higher of (1) the annual bonus earned in the year prior to the change of
control and (2) the average annual bonus earned in the three years before
the change of control (the "highest annual bonus");
- three times the sum of the covered executive's base salary and the highest
annual bonus; plus
- an amount generally equal to the value of three years' additional service
credit under First Security's tax-qualified and supplemental retirement
plans.
In addition, on a covered termination following a change of control, each
covered executive will be entitled to continued welfare benefit coverage for
three years after the date of termination and outplacement services.
If any amounts payable under the change of control severance agreements or
otherwise would be subject to the excise tax under section 4999 of the Internal
Revenue Code, an additional payment will be made so that after the payment of
all income and excise taxes, the covered executive will be in the same after-tax
position as if no excise tax under section 4999 had been imposed. However, if
these additional payments (excluding additional amounts payable due to the
excise tax) do not exceed 110% of the greatest amount that could be paid to the
covered executive without requiring payment of the excise tax, no additional
payments will be made on account of the excise tax. Instead, the payments
otherwise due to the covered executive will be reduced as necessary to prevent
the application of the excise tax.
The transactions contemplated by the merger agreement will constitute a
change of control under the change of control severance agreements. Upon
completion of the merger, Mr. Evans' and the other executives' employment will
be deemed to be terminated other than for cause for purposes of the change of
control severance agreements. Thereafter, the new employment agreement with
Wells Fargo will supersede the change of control severance agreements. See
"--Employment Agreements with First Security Executive Officers."
22
<PAGE>
FIRST SECURITY SUPPLEMENTAL RETIREMENT PLAN. Under the First Security
supplemental retirement plan, on a change of control of First Security, certain
limitations under the plan will be waived, including the noncompetition
restriction under the plan. The transactions provided for by the merger
agreement will constitute a change of control for purposes of the supplemental
retirement plan.
FIRST SECURITY STOCK-BASED RIGHTS.
At the time of the merger, each option previously granted by First Security
under the Comprehensive Management Incentive Plan, as amended, and the 1995
Non-Employee Director Stock Option Plan which is then outstanding and
unexercised shall be converted automatically into an option to purchase shares
of Wells Fargo common stock in the following manner:
(i) the number of shares of Wells Fargo common stock to be subject to
the new option shall be the product of the number of shares of First
Security common stock subject to the original option and the exchange ratio
of 0.355, provided that any fractional shares of Wells Fargo common stock
resulting from such multiplication shall be rounded down to the nearest
share; and
(ii) the exercise price per share of Wells Fargo common stock under the
new option shall be equal to the exercise price per share of First Security
common stock under the original option divided by the exchange ratio of
0.355, provided that such exercise price shall be rounded to the nearest
cent.
Under First Security's stock-based plans, unvested stock options will become
fully vested and exercisable on a change of control of First Security. The
transactions provided for by the merger agreement will constitute a change of
control under the First Security stock-based plans.
INDEMNIFICATION
Wells Fargo has agreed to ensure that all rights to indemnification and all
limitations of liability existing in First Security's certificate of
incorporation or bylaws in favor of the present and former directors and
officers of First Security with respect to claims arising from (a) facts or
events that occurred before the effective time of the merger or (b) the merger
agreement, the stock option agreement or any of the transactions contemplated by
these agreements will survive the merger and continue in full force and effect.
The merger agreement also provides that Wells Fargo will use its reasonable
best efforts to cover for six years following the effective time the officers
and directors of First Security and its subsidiaries under a director's and
officer's liability insurance policy with respect to claims arising out of facts
or events occurring before the effective time. This insurance will provide at
least the same coverage and amounts as the coverage currently provided by First
Security.
DISSENTERS' RIGHTS
Under Delaware law, stockholders of First Security common stock do not have
the right to dissent to the merger.
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 First Security common stock a form of letter of
transmittal, together with instructions, for the exchange of the holder's First
Security stock certificates for a certificate representing Wells Fargo common
stock.
FIRST SECURITY STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
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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 First Security common stock until after the certificates have been
surrendered for exchange.
When the exchange agent receives a surrendered certificate or certificates
from a First Security stockholder, together with a properly completed letter of
transmittal, it will issue and mail to the stockholder a certificate
representing the number of whole shares of Wells Fargo common stock to which the
stockholder is entitled, plus cash for the amount of any remaining fractional
share and any cash dividends that are payable with respect to the shares of
Wells Fargo common stock so issued. No interest will be paid on the fractional
share amount or amounts payable as dividends or other distributions.
A certificate for Wells Fargo common stock may be issued in a name other
than the name in which the surrendered certificate is registered if (a) the
certificate surrendered is properly endorsed and accompanied by all documents
required to transfer the shares to the new holder and (b) the person requesting
the issuance of the Wells Fargo common stock certificate either pays to the
exchange agent in advance any transfer and other taxes due or establishes to the
satisfaction of the exchange agent that such taxes have been paid or are not
due.
The exchange agent will issue stock certificates for Wells Fargo common
stock in exchange for lost, stolen or destroyed certificates for First Security
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 First Security. If, after completion of the merger, certificates for First
Security common stock are presented for transfer to the exchange agent, they
will be canceled and exchanged for certificates representing Wells Fargo common
stock.
None of Wells Fargo, First Security, the exchange agent or any other person
will be liable to any former holder of First Security common stock for any
amount delivered in good faith to a public official pursuant to applicable
abandoned property, escheat or similar laws.
REGULATORY APPROVALS
The merger is subject to the prior approval of the Board of Governors of the
Federal Reserve System. The approval of the Federal Reserve Board is required
because Wells Fargo is a bank holding company registered under the Bank Holding
Company Act.
Wells Fargo will file an application with the Federal Reserve Board
requesting approval of the merger. Copies of the application will be provided to
the U.S. Department of Justice (the "DOJ") and other governmental agencies. The
application will describe the terms of the merger, the parties involved and the
activities to be conducted by Wells Fargo as a result of the merger and will
provide other financial and managerial information. In evaluating the
application, the Federal Reserve Board will consider the financial and
managerial resources and prospects of the existing and combined institutions and
the benefits that may be expected from the merger. Among other things, the
Federal Reserve Board will evaluate the capital adequacy of Wells Fargo before
and after completion of the merger.
The Federal Reserve Board may deny an application if it determines that the
transaction would result in a monopoly or be in furtherance of any combination
or conspiracy to monopolize or attempt to monopolize a given business activity
in any part of the United States. The Federal Reserve Board may also deny an
application if it determines that the transaction would substantially lessen
competition or would tend to create a monopoly in any section of the country, or
would in any other manner result in a restraint of trade, unless the Federal
Reserve Board finds that the anti-competitive effects of the transaction are
clearly outweighed by the probable effects of the transaction in providing
benefits to the public. Wells Fargo and First Security expect to divest
approximately $1.2 billion of deposits and associated loans in
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connection with obtaining Federal Reserve Board approval of the merger. Wells
Fargo and First Security can give no assurance that the Federal Reserve Board or
the DOJ will not seek greater levels of divestiture.
Applicable federal law provides for the publication of notice and public
comment on the application filed by Wells Fargo with the Federal Reserve Board.
Under current law, the merger may not be completed until the Federal Reserve
Board has approved the merger and a period of 30 days, or fewer if prescribed by
the Federal Reserve Board with the concurrence of the Attorney General of the
United States, following the date of approval by the Federal Reserve Board, has
expired.
Prior approval of the merger is also required from the State of Nevada.
First Security also owns certain nonbanking subsidiaries. As a result of the
acquisition of First Security, Wells Fargo will also acquire these nonbanking
subsidiaries, which will require that prior notice be given to the Federal Trade
Commission under the Hart-Scott-Rodino Antitrust Improvements Act.
The approval of an application means only that the regulatory criteria for
approval have been satisfied or waived. It does not mean that the approving
authority has determined that the consideration to be received by First Security
stockholders is fair. Regulatory approval does not constitute an endorsement or
recommendation of the merger.
Wells Fargo and First Security 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 First
Security 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 and all statutory waiting periods thereafter have expired. 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.
However, a divestiture that is required as a condition to a regulatory approval
will not be deemed to be unreasonably burdensome to Wells Fargo if the
divestiture is consistent with U.S. Department of Justice and Federal Reserve
Board guidelines, policies and practices concerning the merger of bank holding
companies that have been used in transactions that have recently been reviewed
by those agencies prior to the date of the merger agreement. See "The Merger
Agreement--Conditions to the Merger" and "--Termination of the Merger Agreement"
and "Regulation and Supervision of Wells Fargo--Bank Holding Company
Activities--Regulatory Approval."
EFFECT OF MERGER ON FIRST SECURITY'S EMPLOYEE BENEFIT PLANS
Each person who is an employee of First Security or a First Security
subsidiary as of the effective date of the merger will be eligible for the
employee welfare plans of Wells Fargo specified in the merger agreement, subject
to any eligibility requirements applicable to such plans. Eligible employees
will enter the specified plans not later than January 1, 2001.
Each person who is an employee of First Security or a First Security
subsidiary as of the effective date of the merger will be eligible for
participation in the Wells Fargo 401(k) plan, subject to any eligibility
requirements applicable to such plan. Each such employee shall also be eligible
for participation in the Wells Fargo cash balance plan pursuant to the terms
thereof, and shall be eligible for access to Wells Fargo's retiree medical
benefit, subject to any applicable eligibility requirements. Wells Fargo shall
recognize years of past service with First Security or a First Security
subsidiary and any predecessor of First Security or a First Security subsidiary
for the purpose of eligibility to access Wells Fargo's retiree medical benefit.
Each person who is an employee of First Security or a First Security
subsidiary as of the effective date of the merger will be eligible for
participation in the employee benefit plans of Wells Fargo on the same basis as
similarly situated employees of Wells Fargo, and Wells Fargo will give each
employee of First
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Security credit for prior service with First Security or its subsidiaries, and
any of their predecessors, for purposes of eligibility, vesting and levels of
benefits under the Wells Fargo employee benefit plans for which the employee is
eligible, subject to any eligibility requirements applicable to these plans.
Eligible employees will enter the specified plans on the effective date of the
merger or on such later date on which the employee becomes eligible to
participate upon conversion to Wells Fargo's payroll systems.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of the material anticipated U.S. federal income
tax consequences of the merger to First Security stockholders who hold First
Security common stock as a capital asset. The summary is based on the U.S. tax
code, regulations under the U.S. tax code, administrative rulings and court
decisions, as in effect as of the date of this document, all of which are
subject to change at any time, possibly with retroactive effect. This summary is
not a complete description of all of the tax consequences of the merger. In
particular, this summary may not address U.S. federal income tax considerations
applicable to you if you are a First Security stockholder subject to special
treatment under U.S. federal income tax law, including, for example:
- foreign persons;
- financial institutions;
- dealers in securities;
- traders in securities who elect to apply a mark-to-market method of
accounting;
- insurance companies;
- tax-exempt entities;
- holders who acquired their shares of First Security common stock through
exercise of an employee stock option or right, or otherwise as
compensation; and
- holders who hold First Security common stock as part of a hedge, straddle,
conversion or constructive sale transaction.
In addition, we do not provide any information in this document about the
tax consequences of the merger under applicable foreign, state or local laws or
under any federal laws other than those relating to the income tax.
We urge you to consult with your tax advisors about the particular tax
consequences of the merger to you, including the effects of U.S. federal, state
or local, or foreign and other tax laws.
[In connection with the filing with the SEC of the registration statement
containing this document, the law firm of Wachtell, Lipton, Rosen & Katz has
delivered to Wells Fargo and First Security an opinion addressing the material
U.S. federal income tax consequences of the merger. This opinion has been
rendered on the basis of facts, representations and assumptions set forth or
referred to in the opinion. In rendering this opinion, Wachtell, Lipton,
Rosen & Katz required and relied upon factual representations contained in
certificates of officers of Wells Fargo and First Security.] The opinion is to
the effect that, for U.S. federal income tax purposes:
- the merger will constitute a reorganization within the meaning of
Section 368(a) of the U.S. tax code;
- no gain or loss will be recognized by the holders of First Security common
stock upon receipt of Wells Fargo common stock, except with respect to
cash received instead of fractional shares of Wells Fargo common stock;
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- the basis of Wells Fargo common stock received, including fractional
shares deemed received and redeemed as described below, by the
stockholders of First Security will be the same as the basis of the First
Security common stock exchanged therefor; and
- the holding period of shares of Wells Fargo common stock received,
including fractional shares deemed received and redeemed as described
below, by the stockholders of First Security will include the holding
period of the First Security common stock, provided that the shares of
First Security common stock were held as a capital asset as of the
effective time of the merger.
First Security will not be required to complete the merger unless it
receives an additional opinion of Wachtell, Lipton, Rosen & Katz, dated the
closing date of the merger, based on the facts and assumptions stated in that
opinion, substantially to the same effect as the opinion described above.
None of the tax opinions delivered or to be delivered to the parties in
connection with the merger as described in this document are binding on the
Internal Revenue Service or the courts, and First Security does not intend to
request a ruling from the Internal Revenue Service with respect to the merger.
If you receive cash instead of a fractional share interest in Wells Fargo
common stock, you will be treated as having received that fractional share
interest and then as having received the cash in redemption of the fractional
share interest, and in most cases you should recognize capital gain or loss for
U.S. federal income tax purposes measured by the difference between the amount
of cash received and the portion of the tax basis of the shares of First
Security common stock allocable to the fractional share interest. This capital
gain or loss would be a long-term capital gain or loss if the holding period for
the fractional share interest in Wells Fargo common stock (determined as
described above) is greater than one year at the effective time.
INFORMATION REPORTING AND BACKUP WITHHOLDING. Payments related to First
Security common stock may be subject to information reporting to the Internal
Revenue Service and to a 31% backup withholding tax. Backup withholding will not
apply, however, to a payment to you, or another payee, if you or the payee
completes and signs the substitute Form W-9 that will be included as part of the
transmittal letter, or otherwise proves to Wells Fargo and the exchange agent
that you or the payee is exempt from backup withholding.
RESALE OF WELLS FARGO COMMON STOCK ISSUED IN THE MERGER
The Wells Fargo common stock issued in the merger will be freely
transferable under the Securities Act of 1933, except for shares issued to First
Security stockholders who are considered to be "affiliates" of First Security 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 First Security may not sell the shares of Wells Fargo common
stock received in the merger except:
- pursuant to an effective registration statement under the Securities Act;
- in compliance with an exemption from the registration requirements of the
Securities Act; or
- in compliance with Rule 145 under the Securities Act.
Generally, those rules permit resales of stock received by First Security
affiliates during the year following the completion of the merger so long as
Wells Fargo has complied with certain reporting requirements and the selling
stockholder complies with certain volume and manner of sale restrictions, and
freely thereafter.
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First Security 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
First Security 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 document does not cover any resales of Wells Fargo common stock
received by affiliates of First Security.
STOCK EXCHANGE LISTING
The shares of Wells Fargo common stock to be issued in the merger will be
listed on the New York Stock Exchange and the Chicago Stock Exchange. The
listing of the Wells Fargo common stock to be issued in the merger is a
condition to First Security's obligation to complete the merger.
ACCOUNTING TREATMENT
Wells Fargo expects to account for the merger as a pooling-of-interests.
Under the pooling-of-interests accounting method, the previously recorded assets
and liabilities of Wells Fargo and First Security would be carried forward to
the combined company at their recorded amounts. In addition, in the combined
company's financial reporting following the completion of the merger, its income
and expenses would include income and expenses of Wells Fargo and First Security
for the entire fiscal year in which the merger occurs and the reported results
of the separate corporations for prior periods would be combined and restated as
the results of the combined company. To comply with the requirements for pooling
of interests accounting treatment, Wells Fargo intends to reduce, prior to
completion of the merger, its previously announced common stock repurchase
authority.
The unaudited pro forma data included in this proxy statement-prospectus for
the merger have been prepared using the pooling-of-interests method of
accounting. See "Summary--Comparative Per Common Share Data."
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THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT. A
COPY OF THE MERGER AGREEMENT IS ATTACHED TO THIS DOCUMENT AS APPENDIX A AND IS
INCORPORATED BY REFERENCE INTO THIS DOCUMENT. THIS SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE MERGER AGREEMENT. FIRST SECURITY
STOCKHOLDERS ARE ENCOURAGED TO READ THE MERGER AGREEMENT CAREFULLY AND IN ITS
ENTIRETY. PARENTHETICAL REFERENCES ARE TO THE RELEVANT PARAGRAPH OR PARAGRAPHS
OF THE MERGER AGREEMENT.
BASIC PLAN OF MERGER
The merger agreement provides that a wholly owned subsidiary of Wells Fargo
will merge by statutory merger with and into First Security, with First Security
as the surviving corporation. (PARAGRAPH 1(A))
EXCHANGE OF WELLS FARGO SHARES FOR FIRST SECURITY SHARES
Under the merger agreement, each share of First Security common stock
outstanding immediately before the merger is to be converted into 0.355 of a
share of Wells Fargo common stock. (PARAGRAPH 1(A))
Since the price of Wells Fargo common stock will fluctuate, First Security
cannot assure you as to the value of the shares of Wells Fargo common stock you
will receive in the merger.
NO ADJUSTMENTS FOR PRICE FLUCTUATIONS
NO ADJUSTMENT WILL BE MADE TO THE NUMBER OF SHARES OF WELLS FARGO COMMON
STOCK YOU WILL RECEIVE FOR YOUR SHARES OF FIRST SECURITY COMMON STOCK TO REFLECT
FLUCTUATIONS IN THE PRICE OF WELLS FARGO COMMON STOCK OCCURRING PRIOR TO
COMPLETION OF THE MERGER.
CONVERSION OF FIRST SECURITY OPTIONS
At the time of the merger, each option previously granted by First Security
under the Comprehensive Management Incentive Plan, as amended, and the 1995
Non-Employee Director Stock Option Plan which is then outstanding and
unexercised shall be converted automatically into an option to purchase shares
of Wells Fargo common stock in the following manner:
(i) the number of shares of Wells Fargo common stock to be subject to the
new option shall be the product of the number of shares of First
Security common stock subject to the original option and the exchange
ratio of 0.355, provided that any fractional shares of Wells Fargo
common stock resulting from such multiplication shall be rounded down to
the nearest share; and
(ii) the exercise price per share of Wells Fargo common stock under the new
option shall be equal to the exercise price per share of First Security
common stock under the original option divided by the exchange ratio of
0.355, provided that such exercise price shall be rounded to the
nearest cent. (PARAGRAPH 1(B))
In addition, upon a change of control of First Security, each option holder
will have the right to elect, during the 60-day period following shareholder
approval of the merger, to exercise each outstanding option and receive in
respect thereof the number of shares of First Security common stock with a fair
market value equal to the difference between (a) the higher of the merger price
or the highest reported sales price during the 60-day period prior to and
including the date of shareholder approval and (b) the exercise price. The
transactions provided for by the merger agreement will constitute a change of
control under the First Security stock-based plans.
ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
If, before the merger is completed, the outstanding shares of Wells Fargo
are increased or decreased in number or changed into or exchanged for a
different number or kind of shares or securities as a result of
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a reorganization, reclassification, recapitalization, stock dividend, stock
split or other similar change in capitalization, then an appropriate and
proportionate adjustment will be made to the exchange ratio. (PARAGRAPH 1(C))
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
instead of the fractional share. The cash payment will be equal to the product
of the fractional part of the share of Wells Fargo common stock multiplied by
the average of the closing prices of a share of Wells Fargo common stock as
reported on the consolidated tape of the New York Stock Exchange for each of the
five consecutive trading days ending on the day immediately preceding the
special meeting called to vote on the merger. (PARAGRAPH 1(D))
TREASURY SHARES
Shares of First Security common stock held by First Security or Wells Fargo,
other than shares held in a fiduciary capacity for third parties, such as shares
held in trust accounts, managed accounts and the like, and any shares held by
First Security or Wells Fargo or any of their subsidiaries in respect of debts
previously contracted, will be canceled and will not be converted into the right
to receive Wells Fargo common shares.
EFFECTIVE DATE AND TIME OF THE MERGER
The effective date of the merger will be the day on which a certificate of
merger is filed with and accepted by the Delaware Secretary of State. The merger
agreement provides that a certificate of merger will be filed within 10 business
days after the satisfaction or waiver of all conditions to the merger or on such
other date as Wells Fargo and First Security may agree, provided that the filing
date will not be the last business day of a calendar month. See "Conditions To
The Merger." The effective time of the merger will be 11:59 p.m., Salt Lake
City, Utah time, on the effective date of the merger. (PARAGRAPH 1(E))
REVISED MERGER STRUCTURE
Subject to the conditions described below, Wells Fargo has the right under
the merger agreement to revise the structure of the proposed transaction so
that:
- First Security is merged into a subsidiary of Wells Fargo; or
- First Security is merged directly into Wells Fargo.
Wells Fargo may revise the structure of the transaction only if the revised
structure does not:
- change the amount or kind of consideration to be received by First
Security in the merger;
- adversely affect the tax treatment of the merger to First Security
stockholders; and
- impede or delay the completion of the merger.
Assuming these conditions are met, Wells Fargo may revise the structure of
the transaction without notice to you. (PARAGRAPH 1(F))
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REPRESENTATIONS AND WARRANTIES
The merger agreement contains various representations and warranties by
Wells Fargo and First Security concerning, among other things (PARAGRAPHS 2 AND
3):
- corporate organization, standing and authority;
- subsidiaries;
- capitalization;
- corporate authority and action;
- compliance of the merger agreement with, and the need for consent or
approval under applicable law and contracts and organizational documents;
- governmental and third party consents and approvals;
- good title to properties and effectiveness of leases;
- financial statements and filings with the SEC and other governmental
agencies;
- the filing of tax returns, the payment of taxes and the absence of certain
tax proceedings;
- absence of material changes in business since December 31, 1999;
- contracts and commitments;
- absence of certain pending or threatened litigation;
- insurance;
- compliance with laws;
- labor matters;
- material interests of certain persons in material contracts of First
Security or its subsidiaries;
- employee benefit plans;
- information provided for inclusion in this document;
- absence of any obligation to register securities;
- absence of undisclosed broker's fees;
- proper administration of fiduciary accounts;
- absence of default on material agreements;
- absence of undisclosed environmental liabilities; and
- termination of the Agreement and Plan of Merger, dated as of June 6, 1999,
between First Security and Zions Bancorporation.
CERTAIN COVENANTS
The merger agreement has a number of covenants and agreements that govern
the actions of First Security and Wells Fargo pending completion of the merger.
Some of the covenants and agreements are summarized below.
CONDUCT OF BUSINESS
FIRST SECURITY
Except as otherwise permitted or required by the merger agreement, or as
otherwise agreed to in writing by Wells Fargo, First Security and each First
Security subsidiary WILL:
- maintain its corporate existence in good standing;
- maintain the general character of its business;
- conduct its business in the ordinary and usual manner;
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- extend credit in accordance with existing lending policies and provide
Wells Fargo access to its loan files, except that it will not, without
Wells Fargo's consent, which consent will be deemed waived under certain
specified circumstances, (A) make any loans equal to or greater than
$1,000,000 to a person that is not a borrower as of April 9, 2000, or
(B) make any new loan or modify, restructure or renew any existing loan
(except pursuant to pre-existing commitments) to any borrower who has
aggregate loans of over $1,000,000 if the amount of the new loan, when
aggregated with all other loans or extensions of credit to such person,
would exceed $2,500,000;
- maintain proper business and accounting records in accordance with
generally accepted principles;
- maintain its properties in good repair and condition, with the exception
of ordinary wear and tear;
- maintain in all material respects insurance coverage or its commercial
equivalent;
- 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 First Security and each First Security subsidiary the
non-compliance with which reasonably could be expected to have a material
adverse effect with respect to First Security; and
- permit Wells Fargo and its representatives (including KPMG LLP) to examine
its and its subsidiaries books, records and properties and to interview
officers, employees and agents at all reasonable times when it is open for
business. (PARAGRAPH 4(A))
Except as otherwise permitted or required by the merger agreement, or as
otherwise agreed to in writing by Wells Fargo, until the effective date of the
merger, First Security and each First Security subsidiary WILL NOT:
- amend or otherwise change its articles of incorporation or association or
bylaws;
- issue or sell or authorize for issuance or sale, or grant any options or
make other agreements with respect to the issuance or sale or conversion
of, any shares of its capital stock, phantom shares or other share
equivalents, or any other of its securities except upon the exercise of
the stock option agreement or upon the exercise of certain stock options;
- authorize or incur any long-term debt (other than deposit liabilities);
- mortgage, pledge or subject to a lien or other encumbrance any of its
properties, except in the ordinary course of business;
- subject to specified exceptions, enter into any material agreement,
contract or commitment that is in excess of $50,000;
- make any investments except U.S. Treasury securities made by First
Security's bank subsidiaries in the ordinary course of business for terms
of up to two years and in amounts of $100,000,000 or less;
- amend or terminate any employee benefit plan except as required by law or
by the merger agreement;
- make any contributions to any specified employee benefit plan except as
required by the terms of the plan in effect as of the date of the merger
agreement, or as amended to comply with applicable law;
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- declare, set aside, make or pay any dividend or other distribution with
respect to its capital stock except any dividend declared by a First
Security subsidiary's board of directors in accordance with applicable law
and regulation, provided that:
- First Security's board of directors may declare and pay cash dividends
out of the net earnings of First Security between the date of the
merger agreement and the effective date of the merger in accordance
with applicable law and regulation and in accordance with past practice
in an amount not to exceed an annualized rate of $0.56 per share; and
- First Security stockholders will be entitled to have a cash dividend
declared on First Security common stock or on Wells Fargo common stock,
but not both, in the calendar quarter in which the merger closes;
- increase the compensation of any officers, directors or executive
employees, except pursuant to existing compensation plans, agreements or
practices;
- sell or otherwise dispose of any shares of capital stock of any First
Security subsidiary; or
- sell or otherwise dispose of any of its assets or properties other than in
the ordinary course of business. (PARAGRAPH 4(B))
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. (PARAGRAPH 5(A))
COMPETING TRANSACTIONS
Neither First Security or any First Security subsidiary nor any director,
officer, representative or agent of First Security or any First Security
subsidiary may, directly or indirectly, solicit, authorize the solicitation of
or enter into any discussions with any entity or group, other than Wells Fargo,
concerning any offer or possible offer to:
- purchase its common stock, any security convertible into its common stock,
or any other equity security of First Security or any of its subsidiaries;
- make a tender or exchange offer for any shares of its common stock or
other equity security of First Security or any of its subsidiaries;
- purchase, lease or otherwise acquire the assets of First Security or any
of its subsidiaries except in the ordinary course of business; or
- merge, consolidate or otherwise combine with First Security or any of its
subsidiaries.
First Security and each of its subsidiaries, as applicable, have also agreed
to promptly inform Wells Fargo if any such entity or group makes an offer or
inquiry concerning any of the foregoing. (PARAGRAPH 4(H))
OTHER COVENANTS
The merger agreement contains various other covenants, including covenants
relating to the preparation and distribution of this document, access to
information, and the listing by Wells Fargo on the New
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York and Chicago Stock Exchanges of the shares of Wells Fargo common stock to be
issued in the merger. In addition, First Security has agreed to:
- redeem the outstanding shares of First Security preferred stock
immediately prior to completion of the merger; and
- use its best efforts to deliver to Wells Fargo prior to completion of the
merger signed representations substantially in the form attached as
Exhibit B to the merger agreement from each executive officer, director or
stockholder of First Security who may reasonably be deemed an "affiliate"
of First Security within the meaning of such term as used in Rule 145 of
the Securities Act. (PARAGRAPHS 4(L) AND 4(N) AND EXHIBIT B) See "The
Merger--Resale of Wells Fargo Common Stock Issued In The Merger."
CONDITIONS TO THE MERGER
Under the merger agreement, various conditions are required to be met before
the parties are obligated to complete the merger. These conditions are customary
and include such items as:
- the continued accuracy of the other party's representations and
warranties;
- the performance by the other party of its obligations under the merger
agreement;
- the receipt of stockholder and regulatory approval, and the absence of any
order restraining or enjoining the merger; and
- subject to certain exceptions, the absence of any changes that have had or
might be reasonably expected to have a material adverse effect on the
other party.
Various additional conditions must be met before First Security is obligated
to complete the merger, including:
- the listing of the Wells Fargo shares to be delivered to the First
Security stockholders on the New York Stock Exchange or the Chicago Stock
Exchange;
- the receipt by Wells Fargo of all securities law or blue sky
authorizations necessary to carry out the merger; and
- the receipt by First Security of a favorable tax opinion. See "The
Merger--U.S. Federal Income Tax Consequences of The Merger."
In addition, various conditions must be met before Wells Fargo is obligated
to complete the merger, including:
- the receipt by First Security and each First Security subsidiary of any
and all material consents or waivers from third parties to loan
agreements, leases or other contracts required for the consummation of the
merger, and the receipt by First Security and each First Security
subsidiary of any and all permits, authorizations, consents, waivers and
approvals required for the lawful consummation by it of the merger;
- the total number of shares of First Security common stock outstanding and
subject to issuance upon exercise, assuming for this purpose that phantom
shares and other share-equivalents constitute First Security common stock,
of all warrants, options, conversion rights, phantom shares or other
share-equivalents shall not exceed 210,000,000; and
- the resignations of each member of First Security's board of directors.
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)
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TERMINATION OF THE MERGER AGREEMENT
TERMINATION BY MUTUAL CONSENT
Wells Fargo and First Security can agree to terminate the merger agreement
at any time before completion of the merger. (PARAGRAPH 9(A)(I))
TERMINATION BY EITHER WELLS FARGO OR FIRST SECURITY
Either Wells Fargo or First Security can terminate the merger agreement
without the consent of the other if any of the following occurs:
- There is a material breach by the other party which has not been cured in
30 days. (PARAGRAPH 9(A)(II))
- The merger has not been completed by December 31, 2000, unless the failure
to complete the merger is due to the failure of the party seeking to
terminate to perform or observe in all material respects the covenants and
agreements to be observed or performed by the party.
(PARAGRAPH 9(A)(III))
- A court or governmental authority of competent jurisdiction has issued a
final order restraining, enjoining or otherwise prohibiting the
transactions contemplated by the merger agreement. (PARAGRAPH 9(A)(IV))
EFFECT OF TERMINATION
Generally, if either party terminates the merger 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 merger
agreement governing confidential information and expenses incurred in connection
with the merger continue in effect after termination of the merger agreement.
(PARAGRAPH 9(B))
WAIVER AND AMENDMENT
Either Wells Fargo or First Security may waive any inaccuracies in the
representations and warranties of the other party or compliance by the other
party with any of the covenants or conditions contained in the merger agreement.
(PARAGRAPH 16)
Wells Fargo and First Security can amend the merger agreement at any time
before the merger is completed; however, the merger agreement prohibits them
from amending the merger agreement after First Security stockholders approve the
merger if the amendment would change in a manner adverse to First Security
stockholders the consideration to be received by First Security stockholders in
the merger. (PARAGRAPH 17)
EXPENSES
Wells Fargo and First Security 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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STOCK OPTION AGREEMENT
THE FOLLOWING DESCRIPTION SETS FORTH THE MATERIAL PROVISIONS OF THE STOCK
OPTION AGREEMENT, BUT DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, THE AGREEMENT, WHICH IS ATTACHED AS
APPENDIX B TO THIS PROXY STATEMENT-PROSPECTUS AND IS INCORPORATED HEREIN BY
REFERENCE. ALL FIRST SECURITY STOCKHOLDERS ARE URGED TO READ THE STOCK OPTION
AGREEMENT CAREFULLY AND IN ITS ENTIRETY.
GENERAL
Following the execution of the merger agreement, Wells Fargo and First
Security entered into a stock option agreement, dated April 9, 2000. Pursuant to
the stock option agreement, First Security granted to Wells Fargo an option to
purchase First Security common stock from First Security on the conditions
described below.
Wells Fargo and First Security entered into the option agreement in order to
increase the likelihood that the merger will be completed in accordance with the
terms of the merger agreement, and to compensate Wells Fargo for the efforts
undertaken and the expenses, losses and opportunity costs incurred in the
transactions in the event of certain acquisitions or potential acquisitions of
First Security by a third party. The stock option agreement may have the effect
of discouraging offers by third parties to acquire First Security prior to the
completion of the merger, even if such persons were prepared to offer to pay
consideration having a higher market price than the First Security common stock
to be received by Wells Fargo under the merger agreement.
Pursuant to the stock option agreement, First Security granted Wells Fargo
an option to purchase up to 41,551,200 shares of First Security common stock.
Although the number of shares Wells Fargo may purchase is subject to adjustment
in certain circumstances (described below), it will never exceed 19.9% of the
number of shares of First Security common stock outstanding immediately before
exercise of the option. Shares that are subject to or issued pursuant to the
option are not taken into account in determining the maximum number of shares
that may be issued under the option. The exercise price of the option is $12.78
per share, and is also subject to adjustment in certain cases. We refer to that
exercise price, as adjusted, as the "Option Price."
EXERCISE OF THE OPTION
Wells Fargo may exercise the option only after the occurrence of both an
Initial Triggering Event (as defined below) and a Subsequent Triggering Event
(as defined below), but before the occurrence of an Exercise Termination Event
(as defined below). The purchase of any shares of common stock of First Security
pursuant to the option is subject to compliance with applicable law, including
the prior approval of the Federal Reserve.
The stock option agreement generally defines the term "Initial Triggering
Event" to mean any of the following events or transactions with respect to First
Security:
- First Security or any of its subsidiaries enters into an agreement to
engage in an "Acquisition Transaction" (as defined below) with a third
party or the board of directors of First Security recommends that its
stockholders approve or accept any Acquisition Transaction, other than the
merger;
- a third party acquires beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the shares of the outstanding
common stock of First Security;
- the stockholders of First Security vote but fail to approve the merger
agreement at the applicable special meeting or such special meeting is
canceled or otherwise not held in violation of the merger agreement and
prior to the stockholder vote or cancellation it has been publicly
announced that any third party has made or disclosed an intention to make
an Acquisition Transaction;
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- the board of directors of First Security withdraws or adversely modifies
or qualifies, or publicly announces its intention to withdraw, modify or
qualify, its recommendation that the stockholders of First Security
approve the transaction contemplated by the merger agreement, or First
Security or any of its subsidiaries authorizes, recommends or proposes, or
publicly announces its intention to authorize, recommend or propose, an
agreement to engage in an Acquisition Transaction with a third party;
- a third party files with the SEC a registration statement or tender offer
materials with respect to a potential exchange offer or tender offer that
would constitute an Acquisition Transaction, or files a preliminary proxy
statement with the SEC with respect to a potential vote by its
stockholders to approve the issuance of shares to be offered in such an
exchange offer;
- First Security willfully breaches any covenant or obligation contained in
the merger agreement in anticipation of an Acquisition Transaction, and
following such breach Wells Fargo would be entitled to terminate the
merger agreement; or
- a third party files an application with the Federal Reserve or another
governmental authority for approval to engage in an Acquisition
Transaction.
As used in the stock option agreement, the term "Acquisition Transaction"
means:
- a merger, consolidation or similar transaction involving First Security or
any of its subsidiaries;
- a purchase, lease or other acquisition of all or substantially all of the
assets or deposits of First Security or any of its subsidiaries; or
- a purchase or other acquisition of securities representing 10% or more of
the voting power of First Security or any of its subsidiaries.
The stock option agreement generally defines the term "Subsequent Triggering
Event" to mean any of the following events or transactions:
- the acquisition by a third party of beneficial ownership of 25% or more of
the outstanding common stock of First Security; or
- First Security or any of its subsidiaries entering into an agreement to
engage in an Acquisition Transaction with a third party or the board of
directors of First Security recommends that its stockholders approve or
accept any Acquisition Transaction, other than the merger; however, if
such Acquisition Transaction contemplates the acquisition of securities of
First Security, the acquisition must be of securities representing 25%
(not just 10%) or more of the voting power of First Security or any of its
subsidiaries.
Under the stock option agreement, an "Exercise Termination Event" will
occur, preventing the further exercise of the stock option by Wells Fargo:
- upon the completion of the merger;
- immediately upon termination of the merger agreement so long as such
termination:
- occurs prior to an Initial Triggering Event, and
- is not a termination under that section of the merger agreement
providing for termination due to material breaches of representations,
warranties, covenants or agreements by the other party; or
- 18 months after the termination of the merger agreement if such
termination:
- is as a result of breaches of representations, warranties, covenants or
agreements by the other party, or
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- occurs subsequent to the occurrence of an Initial Triggering Event.
The right of Wells Fargo to exercise the option and certain other rights
under the stock option agreement is subject to extension in order to obtain
required regulatory approvals, to comply with applicable regulatory waiting
periods, to avoid liability under Section 16(b) of the Securities Exchange Act
of 1934 or in the event of an injunction, order or judgment prohibiting or
delaying such exercise. The Option Price and the number of shares issuable under
the option are subject to adjustment in the event of specified changes in the
capital stock of First Security.
REGISTRATION RIGHTS
Upon the occurrence of a Subsequent Triggering Event that occurs prior to an
Exercise Termination Event, Wells Fargo will have the right, on two occasions,
to require First Security to file, at First Security's expense, a registration
statement with the SEC covering the shares of common stock issued or issuable
pursuant to the option.
REPURCHASE OF OPTION OR OPTION SHARES
The stock option agreement also provides that, upon the occurrence of a
Repurchase Event, Wells Fargo may require First Security to repurchase the
option and all or any part of the shares then issued under the option. The
repurchase of the option shall be at a price per share equal to the amount by
which the market/offer price (as defined in the stock option agreement) exceeds
the Option Price, as applicable. A repurchase of any shares issued under the
option will be at a price per share equal to the market/offer price.
Under the stock option agreement, a "Repurchase Event" will be deemed to
have occurred upon the occurrence of any of the following events:
- the acquisition by any third party of (1) beneficial ownership of 50% or
more of the then outstanding shares of common stock of First Security or
(2) beneficial ownership of 15% or more of the then outstanding shares of
common stock of First Security if First Security has violated the
provisions of the merger agreement relating to its stockholder protection
rights plan; or
- the completion of any Acquisition Transaction; however, if such
Acquisition Transaction contemplates the acquisition of securities of
First Security, the acquisition must be of securities representing 25%
(not just 10%) or more of the voting power of First Security or any of its
subsidiaries.
SURRENDER OF OPTION FOR CASH PAYMENT
Following the occurrence of a Repurchase Event prior to the occurrence of an
Exercise Termination Event, Wells Fargo may relinquish the option to First
Security in exchange for a cash payment by First Security of $100 million
(1) plus, if applicable, the purchase price paid by Wells Fargo for shares of
common stock of First Security upon any previous exercise of the option and
(2) minus the excess of the net price received by Wells Fargo upon sale of
shares acquired upon exercise of the option over the purchase price for such
shares.
SUBSTITUTE OPTION
If, prior to an Exercise Termination Event, First Security enters into an
agreement:
(1) to merge with a third party or engage in a plan of exchange, and First
Security is not the surviving or acquiring corporation;
(2) to merge with a third party or engage in a plan of exchange, and the
common stock of First Security is converted into or exchanged for
securities of a third party or cash or other property or
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<PAGE>
the shares of common stock of First Security after the merger or plan of
exchange represent less than 50% of the outstanding shares and share
equivalents of the merged company; or
(3) to sell all or a substantial part of its or its subsidiaries' assets or
deposits,
the option will be converted into or exchangeable for a substitute option. The
substitute option will be issued, at the election of Wells Fargo, by:
- (1) the continuing or surviving person of a consolidation or merger,
(2) the acquiring person in a plan of exchange, (3) First Security in a
merger or plan of exchange in which First Security is the continuing or
surviving or acquiring person or (4) the transferee of all or a
substantial portion of First Security's assets or deposits; or
- any person that controls any such entity.
The substitute option must have the same terms and conditions as the option.
However, if the terms of the substitute option cannot, for legal reasons, be the
same as those of the option, the terms of the substitute option must be as
similar as possible and in no event less advantageous to Wells Fargo.
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INFORMATION ABOUT WELLS FARGO
GENERAL
Wells Fargo is a diversified financial services company. Through its
subsidiaries and affiliates, Wells Fargo provides retail, commercial, real
estate and mortgage banking, asset management and consumer finance, as well as a
variety of other financial services, including equipment leasing, agricultural
finance, securities brokerage and investment banking, insurance agency services,
computer and data processing services, trust services, mortgage-backed
securities servicing, and venture capital investment.
At March 31, 2000, Wells Fargo had consolidated total assets of
$222.3 billion, consolidated total deposits of $141.5 billion and stockholders'
equity of $23.6 billion. Based on assets at March 31, 2000, Wells Fargo was the
7(th) largest commercial banking organization in the United States.
Wells Fargo expands its business in part by acquiring banking institutions
and other companies engaged in activities closely related to banking. Wells
Fargo continues to explore opportunities to acquire banking institutions and
other companies permitted by the Bank Holding Company Act of 1956, as amended.
Discussions are continually being carried on related to such acquisitions. It is
not presently known whether, or on what terms, such discussions will result in
further acquisitions. It is the policy of Wells Fargo not to comment on such
discussions or possible acquisitions until a definitive agreement with respect
thereto has been signed.
Wells Fargo is a legal entity separate and distinct from its banking and
nonbanking subsidiaries. As a result, the right of Wells Fargo--and thus the
right of Wells Fargo's creditors--to participate in any distribution of assets
or earnings of any subsidiary, other than in its capacity as a creditor of such
subsidiary, is subject to the prior payment of claims of creditors of such
subsidiary. The principal sources of Wells Fargo's revenues are dividends and
fees from its subsidiaries. See "Regulation and Supervision of Wells
Fargo--Dividend Restrictions" for a discussion of the restrictions on the
subsidiary banks' ability to pay dividends to Wells Fargo.
Wells Fargo's principal executive offices are located at 420 Montgomery
Street, San Francisco, California 94163, and its telephone number is
(800) 411-4932.
MANAGEMENT AND ADDITIONAL INFORMATION
Information concerning executive compensation, the principal holders of
voting securities, certain relationships and related transactions, and other
related matters concerning Wells Fargo is included or incorporated by reference
in its annual report on Form 10-K for the year ended December 31, 1999. Wells
Fargo's annual report on Form 10-K is incorporated by reference into this proxy
statement-prospectus. First Security stockholders 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."
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 securities
firms 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.
Effective March 13, 2000, securities firms and insurance companies that
elect to become financial holding companies may acquire banks and other
financial institutions. This may significantly change the
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competitive environment in which Wells Fargo and its subsidiaries conduct
business. The financial services industry is also likely to become 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.
INFORMATION ON WELLS FARGO'S WEB SITE
Information on the internet web site of Wells Fargo or any subsidiary of
Wells Fargo is not part of this proxy statement-prospectus, and you should not
rely on that information in deciding whether to approve the merger unless that
information is also in this proxy statement-prospectus or in a document that is
incorporated by reference into this proxy statement-prospectus.
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REGULATION AND SUPERVISION OF WELLS FARGO
TO THE EXTENT THAT THE FOLLOWING INFORMATION DESCRIBES STATUTORY AND
REGULATORY PROVISIONS, IT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF THOSE PROVISIONS. ALSO, SUCH STATUTES, REGULATIONS AND POLICIES ARE
CONTINUALLY UNDER REVIEW BY CONGRESS AND STATE LEGISLATURES AND FEDERAL AND
STATE REGULATORY AGENCIES. A CHANGE IN STATUTES, REGULATIONS OR REGULATORY
POLICIES APPLICABLE TO WELLS FARGO COULD HAVE A MATERIAL EFFECT ON THE BUSINESS
OF WELLS FARGO.
INTRODUCTION
Wells Fargo, its banking subsidiaries and many of its nonbanking
subsidiaries are subject to extensive regulation by federal and state agencies.
The regulation of bank holding companies and their subsidiaries is intended
primarily for the protection of depositors, federal deposit insurance funds and
the banking system as a whole and not for the protection of security holders.
As discussed in more detail below, this regulatory environment, among other
things, may restrict Wells Fargo's ability to diversify into certain areas of
financial services, acquire depository institutions in certain states and pay
dividends on its capital stock. It may also require Wells Fargo to provide
financial support to one or more of its banking subsidiaries, maintain capital
balances in excess of those desired by management and pay higher deposit
insurance premiums as a result of the deterioration in the financial condition
of depository institutions in general.
Additional information about the regulation and supervision of Wells Fargo
is contained in Wells Fargo's annual and quarterly reports filed with the SEC.
See "Where You Can Find More Information."
REGULATORY AGENCIES
BANK HOLDING COMPANY
Wells Fargo & Company, as a bank holding company, is subject to regulation
under the Bank Holding Company Act of 1956, as amended, and to inspection,
examination and supervision by the Board of Governors of the Federal Reserve
System under the Bank Holding Company Act. As of March 13, 2000, Wells Fargo
became a financial holding company under the Bank Holding Company Act.
SUBSIDIARY BANKS
Wells Fargo's national banking subsidiaries are subject to regulation and
examination primarily by the Office of the Comptroller of the Currency and
secondarily by the Federal Reserve Board and the Federal Deposit Insurance
Corporation. Wells Fargo's state-chartered banking subsidiaries are subject to
primary federal regulation and examination by the FDIC or the Federal Reserve
Board and, in addition, are regulated and examined by banking departments of the
states where they are chartered.
NONBANK SUBSIDIARIES
Many of Wells Fargo's nonbank subsidiaries also are subject to regulation by
the Federal Reserve Board and other applicable federal and state agencies. Wells
Fargo's brokerage subsidiaries are regulated by the SEC, the National
Association of Securities Dealers, Inc. and state securities regulators. Wells
Fargo's insurance subsidiaries are subject to regulation by applicable state
insurance regulatory agencies. Other nonbank subsidiaries of Wells Fargo are
subject to the laws and regulations of both the federal government and the
various states in which they conduct business.
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BANK HOLDING COMPANY ACTIVITIES
"FINANCIAL IN NATURE" REQUIREMENT
As a bank holding company that has elected also to become a financial
holding company, Wells Fargo may affiliate with securities firms and insurance
companies and engage in other activities that are financial in nature.
"Financial in nature" activities include securities underwriting, dealing and
market making, sponsoring mutual funds and investment companies, insurance
underwriting and agency, merchant banking, and activities that the Federal
Reserve Board has determined to be closely related to banking. A bank holding
company that is not also a financial holding company is limited to engaging in
banking and such other activities previously determined by the Federal Reserve
Board to be closely related to banking.
No Federal Reserve Board approval is required for Wells Fargo to acquire a
company, other than a bank holding company, bank or savings association, engaged
in activities that are financial in nature or incidental to activities that are
financial in nature, as determined by the Federal Reserve Board. Prior Federal
Reserve Board approval is required before Wells Fargo may acquire the beneficial
ownership or control of more than 5% of the voting shares or substantially all
of the assets of a bank holding company, bank or savings association.
If any subsidiary bank of Wells Fargo ceases to be "well capitalized" or
"well managed" under applicable regulatory standards, the Federal Reserve Board
may, among other actions, order Wells Fargo to divest the subsidiary bank.
Alternatively, Wells Fargo may elect to conform its activities to those
permissible for a bank holding company that is not also a financial holding
company. If any subsidiary bank of Wells Fargo receives a rating under the
Community Reinvestment Act of 1977 of less than satisfactory, Wells Fargo will
be prohibited from engaging in new activities or acquiring companies other than
bank holding companies, banks or savings associations.
INTERSTATE BANKING
Under the Riegle-Neal Interstate Banking and Branching Act, a bank holding
company may acquire banks in states other than its home state, subject to any
state requirement that the bank has been organized and operating for a minimum
period of time, not to exceed five years, and the requirement that the bank
holding company not control, prior to or following the proposed acquisition,
more than 10% of the total amount of deposits of insured depository institutions
nationwide or, unless the acquisition is the bank holding company's initial
entry into the state, more than 30% of such deposits in the state, or such
lesser or greater amount set by the state. The Riegle-Neal Act also authorizes
banks to merge across state lines, thereby creating interstate branches. States
were permitted for a period of time to opt out of the Riegle-Neal Act and, by
doing so, prohibit interstate mergers in the state.
REGULATORY APPROVAL
In determining whether to approve a proposed bank acquisition, federal
banking regulators will consider, among other factors, the effect of the
acquisition on competition, the public benefits expected to be received from the
acquisition, the projected capital ratios and levels on a post-acquisition
basis, and the acquiring institution's record of addressing the credit needs of
the communities it serves, including the needs of low and moderate income
neighborhoods, consistent with the safe and sound operation of the bank, under
the Community Reinvestment Act of 1977.
DIVIDEND RESTRICTIONS
Wells Fargo & Company is a legal entity separate and distinct from its
subsidiary banks and other subsidiaries. Its principal source of funds to pay
dividends on its common and preferred stock and debt service on its debt is
dividends from its subsidiaries. Various federal and state statutory provisions
and regulations limit the amount of dividends that Wells Fargo's bank
subsidiaries may pay without regulatory
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approval. Dividends payable by a national bank without the express approval of
the OCC are limited to the bank's retained net profits for the preceding two
calendar years plus retained net profits up to the date of any dividend
declaration in the current calendar year. The OCC defines retained net profits
as net income, less dividends declared during the period, both of which are
based on regulatory accounting principles. Wells Fargo's state-chartered
subsidiary banks also are subject to state regulations that limit dividends.
Before Wells Fargo Bank, National Association can declare dividends in 2000
without the prior approval of the OCC, it must have net income of approximately
$500 million plus an amount equal to or greater than the dividends declared in
2000. Because it is not expected to meet this requirement, Wells Fargo Bank,
National Association will likely be required to obtain the prior approval of the
OCC before it declares any dividends in 2000.
Federal bank regulatory agencies have the authority to prohibit Wells
Fargo's subsidiary banks from engaging in unsafe or unsound practices in
conducting their businesses. The payment of dividends, depending on the
financial condition of the bank in question, could be deemed an unsafe or
unsound practice. The ability of Wells Fargo's subsidiary banks to pay dividends
in the future is currently influenced, and could be further influenced, by bank
regulatory policies and capital guidelines.
HOLDING COMPANY STRUCTURE
TRANSFER OF FUNDS FROM BANKING SUBSIDIARIES
Wells Fargo's banking subsidiaries are subject to restrictions under federal
law that limit the transfer of funds or other items of value from these
subsidiaries to Wells Fargo and its nonbanking subsidiaries, including
affiliates, whether in the form of loans and other extensions of credit,
investments and asset purchases, or as other transactions involving the transfer
of value from a subsidiary to an affiliate or for the benefit of an affiliate.
Unless an exemption applies, these transactions by a banking subsidiary with a
single affiliate are limited to 10% of the subsidiary bank's capital and surplus
and, with respect to all covered transactions with affiliates in the aggregate,
to 20% of the subsidiary bank's capital and surplus. Also, loans and extensions
of credit to affiliates generally are required to be secured in specified
amounts.
SOURCE OF STRENGTH DOCTRINE
Under current Federal Reserve Board policy, Wells Fargo 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 could be required at times when Wells Fargo might
not have the resources to provide it. In addition, the OCC may order the PRO
RATA assessment of Wells Fargo if the capital of one of its national bank
subsidiaries were to become impaired. If Wells Fargo failed to pay the
assessment within three months, the OCC could order the sale of its stock in the
national bank subsidiary to cover the deficiency.
Capital loans from Wells Fargo to any of its subsidiary banks are
subordinate in right of payment to deposits and certain other indebtedness of
the subsidiary bank. In the event of Wells Fargo's bankruptcy, any commitment by
Wells Fargo to a federal bank regulatory agency to maintain the capital of a
subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
DEPOSITOR PREFERENCE
The FDI Act provides that, in the event of the "liquidation or other
resolution" of an insured depository institution, the claims of depositors of
the institution, including the claims of the FDIC as subrogee of insured
depositors, and certain claims for administrative expenses of the FDIC as a
receiver will have priority over other general unsecured claims against the
institution. If an insured depository institution fails, insured and uninsured
depositors, along with the FDIC, will have priority in payment ahead of
unsecured, nondeposit creditors, including Wells Fargo.
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LIABILITY OF COMMONLY CONTROLLED INSTITUTIONS
All of Wells Fargo's banks are insured by the FDIC. FDIC-insured depository
institutions can be held liable for any loss incurred, or reasonably expected to
be incurred, by the FDIC due to the default of an FDIC-insured depository
institution controlled by the same bank holding company, or for any assistance
provided by the FDIC to an FDIC-insured depository institution controlled by the
same bank holding company that is in danger of default. "Default" means
generally the appointment of a conservator or receiver. "In danger of default"
means generally the existence of certain conditions indicating that a default is
likely to occur in the absence of regulatory assistance.
CAPITAL REQUIREMENTS
GENERAL
Wells Fargo is subject to risk-based capital requirements and guidelines
imposed by the Federal Reserve Board. These are substantially similar to the
capital requirements and guidelines imposed by the OCC and the FDIC on the
depository institutions under their jurisdictions. For this purpose, a
depository institution's or holding company's assets, and some of its specified
off-balance sheet commitments and obligations, are assigned to various risk
categories. A depository institution's or holding company's capital, in turn, is
classified in one of three tiers, depending on type:
<TABLE>
<CAPTION>
CORE ("TIER 1") SUPPLEMENTARY ("TIER 2") MARKET RISK ("TIER 3")
CAPITAL CAPITAL CAPITAL
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
- - common equity among other items: - qualifying unsecured
- - retained earnings - perpetual preferred stock subordinated debt
- - qualifying noncumulative meeting the Tier 1 definition
perpetual preferred stock - qualifying mandatory
- - a limited amount of convertible securities
qualifying - qualifying subordinated
cumulative perpetual debt
preferred stock at the - allowances for loan and
holding lease
company level losses, subject to
- - minority interests in limitations
equity
accounts of consolidated
subsidiaries
- - less goodwill and most
intangible assets
</TABLE>
Wells Fargo, like other bank holding companies, currently is required to
maintain Tier 1 capital and "TOTAL CAPITAL" (the sum of Tier 1, Tier 2 and Tier
3 capital) equal to at least 4% and 8%, respectively, of its total risk-weighted
assets (including various off-balance-sheet items, such as standby letters of
credit). For a holding company to be considered "well capitalized" for
regulatory purposes, its Tier 1 and total capital ratios must be 6% and 10% on a
risk-adjusted basis, respectively. At March 31, 2000, Wells Fargo met both
requirements, with Tier 1 and total capital equal to 7.5% and 10.3% of its
respective total risk-weighted assets.
Federal Reserve Board, FDIC and OCC rules require Wells Fargo to incorporate
market and interest rate risk components into its risk-based capital standards.
Under these market risk requirements, capital is allocated to support the amount
of market risk related to a financial institution's ongoing trading activities.
The Federal Reserve Board also requires bank holding companies to maintain a
minimum "LEVERAGE RATIO" (Tier 1 capital to adjusted total assets) of 3% if the
holding company has the highest regulatory
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rating and meets other requirements, or of 3% plus an additional "cushion" of at
least one to two percentage points if the holding company does not meet these
requirements. Wells Fargo's leverage ratio at March 31, 2000 was 6.5%.
The Federal Reserve Board may set capital requirements higher than the
minimums described above for holding companies whose circumstances warrant it.
For example, holding companies experiencing or anticipating significant growth
may be expected to maintain capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets. The
Federal Reserve Board has also indicated that it will consider a "tangible Tier
1 capital leverage ratio" (deducting all intangibles) and other indications of
capital strength in evaluating proposals for expansion or new activities.
Wells Fargo's banking subsidiaries are subject to similar risk-based and
leverage capital requirements adopted by its applicable federal banking agency.
Wells Fargo's management believes that each of Wells Fargo's subsidiary banks
met all capital requirements to which they are subject.
Failure to meet capital requirements could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to restrictions on its business, which are described under "--Federal
Deposit Insurance Corporation Improvement Act of 1991."
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. It requires U.S. federal bank regulatory agencies to implement
systems for "prompt corrective action" for insured depository institutions that
do not meet minimum capital requirements based on these categories. The FDICIA
imposes progressively more restrictive constraints on operations, management and
capital distributions, depending on the category in which an institution is
classified. Unless a bank or thrift is well capitalized, it is subject to
restrictions on its ability to offer brokered deposits and on other aspects of
its operations. An undercapitalized bank or thrift must develop a capital
restoration plan, and its parent holding company must guarantee the bank's or
thrift's compliance with the plan up to the lesser of 5% of the bank's or
thrift's assets at the time it became undercapitalized and the amount needed to
comply with the plan.
As of March 31, 2000, Wells Fargo believes that each of its significant bank
subsidiaries was well capitalized, based on the prompt corrective action ratios
and guidelines described above. A bank's capital category is determined solely
for the purpose of applying the OCC's or the FDIC's prompt corrective action
regulations, and the capital category may not constitute an accurate
representation of the bank's overall financial condition or prospects for other
purposes.
DEPOSIT INSURANCE ASSESSMENTS
Through the Bank Insurance Fund ("BIF"), the FDIC insures the deposits of
Wells Fargo's depository institution subsidiaries up to prescribed limits for
each depositor. The amount of FDIC assessments paid by each BIF member
institution is based on its relative risk of default as measured by regulatory
capital ratios and other factors. Specifically, the assessment rate is based on
the institution's capitalization risk category and supervisory subgroup
category. An institution's capitalization risk category is based on the FDIC's
determination of whether the institution is well capitalized, adequately
capitalized or less than adequately capitalized. An institution's supervisory
subgroup category is based on the FDIC's assessment of the financial condition
of the institution and the probability that FDIC intervention or other
corrective action will be required.
The BIF assessment rate currently ranges from zero to 27 cents per $100 of
domestic deposits. The FDIC may increase or decrease the assessment rate
schedule on a semi-annual basis. An increase in the
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<PAGE>
BIF assessment rate could have a material adverse effect on Wells Fargo's
earnings, depending on the amount of the increase. The FDIC is authorized to
terminate a depository institution's deposit insurance upon a finding by the
FDIC that the institution's financial condition is unsafe or unsound or that the
institution has engaged in unsafe or unsound practices or has violated any
applicable rule, regulation, order or condition enacted or imposed by the
institution's regulatory agency. The termination of deposit insurance for one or
more of Wells Fargo's subsidiary depository institutions could have a material
adverse effect on Wells Fargo's earnings, depending on the collective size of
the particular institutions involved.
All FDIC-insured depository institutions must pay an annual assessment to
provide funds for the payment of interest on bonds issued by the Financing
Corporation, a federal corporation chartered under the authority of the Federal
Housing Finance Board. The bonds, commonly referred to as FICO bonds, were
issued to capitalize the Federal Savings and Loan Insurance Corporation. The
FDIC established the FICO assessment rates effective for the second quarter of
2000 at approximately $0.21 per $100 annually for BIF-assessable deposits. The
FICO assessments are adjusted quarterly to reflect changes in the assessment
bases of the FDIC insurance funds and do not vary depending on a depository
institution's capitalization or supervisory evaluations.
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:
- conducting open market operations in United States government securities;
- changing the discount rates of borrowings of depository institutions;
- imposing or changing reserve requirements against depository institutions'
deposits; and
- 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.
FUTURE LEGISLATION
Various legislation, including proposals to substantially change the
financial institution regulatory system and to expand or contract the powers of
banking institutions and bank holding companies, is from time to time introduced
in the Congress. This legislation may change banking statutes and the operating
environment of Wells Fargo and its subsidiaries in substantial and unpredictable
ways. If enacted, such legislation could increase or decrease the cost of doing
business, limit or expand permissible activities or affect the competitive
balance among banks, savings associations, credit unions, and other financial
institutions. Wells Fargo cannot predict whether any of this potential
legislation will be enacted, and if enacted, the effect that it, or any
implementing regulations, would have on the financial condition or results of
operations of Wells Fargo or any of its subsidiaries.
47
<PAGE>
INFORMATION ABOUT FIRST SECURITY
First Security is the West's second largest independent bank holding
company, and is the nation's oldest multistate bank holding company, having been
incorporated on June 15, 1928. As of March 13, 2000, First Security became a
financial holding company under the Bank Holding Company Act. At March 31, 2000,
First Security's banks operated 330 full service domestic bank offices in Utah,
Idaho, Oregon, Wyoming, New Mexico, Nevada, and California. Nonbank subsidiaries
include a residential mortgage loan company, a leasing company, an insurance
subsidiary, an investment management company, a full-service retail securities
broker/dealer/investment banking company, a bankcard transaction processing
company, an information technology subsidiary, and a small business investment
corporation.
At March 31, 2000, First Security had consolidated total assets of
$23.3 billion, consolidated total deposits of $13.6 billion and stockholders'
equity of $1.8 billion.
LITIGATION
On May 22, 2000, a purported class action complaint was filed in the United
States District Court for the District of Utah, Central Division naming as
defendants First Security and certain of its executive officers. The complaint
alleges that First Security knew in October 1999 that it would need to make
certain write-offs in connection with its indirect auto loan and consumer loan
portfolio and that rising interest rates would constrain earnings in the
following year. The complaint further alleges that First Security concealed the
foregoing information until March 3, 2000, in order not to negatively impact the
trading price of its common stock and jeopardize its pending merger with Zions
Bancorporation. The complaint claims that as a result of these events, plaintiff
suffered damages by purchasing First Security common stock during the period
from October 18, 1999 and March 2, 2000 at prices which were falsely inflated by
First Security's nondisclosure. First Security believes that the allegations in
the complaint are without merit and intends to vigorously defend against them.
MANAGEMENT AND ADDITIONAL INFORMATION
First Security's Annual Report on Form 10-K for the year ended December 31,
1999 incorporates by reference or sets forth information relating to executive
compensation; various benefit plans, including stock option plans; voting
securities and their principal holders; various relationships; related
transactions and other related matters pertaining to First Security. First
Security incorporates this Annual Report on Form 10-K in this document by
reference. If you would like copies of this document, you may contact First
Security at the address or telephone number indicated under "Where You Can Find
More Information."
INFORMATION ON FIRST SECURITY'S WEB SITE
Information on the internet web site of First Security or any subsidiary of
First Security is not part of this proxy statement-prospectus, and you should
not rely on that information in deciding whether to approve the merger unless
that information is also in this proxy statement-prospectus or in a document
that is incorporated by reference into this proxy statement-prospectus.
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<PAGE>
WELLS FARGO CAPITAL STOCK
As a result of the merger, you will become a Wells Fargo stockholder. Your
rights as a Wells Fargo stockholder will be governed by Delaware law, Wells
Fargo's restated certificate of incorporation and Wells Fargo's bylaws. This
description of Wells Fargo's capital stock, including the Wells Fargo common
stock to be issued in the merger, reflects the anticipated state of affairs at
the effective time of the merger.
The following summarizes the material terms of Wells Fargo's capital stock
but does not purport to be complete, and is qualified in its entirety by
reference to the applicable provisions of federal law governing bank holding
companies, Delaware law and Wells Fargo's restated certificate of incorporation
and bylaws and the rights agreement, dated as of October 21, 1998, between Wells
Fargo and ChaseMellon Stockholder Services, L.L.C., as rights agent, relating to
rights to purchase shares of Wells Fargo Series C Junior Participating Preferred
Stock.
A copy of Wells Fargo's restated certificate of incorporation as in effect
as of the date of this document is attached as an exhibit to Wells Fargo's
current report on Form 8-K dated June 28, 1993, and amendments to its
certificate of incorporation are attached as exhibits to its current report on
Form 8-K dated July 3, 1995 and quarterly report on Form 10-Q for the quarter
ended September 30, 1998. A copy of Wells Fargo's bylaws as in effect as of the
date of this document are attached as an exhibit to Wells Fargo's annual report
on Form 10-K for the year ended December 31, 1999. A copy of the rights
agreement is attached as an exhibit to Wells Fargo's registration statement on
Form 8-A dated as of October 21, 1998. Wells Fargo's restated certificate of
incorporation and bylaws and the rights agreement are incorporated by reference
into this document.
WELLS FARGO COMMON STOCK
Wells Fargo is authorized to issue 4,000,000,000 shares of common stock, par
value $1 2/3 per share. At March 31, 2000, there were 1,628,680,001 shares of
Wells Fargo common stock outstanding. All of the issued and outstanding shares
of Wells Fargo common stock are, and upon the issuance of Wells Fargo common
stock in connection with the merger will be, validly issued, fully paid and
nonassessable. Holders of Wells Fargo common stock are not entitled to any
preemptive rights.
VOTING AND OTHER RIGHTS. The holders of Wells Fargo common stock are
entitled to one vote per share, and, in general, a plurality of votes cast with
respect to a matter will be sufficient to authorize action upon routine matters.
However:
- 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 on the amendment and by a majority of the outstanding stock of each
class entitled to vote on the amendment as a class.
- Wells Fargo's stockholders may amend its bylaws by the affirmative vote of
a majority of the outstanding stock entitled to vote thereon.
- With some exceptions, under Delaware law the affirmative vote of a
majority of the outstanding shares of Wells Fargo common stock entitled to
vote 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. See "Comparison of Shareholder/Stockholder
Rights--Shareholder/Stockholder Vote Required for Mergers" for a
description of the exceptions to this rule.
Directors are to be elected by a plurality of the votes cast, and Wells
Fargo stockholders do not have the right to cumulate their votes in the election
of directors. For that reason, holders of a majority of the shares of Wells
Fargo common stock entitled to vote in any election of directors of Wells Fargo
may elect all of the directors standing for election. The Wells Fargo board is
not classified.
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<PAGE>
ASSETS UPON DISSOLUTION. In the event of liquidation, holders of Wells
Fargo common stock would be entitled to receive proportionately any assets
legally available for distribution to stockholders of Wells Fargo with respect
to shares held by them, subject to any prior rights of any Wells Fargo preferred
stock then outstanding.
DISTRIBUTIONS. As a Delaware corporation, Wells Fargo 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 Delaware
General Corporation Law 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.
As a bank holding company, the ability of Wells Fargo to pay distributions
will be affected by the ability of its banking subsidiaries to pay dividends.
The ability of these banking subsidiaries, as well as of Wells Fargo, to pay
dividends in the future currently is, and could be further, influenced by bank
regulatory requirements and capital guidelines. See "Regulation and Supervision
of Wells Fargo--Dividend Restrictions" for a more detailed description.
RESTRICTIONS ON OWNERSHIP. The Bank Holding Company Act requires any "bank
holding company" (as defined in the Bank Holding Company Act) to obtain the
approval of the Federal Reserve Board prior to acquiring 5% or more of Wells
Fargo's outstanding common stock. Any person other than a bank holding company
is required to obtain prior approval of the Federal Reserve Board to acquire 10%
or more of Wells Fargo's outstanding common stock under the Change in Bank
Control Act. Any holder of 25% or more of Wells Fargo's outstanding common stock
(or a holder of 5% or more if that holder otherwise exercises a "controlling
influence" over Wells Fargo), other than an individual, is subject to regulation
as a bank holding company under the Bank Holding Company Act.
PREFERRED SHARE PURCHASE RIGHTS. Each issued share of Wells Fargo common
stock includes a Series C Junior Participating Preferred Stock purchase right.
See "--Wells Fargo Rights Plan" below.
WELLS FARGO PREFERRED STOCK
Wells Fargo's restated certificate of incorporation currently authorizes the
issuance of 20,000,000 shares of preferred stock without par value and 4,000,000
shares of preference stock without par value. At March 31, 2000, there were
5,698,417 shares of Wells Fargo preferred stock outstanding and no shares of
Wells Fargo preference stock outstanding.
The Wells Fargo board is authorized to issue preferred stock and preference
stock in one or more series, to fix the number of shares in each such series,
and to determine the designations and voting powers, preferences, and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions of each series. The preferred stock and preference stock may be
issued at any time in any amount, provided that not more than 20,000,000 shares
of preferred stock and 4,000,000 shares of preference stock are outstanding at
any one time.
The Wells Fargo board may determine the designation and number of shares
constituting a series, dividend rates, whether the series is redeemable and the
terms of redemption, liquidation preferences, sinking fund requirements,
conversion privileges, voting rights, as well as other preferences and relative,
participating, optional or other special rights and qualifications, limitations
and restrictions of these special rights, all without any vote or other action
on the part of stockholders.
The Wells Fargo board has designated 4,000,000 shares of Wells Fargo
preferred stock for issuance as Series C Junior Participating Preferred Stock
under the rights agreement. No shares of Wells Fargo Series C Junior
Participating Preferred Stock are outstanding as of the date of this document.
See "--Wells Fargo Rights Plan" below.
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<PAGE>
WELLS FARGO RIGHTS PLAN
On October 21, 1998, Wells Fargo's board of directors declared a dividend of
one Series C Junior Participating Preferred Stock purchase right for each
outstanding share of Wells Fargo common stock. The dividend was paid on
November 23, 1998 to Wells Fargo stockholders of record on that date. Each right
entitles the registered holder to purchase from Wells Fargo one one-thousandth
of a share of Wells Fargo Series C Junior Participating Preferred Stock, subject
to adjustment, at a price of $160 per one one-thousandth of a share of Wells
Fargo Series C Junior Participating Preferred Stock. The description and terms
of the rights are set forth in the rights agreement.
Until the earlier to occur of (1) ten days following a public announcement
that a person or group of affiliated or associated persons (an "acquiring
person") have acquired beneficial ownership of 15% or more of the outstanding
shares of Wells Fargo common stock or (2) ten business days (or a later date as
may be determined by action of Wells Fargo's board of directors prior to the
time that any person becomes an acquiring person) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 15% or more of the outstanding shares of Wells Fargo common stock (the
earlier of these dates being called the "rights distribution date"), the rights
will be evidenced, with respect to any of the Wells Fargo common stock
certificates outstanding as of November 23, 1998, by a Wells Fargo common stock
certificate with a copy of the summary of rights, attached to the rights
agreement as Exhibit C, attached to the certificate.
The rights agreement provides that, until the distribution date, the rights
can only be transferred with the shares of Wells Fargo common stock to which
they are attached. Until the distribution date (or earlier redemption or
expiration of the rights), new Wells Fargo common stock certificates issued
after November 23, 1998, upon transfer or new issuance of Wells Fargo common
stock, will contain a notation incorporating the rights agreement by reference.
Until the distribution date (or earlier redemption or expiration of the rights),
the surrender for transfer of any certificates for shares of Wells Fargo common
stock, outstanding as of November 23, 1998, even without this notation or a copy
of the summary of rights being attached to the certificates, will also
constitute the transfer of the rights associated with the shares of Wells Fargo
common stock represented by the certificate. As soon as practicable following
the distribution date, separate certificates evidencing the rights will be
mailed to holders of record of the shares of Wells Fargo common stock as of the
close of business on the distribution date and these separate rights
certificates alone will evidence the rights.
The rights are not exercisable until the distribution date. The rights will
expire on November 23, 2008, unless that date is extended or unless the rights
are earlier redeemed by Wells Fargo, in each case, as described below.
The purchase price payable, and the number of shares of Wells Fargo
Series C Junior Participating Preferred Stock or other securities or property
issuable, upon exercise of the rights are subject to adjustment from time to
time to prevent dilution:
- in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Wells Fargo Series C Junior Participating
Preferred Stock;
- upon the grant to holders of the Wells Fargo Series C Junior Participating
Preferred Stock of certain rights or warrants to subscribe for or purchase
Wells Fargo Series C Junior Participating Preferred Stock at a price, or
securities convertible into Wells Fargo Series C Junior Participating
Preferred Stock with a conversion price, less than the then-current market
price of the Wells Fargo Series C Junior Participating Preferred Stock; or
- upon the distribution to holders of the Wells Fargo Series C Junior
Participating Preferred Stock of evidences of indebtedness or assets,
excluding regular quarterly cash dividends or dividends payable
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<PAGE>
in Wells Fargo Series C Junior Participating Preferred Stock or of
subscription rights or warrants (other than those referred to above).
The number of outstanding rights and the number of one one-thousandths of a
share of Wells Fargo Series C Junior Participating Preferred Stock issuable upon
exercise of each right are also subject to adjustment in the event of a stock
split of the shares of Wells Fargo common stock or a stock dividend on the
shares of Wells Fargo common stock payable in shares of Wells Fargo common stock
or subdivisions, consolidations or combinations of the shares of Wells Fargo
common stock occurring, in any such case, prior to the distribution date.
Wells Fargo Series C Junior Participating Preferred Stock purchasable upon
exercise of the rights will not be redeemable. Each share of Wells Fargo
Series C Junior Participating Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $10 per share but will be entitled to
an aggregate dividend of 1000 times the dividend declared per share of Wells
Fargo common stock. In the event of liquidation, the holders of the Wells Fargo
Series C Junior Participating Preferred Stock will be entitled to a minimum
preferential liquidation payment of $1000 per share but will be entitled to an
aggregate payment of 1000 times the payment made per share of Wells Fargo common
stock. Each share of Wells Fargo Series C Junior Participating Preferred Stock
will have 1000 votes, voting together with the shares of Wells Fargo common
stock. Finally, in the event of any merger, consolidation or other transaction
in which shares of Wells Fargo common stock are exchanged, each share of Wells
Fargo Series C Junior Participating Preferred Stock will be entitled to receive
1000 times the amount received per share of Wells Fargo common stock. These
rights are protected by customary antidilution provisions.
Because of the nature of the Wells Fargo Series C Junior Participating
Preferred Stock's dividend, liquidation and voting rights, the value of the one
one-thousandth interest in a share of Wells Fargo Series C Junior Participating
Preferred Stock purchasable upon exercise of each right should approximate the
value of one share of Wells Fargo common stock.
In the event that Wells Fargo is acquired in a merger or other business
combination transaction, or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a right
will then have the right to receive, upon the exercise of the right at its
then-current exercise price, that number of shares of common stock of the
acquiring company that at the time of such transaction will have a market value
of two times the exercise price of the right. In the event that any person or
group of affiliated or associated persons becomes the beneficial owner of 15% or
more of the outstanding shares of Wells Fargo common stock, proper provision
will be made so that each holder of a right, other than rights beneficially
owned by the acquiring person (which will be void after that time), will then
have the right to receive upon exercise that number of shares of Wells Fargo
common stock having a market value of two times the exercise price of the right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
shares of Wells Fargo common stock, and prior to their acquisition of 50% or
more of the outstanding shares of Wells Fargo common stock, the Wells Fargo
board may exchange the rights (other than rights owned by such person or group
which have become void), in whole or in part, at an exchange ratio of one share
of Wells Fargo common stock, or one one-thousandth of a share of Wells Fargo
Series C Junior Participating Preferred Stock (or of a share of a class or
series of Wells Fargo preferred stock having equivalent rights, preferences and
privileges), per right (subject to adjustment).
With some exceptions, no adjustment in the purchase price will be required
until cumulative adjustments require an adjustment of at least 1% in the
purchase price. No fractional shares of Wells Fargo Series C Junior
Participating Preferred Stock will be issued, other than fractions which are
integral multiples of one one-thousandth of a share of Wells Fargo Series C
Junior Participating Preferred Stock, which may, at the election of Wells Fargo,
be evidenced by scrip or depositary receipts; and, in lieu of
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<PAGE>
fractional shares, an adjustment in cash will be made based on the market price
of the Wells Fargo Series C Junior Participating Preferred Stock on the last
trading day prior to the date of exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
shares of Wells Fargo common stock, the Wells Fargo board may redeem the rights
in whole, but not in part, at a price of $.01 per right. The redemption of the
rights may be made effective at the time, on the basis, and with the conditions
that the Wells Fargo board, in its sole discretion, may establish. Immediately
upon any redemption of the rights, the right to exercise the rights will
terminate and the only right of the holders of the rights will be to receive the
redemption price.
The terms of the rights may be amended by the Wells Fargo board without the
consent of the holders, including an amendment to lower the 15% triggering
thresholds described above to not less than the greater of:
- 0.001% greater than the largest percentage of the outstanding shares of
Wells Fargo common stock then known to Wells Fargo to be beneficially
owned by any person or group of affiliated or associated persons, and
- 10%.
However, from and after the time that any person becomes an Acquiring
Person, no amendment may adversely affect the interests of the holders of the
rights. Until a right is exercised, the holder, as such, will have no rights as
a stockholder of Wells Fargo, including, without limitation, the right to vote
or to receive dividends.
THE RIGHTS HAVE ANTI-TAKEOVER EFFECTS. The stockholder rights will cause
substantial dilution to a person or group that attempts to acquire Wells Fargo
on terms not approved by the Wells Fargo board, except by means of an offer
conditioned on a substantial number of rights being acquired. The rights should
not interfere with any merger or other business combination approved by the
Wells Fargo board, as the rights may be redeemed by Wells Fargo at the required
redemption price prior to the time that a person or group has acquired
beneficial ownership of 15% or more of the shares of Wells Fargo common stock.
The rights agreement, specifying the terms of the rights and including, as
an exhibit, the form of the certificate of designation setting forth the terms
of the Wells Fargo Series C Junior Participating Preferred Stock, is attached as
an exhibit to Wells Fargo's registration statement on Form 8-A, dated
October 21, 1998, and is incorporated in this document by reference. The
foregoing description of the Wells Fargo Series C Junior Participating Preferred
Stock purchase rights is qualified in its entirety by reference to this exhibit.
See "Where You Can Find More Information" for information on how to obtain this
document.
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COMPARISON OF SHAREHOLDER/STOCKHOLDER RIGHTS
The rights of First Security stockholders are currently governed by the
Delaware General Corporation Law, or DGCL, First Security's certificate of
incorporation and First Security's bylaws. The rights of Wells Fargo
stockholders are currently governed by the DGCL, Wells Fargo's restated
certificate of incorporation and Wells Fargo's bylaws. The following is a
summary of material differences between the rights of First Security
stockholders and the rights of Wells Fargo stockholders. It is not a complete
statement of the provisions affecting, and the differences between, the rights
of First Security stockholders and Wells Fargo stockholders. The summary is
qualified in its entirety by reference to the DGCL, First Security's certificate
of incorporation and bylaws, and Wells Fargo's restated certificate of
incorporation and bylaws.
AUTHORIZED CAPITAL STOCK
<TABLE>
<CAPTION>
FIRST SECURITY WELLS FARGO
<S> <C>
- - 600,000,000 shares of common stock - 4,000,000,000 shares of common stock
- - 400,000 shares of preferred stock - 20,000,000 shares of preferred stock
- 4,000,000 shares of preference stock
</TABLE>
SIZE OF BOARD OF DIRECTORS
<TABLE>
<CAPTION>
FIRST SECURITY WELLS FARGO
<S> <C>
The DGCL provides that the board of The DGCL provides that the board of
directors of a Delaware corporation shall directors of a Delaware corporation shall
consist of one or more directors as fixed by consist of one or more directors as fixed by
the corporation's certificate of the corporation's certificate of
incorporation or bylaws. Under First incorporation or bylaws. Under Wells Fargo's
Security's certificate of incorporation, the restated certificate of incorporation, the
specific number of directors shall be as number of directors shall be as specified in
provided for in the bylaws. First Security's the bylaws but in no event less than 3.
bylaws provide that the size of the board of Wells Fargo's bylaws provide for a board of
directors shall be fixed at 20 members. Each directors consisting of not less than 10 nor
director will hold office until his more than 28 persons, each serving a term of
successor shall have become elected and one year or until his or her earlier death,
qualified. resignation or removal. The number of
directors of Wells Fargo is currently fixed
at 18.
</TABLE>
CUMULATIVE VOTING
Cumulative voting entitles each stockholder to cast an aggregate number of
votes equal to the number of voting shares held, multiplied by the number of
directors to be elected. Each stockholder may cast all of his or her votes for
one nominee or distribute them among two or more nominees, thus permitting
holders of less than a majority of the outstanding shares of voting stock to
achieve board representation. Where cumulative voting is not permitted, holders
of all outstanding shares of voting stock of a corporation elect the entire
board of directors of the corporation, thereby precluding the election of any
directors by the holders of less than a majority of the outstanding shares of
voting stock. Under the DGCL, stockholders do not have the right to cumulate
their votes in the election of directors unless such right is granted in the
certificate of incorporation. Neither First Security's certificate of
incorporation nor Wells Fargo's restated certificate of incorporation provides
for cumulative voting.
CLASSES OF DIRECTORS
The DGCL permits classification of a Delaware corporation's board of
directors, and for staggered terms.
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<PAGE>
Neither First Security's nor Wells Fargo's boards of directors are
classified. In the case of both companies, the entire board is elected annually.
QUALIFICATIONS OF DIRECTORS
<TABLE>
<CAPTION>
FIRST SECURITY WELLS FARGO
<S> <C>
Under the DGCL, a director need not be a Under the DGCL, a director need not be a
resident of the state of Delaware unless the resident of the state of Delaware unless the
certificate of incorporation or bylaws so certificate of incorporation or bylaws so
prescribe. Otherwise, qualifications for prescribe. Otherwise, qualifications for
directors may be set forth in the directors may be set forth in the
certification of incorporation or bylaws. certification of incorporation or bylaws.
First Security's certificate of Wells Fargo's restated certificate of
incorporation and bylaws do not require that incorporation requires directors to be
directors be stockholders of First Security stockholders of Wells Fargo.
or residents of the state of Delaware.
</TABLE>
FILLING VACANCIES ON THE BOARD
<TABLE>
<CAPTION>
FIRST SECURITY WELLS FARGO
<S> <C>
The DGCL provides that, unless the governing The DGCL provides that, unless the governing
documents of a corporation provide documents of a corporation provide
otherwise, vacancies and newly created otherwise, vacancies and newly created
directorships resulting from a resignation directorships resulting from a resignation
or an increase in the authorized number of or an increase in the authorized number of
directors elected by all of the stockholders directors elected by all of the stockholders
having the right to vote as a single class having the right to vote as a single class
may be filled by a majority of the directors may be filled by a majority of the directors
then in office. then in office.
The board may fill vacancies or newly Vacancies on Wells Fargo's board of
created directorships by a majority of the directors may be filled by majority vote of
directors then in office. the remaining directors or, in the event a
vacancy is not so filled or if no director
remains, by the stockholders.
</TABLE>
REMOVAL OF DIRECTORS
The DGCL provides that a director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors. However, in the case of a
corporation whose board is classified, the directors may be removed only for
cause unless the certificate of incorporation provides otherwise. Neither First
Security's nor Wells Fargo's boards is classified, so directors may be removed
with or without cause by the holders of a majority of the shares then entitled
to vote at an election of directors.
55
<PAGE>
NOMINATION OF DIRECTORS FOR ELECTION
<TABLE>
<CAPTION>
FIRST SECURITY WELLS FARGO
<S> <C>
Under First Security's bylaws, nominations Under Wells Fargo's bylaws, nominations for
for First Security's board may be made by Wells Fargo's board may be made by the board
the board or by any stockholder who complies or by any stockholder who complies with the
with the notice procedures described in the notice procedures described in the bylaws.
bylaws. These procedures require the notice These procedures require the notice to be
to be received by First Security not earlier received by Wells Fargo not less than 30 nor
than 120 days prior to the meeting and not more than 60 days prior to the meeting.
later than (i) the 90(th) day prior to the However, if less than 40 days' prior public
meeting or (ii) the 10(th) day following the disclosure of the date of the meeting is
first public announcement of the meeting given to stockholders, then the notice must
date. be received no later than 10 days after the
first public announcement of the meeting
date.
</TABLE>
ANTI-TAKEOVER PROVISIONS
The DGCL contains a business combination statute that protects domestic
corporations from hostile takeovers, and from actions following such a takeover,
by prohibiting some transactions once an acquiror has gained a significant
holding in the corporation.
Section 203 of the DGCL prohibits "BUSINESS COMBINATIONS," including
mergers, sales and leases of assets, issuances of securities and similar
transactions by a corporation or a subsidiary with an "INTERESTED STOCKHOLDER"
who beneficially owns 15 percent or more of a corporation's voting stock, within
three years after the person or entity becomes an interested stockholder,
unless:
- the transaction that will cause the person to become an interested
stockholder is approved by the board of directors of the target prior to
the transaction;
- after the completion of the transaction in which the person becomes an
interested stockholder, the interested stockholder holds at least 85% of
the voting stock of the corporation not including (a) shares held by
officers and directors of interested stockholders and (b) shares held by
specified employee benefit plans; or
- after the person becomes an interested stockholder, the business
combination is approved by the board of directors and holders of at least
66 2/3% of the outstanding voting stock, excluding shares held by the
interested stockholder.
A Delaware corporation may elect not to be governed by Section 203 by a
provision contained in its original certificate of incorporation or an amendment
thereto or to the bylaws, which amendment must be approved by a majority of the
shares entitled to vote and may not be further amended by the board of
directors. Such an amendment is not effective until 12 months following its
adoption. Neither First Security nor Wells Fargo has made such an election.
56
<PAGE>
STOCKHOLDER RIGHTS PLAN
<TABLE>
<CAPTION>
FIRST SECURITY WELLS FARGO
<S> <C>
First Security has implemented a stockholder Wells Fargo has implemented a stockholder
rights plan, under which a group of persons rights plan, under which a group of persons
becomes an acquiring person upon a public becomes an acquiring person upon a public
announcement that they have acquired or announcement that they have acquired or
intend to acquire 15% of First Security's intend to acquire 15% of Wells Fargo's
voting stock. This threshold can be reduced voting stock. This threshold can be reduced
by amendment. by amendment. Each share of Wells Fargo
common stock issued in the merger will be
issued with an attached right. See "Wells
Fargo Capital Stock--Wells Fargo Rights
Plan."
</TABLE>
STOCKHOLDER ACTION WITHOUT A MEETING
<TABLE>
<CAPTION>
FIRST SECURITY WELLS FARGO
<S> <C>
The First Security certificate of In accordance with Section 228 of the DGCL,
incorporation permits stockholder action Wells Fargo's bylaws provide that any action
without a meeting if all stockholders give required or permitted to be taken at a
written consent to taking an action without stockholders' meeting may be taken without a
a meeting. 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, and provide certain procedures
to be followed in such cases.
</TABLE>
CALLING SPECIAL MEETINGS OF STOCKHOLDERS
<TABLE>
<CAPTION>
FIRST SECURITY WELLS FARGO
<S> <C>
Under the DGCL, a special meeting of Under the DGCL, a special meeting of
stockholders may be called by the board of stockholders may be called by the board of
directors or by any other person authorized directors or by any other person authorized
to do so in the certificate of incorporation to do so in the certificate of incorporation
or the bylaws. First Security's bylaws or the bylaws. Wells Fargo's bylaws provide
provide that a special meeting of that a special meeting of stockholders may
stockholders may be called only by the be called only by the chairman of the board,
chairman of the board or a majority of the a vice chairman, the president or a majority
board of directors. Holders of First of Wells Fargo's board of directors. Holders
Security common stock do not have the of Wells Fargo common stock do not have the
ability to call a special meeting of ability to call a special meeting of
stockholders. stockholders.
</TABLE>
57
<PAGE>
SUBMISSION OF STOCKHOLDER PROPOSALS
<TABLE>
<CAPTION>
FIRST SECURITY WELLS FARGO
<S> <C>
The First Security bylaws provide that The Wells Fargo bylaws provide that in order
notice of any proposal to be presented by a for a stockholder to bring business before
stockholder or of any person to be nominated the annual meeting, the stockholder must
as a director must be given not less than 90 give timely notice of the proposal to Wells
nor more than 120 days before the first Fargo. To be timely, the notice must be
anniversary of the prior year's stockholder received not later than the 90th day nor
meeting. However, if the annual meeting is earlier than the 120th day prior to the
more than 30 days before or more than 60 first anniversary of the preceding year's
days after the anniversary of the prior annual meeting. However, if the annual
year's annual meeting, to be timely the meeting is more than 30 days before or more
notice must be delivered no earlier than 120 than 60 days after the anniversary of the
days prior to the annual meeting and no prior year's annual meeting, to be timely
later than 90 days prior to the annual the notice must be delivered no earlier than
meeting or 10 days after the first public 120 days prior to the annual meeting and no
announcement of the meeting date. Notice later than the later of 90 days prior to the
must include, with respect to any nominee annual meeting or 10 days after the first
for director, the information regarding such public announcement of the meeting date.
person required by Regulation S-K of the SEC
and, with respect to all proposals, a brief
description of the business to be conducted,
the reasons for conducting such business,
any material interest in such business of
the stockholder or any owner of shares on
whose behalf the proposal is made and, with
respect to the stockholder giving notice and
any person on whose behalf the proposal is
made, their name and address and the class
and number of shares owned by such person.
</TABLE>
NOTICE OF STOCKHOLDER MEETINGS
The DGCL requires notice of stockholders' meetings to be sent to all
stockholders of record entitled to vote thereon not less than 10 nor more than
60 days prior to the date of the meeting. Each of First Security's and Wells
Fargo's bylaws provide for written notice to stockholders of record at least
10 days prior to an annual or special meeting.
STOCKHOLDER VOTE REQUIRED FOR MERGERS
Under the DGCL, a merger, consolidation or sale of all or substantially all
of a corporation's assets must be approved by the board of directors and by a
majority of the outstanding stock of the corporation entitled to vote thereon.
However, under DGCL 251(f), no vote of stockholders of a constituent corporation
surviving a merger is required, unless the corporation provides otherwise in its
certificate of incorporation, if:
- the merger agreement does not amend the certificate of incorporation of
the surviving corporation;
- each share of stock of the surviving corporation outstanding before the
merger is an identical outstanding or treasury share after the merger; and
- either no shares of common stock of the surviving corporation are to be
issued or delivered pursuant to the merger or, if such common stock will
be issued or delivered, it will not increase the number of shares of
common stock outstanding immediately prior to the merger by more than 20%.
58
<PAGE>
DIVIDENDS
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. First Security and Wells Fargo are
also subject to Federal Reserve Board policies regarding payment of dividends,
which generally limit dividends to operating earnings. See "Regulation and
Supervision of Wells Fargo." First Security and Wells Fargo's bylaws provide
that the stockholders have the right to receive dividends if and when declared
by the respective boards. Dividends may be paid in cash, property or shares of
capital stock.
DISSENTERS' APPRAISAL RIGHTS
Section 262 of the DGCL provides stockholders of a corporation involved in a
merger the right to demand and receive payment of the fair value of their stock
in certain mergers. However, appraisal rights are not available to holders of
shares:
- listed on a national securities exchange;
- designated as a national market system security on an interdealer
quotation system operated by the National Association of Securities
Dealers, Inc.; or
- held of record by more than 2,000 stockholders
unless holders of stock are required to accept in the merger anything other than
any combination of:
- shares of stock or depository receipts of the surviving corporation in the
merger;
- shares of stock or depository receipts of another corporation that, at the
effective date of the merger, will be:
- listed on a national securities exchange,
- designated as a national market system security on an interdealer
quotation system operated by the National Association of Securities
Dealers, Inc., or
- held of record by more than 2,000 holders; and
- cash instead of fractional shares of the stock or depository receipts
received.
Dissenters' appraisal rights are not available to the Wells Fargo
stockholders with respect to the merger because the DGCL does not require that
Wells Fargo stockholders vote to approve the merger agreement. Moreover, Wells
Fargo common stock is listed on the New York and 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.
STOCKHOLDER PREEMPTIVE RIGHTS
The DGCL provides that no stockholder shall have any preemptive rights to
purchase additional securities of the corporation unless the certificate of
incorporation expressly grants these rights. First Security's certificate of
incorporation and Wells Fargo's restated certificate of incorporation do not
provide for preemptive rights.
59
<PAGE>
STOCKHOLDER CLASS VOTING RIGHTS
The DGCL requires voting by separate classes of shares only with respect to
amendments to a corporation's certificate of incorporation that adversely affect
the holders of those classes or that increase or decrease the aggregate number
of authorized shares or the par value of the shares of any of those classes.
INDEMNIFICATION
The DGCL provides that, subject to certain limitations in the case of
"derivative" suits brought by a corporation's stockholders in its name, a
corporation may indemnify any person who is made a party to any third-party suit
or proceeding on account of being a director, officer, employee or agent of the
corporation against expenses, including attorney's fees, judgments, fines and
amounts paid in settlement reasonably incurred by him or her in connection with
the action, through, among other things, a majority vote of a quorum consisting
of directors who were not parties to the suit or proceeding, if the person:
- acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the corporation or, in some
circumstances, at least not opposed to its best interests; and
- in a criminal proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
To the extent a director, officer, employee or agent is successful in the
defense of such an action, suit or proceeding, the corporation is required by
the DGCL to indemnify such person for reasonable expenses incurred thereby.
First Security's certificate of incorporation and Wells Fargo's restated
certificate of incorporation provide for indemnification, to the fullest extent
authorized by the DGCL, for 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 or she is or was a director or officer of such company (or
was serving at the request of such company 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 such company's
board of directors.
First Security's certificate of incorporation and Wells Fargo's restated
certificate of incorporation also provide that such company 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 or she
undertakes to repay all amounts so advanced if it is ultimately determined that
the person receiving such payments is not entitled to be indemnified. First
Security's certificate of incorporation and Wells Fargo's restated certificate
of incorporation authorize such company to provide similar indemnification to
its employees or agents.
Pursuant to First Security's certificate of incorporation and Wells Fargo's
restated certificate of incorporation, First Security or Wells Fargo, as
applicable, may maintain insurance, at its expense, to protect itself and any
directors, officers, employees or agents of such company or another entity
against any expense, liability or loss, regardless of whether such company 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 First Security's
certificate of incorporation or Wells Fargo's restated certificate of
incorporation or bylaws, agreement, vote of stockholders or disinterested
directors or otherwise.
60
<PAGE>
LIMITATIONS ON DIRECTORS' LIABILITY
<TABLE>
<CAPTION>
FIRST SECURITY
<S> <C>
First Security's certificate of incorporation
provides that, to the fullest extent permitted by the
DGCL, a director of First Security shall not be
personally liable to First Security for monetary
damages, except for liability:
- - for any breach of the director's duty of
loyalty to First Security or its
stockholders;
- - for acts or omissions not in good faith or
which involve intentional misconduct or a
knowing violation of law;
- - under Section 174 of the DGCL; or
- - for any transaction from which the
directors derived an improper personal
benefit.
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:
- - any breach of the director's duty of
loyalty to Wells Fargo or its
stockholders;
- - acts or omissions not in good faith or
which involve intentional misconduct or a
knowing violation of law;
- - payment of a dividend or approval of a
stock repurchase in violation of Section
174 of the DGCL; or
- - 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 or her duty of care.
</TABLE>
61
<PAGE>
AMENDMENT OF CERTIFICATE OF INCORPORATION
<TABLE>
<CAPTION>
FIRST SECURITY WELLS FARGO
<S> <C>
First Security's certificate of Under the DGCL, amendments to a
incorporation requires approval of 80% of corporation's certificate of incorporation
the outstanding shares for amendments of the require the approval of the board of
provisions described under "Antitakeover directors and stockholders holding a
Provisions." majority of the outstanding stock of such
class entitled to vote on such amendment as
a class, unless a different proportion is
specified in the certificate of
incorporation or by other provisions of the
DGCL.
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.
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.
</TABLE>
AMENDMENT OF BYLAWS
<TABLE>
<CAPTION>
FIRST SECURITY WELLS FARGO
<S> <C>
Under the DGCL, holders of a majority of the Under the DGCL, holders of a majority of the
voting power of a corporation, and, when voting power of a corporation, and, when
provided in the certificate of provided in the certificate of
incorporation, the directors of the incorporation, the directors of the
corporation, have the power to adopt, amend corporation, have the power to adopt, amend
and repeal the bylaws of a corporation. and repeal the bylaws of a corporation.
First Security's bylaws provide that the Wells Fargo's bylaws generally provide for
board may amend, adopt or repeal bylaws by a amendment by a majority of Wells Fargo's
majority vote and the stockholders may board of directors or by a majority of the
amend, adopt or repeal bylaws by a vote of outstanding stock entitled to vote thereon.
80% of the outstanding shares. However, Wells Fargo's bylaws require the
affirmative vote or consent of 80% of the
common stock outstanding to amend a bylaw
provision related to maintaining local
directorships at subsidiaries with which
Wells Fargo has an agreement to so maintain
local directorships.
</TABLE>
62
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
WELLS FARGO SHARE PRICES AND DIVIDENDS
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 traded under the symbol "NOB." The following table shows, for the
periods indicated, the high and low sales prices of Wells Fargo common stock on
the NYSE composite transactions reporting system and the cash dividends paid per
share.
<TABLE>
<CAPTION>
PRICE RANGE
------------------- DIVIDENDS
HIGH LOW PAID
-------- -------- ---------
<S> <C> <C> <C>
1998
First Quarter............................................. $43.88 $34.75 $0.165
Second Quarter............................................ 43.75 34.00 0.165
Third Quarter............................................. 39.75 27.50 0.185
Fourth Quarter............................................ 40.88 30.19 0.185
1999
First Quarter............................................. 40.44 32.13 0.185
Second Quarter............................................ 44.88 34.38 0.200
Third Quarter............................................. 45.31 36.44 0.200
Fourth Quarter............................................ 49.94 38.38 0.200
2000
First Quarter............................................. 41.69 31.88 0.220
Second Quarter (through May )....................... *
</TABLE>
- ------------------------
* Wells Fargo's board of directors has declared a cash dividend of $0.22 per
share of Wells Fargo common stock, payable on June 1, 2000 to stockholders
of record on May 5, 2000.
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 in its discretion. As described in "Regulation
and Supervision of Wells Fargo--Dividend Restrictions," various federal and
state laws limit the ability of affiliate banks to pay dividends to Wells
Fargo.
63
<PAGE>
FIRST SECURITY SHARE PRICES AND DIVIDENDS
First Security common stock trades on the Nasdaq under the symbol "FSCO."
The following table shows, for the periods indicated, the high and low bid
quotations for First Security common stock as reported on the Nasdaq and the
cash dividends paid per share.
<TABLE>
<CAPTION>
PRICE RANGE
------------------- DIVIDENDS
HIGH LOW PAID
-------- -------- ---------
<S> <C> <C> <C>
1998
First Quarter............................................. $26.167 $21.833 $0.13
Second Quarter............................................ 24.750 21.000 0.13
Third Quarter............................................. 23.938 15.500 0.13
Fourth Quarter............................................ 23.313 15.938 0.13
1999
First Quarter............................................. 23.750 17.563 0.14
Second Quarter............................................ 27.188 17.875 0.14
Third Quarter............................................. 27.375 21.375 0.14
Fourth Quarter............................................ 29.750 23.000 0.14
2000
First Quarter............................................. 26.063 11.063 0.14
Second Quarter (through May )....................... *
</TABLE>
- ------------------------
* First Security's board of directors has declared a cash dividend of $0.14
per share of First Security common stock, payable June 5, 2000 to
stockholders of record on May 19, 2000.
64
<PAGE>
EXPERTS
WELLS FARGO'S INDEPENDENT AUDITORS
The consolidated financial statements of Wells Fargo and subsidiaries as of
December 31, 1999 and 1998, and for each of the years in the three-year period
ended December 31, 1999, 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.
FIRST SECURITY'S INDEPENDENT AUDITORS
The consolidated financial statements of First Security Corporation,
incorporated in this proxy statement-prospectus by reference from First Security
Corporation's Annual Report on Form 10-K for the year ended December 31, 1999,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference and has been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
OPINIONS
SHARE ISSUANCE
Stanley S. Stroup, Executive Vice President and General Counsel of Wells
Fargo, has rendered a legal opinion that the shares of Wells Fargo common stock
offered hereby, when issued in accordance with the merger agreement, will be
validly issued, fully paid and nonassessable. Mr. Stroup beneficially owns
shares of Wells Fargo common stock and options to purchase additional shares of
Wells Fargo common stock. As of the date of this document, the total number of
shares Mr. Stroup owns or has the right to acquire upon exercise of his options
is less than 0.1% of the outstanding shares of Wells Fargo common stock.
TAX MATTERS
Wachtell, Lipton, Rosen & Katz has given an opinion regarding the material
U.S. federal income tax consequences of the merger. See "The Merger--U.S.
Federal Income Tax Consequences of the Merger."
65
<PAGE>
DEADLINES FOR SUBMITTING SHAREHOLDER PROPOSALS
First Security will hold its annual meeting of stockholders on May 22, 2000
at 3:00 p.m. in the Empire Room of the Joseph Smith Memorial Building, 15 E.
South Temple in Salt Lake City, Utah. Any proposal to be presented at the
meeting from a stockholder who wishes to have the proposal included in First
Security's proxy materials sent to stockholders for the meeting using the
processes contained in Rule 14a-8 of the Securities Exchange Act of 1934 must
have been received by the Corporate Secretary of First Security at 79 South Main
Street, Salt Lake City, Utah 84111, not later than January 28, 2000.
66
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
REGISTRATION STATEMENT
Wells Fargo has filed a registration statement on Form S-4 to register with
the SEC the Wells Fargo common stock to be issued to First Security stockholders
in the merger. This proxy statement-prospectus is part of that registration
statement. The registration statement, including the exhibits to the
registration statement, contains additional relevant information about Wells
Fargo and Wells Fargo common stock. 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.
OTHER SEC FILINGS
Wells Fargo and First Security file annual, quarterly and current reports,
proxy statements and other information with the SEC. Wells Fargo's and First
Security's SEC filings are available to the public over the Internet at the
SEC's web site at http://www.sec.gov. You can also read and copy any document
filed by Wells Fargo or First Security with the SEC at the following SEC
locations:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. You may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Wells Fargo's SEC filings are also available from commercial document
retrieval services and from the New York and Chicago Stock Exchanges. For
information on obtaining copies of Wells Fargo's SEC filings at the New York
Stock Exchange, call (212) 656-5060, and at the Chicago Stock Exchange, call
(312) 663-2423. First Security's SEC filings are also available from commercial
document retrieval services.
DOCUMENTS INCORPORATED BY REFERENCE
Some of the information you may want to consider in deciding how to vote on
the merger is not physically included in this document. Instead, the information
is "incorporated by reference" to documents that have been filed by Wells Fargo
or First Security with the SEC.
WELLS FARGO DOCUMENTS
This proxy statement-prospectus incorporates by reference the Wells Fargo
SEC documents set forth below. All of the documents were filed under SEC File
No. 001-2979. Documents filed before November 3, 1998 were filed under the name
Norwest Corporation.
- Annual Report on Form 10-K for the year ended December 31, 1999, including
information specifically incorporated by reference into the Form 10-K from
Wells Fargo's 1999 Annual Report to Stockholders and Wells Fargo's
definitive Notice and Proxy Statement for Wells Fargo's 2000 Annual
Meeting of Stockholders;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
- Current Reports on Form 8-K filed January 18, 2000, January 26, 2000,
April 12, 2000, and April 18, 2000;
67
<PAGE>
- The description of Wells Fargo common stock contained in the Current
Report on Form 8-K filed October 14, 1997, including any amendment or
report filed to update such description;
- The description of preferred stock purchase rights contained in the
Registration Statement on Form 8-A dated October 21, 1998, including any
amendment or report filed to update such description; and
- All reports and definitive proxy or information statements filed by Wells
Fargo pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 after the date of this proxy statement-prospectus and
before completion of the merger and the exchange of Wells Fargo common
stock for First Security common stock.
FIRST SECURITY DOCUMENTS
This proxy statement-prospectus incorporates by reference the First Security
SEC documents set forth below. All of the documents were filed under SEC File
No. 001-6906.
- Annual Report on Form 10-K for the year ended December 31, 1999;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
- Current Reports on Form 8-K filed January 20, 2000, February 11, 2000,
March 3, 2000, March 23, 2000 and April 10, 2000.
- The description of First Security common stock contained in the
Registration Statement on Form S-4/A filed February 17, 2000; and
- All reports and definitive proxy or information statements filed by First
Security pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 after the date of this proxy statement-prospectus and
before the date of the special meeting.
DOCUMENTS AVAILABLE WITHOUT CHARGE FROM THE COMPANIES
Wells Fargo and First Security will provide, without charge, copies of any
report incorporated by reference into this document, excluding exhibits other
than those that are specifically incorporated by reference in this document. You
may obtain a copy of any document incorporated by reference by writing or
calling Wells Fargo or First Security as follows:
<TABLE>
<CAPTION>
WELLS FARGO: FIRST SECURITY:
<S> <C>
Corporate Secretary Corporate Secretary
Wells Fargo & Company First Security Corporation
MAC N9305-173 79 South Main
Sixth and Marquette Salt Lake City, Utah 84111
Minneapolis, MN 55479 (801) 246-5679
(612) 667-8655
</TABLE>
TO ENSURE DELIVERY OF THE COPIES IN TIME FOR THE SPECIAL MEETING, YOUR
REQUEST SHOULD BE RECEIVED BY , 2000.
IN DECIDING HOW TO VOTE ON THE MERGER, YOU SHOULD RELY ONLY ON THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS DOCUMENT. NEITHER
WELLS FARGO NOR FIRST SECURITY HAS AUTHORIZED ANY PERSON TO PROVIDE YOU WITH ANY
INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS DOCUMENT. THIS
DOCUMENT IS DATED MAY , 2000. YOU SHOULD NOT ASSUME THAT THE INFORMATION
CONTAINED IN THIS DOCUMENT IS ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE, AND
NEITHER THE MAILING TO YOU OF THIS DOCUMENT NOR THE ISSUANCE TO YOU OF SHARES OF
WELLS FARGO COMMON STOCK WILL CREATE ANY IMPLICATION TO THE CONTRARY.
68
<PAGE>
FORWARD-LOOKING STATEMENTS
This document, including information incorporated by reference into this
document, may contain forward-looking statements about Wells Fargo and First
Security and the Wells Fargo/First Security merger. Generally speaking, these
forward-looking statements include one or more of the following:
- projections of revenues, income, earnings per share, capital expenditures,
dividends, capital structure or other financial items;
- descriptions of plans or objectives of management for future operations,
products or services;
- forecasts of future economic performance;
- descriptions of assumptions underlying or relating to any of the
foregoing.
Forward-looking statements can be identified by the fact that they do not
relate strictly to historical or current facts. They often include words such as
"believe," "expect," "anticipate," "intend," "plan," "estimate," or words of
similar meaning, or future or conditional verbs such as "will," "would,"
"should," "could" or "may."
Forward-looking statements relating specifically to the proposed Wells
Fargo/First Security merger may include the following:
- the internal rate of return of Wells Fargo expected to be generated by
the merger;
- the expected accretion from the merger to Wells Fargo's cash and GAAP
earnings per share;
- the expenses expected to be incurred by Wells Fargo from combining the
two companies;
- the cost savings expected to be realized by Wells Fargo from combining
the two companies;
- the accounting method expected to be used by Wells Fargo to account for
the merger;
- the business opportunities and strategies expected to be available to
Wells Fargo and First Security following the merger;
- the amount of divestitures that may occur in connection with the merger;
and
- the anticipated closing date of the merger.
Forward-looking statements consist of expectations or predictions of future
conditions, events or results. They are not guarantees of future performance. By
their nature, forward-looking statements are subject to risks and uncertainties.
There are a number of factors--many of which are beyond the control of Wells
Fargo and First Security--that could cause actual conditions, events or results
to differ significantly from those described in the forward-looking statements.
In this regard, in connection with the merger, Wells Fargo and First Security
are in the process of reviewing their respective accounting policies with a view
towards possibly conforming certain policies of First Security to those of Wells
Fargo either prior to or substantially concurrently with the closing of the
merger. While no decisions have yet been made by First Security concerning the
nature or scope of any adjustments that may be required in connection with its
review, it is contemplated that certain adjustments or accruals would be
required to be made to First Security's financial statements in the event its
current policies were to be fully conformed. It is not possible at this time to
determine the precise range of any such adjustments.
Wells Fargo's and First Security's reports filed with the SEC, including
Wells Fargo's and First Security's Forms 10-K for the year ended December 31,
1999, describe some of the general factors that could cause actual conditions,
events or results to differ from those described in the forward-looking
statements. For example, Wells Fargo's Form 10-K describes certain credit,
market, operational, liquidity and interest rate risks associated with Wells
Fargo's business and operations. Other factors described in Wells Fargo's
Form 10-K include changes in business and economic conditions, competition,
fiscal and
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monetary policies, disintermediation, legislation (including financial
modernization legislation), the combination of the former Norwest Corporation
and the former Wells Fargo & Company, and other mergers and acquisitions.
Factors relating specifically to the proposed Wells Fargo/First Security
merger that could cause actual conditions, events or results to differ
significantly from those described in the forward-looking statements include the
following:
- expected cost savings from the merger cannot be fully realized or
realized within the expected time frame;
- revenues following the merger are lower than expected;
- costs or difficulties, including divestitures, related to the integration
of the businesses of Wells Fargo and First Security are greater than
expected; and
- the merger is accounted for as a purchase rather than a pooling of
interests.
There are other factors besides these that could cause actual conditions,
events or results to differ significantly from those described in the
forward-looking statements or otherwise affect in the future Wells Fargo's
and/or First Security's business, results of operations and financial condition.
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APPENDIX A
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as of
the 9(th) day of April, 2000, by and between FIRST SECURITY CORPORATION
("Company"), a Delaware corporation, and WELLS FARGO & COMPANY ("Wells Fargo"),
a Delaware corporation.
WHEREAS, the parties hereto desire to effect a reorganization whereby a
wholly-owned subsidiary of Wells Fargo will merge with and into Company (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 of the shares of Common Stock of Company of the
par value of $1.25 per share ("Company Common Stock") outstanding immediately
prior to the time the Merger becomes effective in accordance with the provisions
of the Merger Agreement into the right to receive shares of voting Common Stock
of Wells Fargo of the par value of $1 2/3 per share ("Wells Fargo Common
Stock"),
NOW, THEREFORE, to effect such reorganization and in consideration of the
premises and the mutual covenants and agreements contained herein, the parties
hereto do hereby represent, warrant, covenant and agree as follows:
1. BASIC PLAN OF REORGANIZATION
(a) MERGER. Subject to the terms and conditions contained herein, a
wholly-owned subsidiary of Wells Fargo (the "Merger Co.") will be merged by
statutory merger with and into Company pursuant to the Merger Agreement, with
Company as the surviving corporation, in which merger each share of Company
Common Stock outstanding immediately prior to the Effective Time of the Merger
(as defined in paragraph 1 (d) below) will be converted into the right to
receive, and exchanged for certificates representing 0.355 shares of Wells Fargo
Common Stock (the "Exchange Ratio").
(b) CONVERSION OF COMPANY OPTIONS. At the Effective Time of the Merger,
each option granted by Company to purchase shares of Company Common Stock under
Company's Comprehensive Management Incentive Plan, as amended, and the 1995
Non-Employee Director Stock Option Plan (the "Company Stock Option Plans") which
is outstanding and unexercised immediately prior thereto (the "Company Stock
Options") shall be converted automatically into an option to purchase shares of
Wells Fargo Common Stock in an amount and at an exercise price determined as
provided below (and otherwise subject to the terms of the Company Stock Option
Plan).
(i) The number of shares of Wells Fargo Common Stock to be subject to
the new option shall be the product of the number of shares of Company
Common Stock subject to the original option and the Exchange Ratio, provided
that any fractional shares of Wells Fargo Common Stock resulting from such
multiplication shall be rounded down to the nearest share; and
(ii) The exercise price per share of Wells Fargo Common Stock under the
new option shall be equal to the exercise price per share of Company Common
Stock under the original option divided by the Exchange Ratio, provided that
such exercise price shall be rounded to the nearest cent.
The adjustment provided herein with respect to any options that are
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")) shall be and is intended to be effected
in a manner which is consistent with Section 424(a) of the Code.
(c) WELLS FARGO COMMON STOCK ADJUSTMENTS. If, between the date hereof and
the Effective Time of the Merger as defined below, shares of Wells Fargo Common
Stock shall be changed into a different
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number of shares or a different class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or if a stock dividend thereon shall be declared with a record
date within such period (a "Common Stock Adjustment"), then the number of shares
of Wells Fargo Common Stock issuable pursuant to subparagraph (a), above, will
be appropriately and proportionately adjusted so that the number of such shares
of Wells Fargo Common Stock issuable in the Merger will equal the number of
shares of Wells Fargo Common Stock which holders of shares of Company 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.
(d) FRACTIONAL SHARES. No fractional shares of Wells Fargo Common Stock
and no certificates or scrip certificates therefor shall be issued to represent
any such fractional interest, and any holder thereof shall be paid an amount of
cash equal to the product obtained by multiplying the fractional share interest
to which such holder is entitled by the average of the closing prices of a share
of Wells Fargo Common Stock on the New York Stock Exchange as reported by
Bloomberg for each of the five (5) consecutive trading days ending on the day
immediately preceding the meeting of stockholders required by paragraph 4(c) of
this Agreement.
(e) MECHANICS OF CLOSING MERGER. Subject to the terms and conditions set
forth herein, the Merger Agreement shall be executed and it or Articles of
Merger or a Certificate of Merger shall be filed with the Secretary of State of
the State of Delaware within ten (10) business days following the satisfaction
or waiver of all conditions precedent set forth in Sections 6 and 7 of this
Agreement or on such other date as may be agreed to by the parties (the "Closing
Date"), provided that the Closing Date shall not occur on the last business day
of a calendar month. 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. Salt
Lake City, Utah, 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 Company
pursuant to the Merger Agreement.
The closing of the transactions contemplated by this Agreement and the
Merger Agreement (the "Closing") shall take place on the Closing Date at the
offices of Wells Fargo, Norwest Center, Sixth and Marquette, Minneapolis,
Minnesota.
(f) RESERVATION OF RIGHT TO REVISE STRUCTURE. At Wells Fargo's election,
the Merger may alternatively be structured so that (1) Company is merged with
and into any other direct or indirect wholly owned subsidiary of Wells Fargo,
(2) any direct or indirect wholly-owned subsidiary of Wells Fargo is merged with
and into Company, or (3) Company is merged with and into Wells Fargo; provided,
however, that no such change shall (A) alter or change the amount or kind of
consideration to be issued to Company's stockholders in the Merger or under such
alternative structure (the "Merger Consideration"), (B) adversely affect the tax
treatment of Company's stockholders as a result of receiving the Merger
Consideration or prevent the parties from obtaining the opinion referred to in
Paragraph 6(h), or (C) materially impede or delay consummation of the Merger. In
the event of such election, the parties agree to execute an appropriate
amendment to this Agreement in order to reflect such election.
2. REPRESENTATIONS AND WARRANTIES OF COMPANY. Company represents and
warrants to Wells Fargo as follows:
(a) ORGANIZATION AND AUTHORITY. Company 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 Company and the Company Subsidiaries (as defined in
paragraph 2(b)) taken as a whole and has
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corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted. Company is registered as a financial
holding company with the Federal Reserve Board under the Bank Holding Company
Act of 1956, as amended (the "BHC Act"). Company has furnished Wells Fargo true
and correct copies of its certificate of incorporation and by-laws, as amended.
(b) COMPANY'S SUBSIDIARIES. Schedule 2(b) sets forth a complete and
correct list of all of Company's subsidiaries as of the date hereof
(individually a "Company Subsidiary" and collectively the "Company
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
Company. No equity security of any Company 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 Company 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. Section 55 (1982),
all of such shares so owned by Company 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 Company Subsidiary is a corporation or
national banking association duly organized, validly existing, duly qualified to
do business and in good standing under the laws of its jurisdiction of
incorporation, and has corporate power and authority to own or lease its
properties and assets and to carry on its business as it is now being conducted.
Except as set forth on Schedule 2(b), Company 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 Company consists of
(i) 18,052 shares of Series A Preferred Stock, no par value ("Company Preferred
Stock"), of which, at the close of business on December 31, 1999, 8,596 shares
were outstanding, and (ii) 600,000,000 shares of Company Common Stock, of which,
as of the close of business on December 31, 1999, 195,971,330.59 shares were
outstanding and 1,675,000 shares were held in the treasury. As of the date
hereof, there are outstanding options (each, a "Company Stock Option") to
purchase an aggregate of 10,132,937.92 shares of Company Common Stock under the
Company Stock Option Plans. The maximum number of shares of Company Common Stock
(assuming for this purpose that phantom shares and other share-equivalents
constitute Company 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, except the option to purchase Company Common Stock granted
pursuant to the Stock Option Agreement dated the date hereof between Company and
Wells Fargo (the "Stock Option Agreement"), were exercised is 210,00,000. All of
the outstanding shares of capital stock of Company have been duly and validly
authorized and issued and are fully paid and nonassessable. Except as set forth
in Schedule 2(c) and except for the option granted pursuant to the Stock Option
Agreement, there are no outstanding subscriptions, contracts, conversion
privileges, options, warrants, calls, preemptive rights or other rights
obligating Company or any Company Subsidiary to issue, sell or otherwise dispose
of, or to purchase, redeem or otherwise acquire, any shares of capital stock of
Company or any Company Subsidiary. Since December 31, 1999 no shares of Company
capital stock have been purchased, redeemed or otherwise acquired, directly or
indirectly, by Company or any Company Subsidiary and, except as set forth in
Schedule 2(c) and except as permitted by this Agreement, no dividends or other
distributions have been declared, set aside, made or paid to the stockholders of
Company.
(d) AUTHORIZATION. Company has the corporate power and authority to enter
into this Agreement and the Merger Agreement and, subject to any required
approvals of its stockholders, to carry out its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Merger Agreement by Company and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Company. Subject to such approvals of
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stockholders and of government agencies and other governing boards having
regulatory authority over Company as may be required by statute or regulation,
this Agreement and the Merger Agreement are valid and binding obligations of
Company enforceable against Company in accordance with their respective terms.
Except as set forth on Schedule 2(d), neither the execution, delivery and
performance by Company of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor compliance
by Company 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 Company or any Company 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 Company or any Company Subsidiary is a party or by which it may be bound,
or to which Company or any Company Subsidiary or any of the properties or assets
of Company or any Company Subsidiary may be subject, or (ii) subject to
compliance with the statutes and regulations referred to in the next paragraph,
violate any statute, rule or regulation or, to the best knowledge of Company,
violate any judgment, ruling, order, writ, injunction or decree applicable to
Company or any Company 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 Delaware
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 Company of the transactions contemplated by this Agreement and
the Merger Agreement.
(e) COMPANY FINANCIAL STATEMENTS. The consolidated balance sheets of
Company and Company's Subsidiaries as of December 31, 1999 and 1998 and related
consolidated statements of income, stockholders' equity and cash flows for the
three years ended December 31, 1999, together with the notes thereto, certified
by Deloitte & Touche LLP and included in Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999 (the "Company 10-K") as filed with
the Securities and Exchange Commission (the "SEC") (collectively, the "Company
Financial Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis and present fairly the
consolidated financial position of Company and Company's Subsidiaries at the
dates and the consolidated results of operations and cash flows of Company and
Company's Subsidiaries for the periods stated therein.
(f) REPORTS. Since December 31, 1995, Company and each Company 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 "Company Reports." As of their respective dates, the
Company 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
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which they were made, not misleading. Copies of all the Company Reports have
been made available to Wells Fargo by Company.
(g) PROPERTIES AND LEASES. Except as may be reflected in the Company
Financial Statements and except for any lien for current taxes not yet
delinquent, Company and each Company 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 Company's
consolidated balance sheet as of December 31, 1999 included in Company's Annual
Report on Form 10-K for the period then ended, and all real and personal
property acquired since such date, except such real and personal property as has
been disposed of in the ordinary course of business. All leases of real property
and all other leases material to Company or any Company Subsidiary pursuant to
which Company or such Company 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 Company or
such Company Subsidiary or any event which, with notice or lapse of time or
both, would constitute such a material default. Substantially all of Company's
and each Company 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 Company and the Company Subsidiaries has filed all
material 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 Company and the
Company Subsidiaries for the fiscal year ended December 31, 1995, and for all
fiscal years prior thereto, are for the purposes of routine audit by the
Internal Revenue Service closed because of the statute of limitations, and no
claims for additional taxes for such fiscal years are pending. Except only as
set forth on Schedule 2(h), (i) neither Company nor any Company Subsidiary is a
party to any pending action or proceeding, nor to Company'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 that could reasonably be expected to have a Material Adverse Effect
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 Company or any Company Subsidiary which has not been
settled, resolved and fully satisfied, or adequately reserved for. Each of
Company and the Company Subsidiaries has paid all taxes owed or which it is
required to withhold from amounts owing to employees, creditors or other third
parties.
(i) NO MATERIAL ADVERSE EFFECT. Since December 31, 1999, no change shall
have occurred and no circumstances shall exist which has had or might reasonably
be expected to have a Material Adverse Effect on Company. "Material Adverse
Effect" means, with respect to Wells Fargo or Company, any effect that (i) is
material and adverse to the financial condition, results of operations, or
business of Wells Fargo and the Wells Fargo Subsidiaries, taken as a whole, or
Company and the Company Subsidiaries, taken as a whole, respectively, excluding
the impact of (A) changes in banking and other laws of general applicability or
interpretations thereof by Governmental Authorities, (B) changes in generally
accepted accounting principles ("GAAP") or regulatory accounting requirements
applicable to banks and their holding companies generally, (C) changes in
general economic conditions affecting banks and their holding companies
generally, provided that, with respect to each of clause (A), (B) or (C), to the
extent that a change does not materially affect it in a way that materially
differs from the way it affects other banking organizations, (D) actions or
omissions of a party to this Agreement, taken with the prior written consent of
the other party to this Agreement, in contemplation of the transactions
contemplated hereby, and (E) any modifications or changes to valuation policies
and practices in connection with the Merger or restructuring charges, in each
case taken with the prior approval of Wells Fargo or Company, as the case may
be, in connection with the Merger, in each case in accordance with GAAP; or
(ii) would materially impair the ability of Wells Fargo or Company to perform
its obligations under this Agreement or to
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consummate the transactions contemplated hereby. "Governmental Authority" means
any court, administrative agency or commission or other federal, state or local
governmental authority or instrumentality.
(j) COMMITMENTS AND CONTRACTS. Except as set forth on Schedule 2(j),
neither Company nor any Company 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 that are terminable at
will by Company or such Company Subsidiary);
(ii) any plan, contract or understanding providing for any bonus,
pension, option, deferred compensation, retirement payment, profit sharing
or similar arrangement with respect to any present or former officer,
director, employee or consultant;
(iii) any labor contract or agreement with any labor union;
(iv) any contract containing covenants that limit the ability of Company
or any Company 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 or with whom, Company or any Company Subsidiary may carry
on its business (other than as may be required by law or applicable
regulatory authorities);
(v) any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K;
(vi) any real property lease and any other lease with annual rental
payments aggregating $20,000,000 or more;
(vii) any agreement or commitment with respect to the Community
Reinvestment Act with any state or federal bank regulatory authority or any
other party; or
(viii) any current or past agreement, contract or understanding with any
current or former director, officer, employee, consultant, financial
adviser, broker, dealer, or agent providing for any rights of
indemnification in favor of such person or entity.
Except for contracts identified on Schedule 2(j), copies of which have been
made available to Wells Fargo, there is no contract described in subparagraph
(iv) of this paragraph 2(j) which would have or could reasonably be expected to
have a material adverse effect on a business activity of Wells Fargo.
(k) LITIGATION AND OTHER PROCEEDINGS. Company has furnished Wells Fargo
copies of (i) all attorney responses to the request of the independent auditors
for Company with respect to loss contingencies as of December 31, 1999 in
connection with the Company Financial Statements, and (ii) a written list of
legal and regulatory proceedings filed against Company or any Company Subsidiary
since said date. There is no pending or, to the best knowledge of Company,
threatened, claim, action, suit, investigation or proceeding, against Company or
any Company Subsidiary, nor is Company or any Company Subsidiary 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 Company and the
Company Subsidiaries taken as a whole.
(l) INSURANCE. Company and each Company Subsidiary is presently insured,
and during each of the past five calendar years (or during such lesser period of
time as Company has owned such Company 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. Company and each Company Subsidiary has all
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties and assets and to carry on its business as presently
conducted and that are material to the business of Company or such Company
Subsidiary; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the best knowledge of Company, no
suspension or cancellation of any of them is threatened; and all such filings,
applications and registrations are current. The conduct by Company and each
Company 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 Company nor any Company 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 Company or any Company Subsidiary
which reasonably could be expected to have a material adverse effect on the
business or properties of Company and the Company Subsidiaries taken as a whole.
(n) LABOR. No work stoppage involving Company or any Company Subsidiary is
pending or, to the best knowledge of Company, threatened. Neither Company nor
any Company Subsidiary is involved in, or threatened with or affected by, any
labor dispute, arbitration, lawsuit or administrative proceeding that could
materially and adversely affect the business of Company or such Company
Subsidiary. Employees of Company and the Company Subsidiaries are not
represented by any labor union nor are any collective bargaining agreements
otherwise in effect with respect to such employees.
(o) MATERIAL INTERESTS OF CERTAIN PERSONS. Except as set forth on
Schedule 2(o), to the best knowledge of Company, no officer or director of
Company or any Company Subsidiary, or any "associate" (as such term is defined
in Rule 14a-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 Company or any Company
Subsidiary.
Schedule 2(o) sets forth a correct and complete list of any loan from
Company or any Company 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
Company's or such Company Subsidiary's Board of Directors.
(p) COMPANY BENEFIT PLANS.
(i) Schedule 2(p)(i) sets forth each employee benefit plan with respect
to which Company or any Company Subsidiary contributes, sponsors or
otherwise has any obligation to contribute on behalf of any current or
former officer, director or employee (the "Plans"). For purposes of this
Section 2(p) and Schedule 2(p)(i), "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended, and the term "Plan" or "Plans"
means all employee benefit plans as defined in Section 3(3) of ERISA, and
all other benefit arrangements including, without limitation, any plan,
program, agreement, policy or commitment providing for insurance coverage of
employees, workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, severance or
termination of employment benefits, life, health, death, disability or
accidental benefits.
(ii) Except as disclosed on Schedule 2(p)(ii), no Plan is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA.
(iii) Except as disclosed on Schedule 2(p)(iii), no Plan promises or
provides health or life benefits to retirees or former employees except as
required by federal continuation of coverage laws or similar state laws.
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(iv) Except as disclosed on Schedule 2(p)(iv), (a) each Plan is and has
been in all material respects operated and administered in accordance with
its provisions and applicable law including, if applicable, ERISA and the
Code; (b) all reports and filings with governmental agencies (including but
not limited to the Department of Labor, Internal Revenue Service, Pension
Benefit Guaranty Corporation and the SEC) required in connection with each
Plan have been timely made; (c) all disclosures and notices required by law
or Plan provisions to be given to participants and beneficiaries in
connection with each Plan have been properly and timely made; (d) there are
no actions, suits or claims pending, other than routine uncontested claims
for benefits with respect to each Plan; and (e) each Plan intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service stating that the Plan
(including all amendments) is tax qualified under Section 401(a) of the Code
and Company knows of no reason that any such Plan is not qualified within
the meaning of Section 401(a) of the Code and knows of no reason that each
related Plan trust is not exempt from taxation under Section 501(a) of the
Code.
(v) Except as disclosed on Schedule 2(p)(v), (a) all contributions,
premium payments and other payments required to be made in connection with
the Plans as of the date of this Agreement have been made; (b) a proper
accrual has been made on the books of Company for all contributions, premium
payments and other payments due in the current fiscal year but not made as
of the date of this Agreement; (c) no contribution, premium payment or other
payment has been made in support of any Plan that is in excess of the
allowable deduction for federal income tax purposes for the year with
respect to which the contribution was made (whether under Sections 404, 419,
419A of the Code or otherwise); and (d) with respect to each Plan that is
subject to Section 301 of ERISA or Section 412 of the Code, Company is not
liable for any accumulated funding deficiency as that term is defined in
Section 412 of the Code and the present value of the accrued benefit
obligations determined as of the date of the most recent actuarial valuation
do not exceed the fair market value of the assets of the Plan as of the date
of the most recent actuarial valuation.
(vi) Except as disclosed in Schedule 2(p)(vi) and to best knowledge of
Company, no Plan or any trust created thereunder, nor any trustee, fiduciary
or administrator thereof, has engaged in a "prohibited transaction," as such
term is defined in Section 4975 of the Code or Section 406 of ERISA or
violated any of the fiduciary standards under Part 4 of Title 1 of ERISA
which could subject such Plan or trust, or any trustee, fiduciary or
administrator thereof, or any party dealing with any such Plan or trust, to
a tax penalty or prohibited transactions imposed by Section 4975 of the Code
or would result in material liability to Company and the Company
Subsidiaries as a whole.
(vii) No Plan subject to Title IV of ERISA or any trust created
thereunder has been terminated, nor have there been any "reportable events"
as that term is defined in Section 4043 of ERISA for which the 30-day notice
requirement has not been waived, with respect to any Plan, other than those
events which may result from the transactions contemplated by this Agreement
and the Merger Agreement.
(viii) Except as disclosed in Schedule 2(p)(viii), neither the execution
and delivery of this Agreement and the Merger Agreement nor the consummation
of the transactions contemplated hereby and thereby will (a) result in any
material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director or
employee or former employee of Company under any Plan or otherwise,
(b) materially increase any benefits otherwise payable under any Plan, or
(c) result in the acceleration of the time of payment or vesting of any such
benefits to any material extent.
(ix) Except as disclosed in Schedule 2(p)(ix), Company has not made any
payments or transfers of property, is not obligated to make any payments or
transfers of property, nor is it a party to any agreement that under certain
circumstances could obligate it to make any payments or transfers of
property that will not be deductible under section 280G of the Code.
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(q) PROXY STATEMENT, ETC. None of the information regarding Company and
the Company Subsidiaries supplied or to be supplied by Company for inclusion in
(i) a Registration Statement on Form S-4 and the prospectus included therein to
be filed with the SEC by Wells Fargo for the purpose of registering the shares
of Wells Fargo Common Stock to be exchanged for shares of Company Common Stock
pursuant to the provisions of the Merger Agreement (the "Registration
Statement"), (ii) the proxy statement included in the Registration Statement to
be mailed to Company's stockholders 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 Registration Statement, Proxy Statement and other
documents are filed with the SEC or any regulatory authority and, in the case of
the Registration Statement, when it becomes effective and, with respect to the
Proxy Statement, when mailed, and, in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the meeting of
stockholders referred to in paragraph 4(c), and at the Effective Time of the
Merger, 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
contained therein, in light of the circumstances under which they were made, not
misleading. All documents which Company and the Company Subsidiaries are
responsible for filing with the SEC and any other regulatory authority in
connection with the Merger will comply as to form in all material respects with
the provisions of applicable law.
(r) REGISTRATION OBLIGATIONS. Except as set forth on Schedule 2(r),
neither Company nor any Company Subsidiary is under any obligation, contingent
or otherwise, by reason of any agreement to register any of its securities under
the Securities Act.
(s) BROKERS AND FINDERS. Except for J. P. Morgan Securities Inc., neither
Company nor any Company 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
Company or any Company Subsidiary, in connection with this Agreement and the
Merger Agreement or the transactions contemplated hereby and thereby.
(t) FIDUCIARY ACTIVITIES. Company and each Company Subsidiary has properly
administered in all respects material and which could reasonably be expected to
be material, to the financial condition of Company and the Company 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 Company, any Company
Subsidiary, nor any director, officer or employee of Company or any Company
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 Company and the Company 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 Company nor any Company Subsidiary is in default,
nor has any event occurred that, 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 Company and the Company Subsidiaries, taken as a whole. To
the best of Company's knowledge, all parties with whom Company or any Company
Subsidiary has material leases, agreements or contracts or who owe to Company or
any Company Subsidiary material obligations other than those arising in the
ordinary course of the banking business of the Company Subsidiaries are in
compliance therewith in all material respects.
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(v) ENVIRONMENTAL LIABILITY. There is no legal, administrative, or other
proceeding, claim, or action of any nature seeking to impose, or that could
result in the imposition of, on Company or any Company 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
Company's knowledge, threatened against Company or any Company Subsidiary the
result of which has had or could reasonably be expected to have a material
adverse effect upon Company and Company's Subsidiaries taken as a whole; to the
best of Company's knowledge, there is no reasonable basis for any such
proceeding, claim or action; and to the best of Company's knowledge neither
Company nor any Company 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. Company has provided Wells Fargo with copies
of all environmental assessments, reports, studies and other related information
in its possession with respect to each bank facility and each non-residential
OREO property.
(w) ANTI-TAKEOVER PROVISIONS NOT APPLICABLE. The provisions of
Section 203 of the Delaware General Corporation Law as they relate to Company do
not and will not apply to this Agreement, the Merger Agreement, and the Stock
Option Agreement or to any of the transactions contemplated hereby or thereby.
(x) ZIONS BANCORPORATION MERGER AGREEMENT. The Agreement and Plan of
Merger dated as of June 6, 1999 by and between Company and Zions Bancorporation
has been terminated by Company in accordance with its terms.
(y) RIGHTS PLAN. Company has taken all actions necessary to provide that
Wells Fargo is not, and will not become, an Acquiring Person, as defined in the
Shareholder Rights Agreement, dated August 28, 1989 and amended as of
September 26, 1989, May 18, 1993 and October 27, 1998, between Company and First
Chicago Trust Company of New York (the "Rights Plan"), as a result of the
execution of this Agreement or consummation of the transactions contemplated by
this Agreement. Company has provided copies of such actions to Wells Fargo.
3. REPRESENTATIONS AND WARRANTIES OF WELLS FARGO. Wells Fargo represents
and warrants to Company as follows:
(a) ORGANIZATION AND AUTHORITY. Wells Fargo is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and failure to be so qualified would
have a material adverse effect on Wells Fargo and its subsidiaries taken as a
whole and has corporate power and authority to own its properties and assets and
to carry on its business as it is now being conducted. Wells Fargo is registered
as a financial holding company with the Federal Reserve Board under the BHC Act.
(b) WELLS FARGO SUBSIDIARIES. Schedule 3(b) sets forth a complete and
correct list as of December 31, 1999, of Wells Fargo's Significant Subsidiaries
(as defined in Regulation S-X promulgated by the SEC), but excluding Norwest
Venture Partners VI, LP (individually a "Wells Fargo Subsidiary" and
collectively the "Wells Fargo Subsidiaries"), all shares of the outstanding
capital stock of each of which, except as set forth in Schedule 3(b), are on the
date of this Agreement owned directly or indirectly by Wells Fargo. No equity
security of any Wells Fargo Subsidiary is or may be required to be issued to any
person or entity other than Wells Fargo by reason of any option, warrant, scrip,
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 Wells Fargo Subsidiary is bound to
issue additional shares of its capital stock, or options, warrants or rights to
purchase or acquire any additional shares of its capital stock. Subject to 12
U.S.C. Section 55 (1982), all of such shares so owned by Wells Fargo are fully
paid and nonassessable and are owned by it free and clear of any lien, claim,
charge, option, encumbrance or agreement with respect thereto. Each
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Wells Fargo Subsidiary is a corporation or national banking association duly
organized, validly existing, duly qualified to do business and in good standing
under the laws of its jurisdiction of incorporation, and has corporate power and
authority to own or lease its properties and assets and to carry on its business
as it is now being conducted.
(c) WELLS FARGO CAPITALIZATION. As of December 31, 1999, the authorized
capital stock of Wells Fargo consists of (i) 20,000,000 shares of Preferred
Stock, without par value, of which as of the close of business on December 31,
1999, 3,732 shares of ESOP Cumulative Convertible Preferred Stock, at $1,000
stated value, 11,990 shares of 1995 ESOP Cumulative Convertible Preferred Stock,
at $1,000 stated value, 12,011 shares of 1996 ESOP Cumulative Convertible
Preferred Stock, at $1,000 stated value, 10,839 shares of 1997 ESOP Cumulative
Convertible Preferred Stock, at $1,000 stated value, 8,386 shares of 1998 ESOP
Cumulative Convertible Preferred Stock, $1,000 stated value, 22,263 shares of
1999 ESOP Cumulative Convertible Preferred Stock, $1,000 stated value, 1,500,000
shares of Adjustable-Rate Cumulative Preferred Stock, Series B, $50 stated
value, and 4,000,000 shares of 6.59% Adjustable Rate Noncumulative Preferred
Stock, Series H, $50 stated value, were outstanding; (ii) 4,000,000 shares of
Preference Stock, without par value, of which as of the close of business on
December 31, 1999, no shares were outstanding; and (iii) 4,000,000,000 shares of
Common Stock, $1 2/3 par value, of which as of the close of business on
December 31, 1999, 1,626,849,541 shares were outstanding and 39,245,724 shares
were held in the treasury. All of the outstanding shares of capital stock of
Wells Fargo have been duly and validly authorized and issued and are fully paid
and nonassessable.
(d) AUTHORIZATION. Wells Fargo has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by Wells Fargo and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Wells Fargo. No approval or consent by the
stockholders of Wells Fargo is necessary for the execution and delivery of this
Agreement and the Merger Agreement and the consummation of the transactions
contemplated hereby and thereby. Subject to such approvals of government
agencies and other governing boards having regulatory authority over Wells Fargo
as may be required by statute or regulation, this Agreement is a valid and
binding obligation of Wells Fargo enforceable against Wells Fargo in accordance
with its terms.
Neither the execution, delivery and performance by Wells Fargo of this
Agreement or the Merger Agreement, nor the consummation of the transactions
contemplated hereby and thereby, nor compliance by Wells Fargo with any of the
provisions hereof or thereof, will (i) violate, conflict with, or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration of, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Wells Fargo or any Wells Fargo Subsidiary under any of the terms, conditions or
provisions of, (x) its certificate of incorporation or by-laws or (y) any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Wells Fargo or any Wells
Fargo Subsidiary is a party or by which it may be bound, or to which Wells Fargo
or any Wells Fargo Subsidiary or any of the properties or assets of Wells Fargo
or any Wells Fargo Subsidiary may be subject, or (ii) subject to compliance with
the statutes and regulations referred to in the next paragraph, violate any
statute, rule or regulation or, to the best knowledge of Wells Fargo, violate
any judgment, ruling, order, writ, injunction or decree applicable to Wells
Fargo or any Wells Fargo Subsidiary or any of their respective properties or
assets.
Other than in connection with or in compliance with the provisions of the
Securities Act, the Exchange Act, the securities or blue sky laws of the various
states or filings, consents, reviews, authorizations, approvals or exemptions
required under the BHC Act or the HSR Act, and filings required to effect the
Merger under Delaware law, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or authority is necessary
for the consummation by Wells Fargo of the transactions contemplated by this
Agreement and the Merger Agreement.
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(e) WELLS FARGO FINANCIAL STATEMENTS. The consolidated balance sheets of
Wells Fargo and Wells Fargo's subsidiaries as of December 31, 1999 and 1998 and
related consolidated statements of income, changes in stockholders' equity and
comprehensive income, and cash flows for the three years ended December 31,
1999, together with the notes thereto, audited by KPMG LLP and included in Wells
Fargo's Annual Report on Form 10-K for the fiscal year ended December 31, 1999
(the "Wells Fargo 10-K") as filed with the SEC (collectively, the "Wells Fargo
Financial Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis and present fairly the
consolidated financial position of Wells Fargo and its subsidiaries at the dates
and the consolidated results of operations, changes in financial position and
cash flows of Wells Fargo and its subsidiaries for the periods stated therein.
(f) REPORTS. Since December 31, 1995, Wells Fargo and each Wells Fargo
Subsidiary has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with (i) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q and proxy statements,
(ii) the Federal Reserve Board, (iii) the FDIC, (iv) the Comptroller and
(v) any applicable state securities or banking authorities. All such reports and
statements filed with any such regulatory body or authority are collectively
referred to herein as the "Wells Fargo Reports." As of their respective dates,
the Wells Fargo Reports complied in all material respects with all the rules and
regulations promulgated by the SEC, the Federal Reserve Board, the FDIC, the
Comptroller and any applicable state securities or banking authorities, as the
case may be, and did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(g) PROPERTIES AND LEASES. Except as may be reflected in the Wells Fargo
Financial Statements and except for any lien for current taxes not yet
delinquent, Wells Fargo and each Wells Fargo Subsidiary has good title free and
clear of any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Wells Fargo's
consolidated balance sheet as of December 31, 1999 included in Wells Fargo's
Annual Report on Form 10-K for the period then ended, and all real and personal
property acquired since such date, except such real and personal property that
has been disposed of in the ordinary course of business. All leases of real
property and all other leases material to Wells Fargo or any Wells Fargo
Subsidiary pursuant to which Wells Fargo or such Wells Fargo Subsidiary, as
lessee, leases real or personal property, are valid and effective in accordance
with their respective terms, and there is not, under any such lease, any
material existing default by Wells Fargo or such Wells Fargo Subsidiary or any
event which, with notice or lapse of time or both, would constitute such a
material default. Substantially all Wells Fargo's and each Wells Fargo
Subsidiary's buildings and equipment in regular use have been well maintained
and are in good and serviceable condition, reasonable wear and tear excepted.
(h) TAXES. Each of Wells Fargo and the Wells Fargo Subsidiaries has filed
all material federal, state, county, local and foreign tax returns, including
information returns, required to be filed by it, and paid or made adequate
provision for the payment of all taxes owed by it, including those with respect
to income, withholding, social security, unemployment, workers compensation,
franchise, ad valorem, premium, excise and sales taxes, and no taxes shown on
such returns to be owed by it or assessments received by it are delinquent. The
federal income tax returns of Wells Fargo and the Wells Fargo Subsidiaries for
the fiscal year ended December 31, 1982, and for all fiscal years prior thereto,
are for the purposes of routine audit by the Internal Revenue Service closed
because of the statute of limitations, and no claims for additional taxes for
such fiscal years are pending. Except only as set forth on Schedule 3(h),
(i) neither Wells Fargo nor any Wells Fargo Subsidiary is a party to any pending
action or proceeding, nor to Wells Fargo's knowledge is any such action or
proceeding threatened by any governmental authority, for the assessment or
collection of taxes, interest, penalties, assessments or deficiencies that could
reasonably be expected to have any material adverse effect on Wells Fargo and
its subsidiaries taken as a whole, and (ii) no issue has been raised by any
federal, state, local or foreign taxing authority in connection with an audit or
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examination of the tax returns, business or properties of Wells Fargo or any
Wells Fargo Subsidiary that has not been settled, resolved and fully satisfied,
or adequately reserved for. Each of Wells Fargo and the Wells Fargo Subsidiaries
has paid all taxes owed or which it is required to withhold from amounts owing
to employees, creditors or other third parties.
(i) NO MATERIAL ADVERSE EFFECT. Since December 31, 1999, no change shall
have occurred and no circumstances shall exist which has had or might reasonably
be expected to have a Material Adverse Effect on Wells Fargo.
(j) COMMITMENTS AND CONTRACTS. Except as set forth on Schedule 3(j), as of
December 31, 1999 neither Wells Fargo nor any Wells Fargo Subsidiary is a party
or subject to any of the following (whether written or oral, express or
implied):
(i) any labor contract or agreement with any labor union;
(ii) any contract not made in the ordinary course of business containing
covenants which materially limit the ability of Wells Fargo or any Wells
Fargo Subsidiary to compete in any line of business or with any person or
which involve any material restriction of the geographical area in which, or
method by which, Wells Fargo or any Wells Fargo Subsidiary may carry on its
business (other than as may be required by law or applicable regulatory
authorities);
(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. There is no pending or, to the best
knowledge of Wells Fargo, threatened, claim, action, suit, investigation or
proceeding, against Wells Fargo or any Wells Fargo Subsidiary nor is Wells Fargo
or any Wells Fargo Subsidiary subject to any order, judgment or decree, except
for matters which, in the aggregate, will not have, or cannot reasonably be
expected to have, a material adverse effect on the business, financial condition
or results of operations of Wells Fargo and its subsidiaries taken as a whole.
(l) INSURANCE. Wells Fargo and each Wells Fargo Subsidiary is presently
insured or self insured, and during each of the past five calendar years (or
during such lesser period of time as Wells Fargo has owned such Wells Fargo
Subsidiary) has been insured or self-insured, for reasonable amounts with
financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable law and regulation.
(m) COMPLIANCE WITH LAWS. Wells Fargo and each Wells Fargo Subsidiary has
all permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties or assets and to carry on its business as presently
conducted and that are material to the business of Wells Fargo or such Wells
Fargo Subsidiary; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect, and to the best knowledge of Wells
Fargo, no suspension or cancellation of any of them is threatened; and all such
filings, applications and registrations are current. The conduct by Wells Fargo
and each Wells Fargo Subsidiary of its business and the condition and use of its
properties does not violate or infringe, in any respect material to any such
business, any applicable domestic (federal, state or local) or foreign law,
statute, ordinance, license or regulation. Neither Wells Fargo nor any Wells
Fargo Subsidiary is in default under any order, license, regulation or demand of
any federal, state, municipal or other governmental agency or with respect to
any order, writ, injunction or decree of any court. Except for statutory or
regulatory restrictions of general application, no federal, state, municipal or
other governmental authority has placed any restrictions on the business or
properties of Wells Fargo or any Wells Fargo Subsidiary which reasonably could
be expected to have a material adverse effect on the business or properties of
Wells Fargo and its subsidiaries taken as a whole.
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(n) LABOR. No work stoppage involving Wells Fargo or any Wells Fargo
Subsidiary is pending or, to the best knowledge of Wells Fargo, threatened.
Neither Wells Fargo nor any Wells Fargo Subsidiary is involved in, or threatened
with or affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding that could materially and adversely affect the business of Wells
Fargo or such Wells Fargo Subsidiary. Except as set forth on Schedule 3(j),
employees of Wells Fargo and the Wells Fargo Subsidiaries are not represented by
any labor union nor are any collective bargaining agreements otherwise in effect
with respect to such employees.
(o) WELLS FARGO BENEFIT PLANS.
(i) For purposes of this Section 3(o), the term "Wells Fargo Plan" or
"Wells Fargo Plans" means all employee benefit plans as defined in
Section 3(3) of ERISA, to which Wells Fargo contributes, sponsors, or
otherwise has any obligations.
(ii) No Wells Fargo Plan is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
(iii) Each Wells Fargo Plan is and has been in all material respects
operated and administered in accordance with its provisions and applicable
law, including, if applicable, ERISA and the Code.
(iv) Except as set forth on Schedule 3(p)(iv), each Wells Fargo Plan
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service stating
that the Wells Fargo Plan (including all amendments) is tax qualified under
Section 401(a) of the Code and Wells Fargo knows of no reason that any such
Wells Fargo Plan is not qualified within the meaning of Section 401(a) of
the Code and knows of no reason that each related Wells Fargo Plan trust is
not exempt from taxation under Section 501(a) of the Code.
(v) All contributions, premium payments, and other payments required to
be made in connection with the Wells Fargo Plans as of the date of this
Agreement have been made.
(vi) With respect to each Wells Fargo Plan that is subject to
Section 301 of ERISA or Section 412 of the Code, neither Wells Fargo nor any
Wells Fargo Subsidiary is liable for any accumulated funding deficiency as
that term is defined in Section 412 of the Code.
(vii) The present value of all benefits vested and all benefits accrued
under each Wells Fargo Plan that is subject to Title IV of ERISA does not,
in each case, exceed the value of the assets of the Wells Fargo Plans
allocable to such vested or accrued benefits as of the end of the most
recent Plan Year.
(p) REGISTRATION STATEMENT, ETC. None of the information regarding Wells
Fargo and its subsidiaries supplied or to be supplied by Wells Fargo for
inclusion in (i) the Registration Statement, (ii) the Proxy Statement, or
(iii) any other documents to be filed with the SEC or any regulatory authority
in connection with the transactions contemplated hereby or by the Merger
Agreement will, at the respective times such Registration Statement, Proxy
Statement and other documents are filed with the SEC or any regulatory authority
and, in the case of the Registration Statement, when it becomes effective and,
with respect to the Proxy Statement, when mailed, and, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
meeting of stockholders referred to in paragraph 4(c), and at the Effective Time
of the Merger 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
contained therein, in light of the circumstances under which they were made, not
misleading. All documents which Wells Fargo and the Wells Fargo Subsidiaries are
responsible for filing with the SEC and any other regulatory authority in
connection with the Merger will comply as to form in all material respects with
the provisions of applicable law.
(q) BROKERS AND FINDERS. Except for Credit Suisse First Boston, neither
Wells Fargo nor any Wells Fargo Subsidiary nor any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees,
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and no broker or finder has acted directly or indirectly for Wells Fargo or any
Wells Fargo Subsidiary in connection with this Agreement and the Merger
Agreement or the transactions contemplated hereby and thereby.
(r) NO DEFAULTS. Neither Wells Fargo nor any Wells Fargo Subsidiary is in
default, nor has any event occurred that, with the passage of time or the giving
of notice, or both, would constitute a default under any material agreement,
indenture, loan agreement or other instrument to which it is a party or by which
it or any of its assets is bound or to which any of its assets is subject, the
result of which has had or could reasonably be expected to have a material
adverse effect upon Wells Fargo and its subsidiaries taken as a whole. To the
best of Wells Fargo's knowledge, all parties with whom Wells Fargo or any Wells
Fargo Subsidiary has material leases, agreements or contracts or who owe to
Wells Fargo or any Wells Fargo Subsidiary material obligations, other than those
arising in the ordinary course of the banking business of the Wells Fargo
Subsidiaries are in compliance therewith in all material respects.
(s) ENVIRONMENTAL LIABILITY. There is no legal, administrative, or other
proceeding, claim, or action of any nature seeking to impose, or that could
result in the imposition, on Wells Fargo or any Wells Fargo Subsidiary of any
liability relating to the release of hazardous substances as defined under any
local, state or federal environmental statute, regulation or ordinance
including, without limitation, CERCLA, pending or to the best of Wells Fargo's
knowledge, threatened against Wells Fargo or any Wells Fargo Subsidiary, the
result of which has had or could reasonably be expected to have a material
adverse effect upon Wells Fargo and its subsidiaries taken as a whole; to the
best of Wells Fargo's knowledge, there is no reasonable basis for any such
proceeding, claim or action; and to the best of Wells Fargo's knowledge, neither
Wells Fargo nor any Wells Fargo Subsidiary is subject to any agreement, order,
judgment, or decree by or with any court, governmental authority or third party
imposing any such environmental liability.
(t) MERGER CO. As of the Closing Date, Merger Co. will be a corporation
duly organized, validly existing, duly qualified to do business and in good
standing under the laws of its jurisdiction of incorporation, and will have
corporate power and authority to own or lease its properties and assets and to
carry on its business. As of the Closing Date, the execution, delivery and
performance by Merger Co. of the Merger Agreement will have been duly authorized
by Merger Co.'s Board of Directors and stockholders, and the Merger Agreement
will be a valid and binding obligation of Merger Co., enforceable against Merger
Co. in accordance with its terms.
4. COVENANTS OF COMPANY. Company covenants and agrees with Wells Fargo as
follows:
(a) AFFIRMATIVE COVENANTS. Except as otherwise permitted or required by
this Agreement, from the date hereof until the Effective Time of the Merger,
Company, and each Company 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 Wells Fargo (which consent requirement shall be deemed to be waived
as to any loan approval request to which Wells Fargo has made no response by the
end of the third business day following the day of receipt of the request by a
representative designated by Wells Fargo in writing), (A) make any loan or
extension of credit aggregating an amount equal to or in excess of $1,000,000 to
a person or entity that is not a borrower as of the date hereof, or (B) make any
new loan or modify, restructure or renew any existing loan (except pursuant to
commitments made prior to the date of this Agreement) to any borrower who has
aggregate extensions of credit in excess of $1,000,000 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 $2,500,000; 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
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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 Company and each Company
Subsidiary the non-compliance with which reasonably could be expected to have a
material adverse effect on Company and the Company Subsidiaries taken as a
whole; and permit Wells Fargo and its representatives (including KPMG LLP) to
examine its and its subsidiaries books, records and properties and to interview
officers, employees and agents at all reasonable times when it is open for
business. No such examination by Wells Fargo or its representatives either
before or after the date of this Agreement shall in any way affect, diminish or
terminate any of the representations, warranties or covenants of Company herein
expressed.
(b) NEGATIVE COVENANTS. Except as otherwise contemplated or required by
this Agreement, from the date hereof until the Effective Time of the Merger,
Company and each Company Subsidiary will not (without the prior written consent
of Wells Fargo): amend or otherwise change its articles of incorporation or
association or by-laws; issue or sell or authorize for issuance or sale, or
grant any options or make other agreements with respect to the issuance or sale
or conversion of, any shares of its capital stock, phantom shares or other
share-equivalents, or any other of its securities, except that Company may issue
shares of Company Common Stock upon the exercise of the option granted under the
Stock Option Agreement or upon the exercise of outstanding stock options
described in Schedule 4(b); authorize or incur any long-term debt (other than
deposit liabilities); mortgage, pledge or subject to lien or other encumbrance
any of its properties, except in the ordinary course of business; enter into any
material agreement, contract or commitment in excess of $50,000 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 of
Treasury securities only for terms of up to two years and in amounts of
$100,000,000 or less; amend or terminate any Plan except as required by law or
by paragraph 4(j) hereof; 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 (A) Company may declare and pay dividends on Company Preferred Stock and
on Company Common Stock, in accordance with applicable law and regulation and
consistent with past practice, out of the net earnings of Company between the
date hereof and the Effective Date of the Merger, determined in accordance with
generally accepted accounting principles, in an amount not to exceed an
annualized rate of $0.56 PROVIDED, HOWEVER, that the stockholders of Company
shall be entitled to a dividend on Company Common Stock or Wells Fargo Common
Stock, but not both, in the calendar quarter in which the Closing shall occur,
and (B) any dividend declared by a Company 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 Company; 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 Company Subsidiary; or sell or
otherwise dispose of any of its assets or properties other than in the ordinary
course of business.
(c) STOCKHOLDER MEETING. The Board of Directors of Company 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, a meeting of its
stockholders and will direct that this Agreement and the Merger Agreement be
submitted to a vote at such meeting. The Board of Directors of Company will
(i) cause proper notice of such meeting to be given to its stockholders in
compliance with the Delaware General Corporation Law 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 stockholders proxies in favor
thereof.
(d) INFORMATION FURNISHED BY COMPANY. Company will furnish or cause to be
furnished to Wells Fargo all the information concerning Company and the Company
Subsidiaries required for inclusion in the Registration Statement, or any
statement or application made by Wells Fargo to any governmental body in
connection with the transactions contemplated by this Agreement. Any financial
statement for any fiscal
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year provided under this paragraph must include the audit opinion and the
consent of Deloitte & Touche LLP to use such opinion in such Registration
Statement.
(e) APPROVALS. Company 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 Company to carry out the transactions
contemplated by this Agreement and will cooperate with Wells Fargo to obtain all
such approvals and consents required of Wells Fargo.
(f) DELIVERY OF CLOSING DOCUMENTS. Company 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) CONFIDENTIAL INFORMATION. Company will hold in confidence all
documents and information concerning Wells Fargo and its subsidiaries furnished
to Company 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 Company's outside
professional advisers in connection with this Agreement, with the same
undertaking from such professional advisers. If the transactions contemplated by
this Agreement shall not be consummated, such confidence shall be maintained and
such information shall not be used in competition with Wells Fargo (except to
the extent that such information was previously known to Company, in the public
domain, or later acquired by Company from other sources not known to Company to
be subject to a confidentiality obligation to Wells Fargo) and, upon request,
all such documents and any copies thereof and all documents prepared by Company
that include such confidential information shall be destroyed, excluding
documents such as minutes of meetings and regulatory filings that Company is
required to retain.
(h) COMPETING TRANSACTIONS. Neither Company, nor any Company Subsidiary,
nor any director, officer, representative or agent thereof, will, directly or
indirectly, solicit, authorize the solicitation of or enter into any discussions
with any corporation, partnership, person or other entity or group (other than
Wells Fargo) concerning any offer or possible offer (i) to purchase any shares
of common stock, any option or warrant to purchase any shares of common stock,
any securities convertible into any shares of such common stock, or any other
equity security of Company or any Company 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 Company or any
Company Subsidiary except in the ordinary course of business, or (iv) to merge,
consolidate or otherwise combine with Company or any Company Subsidiary. If any
corporation, partnership, person or other entity or group makes an offer or
inquiry to Company or any Company Subsidiary concerning any of the foregoing,
Company or such Company Subsidiary will promptly disclose such offer or inquiry
to Wells Fargo.
(i) PUBLIC DISCLOSURE. Company shall consult with Wells Fargo as to the
form and substance of any proposed press release or other proposed public
disclosure of matters related to this Agreement or any of the transactions
contemplated hereby.
(j) BENEFIT PLANS. Company and each Company Subsidiary will take all
action necessary or required (i) to terminate or amend, if requested by Wells
Fargo, all qualified retirement 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 an application to the Internal Revenue Service for a
favorable determination letter for each of the Plans that is subject to the
qualification requirements of Section 401(a) of the Code prior to the Effective
Date of the Merger.
(k) POOLING OF INTERESTS. Neither Company nor any Company Subsidiary shall
take any action which with respect to Company would disqualify the Merger as a
"pooling of interests" for accounting purposes.
(l) AFFILIATE LETTERS. Company shall use its best efforts to obtain and
deliver at least 32 days prior to the Effective Date of the Merger signed
representations substantially in the form attached hereto as Exhibit B to Wells
Fargo by each executive officer, director or stockholder of Company who may
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reasonably be deemed an "affiliate" of Company within the meaning of such term
as used in Rule 145 under the Securities Act.
(m) COMFORT CERTIFICATE. Company shall furnish Wells Fargo with a
certificate from the Chief Executive Officer and Chief Financial Officer of
Company a letter, dated as of the effective date of the Registration Statement
and updated through the Closing Date, in form and substance satisfactory to
Wells Fargo, to the effect that:
(i) the interim quarterly consolidated financial statements of Company
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 consolidated financial statements of
Company;
(ii) the amounts reported in the interim quarterly consolidated
financial statements of Company agree with the general ledger of Company;
(iii) the annual and quarterly consolidated financial statements of
Company and the Company Subsidiaries included in, or incorporated by
reference in, the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Securities Act
and the published rules and regulations thereunder;
(iv) from the date of the most recent unaudited consolidated financial
statements of Company and the Company Subsidiaries as may be included in the
Registration Statement to a date 5 days prior to the effective date of the
Registration Statement and to a date 5 days prior to the Closing, there are
no increases in long-term debt, changes in the capital stock or decreases in
stockholders' equity of Company and the Company Subsidiaries, except in each
case for changes, increases or decreases which the Registration Statement
discloses have occurred or may occur or which are described in such letters.
For the same period, there have been no decreases in consolidated net
interest income, consolidated net interest income after provision for credit
losses, consolidated income before income taxes, consolidated net income and
net income per share amounts of Company and the Company 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 Company and the Company Subsidiaries, which appear in the
Registration Statement under the certain captions to be specified by Wells
Fargo, and have compared certain of such amounts, percentages, numbers and
financial information with the accounting records of Company and the Company
Subsidiaries and have found them to be in agreement with financial records
and analyses prepared by Company included in the annual and quarterly
consolidated financial statements, except as disclosed in such letters.
(n) REDEMPTION OF PREFERRED STOCK. Immediately prior to the Effective Time
of the Merger, Company shall redeem outstanding shares of Company Preferred
Stock, in accordance with the terms of Company's amended certificate of
incorporation, using Company's own funds.
(o) REDEMPTION OF RIGHTS. Immediately prior to the Effective Date of the
Merger, Company shall take such actions as may be necessary to redeem all rights
outstanding under the Rights Plan, in accordance with the terms of the Rights
Plan, at a cost of no more than $0.01 per right.
5. COVENANTS OF WELLS FARGO. Wells Fargo covenants and agrees with Company
as follows:
(a) AFFIRMATIVE COVENANTS. From the date hereof until the Effective Time
of the Merger, Wells Fargo will maintain its corporate existence in good
standing; conduct, and cause the Wells Fargo Subsidiaries to conduct, their
respective businesses in compliance with all material obligations and duties
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imposed on them by all laws, governmental regulations, rules and ordinances, and
judicial orders, judgments and decrees applicable to Wells Fargo or the Wells
Fargo Subsidiaries, their businesses or their properties; maintain all books and
records of it and the Wells Fargo Subsidiaries, including all financial
statements, in accordance with the accounting principles and practices
consistent with those used for the Wells Fargo Financial Statements, except for
changes in such principles and practices required under generally accepted
accounting principles.
(b) INFORMATION PROVIDED BY WELLS FARGO. Wells Fargo will furnish to
Company all the information concerning Wells Fargo required for inclusion in a
proxy statement or statements to be sent to the stockholders of Company, or in
any statement or application made by Company to any governmental body in
connection with the transactions contemplated by this Agreement.
(c) REGISTRATION STATEMENT. As promptly as practicable after the execution
of this Agreement, Wells Fargo will file with the SEC the Registration Statement
and any other applicable documents, relating to the shares of Wells Fargo Common
Stock to be delivered to the stockholders of Company 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
Company stockholders, at the time of the Company stockholders' meeting referred
to in paragraph 4(c) hereof and at the Effective Time of the Merger the
prospectus included as part of the Registration Statement, as amended or
supplemented by any amendment or supplement filed by Wells Fargo (hereinafter
the "Prospectus"), will not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein not
false or misleading; PROVIDED, HOWEVER, that none of the provisions of this
subparagraph shall apply to statements in or omissions from the Registration
Statement or the Prospectus made in reliance upon and in conformity with
information furnished by Company or any Company Subsidiary for use in the
Registration Statement or the Prospectus.
(d) STOCK EXCHANGE LISTINGS. Wells Fargo will file all documents required
to be filed to list the Wells Fargo Common Stock to be issued pursuant to the
Merger Agreement on the New York Stock Exchange and the Chicago Stock Exchange
and use its best efforts to effect said listings.
(e) WELLS FARGO SHARES. The shares of Wells Fargo Common Stock to be
issued by Wells Fargo to the stockholders of Company pursuant to this Agreement
and the Merger Agreement will, upon such issuance and delivery to said
stockholders pursuant to the Merger Agreement, be duly authorized, validly
issued, fully paid and nonassessable. The shares of Wells Fargo Common Stock to
be delivered to the stockholders of Company pursuant to the Merger Agreement are
and will be free of any preemptive rights of the stockholders of Wells Fargo.
(f) BLUE SKY APPROVALS. Wells Fargo will file all documents required to
obtain, prior to the Effective Time of the Merger, all necessary Blue Sky
permits and approvals, if any, required to carry out the transactions
contemplated by this Agreement, will pay all expenses incident thereto and will
use its best efforts to obtain such permits and approvals.
(g) APPROVALS. Wells Fargo will take all necessary corporate and other
action and file all documents required to obtain and will use its best efforts
to obtain all approvals of regulatory authorities, consents and approvals
required of it to carry out the transactions contemplated by this Agreement and
will cooperate with Company to obtain all such approvals and consents required
by Company.
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(h) CONFIDENTIAL INFORMATION. Wells Fargo will hold in confidence all
documents and information concerning Company and Company's Subsidiaries
furnished to it and its representatives in connection with the transactions
contemplated by this Agreement and will not release or disclose such information
to any other person, except as required by law and except to its outside
professional advisers in connection with this Agreement, with the same
undertaking from such professional advisers. If the transactions contemplated by
this Agreement shall not be consummated, such confidence shall be maintained and
such information shall not be used in competition with Company (except to the
extent that such information was previously known to Wells Fargo, in the public
domain, or later acquired by Wells Fargo from other sources not known to Wells
Fargo to be subject to a confidentiality obligation to Company) and, upon
request, all such documents and any copies thereof and all documents prepared by
Wells Fargo that include such confidential information shall be destroyed,
excluding documents such as minutes of meetings and regulatory filings that
Wells Fargo is required to retain.
(i) MERGER FILINGS. Wells Fargo will file any documents or agreements
required to be filed in connection with the Merger under the Delaware General
Corporation Law.
(j) DELIVERY OF CLOSING DOCUMENTS. Wells Fargo will use its best efforts
to deliver to the Closing all opinions, certificates and other documents
required to be delivered by it at the Closing.
(k) PUBLIC DISCLOSURE. Wells Fargo shall consult with Company 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) NOTICE OF REGULATORY APPROVALS. Wells Fargo shall give Company notice
of receipt of the regulatory approvals referred to in paragraph 7(e).
(m) POOLING OF INTERESTS. Neither Wells Fargo nor any Wells Fargo
Subsidiary shall take any action which with respect to Wells Fargo would
disqualify the Merger as a "pooling of interests" for accounting purposes. Wells
Fargo shall use its best efforts to obtain and deliver to Company, prior to the
Effective Date of the Merger, signed representations from the directors and
executive officers of Wells Fargo to the effect that, except for DE MINIMUS
dispositions which will not disqualify the Merger as a pooling of interests,
they will not dispose of shares of Wells Fargo or Company during the period
commencing 30 days prior to the Effective Date and ending upon publication by
Wells Fargo of financial results including at least 30 days of combined
operations of Company and Wells Fargo.
(n) INDEMNIFICATION.
(i) Following the Effective Date of the Merger, Wells Fargo shall
indemnify, defend and hold harmless the present and former directors and
officers of Company and the Company Subsidiaries (each, an "Indemnified
Party") against all costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") as incurred, in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative
or investigative, arising out of actions or omissions occurring at or prior
to the Effective Time of the Merger (including, without limitation, the
transactions contemplated by this Agreement) to the fullest extent that
Company and the Company Subsidiaries are permitted to indemnify (and advance
expenses to) their respective directors and officers under the laws of their
respective jurisdictions of incorporation, their respective charters and
their respective bylaws;
(ii) any Indemnified Party wishing to claim indemnification under
paragraph 5(n)(i), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify Wells Fargo thereof;
provided that the failure to so notify shall not affect the obligations of
Wells Fargo under paragraph 5(n)(i) unless and to the extent that Wells
Fargo is actually and materially prejudiced as result of such failure. In
the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time of the Merger),
(A) Wells Fargo shall have the right to assume the defense thereof and Wells
Fargo shall not be liable to any Indemnified
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Party for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Party in connection with the
defense thereof, except that if Wells Fargo elects not to assume such
defense or counsel for the Indemnified Party advises that there are issues
which raise conflicts of interest between Wells Fargo and the Indemnified
Party, the Indemnified Party may retain counsel satisfactory to them, and
Wells Fargo shall pay the reasonable fees and expenses of such counsel for
the Indemnified Party promptly as statements therefor are received;
PROVIDED, HOWEVER, that Wells Fargo shall be obligated pursuant to this
subparagraph (ii) to pay for only one firm of counsel for all Indemnified
Parties in any jurisdiction unless the use of one counsel for such
Indemnified Parties would present such counsel with a conflict of interest
and (B) such Indemnified Party shall cooperate in the defense of any such
matter;
(iii) for a period of six years after the Effective Time of the Merger,
Wells Fargo shall use its reasonable best efforts to provide directors' and
officers' liability insurance that serves to reimburse the present and
former officers and directors of Company and the Company Subsidiaries
(determined as of the Effective Time of the Merger) with respect to claims
against such directors and officers arising from facts or events occurring
at or prior to the Effective Time of the Merger (including, without
limitation, the transactions contemplated by this Agreement) which insurance
shall contain at least the same coverage and amounts, and contain terms and
conditions no less advantageous, as that coverage currently provided by
Company;
(iv) if Wells Fargo or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the
continuing or surviving entity of such consolidation or merger or shall
transfer all or substantially all of its properties and assets to any other
entity, then and in each such case, Wells Fargo shall cause proper provision
to be made so that the successors and assigns of Wells Fargo 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.
6. CONDITIONS PRECEDENT TO OBLIGATION OF COMPANY. The obligation of
Company 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 Company:
(a) REPRESENTATIONS AND WARRANTIES. Except as they may be affected by
transactions contemplated hereby and except to the extent such representations
and warranties are by their express provisions made as of a specified date and
except for activities or transactions after the date of this Agreement made in
the ordinary course of business and not expressly prohibited by this Agreement,
the representations and warranties contained in paragraph 3 hereof shall be true
and correct in all respects material to Wells Fargo and its subsidiaries taken
as a whole as if made at the Time of Filing; PROVIDED, HOWEVER, that for
purposes of this paragraph, such representations and warranties (other than the
representations and warranties contained in paragraph 3(c), which shall be true
and correct in all material respects) shall be deemed to be true and correct
unless the failure or failures of such representations and warranties to be so
true and correct, either individually or in the aggregate, and without giving
effect to any qualification as to materiality set forth in such representations
and warranties, will have a Material Adverse Effect on Company.
(b) PERFORMANCE OF WELLS FARGO OBLIGATIONS. Wells Fargo shall have, or
shall have caused to be, performed and observed in all material respects all
covenants, agreements and conditions hereof to be performed or observed by it
and Merger Co. at or before the Time of Filing.
(c) WELLS FARGO COMPLIANCE CERTIFICATE. Company shall have received a
favorable certificate, dated as of the Effective Date of the Merger, signed by
the Chairman, the President or any Executive Vice President or Senior Vice
President and by the Secretary or Assistant Secretary of Wells Fargo, as to the
matters set forth in subparagraphs (a) and (b) of this paragraph 6.
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(d) STOCKHOLDER APPROVALS. 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 Company required for approval of a plan of merger in
accordance with the provisions of Company's Certificate of Incorporation and the
Delaware General Corporation Law.
(e) GOVERNMENTAL APPROVALS. Wells Fargo shall have received approval by
the Federal Reserve Board and by such other governmental agencies as may be
required by law of the transactions contemplated by this Agreement and the
Merger Agreement and all waiting and appeal periods prescribed by applicable law
or regulation shall have expired.
(f) NO RESTRAINING ORDER, ETC. 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) SHARES AUTHORIZED FOR LISTING. The shares of Wells Fargo Common Stock
to be delivered to the stockholders of Company 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) TAX OPINION. Company shall have received an opinion, dated the Closing
Date, of Wachtell, Lipton, Rosen & Katz, substantially to the effect that, for
federal income tax purposes: (i) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code; (ii) no gain or loss will be
recognized by the holders of Company Common Stock upon receipt of Wells Fargo
Common Stock, except with respect to cash received in lieu of fractional shares;
(iii) the basis of the Wells Fargo Common Stock received by the stockholders of
Company (including fractional shares deemed received and redeemed) will be the
same as the basis of Company Common Stock exchanged therefor; and (iv) the
holding period of the shares of Wells Fargo Common Stock received by the
stockholders of Company (including fractional shares deemed received and
redeemed) will include the holding period of the Company Common Stock exchanged
therefor, provided such shares of Company Common Stock were held as a capital
asset as of the Effective Time of the Merger.
(i) REGISTRATION STATEMENT EFFECTIVE; NO STOP ORDER, ETC.; BLUE SKY
AUTHORIZATIONS RECEIVED. The Registration Statement (as amended or
supplemented) shall have become effective under the Securities Act and shall not
be subject to any stop order, and no action, suit, proceeding or investigation
by the SEC to suspend the effectiveness of the Registration Statement shall have
been initiated and be continuing, or have been threatened and be unresolved.
Wells Fargo shall have received all state securities law or blue sky
authorizations necessary to carry out the transactions contemplated by this
Agreement.
(j) NO MATERIAL ADVERSE CHANGE. Since December 31, 1999, no change shall
have occurred and no circumstances shall exist which has had or might reasonably
be expected to have a Material Adverse Effect on Wells Fargo.
7. CONDITIONS PRECEDENT TO OBLIGATION OF WELLS FARGO. The obligation of
Wells Fargo to effect the Merger shall be subject to the satisfaction at or
before the Time of Filing of the following conditions, which may be waived in
writing by Wells Fargo:
(a) REPRESENTATIONS AND WARRANTIES. Except as they may be affected by
transactions contemplated hereby and except to the extent such representations
and warranties are by their express provisions made as of a specified date and
except for activities or transactions or events occurring after the date of this
Agreement made in the ordinary course of business and not expressly prohibited
by this Agreement, the representations and warranties contained in paragraph 2
hereof shall be true and correct in all respects material to Company and the
Company Subsidiaries taken as a whole as if made at the Time of Filing;
PROVIDED, HOWEVER, that for purposes of this paragraph, such representations and
warranties (other than the representations and warranties contained in
paragraph 2(c), which shall be true and correct in all material respects) shall
be deemed to be true and correct unless the failure or failures of such
representations and warranties to be so true and correct, either individually or
in the aggregate, and without giving effect to any
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qualification as to materiality set forth in such representations and
warranties, will have a Material Adverse Effect on Wells Fargo.
(b) PERFORMANCE OF COMPANY OBLIGATIONS. Company 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) STOCKHOLDER APPROVALS. 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 Company required for approval of a plan of merger in
accordance with the provisions of Company's Certificate of Incorporation and the
Delaware General Corporation Law.
(d) COMPANY'S COMPLIANCE CERTIFICATE. Wells Fargo shall have received a
favorable certificate dated as of the Effective Date of the Merger signed by the
Chairman or President and by the Secretary or Assistant Secretary of Company, as
to the matters set forth in subparagraphs (a) through (c) of this paragraph 7.
(e) GOVERNMENTAL APPROVALS. Wells Fargo shall have received approval by
all governmental agencies as may be required by law of the transactions
contemplated by this Agreement and the Merger Agreement and all waiting and
appeal periods prescribed by applicable law or regulation shall have expired. No
approvals, licenses or consents granted by any regulatory authority shall
contain any condition or requirement relating to Company or any Company
Subsidiary that, in the good faith judgment of Wells Fargo, is unreasonably
burdensome to Wells Fargo. For purposes of this paragraph 7(e), a divestiture
required as a condition to any regulatory approval shall not be deemed to be
unreasonably burdensome if such divestiture is consistent with Department of
Justice and Federal Reserve Board guidelines, policies, and practices regarding
the merger of bank holding companies that have been used in transactions that
have recently been reviewed prior to the date of this Agreement.
(f) CONSENTS, AUTHORIZATIONS, ETC. OBTAINED. Company and each Company
Subsidiary shall have obtained any and all material consents or waivers from
other parties to loan agreements, leases or other contracts material to
Company's or such Company Subsidiary's business required for the consummation of
the Merger, and Company and each Company Subsidiary shall have obtained any and
all material permits, authorizations, consents, waivers and approvals required
for the lawful consummation by it of the Merger.
(g) NO RESTRAINING ORDER, ETC. 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) POOLING OF INTERESTS OPINIONS. The Merger shall qualify as a "pooling
of interests" for accounting purposes and Wells Fargo shall have received from
KPMG and Deloitte & Touche LLP opinions to that effect.
(i) NUMBER OF OUTSTANDING SHARES. At any time since the date hereof the
total number of shares of Company Common Stock outstanding and subject to
issuance upon exercise (assuming for this purpose that phantom shares and other
share-equivalents constitute Company Common Stock) of all warrants, options,
conversion rights, phantom shares or other share-equivalents, other than any
option held by Wells Fargo, shall not have exceeded 210,00,000.
(j) REGISTRATION STATEMENT EFFECTIVE; NO STOP ORDER, ETC.; BLUE SKY
AUTHORIZATIONS RECEIVED. The Registration Statement (as amended or
supplemented) shall have become effective under the Securities Act and shall not
be subject to any stop order, and no action, suit, proceeding or investigation
by the SEC to suspend the effectiveness of the Registration Statement shall have
been initiated and be continuing, or have been threatened or be unresolved.
Wells Fargo shall have received all state securities law or blue sky
authorizations necessary to carry out the transactions contemplated by this
Agreement.
(k) [Intentionally left blank]
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<PAGE>
(l) [Intentionally left blank]
(m) [Intentionally left blank]
(n) NO MATERIAL ADVERSE CHANGE. Since December 31, 1999 except as set
forth in the Company 10-K, 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 Company.
(p) RESIGNATIONS. Company shall have delivered the resignations of each
member of its Board of Directors as of the Effective Time, and such resignations
shall not have been withdrawn.
(q) REDEMPTION OF PREFERRED STOCK. Company shall have taken all actions
necessary to redeem the Company Preferred Stock, effective prior to the
Effective Time of the Merger.
(o) COMPANY RIGHTS PLAN. At the Effective Date of the Merger, there shall
be no rights issuable or outstanding under the Rights Plan and all rights
previously outstanding shall have been redeemed in accordance with the terms of
the Rights Plan. No Person shall have become an Acquiring Person and the
Separation Time shall not have occurred (as each of such terms is defined in the
Rights Plan).
8. EMPLOYEE BENEFIT PLANS. Each person who is an employee of Company or
any Company Subsidiary as of the Effective Date of the Merger ("Company
Employees") shall be eligible for participation in the employee welfare and
retirement plans of Wells Fargo, as in effect from time to time, as follows:
(a) EMPLOYEE WELFARE BENEFIT PLANS. Each Company Employee shall be
eligible for participation in the employee welfare benefit plans of Wells Fargo
listed below subject to any eligibility requirements applicable to such plans
after taking into account paragraph 8(d) hereof, 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 (the "Benefits Conversion Date"), unless
such date would occur on or after October 1, 2000, in which case the Benefits
Conversion date would be January 1, 2001:
Medical Plan
Dental Plan
Vision Plan
Short Term Disability Plan
Long Term Disability Plan
Long Term Care Plan
Flexible Benefits Plan
Basic Group Life Insurance Plan
Group Universal Life Insurance Plan
Dependent Group Life Insurance Plan
Business Travel Accident Insurance Plan
Accidental Death and Dismemberment Plan
Salary Continuation Pay Plan
Paid Time Off Program
(b) EMPLOYEE RETIREMENT BENEFIT PLANS. As of the Benefits Conversion Date,
each Company Employee shall be eligible to participate in the Wells Fargo 401(k)
Plan (the "401(k) Plan") and the Wells Fargo Cash Balance Plan (the "Cash
Balance Plan"), subject to any eligibility requirements applicable to such plans
after taking into account paragraph 8(d) hereof. As of the Benefits Conversion
Date, each
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<PAGE>
Company Employee shall be eligible for access to Wells Fargo's retiree medical
benefit program, subject to any eligibility requirements applicable to such
benefit after taking into account paragraph 8(d) hereof.
(c) CONTINUITY OF COVERAGE. It is intended that the transition from
Company's Plans to the Wells Fargo Plans will be facilitated without gaps in
coverage to the participants or interruption in participation and without
duplication of costs to Wells Fargo. Prior to the Benefits Conversion Date, the
Company Plans as in effect of the date of this Agreement shall remain in effect
with respect to the Company Employees.
(d) SERVICE CREDIT; PRE-EXISTING CONDITIONS. From and after the Effective
Date of the Merger, Wells Fargo shall, or shall cause the surviving corporation
to, recognize the prior service with Company or the Company Subsidiaries (and
any of their predecessor entities, to the extent such service was recognized by
the Company or the Company Subsidiaries under any comparable Company Plan) of
each Company Employee in connection with the Wells Fargo Plans in which such
Company Employee is eligible to participate following the Benefits Conversion
Date, including without limitation the 401(k) Plan and the Cash Balance Plan,
for purposes of eligibility, vesting and levels of benefits, provided, that such
crediting of service shall in no event result in the duplication of benefits
with respect to the same period of service. From and after the Benefits
Conversion Date, Wells Fargo shall, or shall cause the surviving corporation to,
(i) cause any pre-existing conditions or limitations and eligibility waiting
periods under any group health plans of Wells Fargo to be waived with respect to
the Company Employees and their eligible dependents (to the extent permitted to
do so by the applicable insurance carrier) and (ii) give each Company Employee
credit for the plan year in which the Benefits Conversion Date occurs towards
applicable deductibles and annual out-of-pocket limits for expenses incurred
prior to the Benefits Conversion Date.
(e) COMPANY SEVERANCE PLAN. Notwithstanding anything to the contrary
contained in this Agreement, during the 18-month period following the Effective
Date of the Merger, Wells Fargo shall, or shall cause the surviving corporation
to, honor and continue the Company Severance Pay Plan (as amended and restated
April 3, 2000, and further amended April 9, 2000) as in effect immediately prior
to the Effective Date of the Merger; provided, however, that no Company Employee
who is a participant in any Company severance or salary continuation plan or who
has an employment agreement with the Company or any Company Subsidiary in each
case that would provide such Company Employee with severance or salary
continuation benefits after the Effective Date of the Merger shall be eligible
to participate in the Wells Fargo Salary Continuation Plan, until such time as
such Company Employee is no longer eligible or entitled to receive severance or
salary continuation benefits under such Company plan or agreement.
9. TERMINATION OF AGREEMENT.
(a) TERMINATION. This Agreement may be terminated, and the Merger may be
abandoned:
(i) Mutual Consent. At any time prior to the Effective Time of the
Merger, by mutual consent of Company and Wells Fargo, if the board of
directors of each so determines by vote of a majority of the members of its
entire board.
(ii) Breach. At any time prior to the Effective Time of the Merger, by
Company or Wells Fargo, if its board of directors of so determines by vote
of a majority of the members of its entire board, in the event of either:
(A) a breach by the other party of any representation or warranty contained
therein, which breach cannot be or has not been cured within 30 calendar
days after the giving of written notice to the breaching party of such
breach, or (B) a breach by the other party of any of the covenants or
agreements contained herein, which breach cannot be or has not been cured
within 30 calendar days after the giving of written notice to the breaching
party of such breach; provided that such breach under clause (A) or
(B) would entitle the non-breaching party not to consummate the Merger under
paragraphs 6 or 7 hereof.
(iii) Delay. At any time prior to the Effective Time of the Merger, by
Company or Wells Fargo, if its board of directors so determines by vote of a
majority of the members of its entire board, in the event that the Merger is
not consummated by December 31, 2000, except to the extent that the failure
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<PAGE>
of the Merger then to be consummated arises out of or results from the
knowing action or inaction of the party seeking to terminate pursuant to
this paragraph 9(a)(iii), which action or inaction is in violation of its
obligations under this Agreement.
(iv) No Approval. By Company or Wells Fargo, if its board of directors
of so determines by vote of a majority of the members of its entire board,
in the event that the approval of any Governmental Authority required for
consummation of the transactions contemplated by this Agreement shall have
been denied by final nonappealable action of such Governmental Authority.
(b) EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination of
this Agreement and the abandonment of the Merger pursuant to this paragraph 9,
no party to this Agreement shall have any liability or further obligation to the
other party hereto except as set forth below and except that termination will
not relieve a breaching party from liability for any breach of this Agreement
giving rise to such termination and except that paragraphs 4(g), 5(h) and 10
shall survive any termination of this Agreement.
10. EXPENSES. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by Company and Company Subsidiaries shall be borne by
Company, and all such expenses incurred by Wells Fargo shall be borne by Wells
Fargo.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, but shall not be assignable by either party hereto without the prior
written consent of the other party hereto.
12. THIRD PARTY BENEFICIARIES. Except as otherwise provided in
paragraph 5(n) hereof with respect to indemnification of directors and officers,
each party hereto intends that this Agreement shall not benefit or create any
right or cause of action in or on behalf of any person other than the parties
hereto.
13. NOTICES. Any notice or other communication provided for herein or
given hereunder to a party hereto shall be in writing and shall be
(i) delivered in person, or (ii) shall be mailed by first class registered or
certified mail, postage prepaid, or (iii) shall be sent by facsimile, or
(iv) shall be sent by reputable overnight courier service addressed as follows:
If to Wells Fargo:
Wells Fargo & Company
Sixth and Marquette
Minneapolis, Minnesota 55479
Attention: Corporate Secretary
Facsimile: (612) 667-6082
If to Company:
First Security Corporation
79 South Main Street, Second Floor
Salt Lake City, Utah 84111
Attention: Spencer F. Eccles, Chairman & CEO
Facsimile: (801) 359-6928
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<PAGE>
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52(nd) Street
New York, NY 10019
Attention: Edward D. Herlihy
Facsimile: (212) 403-2000
or to such other address with respect to a party as such party shall notify the
other in writing as above provided. Notice shall be effective upon receipt.
14. COMPLETE AGREEMENT. This Agreement, including the Exhibits and
Schedules hereto, and the Merger Agreement contain the complete agreement
between the parties hereto with respect to the Merger and other transactions
contemplated hereby and supersede all prior agreements and understandings
between the parties hereto with respect thereto.
15. CAPTIONS. The captions contained in this Agreement and the Exhibits
and Schedules hereto are for convenience of reference only and do not form a
part of this Agreement or the Exhibits or Schedules.
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 stockholders of
Company shall be made which changes in a manner adverse to such stockholders the
consideration to be provided to said stockholders pursuant to this Agreement and
the Merger Agreement.
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware without regard to the conflict
of laws provisions thereof.
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.
<TABLE>
<CAPTION>
WELLS FARGO & COMPANY FIRST SECURITY CORPORATION
- --------------------- ---------------------------------------------
<S> <C>
By: /s/ Richard M. Kovacevich By: /s/ Spencer F. Eccles
President and Chief Executive Chairman and Chief Executive
Officer Officer
</TABLE>
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<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
BETWEEN
FIRST SECURITY CORPORATION
a Delaware corporation
(the surviving corporation)
AND
[MERGER CO.]
a Delaware corporation
(the merged corporation)
This Agreement and Plan of Merger dated as of , 2000, between
FIRST SECURITY CORPORATION, a Delaware corporation (hereinafter sometimes called
"Company" and sometimes called the "surviving corporation") and [MERGER CO.], a
Delaware corporation ("Merger Co.")(said corporations being hereinafter
sometimes referred to as the "constituent corporations"),
WHEREAS, Merger Co., a wholly-owned subsidiary of Wells Fargo & Company, was
incorporated by a Certificate of Incorporation filed in the office of the
Secretary of State of the State of Delaware on , 20 , and said
corporation is now a corporation subject to and governed by the provisions of
the Delaware General Corporation Law. Merger Co. has authorized capital stock of
shares of common stock having a par value of $ per share ("Merger Co.
Common Stock"), of which shares were outstanding as of the date
hereof; and
WHEREAS, Company was incorporated by a Certificate of Incorporation filed in
the office of the Secretary of State of the State of Delaware on , 19 and
said corporation is now a corporation subject to and governed by the provisions
of the Delaware General Corporation Law. Company has authorized capital stock of
shares of Common Stock, par value $ per share ("Company Common
Stock") of which shares were outstanding and no shares were held in the
treasury as of , 19 ; and
WHEREAS, Wells Fargo & Company and Company are parties to an Agreement and
Plan of Reorganization dated as of , 2000 (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 stockholders of
said corporations that said corporations merge and that Merger Co. be merged
with and into Company, with Company continuing as the surviving corporation, on
the terms and conditions hereinafter set forth in accordance with the provisions
of the Delaware General Corporation Law, which statute permits such merger; and
WHEREAS, it is the intent of the parties to effect a merger which qualifies
as a reorganization under 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
stockholders of 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 Company pursuant to the laws of the State of Delaware, and do
hereby agree upon, prescribe and set forth the terms and conditions of the
merger of Merger Co. with and into Company, the mode of carrying said merger
into effect, the manner and basis of exchanging the shares of Company Common
Stock for shares of common stock of Wells Fargo of the par value of $1 2/3 per
share ("Wells Fargo Common
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<PAGE>
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
Company, 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 .
SECOND: The Certificate of Incorporation of Company at the time of merger
shall be amended as set forth below and, as so amended, shall be the Articles of
Incorporation of the surviving corporation until further amended according to
law:
[AMEND TO CHANGE NAME, NUMBER OF DIRECTORS, ETC.]
THIRD: The By-Laws of Company 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 directors of Merger Co. at the time of merger shall be and
remain the directors of the surviving corporation and shall hold office from the
time of merger until their respective successors are elected and qualify.
FIFTH: The officers of Merger Co. at the time of merger shall be and remain
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.
SIXTH: The manner and basis of converting the shares of Company Common Stock
into cash or shares of Wells Fargo Common Stock shall be as follows:
1. Each of the shares of Company Common Stock outstanding immediately
prior to the time of merger 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 the right to receive shares of Wells Fargo Common
Stock.
2. As soon as practicable after the merger becomes effective, each
holder of a certificate which, prior to the effective time of the merger,
represented shares of Company 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 representing the number of whole
shares of Wells Fargo Common Stock to which such holder shall be entitled on
the basis set forth in paragraph 1 above. Until so surrendered each
certificate which, immediately prior to the time of merger, represented
shares of Company Common Stock shall not be transferable on the books of the
surviving corporation but shall be deemed to evidence only the right to
receive (except for the payment of dividends as provided below) the number
of whole shares of Wells Fargo Common Stock issuable on the basis above set
forth; provided, however, until the holder of such certificate for Company
Common Stock shall have surrendered the same as above set forth, no dividend
payable to holders of record of Wells Fargo Common Stock as of any date
subsequent to the effective date of merger shall be paid to such holder with
respect to the shares of Wells Fargo Common Stock, if any, issuable in
connection with the merger, but, upon surrender and exchange thereof as
herein provided, there shall be paid by the surviving corporation or the
Agent to the record holder of such certificate representing Wells Fargo
Common Stock issued in exchange therefor an amount with respect to such
shares of Wells Fargo Common Stock equal to all dividends that shall have
been paid or become payable to holders of record of Wells Fargo Common Stock
between the effective date of merger and the date of such exchange.
3. If between the date of the Reorganization Agreement and the time of
merger, shares of Wells Fargo Common Stock shall be changed into a different
number of shares or a different class of shares
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<PAGE>
by reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or if a stock dividend thereon shall be
declared with a record date within such period, then the number of shares of
Wells Fargo Common Stock, if any, into which a share of Company Common Stock
shall be converted on the basis above set forth, will be appropriately and
proportionately adjusted so that the number of such shares of Wells Fargo
Common Stock into which a share of Company Common Stock shall be converted
will equal the number of shares of Wells Fargo Common Stock which the
holders of shares of Company Common Stock would have received pursuant to
such reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or stock dividend had the record date therefor been
immediately following the time of merger.
4. No fractional shares of Wells Fargo Common Stock and no certificates
or scrip certificates therefor shall be issued to represent any such
fractional interest, and any holder of a fractional interest shall be paid
an amount of cash equal to the product obtained by multiplying the
fractional share interest to which such holder is entitled by the average of
the closing prices of a share of Wells Fargo Common Stock on the New York
Stock Exchange as reported by Bloomberg for each of the five (5) trading
days immediately preceding the meeting of stockholders held to vote on the
merger.
5. Each share of Merger Co. Common Stock issued and outstanding at the
time of merger shall be converted into and exchanged for shares 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 Delaware;
provided, however, that all of the following actions shall have been taken
in the following order:
a. This Agreement shall be approved and adopted on behalf of Merger
Co. and Company in accordance with the Delaware General Corporation Law;
and
b. A certificate of merger (which may have this Agreement attached
thereto) with respect to the merger, setting forth the information
required by the Delaware General Corporation Law, shall be executed by
the President or a Vice President of Merger Co. and by the Secretary or
an Assistant Secretary of Merger Co., and by the President or a Vice
President of Company and by the Secretary or an Assistant Secretary of
Company, and shall be filed in the office of the Secretary of State of
the State of Delaware in accordance with the Delaware General Corporation
Law.
2.The merger shall become effective as of 11:59 p.m. (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 Company shall continue as the surviving
corporation.
2. The merger shall have the other effects prescribed by Section 259 of
the Delaware General Corporation Law.
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
Delaware shall be , and the name of the registered agent of
Company at such address is .
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
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<PAGE>
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 Company 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 among the parties hereto shall
be governed by and construed in accordance with the laws of the State of
Delaware.
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 the State of Delaware, subject to the provisions of
the Reorganization Agreement this Agreement may be terminated upon approval
by the Boards of Directors of either of the constituent corporations
notwithstanding the approval of the stockholders of either constituent
corporation.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement and Plan of
Merger to be signed in their respective corporate names by the undersigned
officers and their respective corporate seals to be affixed hereto, pursuant to
authority duly given by their respective Boards of Directors, all as of the day
and year first above written.
FIRST SECURITY CORPORATION
By: __________________________
Its: __________________________
[MERGER CO.]
By: __________________________
Its: __________________________
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<PAGE>
EXHIBIT B
Wells Fargo & Company
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479
Attention: Corporate Secretary
Gentlemen:
I have been advised that I might be considered to be an "affiliate," as that
term is defined for purposes of paragraphs (c) and (d) of Rule 145 ("Rule 145")
promulgated by the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act") of FIRST SECURITY
CORPORATION, a Delaware corporation ("Company").
Pursuant to an Agreement and Plan of Reorganization, dated as of April 9,
2000, (the "Reorganization Agreement"), between Company and Wells Fargo &
Company, a Delaware corporation ("Wells Fargo") it is contemplated that a
wholly-owned subsidiary of Wells Fargo will merge with and into Company (the
"Merger") and as a result, I will receive in exchange for each share of Common
Stock, par value $1.25 per share, of Company ("Company Common Stock") owned by
me immediately prior to the Effective Time of the Merger (as defined in the
Reorganization Agreement), a number of shares of Common Stock, par value $1 2/3
per share, of Wells Fargo ("Wells Fargo Common Stock"), as more specifically set
forth in the Reorganization Agreement.
I hereby agree as follows:
I will not offer to sell, transfer or otherwise dispose of any of the shares
of Company Common Stock or Wells Fargo Common Stock held by me during the
30 days prior to the Effective Time of the Merger.
I will not offer to sell, transfer or otherwise dispose of any of the shares
of Wells Fargo Common Stock issued to me pursuant to the Merger (the "Stock")
except (a) in compliance with the applicable provisions of Rule 145, (b) in a
transaction that is otherwise exempt from the registration requirements of the
Securities Act, or (c) in an offering registered under the Securities Act.
I will not sell, transfer or otherwise dispose of any Wells Fargo Common
Stock or in any way reduce my risk relative to any shares of any Wells Fargo
Common Stock issued to me pursuant to the Merger until such time as financial
results covering at least 30 days of post-Merger combined operations of Company
and Wells Fargo have been published.
I consent to the endorsement of the Stock issued to me pursuant to the
Merger with a restrictive legend which will read substantially as follows:
"The shares represented by this certificate were issued in a transaction to
which Rule 145 promulgated under the Securities Act of 1933, as amended (the
"Act"), applies, and may be sold or otherwise transferred only in compliance
with the limitations of such Rule 145, or upon receipt by Wells Fargo & Company
of an opinion of counsel reasonably satisfactory to it that some other exemption
from registration under the Act is available, or pursuant to a registration
statement under the Act."
Wells Fargo's transfer agent shall be given an appropriate stop transfer
order and shall not be required to register any attempted transfer of the shares
of the Stock, unless the transfer has been effected in compliance with the terms
of this letter agreement.
It is understood and agreed that this letter agreement shall terminate and
be of no further force and effect and the restrictive legend set forth above
shall be removed by delivery of substitute certificates without such legend, and
the related stop transfer restrictions shall be lifted forthwith, if (a) (i) any
such
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<PAGE>
shares of Stock shall have been registered under the Securities Act for sale,
transfer or other disposition by me or on my behalf and are sold, transferred or
otherwise disposed of, or (ii) any such shares of Stock are sold in accordance
with the provisions of paragraphs (c), (e), (f) and (g) of Rule 144 promulgated
under the Securities Act, or (iii) I am not at the time of such disposition an
affiliate of Wells Fargo and have been the beneficial owner of the Stock for at
least one year (or such other period as may be prescribed thereunder) and Wells
Fargo has filed with the Commission all of the reports it is required to file
under the Securities Exchange Act of 1934, as amended, during the preceding
twelve months, or (iv) I am not and have not been for at least three months an
affiliate of Wells Fargo and have been the beneficial owner of the Stock for at
least two years (or such other period as may be prescribed by the Securities
Act, and the rules and regulations promulgated thereunder), or (v) Wells Fargo
shall have received an opinion of counsel acceptable to Wells Fargo to the
effect that the stock transfer restrictions and the legend are not required, and
(b) financial results covering at least 30 days of post-Merger combined
operations have been published.
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 Company
Common Stock, Wells Fargo Common Stock or the Stock, to the extent I felt
necessary, with my counsel or counsel for Company.
Sincerely,
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<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 9, 2000, between Wells Fargo &
Company, a Delaware corporation ("GRANTEE"), and First Security Corporation, a
Delaware corporation ("ISSUER") (this "Agreement" or "Stock Option Agreement").
RECITALS
A. MERGER AGREEMENT. Grantee and Issuer have entered into an Agreement and
Plan of Reorganization, dated as of April 9, 2000 (the "MERGER AGREEMENT"),
which agreement has been executed by the parties hereto immediately prior to
this Stock Option Agreement; and
B. OPTION. As a condition to Grantee's entering into the Merger Agreement
and in consideration therefor and in consideration for the option granted to
Issuer by Grantee pursuant to an option agreement dated as of the date hereof,
Issuer has agreed to grant Grantee the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "OPTION") to purchase, subject to the terms hereof, up to an aggregate of
41,551,200 fully paid and nonassessable shares of the common stock, par value
$1.25 per share, of Issuer ("COMMON STOCK") at a price per share equal to the
average of the last reported sale prices per share of Common Stock as reported
on the NASDAQ National Market (as reported in THE WALL STREET JOURNAL or, if not
reported therein, in another authoritative source) on April 7, 2000 and
April 10, 2000; PROVIDED, HOWEVER, that in no event shall the number of shares
for which this Option is exercisable exceed 19.9% of the issued and outstanding
shares of Common Stock. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in the
second sentence of Section 5 hereof), the number of shares of Common Stock
subject to the Option shall be increased so that, after such issuance, such
number together with any shares of Common Stock previously issued pursuant
hereto, equals 19.9% of the number of shares of Common Stock then issued and
outstanding without giving effect to any shares subject or issued pursuant to
the Option. Nothing contained in this Section l(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer to issue shares in breach of any
provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in whole
or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), PROVIDED that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six (6) months following such Subsequent Triggering Event (or such later period
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section 9(a)(ii) of the Merger Agreement (a
"LISTED TERMINATION"); or (iii) the passage of eighteen (18) months (or such
longer period as provided in Section 10) after termination of the Merger
Agreement if such termination follows the occurrence of an Initial Triggering
Event or is a Listed Termination. The term "HOLDER" shall mean the holder or
holders of the Option. Notwithstanding anything to the contrary contained
herein, the Option may not be exercised at any time when Grantee shall be in
material breach of any of its covenants or agreements contained in the Merger
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Agreement such that Issuer shall be entitled to terminate the Merger Agreement
pursuant to Section 9(a)(ii) thereof. Anything to the contrary notwithstanding,
at no point may the Option be exercised, as a whole or in part, to the extent
that such exercise (or the acquisition of Option Shares thereunder) would, if it
occurred on the date hereof, be inconsistent with any provision of the Merger
Agreement.
(c) The term "INITIAL TRIGGERING EVENT" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any of its Significant Subsidiaries (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) (the "ISSUER SUBSIDIARIES"), without having received
Grantee's prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as hereinafter defined) with any
person (the term "PERSON" for purposes of this Agreement having the meaning
assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "1934 ACT"), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries (each a "GRANTEE
SUBSIDIARY") or the Board of Directors of Issuer (the "ISSUER BOARD") shall
have recommended that the stockholders of Issuer approve or accept any
Acquisition Transaction other than as contemplated by the Merger Agreement.
For purposes of this Agreement, (a) "ACQUISITION TRANSACTION" shall mean
(x) a merger or consolidation, or any similar transaction, involving Issuer
or any Issuer Subsidiary (other than mergers, consolidations or similar
transactions involving solely Issuer and/or one or more wholly-owned
Subsidiaries of the Issuer, PROVIDED, any such transaction is not entered
into in violation of the terms of the Merger Agreement), (y) a purchase,
lease or other acquisition of all or any substantial part of the assets or
deposits of Issuer or any Issuer Subsidiary, or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power of
Issuer or any Issuer Subsidiary and (b) "SUBSIDIARY" shall have the meaning
set forth in Rule 12b-2 under the 1934 Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary shall
have acquired beneficial ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding shares of Common Stock (the term
"BENEFICIAL OWNERSHIP" for purposes of this Agreement having the meaning
assigned thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iii) The stockholders of Issuer shall have voted and failed to approve
the Merger Agreement and the Merger at a meeting which has been held for
that purpose or any adjournment or postponement thereof, or such meeting
shall not have been held in violation of the Merger Agreement or shall have
been canceled prior to termination of the Merger Agreement if, prior to such
meeting (or if such meeting shall not have been held or shall have been
canceled, prior to such termination), it shall have been publicly announced
that any person (other than Grantee or any of its Subsidiaries) shall have
made, or disclosed an intention to make, a proposal to engage in an
Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn, modified or qualified (or
publicly announced its intention to withdraw, modify or qualify) in any
manner adverse in any respect to Grantee its recommendation that the
shareholders of Issuer approve the transactions contemplated by the Merger
Agreement, or Issuer or any Issuer Subsidiary shall have authorized,
recommended, proposed (or publicly announced its intention to authorize,
recommend or propose) an agreement to engage in an Acquisition Transaction
with any person other than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall have
filed with the SEC a registration statement or tender offer materials with
respect to a potential exchange or tender offer that would constitute an
Acquisition Transaction (or filed a preliminary proxy statement with the SEC
with respect to a potential vote by its shareholders to approve the issuance
of shares to be offered in such an exchange offer);
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(vi) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of an Acquisition
Transaction, and following such breach Grantee would be entitled to
terminate the Merger Agreement (whether immediately or after the giving of
notice or passage of time or both); or
(vii) Any person other than Grantee or any Grantee Subsidiary, without
Grantee's prior written consent, shall have filed an application or notice
with the Board of Governors of the Federal Reserve System (the "FEDERAL
RESERVE BOARD") or other federal or state bank regulatory or antitrust
authority, which application or notice has been accepted for processing, for
approval to engage in an Acquisition Transaction.
(c) The term "SUBSEQUENT TRIGGERING EVENT" shall mean any of the following
events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 25% or more of the then outstanding
Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) of the second sentence thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event (together, a "TRIGGERING
EVENT"), it being understood that the giving of such notice by Issuer shall not
be a condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the Option
(or any portion thereof), it shall send to Issuer a written notice (the date of
which being herein referred to as the "NOTICE DATE") specifying (i) the total
number of shares it will purchase pursuant to such exercise and (ii) a place and
date not earlier than three business days nor later than 60 business days from
the Notice Date for the closing of such purchase (the "CLOSING DATE"); PROVIDED,
that if prior notification to or approval of the Federal Reserve Board or any
other regulatory or antitrust agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and
(ii) present and surrender this Agreement to Issuer at its principal executive
offices, PROVIDED that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder hereof
and Issuer and to resale restrictions arising under the
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Securities Act of 1933, as amended. A copy of such agreement is on file at
the principal office of Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 ACT") in the
above legend shall be removed by delivery of substitute certificate(s) without
such reference if the Holder shall have delivered to Issuer a copy of a letter
from the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions of
this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference in the opinion
of counsel to the Holder, in form and substance reasonably satisfactory to the
Issuer; and (iii) the legend shall be removed in its entirety if the conditions
in the preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state or other federal banking law, prior approval
of or notice to the Federal Reserve Board or to any state or other federal
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "AGREEMENT" and "OPTION" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
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Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5. In the event of any change in Common Stock by
reason of a stock dividend, stock split, split-up, recapitalization, stock
combination, exchange of shares or similar transaction, the type and number of
shares or securities subject to the Option, and the Option Price therefor, shall
be adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction so that Grantee shall receive, upon exercise of the
Option, the number and class of shares or other securities or property that
Grantee would have received in respect of Common Stock if the Option had been
exercised immediately prior to such event, or the record date therefor, as
applicable. If any additional shares of Common Stock are issued after the date
of this Agreement (other than pursuant to an event described in the second
sentence of this Section 5), the number of shares of Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding, without giving
effect to any shares subject to or issued pursuant to the Option.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of Grantee delivered
within twelve (12) months (or such later period as provided in Section 10) of
such Subsequent Triggering Event (whether on its own behalf or on behalf of any
subsequent holder of this Option (or part thereof) or any of the shares of
Common Stock issued pursuant hereto), promptly prepare, file and keep current a
registration statement under the 1933 Act covering any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("OPTION SHARES") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
PROVIDED, HOWEVER, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 33 1/3% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and PROVIDED FURTHER, HOWEVER, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration and the twelve (12) month period
referred to in the first sentence of this section shall be increased to
twenty-four (24) months. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of
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representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements for Issuer. Upon receiving any request
under this Section 6 from any Holder, Issuer agrees to send a copy thereof to
any other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall the
number of registrations that Issuer is obligated to effect be increased by
reason of the fact that there shall be more than one Holder as a result of any
assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "OPTION REPURCHASE PRICE") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "OWNER"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "OPTION SHARE REPURCHASE PRICE") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "MARKET/OFFER
PRICE" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office, a
copy of this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase this Option and/or
the Option Shares in accordance with the provisions of this Section 7. The
Holder shall also represent and warrant that it has sole record and beneficial
ownership of such Option Shares and that such Option Shares are then free and
clear of all liens. As promptly as practicable, and in any event within five
(5) business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices relating
thereto, Issuer shall deliver or cause to be delivered to the Holder the Option
Repurchase Price and/or to the Owner the Option Share Repurchase Price therefor
or the portion thereof that Issuer is not then prohibited under applicable law
and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five (5) business days
after the date on which Issuer is no longer so prohibited; PROVIDED, HOWEVER,
that if Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from
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delivering to the Holder and/or the Owner, as appropriate, the Option Repurchase
Price and the Option Share Repurchase Price, respectively, in full (and Issuer
hereby undertakes to use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to accomplish such repurchase), the Holder or Owner may
revoke its notice of repurchase of the Option and/or the Option Shares whether
in whole or to the extent of the prohibition, whereupon, in the latter case,
Issuer shall promptly (i) deliver to the Holder and/or the Owner, as
appropriate, that portion of the Option Repurchase Price and/or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Holder, a new Agreement
evidencing the right of the Holder to purchase that number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock for which the
surrendered Agreement was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Option Repurchase Price
less the portion thereof theretofore delivered to the Holder and the denominator
of which is the Option Repurchase Price, and/or (B) to the Owner, a certificate
for the Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by Issuer
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Holder shall nonetheless have the right to exercise the
Option until the expiration of such 30-day period.
(d) For purposes of this Agreement, a "REPURCHASE EVENT" shall be deemed to
have occurred upon the occurrence of any of the following events or transactions
after the date hereof:
(i) the acquisition by any person (other than Grantee or any Grantee
Subsidiary) of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in
clause (z) shall be 25%.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquirer in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share equivalents
of the merged or acquiring company, or (iii) to sell or otherwise transfer all
or a substantial part of its or any Issuer Subsidiary's assets or deposits to
any person, other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "SUBSTITUTE OPTION"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "ACQUIRING CORPORATION" shall mean (i) the continuing or surviving
person of a consolidation or merger with Issuer (if other than Issuer),
(ii) the acquiring person in a plan of exchange in which Issuer is acquired,
(iii) the Issuer in a merger or plan of exchange in which Issuer is the
continuing or surviving or acquiring person and (iv) the transferee of all
or a substantial part of Issuer's assets or deposits (or the assets or
deposits of any Issuer Subsidiary).
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(ii) "SUBSTITUTE COMMON STOCK" shall mean the common stock issued by the
issuer of the Substitute Option upon exercise of the Substitute Option.
(iii) "ASSIGNED VALUE" shall mean the market/offer price, as defined in
Section 7.
(iv) "AVERAGE PRICE" shall mean the average closing price of a share of
the Substitute Common Stock for one (1) year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; PROVIDED that if Issuer is the issuer of
the Substitute Option, the Average Price shall be computed with respect to a
share of common stock issued by the person merging into Issuer or by any
company which controls or is controlled by such person, as the Holder may
elect.
(c) The Substitute Option shall have the same terms as the Option, PROVIDED
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute Option
in substantially the same form as this Agreement (after giving effect for such
purpose to the provisions of Section 9), which agreement shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "SUBSTITUTE OPTION ISSUER")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"SUBSTITUTE OPTION HOLDER"), the issuer of the Substitute Option (the
"SUBSTITUTE OPTION ISSUER") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "SUBSTITUTE OPTION REPURCHASE PRICE")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "SUBSTITUTE SHARE
OWNER") of shares of Substitute Common Stock (the "SUBSTITUTE SHARES"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"SUBSTITUTE SHARE REPURCHASE PRICE") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "HIGHEST
CLOSING PRICE" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
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<PAGE>
(c) The Substitute Option Holder and the Substitute Share Owner, as the case
may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five (5) business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
PROVIDED, HOWEVER, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute Option until
the expiration of such 30-day period.
10. The periods for exercise of certain rights under Sections 2, 6, 7, 9 and
14 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights (for so long as the Holder, Owner,
Substitute Option Holder or Substitute Share Owner, as the case may be, is using
commercially reasonable efforts to obtain such regulatory approvals), and for
the expiration of all statutory waiting periods; (ii) to the extent necessary to
avoid liability under Section 16(b) of the 1934 Act by reason
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<PAGE>
of such exercise; and (iii) when there exists an injunction, order or judgment
that prohibits or delays exercise of such right.
11. (a) Issuer hereby represents and warrants to Grantee as follows:
(i) Issuer has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized
by the Issuer Board prior to the date hereof and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This Agreement has been
duly and validly executed and delivered by Issuer.
(ii) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock
at any time and from time to time issuable hereunder, and all such shares,
upon issuance pursuant thereto, will be duly authorized, validly issued,
fully paid, nonassessable, and will be delivered free and clear of all
claims, liens, encumbrance and security interests and not subject to any
preemptive rights.
(b) Grantee hereby represents and warrants to Issuer as follows: Grantee has
the requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement by the Grantee and the performance of its obligations
hereunder by the Grantee have been duly and validly authorized by the Board of
Directors of Grantee and no other corporate proceedings on the part of the
Grantee are necessary to authorize this Agreement or for Grantee to perform its
obligations hereunder. This Agreement has been duly and validly executed and
delivered by Grantee.
(c) This Option is not being, and any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be, acquired with a
view to the public distribution thereof and will not be transferred or otherwise
disposed or except in a transaction registered or exempt from registration under
the 1933 Act.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event an Initial Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; PROVIDED, HOWEVER,
that until the date fifteen (15) days following the date on which the Federal
Reserve Board has approved an application by Grantee to acquire the shares of
Common Stock subject to the Option, Grantee may not assign its rights under the
Option except in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in excess of 2%
of the voting shares of Issuer, (iii) an assignment to a single party (e.g., a
broker or investment banker) for the purpose of conducting a widely dispersed
public distribution on Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board.
13. Each of Grantee and Issuer will use its reasonable best efforts to make
all filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including, without limitation, applying to the Federal Reserve
Board under the BHCA for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.
14. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the Option (together with any Option Shares
issued to and then owned by Grantee) to Issuer in exchange for a cash
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<PAGE>
fee equal to the Surrender Price. The "SURRENDER PRICE" shall be equal to
$100 million (i) plus, if applicable, Grantee's purchase price with respect to
any Option Shares and (ii) minus, if applicable, the excess of (A) the net
price, if any, received by Grantee or a Grantee Subsidiary pursuant to the sale
of Option Shares (or any other securities into which such Option Shares were
converted or exchanged) to any unaffiliated party, over (B) Grantee's purchase
price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 14 by surrendering to Issuer, at its principal
office, a copy of this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 14 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five (5) business days after the date on which Issuer is no longer so
prohibited; PROVIDED, HOWEVER, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 14 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall
(A) use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five (5) days of the submission or receipt of
any documents relating to any such regulatory and legal approvals, provide
Grantee with copies of the same and (c) keep Grantee advised of both the status
of any such request for regulatory and legal approvals, as well as any
discussions with any relevant regulatory or other third party reasonably related
to the same and (ii) Grantee may revoke such notice of surrender by delivery of
a notice of revocation to Issuer and, upon delivery of such notice of
revocation, the Exercise Termination Date shall be extended to a date six
(6) months from the date on which the Exercise Termination Date would have
occurred if not for the provisions of this Section 14(c) (during which period
Grantee may exercise any of its rights hereunder, including any and all rights
pursuant to this Section 14).
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith, both
parties waive the posting of any bond or similar requirement.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or
Section 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to the conflict of law principles
thereof (except to the extent that mandatory provisions of federal law are
applicable).
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<PAGE>
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
<TABLE>
<S> <C> <C> <C>
WELLS FARGO & COMPANY FIRST SECURITY CORPORATION
/s/ RICHARD M. KOVACEVICH /s/ SPENCER F. ECCLES
---------------------------- ----------------------------
By: By:
President and Chief Executive Officer Chairman and Chief Executive Officer
Title: Title:
</TABLE>
[Stock Option Agreement]
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<PAGE>
APPENDIX C
, 2000
Board of Directors
First Security Corporation
79 S. Main Street
Salt Lake City, Utah 84111
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the stockholders of First Security Corporation (the "Company") of the
Exchange Ratio (as defined below) in connection with the proposed merger (the
"Merger") of the Company with Wells Fargo & Company ("Wells Fargo"). Pursuant to
the Agreement and Plan of Reorganization, dated as of April 9, 2000 (the
"Agreement"), by and between the Company and Wells Fargo, a wholly-owned
subsidiary of Wells Fargo will merge with and into the Company, with the result
that the Company will become a wholly-owned subsidiary of Wells Fargo and each
share of common stock, par value $1.25 per share, of the Company issued and
outstanding immediately prior to the effective time of the Merger will be
converted into the right to receive 0.355 of a share (the "Exchange Ratio") of
common stock, par value $1 2/3 per share, of Wells Fargo (the "Wells Fargo
Common Stock").
In arriving at our opinion, we have reviewed (i) the Agreement; (ii) the Proxy
Statement-Prospectus of the Company and Wells Fargo relating to the Merger;
(iii) certain publicly available information concerning the businesses of the
Company and Wells Fargo and of certain other companies engaged in businesses
comparable to those of the Company and Wells Fargo, and the reported market
prices for certain other companies' securities deemed comparable; (iv) publicly
available terms of certain transactions involving companies comparable to the
Company and Wells Fargo and the consideration received for such companies;
(v) current and historical market prices of the Company Common Stock and the
Wells Fargo Common Stock; (vi) the audited financial statements of the Company
for the fiscal years ended December 31, 1995, 1996, 1997, 1998 and 1999, the
audited financial statements of Wells Fargo for the fiscal years ended
December 31, 1998 and 1999, and the unaudited financial statements of the
Company and Wells Fargo for the period ended March 31, 2000; (vii) certain other
communications from the Company to its stockholders, including communications
(and related documents) relating to the proposed merger with Zions
Bancorporation which was terminated on April 1, 2000; (viii) certain internal
financial analyses and forecasts prepared by the Company and its management;
(ix) the terms of other business combinations that we deemed relevant.
In addition, we have held discussions with certain members of the management of
the Company and Wells Fargo with respect to certain aspects of the Merger, the
past and current business operations of the Company and Wells Fargo, the
financial condition and future prospects and operations of the Company and Wells
Fargo, the effects of the Merger on the financial condition and future prospects
of the Company and Wells Fargo, and certain other matters we believed necessary
or appropriate to our inquiry. We have reviewed such other financial studies and
analyses and considered such other information as we deemed appropriate for the
purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company and Wells Fargo or otherwise
reviewed by us, and we have not assumed any responsibility or liability
therefor. We have not conducted any valuation or appraisal of any assets or
liabilities, nor have any such valuations or appraisals been provided to us. We
have not been requested to review individual credit files or make any
independent assessment as to the future performance or non-performance of the
Company's or Wells Fargo's assets. We have assumed that current allowances and
reserves for loan losses for both the Company and Wells Fargo are sufficient to
cover all such losses. In relying on financial analyses and forecasts
C-1
<PAGE>
provided or confirmed to us, we have assumed that they have been reasonably
prepared based on assumptions reflecting the best currently available estimates
and judgments by management as to the expected future results of operations and
financial condition of the Company and Wells Fargo to which such analyses or
forecasts relate. We have also assumed that, in the course of obtaining
regulatory and third party consents for the Merger and the other transactions
contemplated by the Agreement and the Proxy Statement-Prospectus, no restriction
will be imposed that will have a material adverse effect on the future results
of operations or financial condition of the Company or Wells Fargo. We have
further assumed that the Merger will be accounted for as a pooling-of-interests
under generally accepted accounting principles and that it will qualify as a
tax-free reorganization for U.S. federal income tax purposes. We have relied as
to all legal matters relevant to rendering our opinion upon the advice of
counsel.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect this opinion and
that we do not have any obligation to update, revise, or reaffirm this opinion.
We are expressing no opinion herein as to the price at which the Wells Fargo
Common Stock will trade at any future time. In providing financial advisory
services to the Company relative to the proposed Merger, we were not requested
to, and did not, solicit third party indications of interest in acquiring all or
any portion of the Company.
We have acted as financial advisor to the Company with respect to the proposed
Merger and will receive a fee from the Company for our services which is
contingent upon the consummation of the Merger and is net of the $250,000
engagement fee we received in connection with the financial advice we provided
to the Company relative to its proposed merger with Zions Bancorporation, which
transaction was terminated on April 1, 2000.
In the past, J.P. Morgan Securities Inc. and its affiliates have provided
financial advisory, capital markets and commercial banking services to the
Company, for which they have received customary fees. In the ordinary course of
their businesses, J.P. Morgan Securities Inc. and its affiliates may actively
trade the debt and equity securities of the Company or Wells Fargo for their own
account or for the accounts of customers and, accordingly, they may at any time
hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the date
hereof that the Exchange Ratio in the proposed Merger is fair, from a financial
point of view, to the Company's stockholders.
This letter is provided to the Board of Directors of the Company in connection
with and for the purposes of its evaluation of the Merger. This opinion does not
constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote with respect to the Merger. This opinion may not be
disclosed, referred to, or communicated (in whole or in part) to any third party
for any purpose whatsoever except with our prior written consent in each
instance. This opinion may be reproduced in full in any proxy or information
statement mailed to stockholders of the Company but may not otherwise be
disclosed publicly in any manner without our prior written approval and must be
treated as confidential.
Very truly yours,
J.P. MORGAN SECURITIES INC.
MD CEN 106121
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes
indemnification of directors and officers of a Delaware corporation under
certain circumstances against expenses, judgments and the like in connection
with an action, suit or proceeding. Article Fourteenth of the Registrant's
Restated Certificate of Incorporation provides for broad indemnification of
directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. See Exhibit Index.
(b) Financial Statement Schedules. Not Applicable.
(c) Report, Opinion or Appraisal. See Exhibits 5.1 and 8.1
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
posteffective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities
Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) (Section230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price represent no more
than 20% change in the maximum offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such posteffective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a posteffective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
<PAGE>
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of San Francisco, state of
California, on May 24, 2000.
<TABLE>
<S> <C> <C>
WELLS FARGO & COMPANY
By: /s/ RICHARD M. KOVACEVICH
-----------------------------------------
Richard M. Kovacevich
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on May 24, 2000 by the following persons
in the capacities indicated:
<TABLE>
<S> <C>
/s/ RICHARD M. KOVACEVICH President and Chief Executive Officer
- ------------------------------------------- (Principal Executive Officer)
Richard M. Kovacevich
/s/ ROSS J. KARI Executive Vice President and Chief
- ------------------------------------------- Financial Officer
Ross J. Kari (Principal Financial Officer)
/s/ LES L. QUOCK Senior Vice President and Controller
- ------------------------------------------- (Principal Accounting Officer)
Les L. Quock
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
LES S. BILLER ) RICHARD D. McCORMICK )
J.A. BLANCHARD III ) CYNTHIA H. MILLIGAN )
MICHAEL R. BOWLIN ) BENJAMIN F. MONTOYA )
DAVID A. CHRISTENSEN ) PHILIP J. QUIGLEY )
SUSAN E. ENGEL ) DONALD B. RICE )
PAUL HAZEN ) JUDITH M. RUNSTAD ) A majority of
ROBERT L. JOSS ) SUSAN G. SWENSON ) the Board of
REATHA CLARK KING ) CHANG-LIN TIEN ) Directors*
RICHARD M. KOVACEVICH ) MICHAEL W. WRIGHT )
</TABLE>
- ------------------------
* Richard M. Kovacevich, by signing his name hereto, does hereby sign this
document on behalf of each of the directors named above pursuant to powers
of attorney duly executed by such persons.
/s/ RICHARD M. KOVACEVICH
-------------------------------------------------------------------------
Richard M. Kovacevich
Attorney-in-Fact
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
2.1 Agreement and Plan of Reorganization, dated as of April 9,
2000, by and between First Security Corporation and Wells
Fargo & Company, included as Appendix A to the accompanying
proxy statement-prospectus.
3.1 Restated Certificate of Incorporation, incorporated by
reference to Exhibit 3(b) to the Registrant's Current Report
on Form 8-K dated June 28, 1993. Certificates of Amendment
of Certificate of Incorporation, incorporated by reference
to Exhibit 3 to the Registrant's Current Report on Form 8-K
dated July 3, 1995 (authorizing preference stock), and
Exhibits 3(b) and 3(c) to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998
(changing the Registrant's name and increasing authorized
common and preferred stock, respectively).
3.2 Certificate of Change of Location of Registered Office and
Change of Registered Agent, incorporated by reference to
Exhibit 3(b) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999.
3.3 Certificate of Designations for the Registrant's ESOP
Cumulative Convertible Preferred Stock, incorporated by
reference to Exhibit 4 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1994.
3.4 Certificate of Designations for the Registrant's 1995 ESOP
Cumulative Convertible Preferred Stock, incorporated by
reference to Exhibit 4 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1995.
3.5 Certificate Eliminating the Certificate of Designations for
the Registrant's Cumulative Convertible Preferred Stock,
Series B, incorporated by reference to Exhibit 3(a) to the
Registrant's Current Report on Form 8-K dated November 1,
1995.
3.6 Certificate Eliminating the Certificate of Designations for
the Registrant's 10.24% Cumulative Preferred Stock,
incorporated by reference to Exhibit 3 to the Registrant's
Current Report on Form 8-K dated February 20, 1996.
3.7 Certificate of Designations for the Registrant's 1996 ESOP
Cumulative Convertible Preferred Stock, incorporated by
reference to Exhibit 3 to the Registrant's Current Report on
Form 8-K dated February 26, 1996.
3.8 Certificate of Designations for the Registrant's 1997 ESOP
Cumulative Convertible Preferred Stock, incorporated by
reference to Exhibit 3 to the Registrant's Current Report on
Form 8-K dated April 14, 1997.
3.9 Certificate of Designations for the Registrant's 1998 ESOP
Cumulative Convertible Preferred Stock, incorporated by
reference to Exhibit 3 to the Registrant's Current Report on
Form 8-K dated April 20, 1998.
3.10 Certificate of Designations for the Registrant's Adjustable
Cumulative Preferred Stock, Series B, incorporated by
reference to Exhibit 3(j) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1998.
3.11 Certificate of Designations for the Registrant's
Fixed/Adjustable Rate Noncumulative Preferred Stock, Series
H, incorporated by reference to Exhibit 3(k) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
3.12 Certificate of Designations for the Registrant's Series C
Junior Participating Preferred Stock, incorporated by
reference to Exhibit 3(l) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1998.
3.13 Certificate Eliminating the Certificate of Designations for
the Registrant's Series A Junior Participating Preferred
Stock, incorporated by reference to Exhibit 3(a) to the
Registrant's Current Report on Form 8-K dated April 21,
1999.
3.14 Certificate of Designations for the Registrant's 1999 ESOP
Cumulative Convertible Preferred Stock, incorporated by
reference to Exhibit 3(b) to the Registrant's Current Report
on Form 8-K dated April 21, 1999.
3.15 Certificate of Designations for the Registrant's 2000 ESOP
Cumulative Convertible Preferred Stock, incorporated by
reference to Exhibit 3(o) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000.
3.16 By-Laws, incorporated by reference to Exhibit 3(m) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998.
4.1 See Exhibits 3.1 through 3.16.
4.2 Rights Agreement, dated as of October 21, 1998, between the
Registrant and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent, incorporated by reference to Exhibit 4.1 to
the Registrant's Registration Statement on Form 8-A dated
October 21, 1998.
5.1 Opinion of Stanley S. Stroup as to the legality of the
shares to be issued (including consent).
8.1 Opinion of Wachtell, Lipton, Rosen & Katz regarding tax
matters (including consent).
23.2 Consent of KPMG LLP relating to the audited financial
statements of Wells Fargo & Company.
23.3 Consent of Deloitte & Touche LLP relating to the audited
financial statements of First Security Corporation.
23.4 Consent of Wachtell, Lipton, Rosen & Katz regarding its tax
opinion (included in Exhibit 8.1).
24.1 Powers of Attorney.
99.1 Form of proxy for special meeting of stockholders of First
Security Corporation.
99.2 Consent of J.P. Morgan Securities Inc. relating to First
Security Corporation.
</TABLE>
II-5
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF STANLEY S. STROUP
EXECUTIVE VICE PRESIDENT AND GENERAL
COUNSEL OF WELLS FARGO & COMPANY]
May 24, 2000
Board of Directors
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94163
Ladies and Gentlemen:
In connection with the proposed registration under the Securities Act of 1933,
as amended, of a maximum of 90,000,000 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
referred to as the "Shares"), which are proposed to be issued by the Company in
connection with the merger (the "Merger") of a wholly-owned subsidiary of the
Company with First Security Corporation, I have examined such corporate records
and other documents, including the registration statement on Form S-4 relating
to the Shares, and have reviewed such matters of law as I have deemed necessary
for this opinion, and I advise you that in my opinion:
1. The Company is a corporation duly organized and existing under the laws
of the state of Delaware.
2. All necessary corporate action on the part of the Company has been taken
to authorize the issuance of the Shares in connection with the Merger,
and when issued as described in the registration statement, the Shares
will be legally and validly issued, fully paid and nonassessable.
I consent to the filing of this opinion as an exhibit to the registration
statement.
Sincerely,
/s/ Stanley S. Stroup
<PAGE>
[Letterhead of Wachtell, Lipton, Rosen & Katz]
[Form of Tax Opinion]
, 2000
--------- --
First Security Corporation
79 South Main
Salt Lake City, Utah 84111
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94163
Ladies and Gentlemen:
We have acted as special counsel to First Security Corporation, a
Delaware corporation ("First Security"), in connection with the proposed merger
(the "Merger") of a direct, wholly-owned subsidiary of Wells Fargo & Company, a
Delaware corporation ("Wells Fargo"), with and into First Security, upon the
terms and conditions set forth in the Agreement and Plan of Reorganization,
dated as of April 9, 2000, by and between First Security and Wells Fargo (the
"Agreement"). At your request, in connection with the filing of the Registration
Statement on Form S-4 filed with the Securities and Exchange Commission in
connection with the Merger (the "Registration Statement"), we are rendering our
opinion concerning certain federal income tax consequences of the Merger. Any
capitalized term used and not defined herein has the meaning given to it in the
Agreement.
For purposes of the opinion set forth below, we have relied, with the
consent of First Security and the consent of Wells Fargo, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of First Security and Wells
Fargo dated the date hereof, and have assumed that such statements and
representations will be complete and accurate at the Effective Time of the
Merger and that all statements and representations made to the knowledge of any
person or entity or with similar qualification are and will be true and correct
as if made without such qualification. We have also relied upon the accuracy of
the Registration Statement and the proxy statement-prospectus included therein
(the "Proxy Statement").
<PAGE>
First Security Corporation
Wells Fargo & Company
, 2000
- --------- --
Page 2
We have also assumed that (i) the transactions contemplated by the
Agreement will be consummated in accordance therewith and as described in the
Registration Statement and the Proxy Statement (and no terms or conditions
therein material to this opinion will be waived), (ii) the Merger will be
reported by First Security and Wells Fargo on their respective federal income
tax returns in a manner consistent with the opinion set forth below, and (iii)
the Merger will qualify as a statutory merger under the applicable laws of the
State of Delaware.
Based upon and subject to the foregoing, under currently applicable
United States federal income tax law, it is our opinion that, for United States
federal income tax purposes, (i) the Merger will constitute a reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended, (ii) no gain or loss will be recognized by the holders of First
Security common stock upon receipt of Wells Fargo common stock, except with
respect to cash received in lieu of fractional shares of Wells Fargo common
stock, (iii) the basis of Wells Fargo common stock received, including
fractional shares deemed received and redeemed, by the stockholders of First
Security will be the same as the basis of the First Security common stock
exchanged therefor and (iv) the holding period of shares of Wells Fargo common
stock received, including fractional shares deemed received and redeemed, by the
stockholders of First Security will include the holding period of the First
Security common stock, provided that the shares of First Security common stock
were held as a capital asset as of the Effective Time of the Merger.
We express no opinion as to the United States federal income tax
consequences of the Merger to stockholders subject to special treatment under
United States federal income tax law (including, for example, foreign persons,
financial institutions, dealers in securities, traders in securities who elect
to apply a mark-to-market method of accounting, insurance companies, tax-exempt
entities, holders who dissent from the Merger and receive the fair value of
their shares of First Security common stock in cash, holders who acquired their
shares of First Security common stock through the exercise of an employee stock
option or right or otherwise as compensation, and holders who hold First
Security common stock as part of a hedge, straddle, conversion or constructive
sale transaction). In addition, no opinion is expressed with respect to the tax
consequences of the Merger under applicable foreign, state or local laws or
under any federal tax laws other than those pertaining to the income tax.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to us under the caption "The Merger--U.S. Federal Income Tax
Consequences of the Merger" and elsewhere in the Proxy Statement. In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
<PAGE>
First Security Corporation
Wells Fargo & Company
, 2000
- --------- --
Page 3
We are furnishing this opinion to you solely in connection with the
filing of the Registration Statement and this opinion is not to be relied upon,
circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
of Wells Fargo & Company
We consent to the incorporation by reference in the proxy statement-prospectus
included in this registration statement on Form S-4 of Wells Fargo & Company
related to the acquisition of First Security Corporation of our report dated
January 18, 2000, with respect to the consolidated balance sheet of Wells
Fargo & Company and Subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, changes in stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 1999, and to the reference to our firm under the
heading "Experts" in the proxy statement-prospectus.
/s/ KPMG LLP
San Francisco, California
May 24, 2000
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Wells Fargo & Company on Form S-4 of our report dated February 18, 2000,
appearing in the Annual Report on Form 10-K of First Security Corporation for
the year ended December 31, 1999 and to the reference to us under the heading
"Experts" in the Proxy Statement-Prospectus, which is part of such Registration
Statement.
/s/ DELOITTE & TOUCHE LLP
Salt Lake City, Utah
May 24, 2000
<PAGE>
EXHIBIT 24.1
WELLS FARGO & COMPANY
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer
of WELLS FARGO & COMPANY, a Delaware corporation, does hereby make, constitute
and appoint RICHARD M. KOVACEVICH, LES BILLER, ROSS J. KARI, 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 90,000,000
shares of Common Stock of the Company and any preferred stock purchase rights
associated with such shares, adjusted for any change in the number of
outstanding shares of Common Stock resulting from stock splits, reverse stock
splits, or stock dividends occurring after the date hereof, which may be issued
in connection with the acquisition by the Company of First Security Corporation
and its subsidiaries, and to file the same, with all exhibits thereto and other
supporting documents, with said Commission, granting unto said
attorneys-in-fact, and each of them, full power and authority to do and perform
any and all acts necessary or incidental to the performance and execution of the
powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
9th day of April, 2000.
<TABLE>
<S> <C>
/s/ LES S. BILLER /s/ RICHARD D. McCORMICK
/s/ J.A. BLANCHARD III /s/ CYNTHIA H. MILLIGAN
/s/ MICHAEL R. BOWLIN /s/ BENJAMIN F. MONTOYA
/s/ DAVID A. CHRISTENSEN /s/ PHILIP J. QUIGLEY
/s/ SUSAN E. ENGEL /s/ DONALD B. RICE
/s/ PAUL HAZEN /s/ JUDITH M. RUNSTAD
/s/ ROBERT L. JOSS /s/ SUSAN G. SWENSON
/s/ REATHA CLARK KING /s/ CHANG-LIN TIEN
/s/ RICHARD M. KOVACEVICH /s/ MICHAEL W. WRIGHT
</TABLE>
<PAGE>
EXHIBIT 99.1
<TABLE>
<C> <S> <C>
/X/ Please mark
your vote as
this
</TABLE>
FIRST SECURITY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF STOCKHOLDERS--JUNE , 2000
The undersigned stockholder of First Security Corporation, a Delaware
corporation (the "Company"), acknowledges receipt of the Notice of Special
Meeting of Stockholders and proxy statement-prospectus, dated June , 2000, and
the undersigned revokes all other proxies and appoints Spencer F. Eccles and
Morgan J. Evans, and each of them, the attorneys and proxies for the
undersigned, each with full power of substitution, to attend and act for the
undersigned at the Company's Special Meeting of Stockholders at ,
local time, June , 2000 and at any adjournments or postponements thereof and
in connection therewith to vote and represent all of the shares of the Company's
Common Stock and Preferred Stock covered by this proxy which the undersigned
would be entitled to vote:
1. Proposal 1. To adopt the Agreement and Plan of Reorganization, dated as of
April 9, 2000 by and between the Company and Wells Fargo & Company ("Wells
Fargo"); and a related Agreement and Plan of Merger, dated as of ,
2000, by and between First Security Merger Co., a wholly-owned subsidiary of
Wells Fargo, included as Exhibit A-1 to the Agreement and Plan of
Reorganization (collectively, the Merger Agreement) and the transactions
contemplated by the Merger Agreement.
/ / For / / Against / / Abstain
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. Each of the above-named
proxies present at said meeting, either in person or by substitute, shall
have and exercise all the powers of said proxies hereunder.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED BY THE
UNDERSIGNED. IF NO SPECIFICATIONS TO THE CONTRARY ARE INDICATED HEREON, THIS
PROXY WILL BE TREATED AS A GRANT OF AUTHORITY TO VOTE FOR PROPOSAL 1 AND IN THE
DISCRETION OF THE PROXIES ON ANY OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING. PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE POSTAGE PREPAID
ENVELOPE PROVIDED.
<TABLE>
<S> <C> <C>
Dated:
Signature(s)
Note: Please sign exactly as your name
appears hereon. When signing as
attorney, executor, administrator,
trustee or guardian, please give full
title as such. If shares are held
jointly, each holder should sign.
</TABLE>
<PAGE>
EXHIBIT 99.2
CONSENT OF J.P. MORGAN SECURITIES INC.
We hereby consent to (i) the use our opinion letter to the Board of
Directors of First Security Corporation (the "Company") included as Appendix C
to the Proxy Statement-Prospectus which forms a part of the Registration
Statement on Form S-4 relating to the proposed merger of the Company and Wells
Fargo & Company and (ii) the references to such opinion in such Proxy
Statement-Prospectus. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we hereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
/s/ J.P. MORGAN SECURITIES INC.
May 24, 2000
MD CEN 106121
