<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON February 9, 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)
DELAWARE 6712 41-0449260
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
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, Esq.
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:
EDWARD D. HERLIHY, ESQ. EDMUND O. BELSHEIM, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ PERKINS COIE LLP
51 West 52nd Street 1201 Third Avenue, 40th Floor
New York, New York 10019 Seattle, Washington 98101-3099
(212) 403-1000 (206) 583-8888
---------------
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
Title of Each Class of Amount to Maximum Maximum Amount of
Securities to be be Registered Offering Price Aggregate Registration Fee
Registered (1) Per Share (2) Offering Price (3)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$1-2/3 per share (and
associated Preferred
Stock Purchase
Rights)............... 7,779,508 $34.9222 $271,677,782 $71,723
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Based upon the maximum number of shares of common stock, par value $0.01
per share (the "Ragen MacKenzie common stock"), of Ragen MacKenzie Group
Incorporated ("Ragen MacKenzie") which will each be exchanged for a maximum
of .5208 shares of common stock, $1-2/3 par value (the "Wells Fargo common
stock"), of Wells Fargo & Company ("Wells Fargo") pursuant to the merger
described herein.
(2) Calculated in accordance with Rule 457(f)(1) under the Securities Act based
on the aggregate market value on February 3, 2000 of the shares of Ragen
MacKenzie common stock expected to be canceled in connection with the
merger and computed by dividing (i) the product of (A) the average of the
high and low prices of Ragen MacKenzie common stock as reported on the NYSE
on February 3, 2000 ($18.1875) and (B) 14,937,610, representing the maximum
number of shares of Ragen MacKenzie common stock expected to be canceled in
connection with the merger, by (ii) 7,779,508, representing the maximum
number of shares of Wells Fargo common stock to be issued in connection
with the merger.
(3) The registration fee of $71,723 was calculated pursuant to Rule 457(f)
under the Securities Act, as follows: .000264 multiplied by the proposed
maximum aggregate offering price. In accordance with Rule 457(b), the
filing fee of $61,555.36 paid pursuant to Section 14(g) of the Securities
Exchange Act of 1934, as amended, and Rule 0-11 thereunder at the time of
the filing of the Proxy Statement-Prospectus contained in this Registration
Statement as preliminary proxy materials has been credited to offset the
$71,723 registration fee that would otherwise be payable.
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>
[LOGO RAGEN MACKENZIE]
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The Board of Directors of Ragen MacKenzie Group Incorporated has approved
the acquisition of Ragen MacKenzie by Wells Fargo & Company. The acquisition,
which will be accomplished by the merger of a subsidiary of Wells Fargo into
Ragen MacKenzie, will allow Ragen MacKenzie and its clients to have access to
the resources of one of the largest banking organizations in the United States.
We and Wells Fargo are bringing together our institutions to position each of
us to better meet all of our clients' financial needs.
Each share of Ragen MacKenzie common stock will be converted into the right
to receive a fraction of a share of Wells Fargo common stock based upon the
average closing price of Wells Fargo common stock during a ten-day measurement
period prior to the closing:
<TABLE>
<CAPTION>
If the average closing price is... ...then you will receive:
<S> <C>
above $42.00 0.4464 shares of Wells Fargo common stock
from $36.00 to $42.00 $18.75 in value of Wells Fargo common stock
below $36.00 0.5208 shares of Wells Fargo common stock
</TABLE>
The closing price of Wells Fargo common stock on February 8, 2000 was
$38.9375 a share. Since the price of Wells Fargo common stock will fluctuate,
we cannot assure you as to what the price of Wells Fargo common stock will be
during the measurement period. We expect the merger to, in general, be tax-free
to Ragen MacKenzie shareholders, except for the receipt of cash in lieu of
fractional Wells Fargo shares.
We can't complete the merger unless we obtain the necessary government
approvals and unless our shareholders approve it. YOUR VOTE IS VERY IMPORTANT.
Whether or not you plan to attend the meeting, please take the time to vote by
completing and mailing the enclosed proxy card to us. If you sign, date and
mail your proxy card without indicating how you want to vote, your proxy will
be counted as a vote FOR the merger. If you don't return your card, or if you
don't instruct your broker how to vote any shares held for you in your broker's
name, the effect will be the same as a vote against the merger. You may, of
course, attend the meeting and vote in person even if you have previously
returned your proxy card. The special meeting will be held at The Rainier Club,
820 Fourth Avenue, Seattle, Washington on March 16, 2000, at 8:00 a.m., local
time.
This document provides detailed information about the transaction we are
proposing, and it includes the merger agreement as an appendix. WE ENCOURAGE
YOU TO READ THIS ENTIRE DOCUMENT CAREFULLY. You can find additional information
about Ragen MacKenzie and Wells Fargo from documents filed with the Securities
and Exchange Commission.
The common stocks of both Ragen MacKenzie and Wells Fargo are listed on the
NYSE. Ragen MacKenzie is listed under the symbol "RMG," and Wells Fargo is
listed under the symbol "WFC."
I enthusiastically support this combination and join with the other members
of our Board of Directors in recommending that you vote in favor of the merger.
/s/ Lesa A. Sroufe
Lesa A. Sroufe
Chairman and Chief Executive Officer
Ragen MacKenzie Group Incorporated
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS DOCUMENT OR DETERMINED IF
THIS DOCUMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THE SECURITIES WELLS FARGO IS OFFERING THROUGH THIS DOCUMENT
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 FEBRUARY 9, 2000 AND FIRST MAILED TO
SHAREHOLDERS ON FEBRUARY 15, 2000
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This document incorporates important business and financial information
about Wells Fargo and Ragen MacKenzie from documents that are not included in
or delivered with this document. See "Where You Can Find More Information" on
page 72 for a list of documents that are incorporated into this document. You
can obtain documents related to Wells Fargo and Ragen MacKenzie that are
incorporated by reference in this document without charge upon your written or
oral request to the following address(es) and telephone number(s):
WELLS FARGO RAGEN MACKENZIE
Corporate Secretary Investor Relations
Wells Fargo & Company Ragen MacKenzie Group Incorporated
MAC N9305-173 999 Third Avenue, Suite 4300
Sixth and Marquette Seattle, Washington 98104
Minneapolis, Minnesota 55479 Telephone (206) 343-5000
Telephone (612) 667-8655
If you would like to request documents, please do so by March 9, 2000 in
order to receive them before the special meeting.
<PAGE>
RAGEN MACKENZIE GROUP INCORPORATED
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 16, 2000
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders of
Ragen MacKenzie Group Incorporated, a Washington corporation ("Ragen
MacKenzie"), on March 16, 2000, at 8:00 a.m., local time, at The Rainier Club,
820 Fourth Avenue, Seattle, Washington, for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement and Plan
of Merger, dated as of September 28, 1999, by and among Wells Fargo &
Company, a Delaware corporation, Romero Acquisition Corp. ("Merger Sub"), a
Washington corporation, and Ragen MacKenzie, and the transactions
contemplated thereby, including the merger of Merger Sub, a wholly-owned
subsidiary of Wells Fargo, with and into Ragen MacKenzie upon the terms and
subject to the conditions set forth in the merger agreement, as more fully
described in the enclosed Proxy Statement-Prospectus.
2. To transact any other business as may properly be brought before the
special meeting or any adjournments or postponements of the special
meeting.
You are entitled to assert dissenters' rights with respect to the merger
under Chapter 23B.13 of the Washington Business Corporation Act.
We have fixed the close of business on February 3, 2000 as the record date
for determining those shareholders entitled to vote at the special meeting and
any adjournments or postponements of the special meeting. Accordingly, only
shareholders of record on that date are entitled to notice of, and to vote at,
the special meeting and any adjournments or postponements of the special
meeting.
By Order of the Board of Directors,
/s/ V. Lawrence Bensussen
V. Lawrence Bensussen
Senior Vice President,
Chief Financial Officer and
Secretary
February 9, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE. THE ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD. FAILURE TO RETURN A PROPERLY EXECUTED
PROXY CARD OR TO VOTE AT THE MEETING WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST THE AGREEMENT AND PLAN OF MERGER.
THE BOARD OF DIRECTORS OF RAGEN MACKENZIE UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
<PAGE>
To find any one of the principal sections identified below, simply bend the
document slightly to expose the black tabs and open the document to the tab
which corresponds to the title of the section you wish to read. For your
convenience, we have included an index of frequently used terms in this
document in an index of defined terms, which is printed on gold paper towards
the back of this document.
TABLE OF CONTENTS
SUMMARY
SPECIAL MEETING
THE MERGER
BUSINESS AND MANAGEMENT
REGULATION AND SUPERVISION
WELLS FARGO CAPITAL STOCK
COMPARISON OF SHAREHOLDERS' RIGHTS
OTHER MATTERS
FINANCIAL INFORMATION
APPENDICES
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY................................................................... 1
The Merger.............................................................. 1
What You Will Receive................................................... 1
Merger Generally Tax-Free for Ragen MacKenzie Shareholders.............. 1
Market Price of Wells Fargo Stock....................................... 1
Why We Are Merging With Wells Fargo..................................... 2
Our Recommendations to Shareholders..................................... 2
Our Financial Advisor Believes the Exchange Ratio Is Fair to
Shareholders........................................................... 2
You Have Appraisal Rights............................................... 2
We Expect to Use Purchase Accounting.................................... 2
The Companies........................................................... 2
The Shareholders' Meeting............................................... 3
Record Date; Vote Required.............................................. 3
Our Directors and Executive Officers Have Committed to Vote for the
Merger................................................................. 3
Conditions to Completion of the Merger.................................. 3
We Must Obtain Regulatory Approvals to Complete the Merger.............. 3
We or Wells Fargo May Decide Not to Complete the Merger................. 4
We May Amend the Terms of the Merger and Waive Some Conditions.......... 4
We Have Granted a Stock Option to Wells Fargo........................... 4
Our Directors and Officers Have Interests in the Merger that Differ from
Your Interests as a Shareholder........................................ 5
Your Rights as a Wells Fargo Stockholder Will Differ from Your Rights as
a Ragen MacKenzie Shareholder.......................................... 5
Well Fargo Is Regulated Differently than Ragen MacKenzie................ 5
Selected Financial Data................................................. 6
Unaudited Comparative Per Common Share Data............................. 7
SPECIAL MEETING........................................................... 9
Matters to be Considered................................................ 9
Proxies................................................................. 9
Solicitation of Proxies................................................. 9
Record Date and Voting Rights........................................... 10
Recommendation of the Ragen MacKenzie Board............................. 11
THE MERGER................................................................ 12
Background of the Merger................................................ 12
Reasons for the Merger.................................................. 13
Opinion of Ragen MacKenzie's Financial Advisor.......................... 14
The Merger.............................................................. 20
Conversion of Stock..................................................... 21
Treatment of Options.................................................... 22
Antidilution Adjustments................................................ 22
Exchange of Certificates; Fractional Shares............................. 22
Effective Time.......................................................... 23
Representations and Warranties.......................................... 23
Conduct of Business Pending the Merger.................................. 25
Other Agreements........................................................ 27
Employee Retention Program and Benefit Plans............................ 28
Support Agreements...................................................... 29
Conditions to Completion of the Merger.................................. 29
Regulatory Approvals Required for the Merger............................ 31
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Federal Income Tax Consequences........................................ 32
Accounting Treatment................................................... 33
Termination of the Merger Agreement.................................... 33
Waiver and Amendment of the Merger Agreement........................... 35
Stock Exchange Listing................................................. 35
Interests in the Merger That May Be Different From Yours............... 35
Stock Option Agreement................................................. 37
Restrictions on Resales by Affiliates.................................. 41
PRICE RANGE OF COMMON STOCK AND DIVIDENDS................................ 42
Wells Fargo............................................................ 42
Ragen MacKenzie........................................................ 43
INFORMATION ABOUT WELLS FARGO............................................ 44
Management and Additional Information.................................. 44
Information on Wells Fargo's Web Site.................................. 44
INFORMATION ABOUT RAGEN MACKENZIE........................................ 45
Management and Additional Information.................................. 45
Information on Ragen MacKenzie's Web Site.............................. 45
REGULATION AND SUPERVISION OF WELLS FARGO................................ 46
Liability for Bank Subsidiaries........................................ 46
Capital Requirements................................................... 47
Dividend Restrictions.................................................. 48
Deposit Insurance Assessments.......................................... 49
Depositor Preference Statute........................................... 49
Brokered Deposits...................................................... 49
Interstate Banking and Branching....................................... 49
Control Acquisitions................................................... 50
Section 20 Subsidiaries................................................ 50
Financial Modernization Legislation.................................... 50
WELLS FARGO CAPITAL STOCK................................................ 52
Wells Fargo Common Stock............................................... 52
Wells Fargo Preferred Stock............................................ 53
Wells Fargo Rights Plan................................................ 54
COMPARISON OF RIGHTS OF RAGEN MACKENZIE SHAREHOLDERS AND WELLS FARGO
STOCKHOLDERS ........................................................... 57
Authorized Capital Stock............................................... 57
Size of Board of Directors............................................. 57
Cumulative Voting for Directors........................................ 57
Classes of Directors................................................... 58
Qualifications of Directors............................................ 58
Filling Vacancies on the Board......................................... 58
Removal of Directors................................................... 59
Nomination of Directors for Election................................... 59
Anti-Takeover Provisions............................................... 59
Shareholder/Stockholder Rights Plan.................................... 60
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Shareholder/Stockholder Action Without a Meeting......................... 61
Calling Special Meetings of Shareholders/Stockholders.................... 61
Submission of Shareholder/Stockholder Proposals.......................... 61
Notice of Shareholder/Stockholder Meetings............................... 62
Shareholder/Stockholder Vote Required for Mergers........................ 62
Dividends................................................................ 63
Dissenters' Appraisal Rights............................................. 64
Shareholder/Stockholder Preemptive Rights................................ 65
Shareholder/Stockholder Class Voting Rights.............................. 65
Indemnification.......................................................... 65
Amendment of Articles/Certificate of Incorporation....................... 67
Amendment of Bylaws...................................................... 68
DISSENTERS' APPRAISAL RIGHTS............................................... 69
LEGAL MATTERS.............................................................. 71
EXPERTS.................................................................... 71
SHAREHOLDER PROPOSALS...................................................... 71
WHERE YOU CAN FIND MORE INFORMATION........................................ 72
FORWARD-LOOKING STATEMENTS................................................. 75
INDEX OF DEFINED TERMS..................................................... 76
</TABLE>
<TABLE>
<C> <S> <C>
Appendix A Agreement and Plan of Merger................................. A-1
Appendix B Stock Option Agreement....................................... B-1
Appendix C Opinion of Lazard Freres & Co. LLC to the Ragen MacKenzie
Board of Directors........................................... C-1
Appendix D Dissenters' Rights Provision under the Washington Business
Corporation Act.............................................. D-1
</TABLE>
-iii-
<PAGE>
SUMMARY
This brief summary highlights selected information from this document. It
does not contain all of the information that is important to you. We urge you
to carefully read the entire document and the other documents to which this
document refers to fully understand the merger. See "Where You Can Find More
Information" on page 72. Each item in this summary includes a page reference
directing you to a more complete description of that item.
THE MERGER (PAGE 12)
We have attached the merger agreement to this document as Appendix A. Please
read the merger agreement. It is the legal document that governs the merger.
In the proposed transaction, Wells Fargo will acquire Ragen MacKenzie
through the merger of a wholly-owned subsidiary of Wells Fargo with Ragen
MacKenzie, with Ragen MacKenzie becoming a wholly-owned subsidiary of Wells
Fargo. We expect to complete the merger in the first quarter of calendar year
2000.
WHAT YOU WILL RECEIVE (PAGE 21)
When the merger is complete, each share of Ragen MacKenzie common stock you
hold will automatically become the right to receive a number of shares of Wells
Fargo common stock. We refer to this number as the "exchange ratio."
The exchange ratio will depend on the average closing price of Wells Fargo
common stock during a measurement period covering the ten consecutive New York
Stock Exchange trading days ending on the last trading day before all of the
closing conditions of the merger, other than those conditions that relate to
the delivery of documents at the closing, are met.
<TABLE>
<CAPTION>
If the average closing ...then the exchange
price is... ratio will be:
<S> <C>
0.4464 shares of
above $42.00 Wells Fargo common stock
$18.75 in value of
from $36.00 to $42.00 Wells Fargo common stock
0.5208 shares of
below $36.00 Wells Fargo common stock
</TABLE>
Since the price of Wells Fargo common stock will fluctuate, we cannot assure
you what the price of Wells Fargo common stock will be during the measurement
period used to determine the average closing price.
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. For further detail regarding the treatment of fractional shares, see
"The Merger--Exchange of Certificates; Fractional Shares."
MERGER GENERALLY TAX-FREE FOR RAGEN MACKENZIE SHAREHOLDERS (PAGE 32)
We expect that, for U.S. federal income tax purposes, the exchange of your
shares of Ragen MacKenzie common stock for shares of Wells Fargo common stock
in the merger generally will not cause you to recognize any gain or loss. You
will, however, have to recognize income or gain in connection with any cash
that you receive instead of fractional shares.
THIS TAX TREATMENT MAY NOT APPLY TO EVERY RAGEN MACKENZIE SHAREHOLDER.
DETERMINING THE ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU CAN BE
COMPLICATED. THEY WILL DEPEND ON YOUR SPECIFIC SITUATION AND ON VARIABLES NOT
WITHIN OUR CONTROL. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL
UNDERSTANDING OF THE MERGER'S TAX CONSEQUENCES.
Neither we nor Wells Fargo will be obligated to complete the merger unless
we receive opinions from our respective legal counsel, dated the effective date
of the merger, substantially to the effect that the merger will qualify as a
reorganization within the meaning of Section 368(a) of the U.S. tax code.
MARKET PRICE OF WELLS FARGO STOCK (PAGE 42)
Shares of Wells Fargo and Ragen MacKenzie common stock are quoted on the
NYSE. Wells Fargo is listed under the symbol "WFC" and we are listed under the
symbol "RMG." The market
1
<PAGE>
value of the aggregate consideration that Ragen MacKenzie shareholders will
receive in the merger is approximately $259 million based on Wells Fargo's
closing stock price on September 27, 1999, the date before we announced the
merger. The closing prices of Wells Fargo and Ragen MacKenzie common stock on
September 27, 1999 and February 8, 2000, and the implied value to be received
by you for each share of Ragen MacKenzie common stock had the merger been
completed on those dates, were as follows:
<TABLE>
<CAPTION>
Value of
Merger
Consideration
per Share of
Ragen
Wells Fargo Ragen MacKenzie MacKenzie
Common Stock Common Stock Common Stock
------------ --------------- -------------
<S> <C> <C> <C>
September 27, 1999................... $38.50 $17.25 $18.75
February 8, 2000..................... $38.94 $18.31 $18.75
</TABLE>
In addition, recently declared per share dividend information for Wells
Fargo common stock is as follows:
<TABLE>
<CAPTION>
Wells Fargo
Common Stock
------------
<S> <C>
4th Quarter 1999................................................... $ .20
1st Quarter 2000................................................... $ .22
</TABLE>
We have not paid or declared cash dividends on Ragen MacKenzie common stock
since the shares were issued.
Of course, the market price of Wells Fargo common stock will fluctuate prior
to the merger. You should obtain current stock price quotations for Wells Fargo
common stock and Ragen MacKenzie common stock.
WHY WE ARE MERGING WITH WELLS FARGO (PAGE 13)
We are proposing to join Wells Fargo because we believe that doing so will
allow us to satisfy the needs of our customers for a greater range of financial
products, and will increase the productivity of our sales force by providing
access to additional products and potential new clients.
OUR RECOMMENDATIONS TO SHAREHOLDERS (PAGE 11)
Our board of directors believes that the merger is fair to you and in your
best interests, and unanimously recommends that you vote "FOR" the proposal to
approve the merger agreement.
OUR FINANCIAL ADVISOR BELIEVES THE EXCHANGE RATIO IS FAIR TO SHAREHOLDERS (PAGE
14)
Lazard Freres & Co. LLC has delivered a written opinion to our board of
directors that, as of the date of this document, the exchange ratio is fair to
the holders of Ragen MacKenzie common stock from a financial point of view. We
have attached this opinion 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 Lazard in providing its opinion. We
have agreed to pay Lazard approximately $2.5 million for its services upon
completion of the merger.
YOU HAVE APPRAISAL RIGHTS (PAGE 69)
Under Washington law, you can dissent from the merger and have the fair
value of your Ragen MacKenzie common stock appraised by a court and paid in
cash by Wells Fargo. TO DO THIS, YOU MUST FOLLOW REQUIRED PROCEDURES, INCLUDING
FILING A NOTICE WITH RAGEN MACKENZIE, AND MUST NOT VOTE IN FAVOR OF THE MERGER.
If you hold shares of Ragen MacKenzie common stock and you dissent from the
merger and follow the required procedures, your shares of Ragen MacKenzie
common stock will not be converted into shares of common stock of Wells Fargo.
Instead, your only right will be to receive the appraised value of your shares
in cash. We have attached the provisions of Washington law governing
dissenters' rights to this document as Appendix D. See "Dissenters' Appraisal
Rights."
WE EXPECT TO USE PURCHASE ACCOUNTING (PAGE 33)
Wells Fargo intends to account for the acquisition of Ragen MacKenzie using
the purchase method of accounting. Wells Fargo will record, at fair value, the
acquired assets and assumed liabilities of Ragen MacKenzie, and to the extent
that the total purchase price consideration exceeds the fair value of assets
acquired and liabilities assumed, Wells Fargo will record goodwill.
THE COMPANIES (PAGES 44 AND 45)
WELLS FARGO & COMPANY
420 Montgomery Street
San Francisco, California 94163
(800) 411-4932
Wells Fargo is a diversified financial services company whose subsidiaries
and affiliates provide
2
<PAGE>
banking, insurance, investments, and mortgage and consumer finance through
stores located across North America. At September 30, 1999, Wells Fargo had
$207 billion in assets, 7th largest among U.S. bank holding companies.
RAGEN MACKENZIE GROUP INCORPORATED
999 Third Avenue, Suite 4300
Seattle, Washington 98104
(206) 343-5000
Our operations are headquartered in Seattle, and our primary business is
retail securities brokerage. We have 32 offices in seven Western states through
which we conduct this business. Our business also includes proprietary trading
of fixed income securities, institutional brokerage services, correspondent
brokerage services and investment banking services. At September 24, 1999, we
had total assets of $649 million.
THE SHAREHOLDERS' MEETING (PAGE 9)
The special meeting will be held on March 16, 2000, at 8:00 a.m., local
time, at The Rainier Club, 820 Fourth Avenue, Seattle, Washington. At the
special meeting, we will ask you:
. to approve the merger of Ragen MacKenzie and Wells Fargo
. to act on other matters that may properly be submitted to a vote at the
special meeting.
RECORD DATE; VOTE REQUIRED (PAGE 10)
You can vote at the special meeting if you owned Ragen MacKenzie common
stock at the close of business on February 3, 2000. On that date, there were
13,065,772 shares of Ragen MacKenzie common stock outstanding and entitled to
vote. You can cast one vote for each share of Ragen MacKenzie common stock you
owned on that date. In order to approve the merger agreement, the holders of a
majority of our outstanding shares must vote in favor of doing so.
OUR DIRECTORS AND EXECUTIVE OFFICERS HAVE COMMITTED TO VOTE FOR THE MERGER
(PAGE 29)
At the same time that the merger agreement was executed, our directors and
executive officers entered into support agreements with Wells Fargo and agreed
that:
. they will vote all of their shares of Ragen MacKenzie stock in favor of
approval of the merger
. they will not encourage any competing acquisition of Ragen MacKenzie.
As of the record date for the special meeting, these directors and executive
officers owned a total of about 14.6% of the outstanding shares of Ragen
MacKenzie common stock.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE 29)
The obligations that we and Wells Fargo have to complete the merger depend
on a number of conditions being met, including:
. approval of the merger agreement by Ragen MacKenzie shareholders
. approval of the merger by the necessary federal and state regulatory
authorities and self-regulatory organizations.
In addition, Wells Fargo's obligations to complete the merger depend on
several additional conditions being met, including:
. the effectiveness of employment agreements with specified Ragen MacKenzie
employees
. our data processing, operating and platform systems being ready for the
Year 2000.
Where the law permits, either we or Wells Fargo could choose to waive
satisfaction of a condition to our obligation to complete the merger. We cannot
be certain when, or if, the conditions to the merger will be satisfied or
waived, or that the merger will be completed. In any event, under the terms of
the merger agreement, the merger will not be completed prior to March 16, 2000.
WE MUST OBTAIN REGULATORY APPROVALS TO COMPLETE THE MERGER (PAGE 31)
We can't complete the merger unless it is approved by the Board of Governors
of the Federal Reserve System.
3
<PAGE>
The merger is also subject to the approval of, or notice to, state and other
regulatory authorities and self-regulatory organizations, including the NYSE
and the National Association of Securities Dealers Inc. We have agreed to
cooperate with Wells Fargo to make all of the necessary filings, and either we
or Wells Fargo have filed, or soon will file, all of the required applications
and notices.
As of the date of this document, we haven't received the required approvals.
While we don't know of any reason why we wouldn't be able to obtain the
necessary approvals in a timely manner, we can't be certain when or if, or on
what terms, we will get them.
WE OR WELLS FARGO MAY DECIDE NOT TO COMPLETE THE MERGER (PAGE 33)
We can mutually agree with Wells Fargo to terminate the merger agreement
without completing the merger at any time before the merger is completed.
Either of us can decide, without the consent of the other, to terminate the
merger agreement in a number of other situations, including:
. the final denial of a required regulatory approval
. our failure to obtain the shareholder vote we need to approve the merger
. the failure to complete the merger by June 30, 2000.
Also, we can terminate the merger agreement if:
. the average closing price of Wells Fargo common stock during a 10-day
measurement period specified in the merger agreement prior to the closing
date of the merger is less than $32.00 and
. based on average closing prices during that measurement period, Wells
Fargo common stock has, in the period from signing of the merger
agreement to the end of the measurement period, underperformed an index
of selected bank holding company stocks by more than 15 percentage
points.
In these circumstances, however, we cannot terminate the merger agreement if
Wells Fargo makes a compensating increase in the exchange ratio according to a
prescribed formula.
Whether or not the merger is completed, we and Wells Fargo will each pay our
own fees and expenses, except that we will evenly divide the costs and expenses
that we have incurred in printing and mailing this document. We will also
evenly divide the fees that we will have to pay to the Securities and Exchange
Commission in connection with registering the shares to be issued in the
merger.
WE MAY AMEND THE TERMS OF THE MERGER AND WAIVE SOME CONDITIONS (PAGE 35)
We may jointly amend the merger agreement with Wells Fargo, and each of us
may waive our right to require the other party to adhere to the terms and
conditions of the merger agreement. However, neither of our two companies may
amend the merger agreement after the Ragen MacKenzie shareholders approve the
merger if the amendment requires further approval under applicable law, unless
the Ragen MacKenzie shareholders approve the amendment.
WE HAVE GRANTED A STOCK OPTION TO WELLS FARGO (PAGE 37 AND APPENDIX B)
As an inducement to Wells Fargo to enter into the merger agreement, we
entered into a stock option agreement granting Wells Fargo an option to
purchase shares of our common stock under the circumstances described in the
option agreement. We granted the option to Wells Fargo in order to increase the
likelihood that it would complete the merger. The option could discourage other
companies from proposing a competing combination with us. The maximum amount of
Ragen MacKenzie shares that Wells Fargo can purchase if it exercises its option
is 19.9% of the outstanding shares of Ragen MacKenzie common stock. The
purchase price under the option is $15.50 per share. In some circumstances,
Wells Fargo may require us to repurchase the option and/or the shares purchased
under the option at a price based on a formula described in the option. In
these same circumstances,
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<PAGE>
Wells Fargo could instead choose to give up its option to us and receive a cash
payment of $7.5 million.
Wells Fargo cannot exercise its option unless particular events described in
the option agreement occur. These events generally are agreements to engage in
business combinations or acquisition transactions with third parties and
related events, such as the sale of a substantial amount of assets or stock or
a merger, other than the merger we are proposing in this document. Neither we
nor Wells Fargo know of any event that has occurred as of the date of this
document that would allow Wells Fargo to exercise its option.
OUR DIRECTORS AND OFFICERS HAVE INTERESTS IN THE MERGER THAT DIFFER FROM YOUR
INTERESTS AS A SHAREHOLDER (PAGE 35)
Some of our directors and executive officers have interests in the merger
that differ from, or are in addition to, their interests as shareholders in our
company. These interests include retention agreements that the officers have
entered into with us in connection with our agreeing to merge with Wells Fargo,
and rights under our benefit plans. These retention agreements will provide the
officers with guaranteed minimum compensation and retention payments after the
merger. The plans provide for the accelerated vesting of the options granted
under the plans in some cases in which an executive officer's employment is
terminated after the merger.
The members of our board of directors knew about these additional interests
and considered them when they approved the merger agreement and the merger.
YOUR RIGHTS AS A WELLS FARGO STOCKHOLDER WILL DIFFER FROM YOUR RIGHTS AS A
RAGEN MACKENZIE SHAREHOLDER (PAGE 57)
Your rights as Ragen MacKenzie shareholders are currently governed by
Washington law and by our articles of incorporation and bylaws. Upon our
completing the merger, you will become shareholders of Wells Fargo, and your
rights will be governed by Delaware law, Wells Fargo's restated certificate of
incorporation and Wells Fargo's by-laws.
WELLS FARGO IS REGULATED DIFFERENTLY THAN RAGEN MACKENZIE (PAGE 46)
Wells Fargo, its banking subsidiaries and many of its nonbanking
subsidiaries are subject to extensive regulation by a number of federal and
state agencies. This regulation, among other things, may restrict Wells Fargo's
ability to diversify into other areas of financial services, acquire depository
institutions in a number of states and pay dividends on its stock. It may also
require Wells Fargo to provide financial support to one or more of its
subsidiary banks, maintain capital balances in excess of those desired by
management and pay higher deposit premiums as a result of a deterioration in
the financial condition of depository institutions in general.
On November 12, 1999, President Clinton signed into law the Gramm-Leach-
Bliley Act that, effective March 11, 2000, will permit bank holding companies
to become financial holding companies and thereby affiliate with securities
firms and insurance companies and engage in other activities that are financial
in nature. The Gramm-Leach-Bliley Act defines "financial in nature" to include:
. securities underwriting, dealing and market making
. sponsoring mutual funds and investment companies
. insurance underwriting and agency
. merchant banking activities
. activities that the Board of Governors of the Federal Reserve System has
determined to be closely related to banking.
Under the Gramm-Leach-Bliley Act, securities firms and insurance companies
that elect to become financial holding companies may acquire banks and other
financial institutions. The Act may significantly change the competitive
environment in which Wells Fargo and its subsidiaries conduct business.
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<PAGE>
SELECTED FINANCIAL DATA
The following tables show summarized historical financial data for ourselves
and for Wells Fargo. This information is based on historical financial
information that both we and Wells Fargo have presented in our prior filings
with the SEC. You should read all of the summary financial information we
provide in the following tables together with this historical financial
information, which is also incorporated into this document by reference. See
"Where You Can Find More Information" on page 72 for a description of where you
find this historical information.
The balance sheet data for 1994 through 1998 for Wells Fargo is derived from
its audited consolidated balance sheets of December 31, 1998, 1997 and 1996 and
its unaudited financial information for 1995 and 1994. The income statement
data for 1994 through 1998 for Wells Fargo is derived from its audited
consolidated statement of income for each of the years in the four-year period
ended December 31, 1998 and its unaudited financial information for 1994. The
data for Wells Fargo as of and for the nine months ended September 30, 1999 and
1998 is derived from its unaudited financial statements for those periods. The
information for Ragen MacKenzie is derived from its audited financial
statements for the five fiscal years ended September 24, 1999, and its
unaudited financial statements for the three-month periods ended December 31,
1999 and 1998.
The information in the following table is only a summary and should be read
with the full financial statements and related notes of Wells Fargo and Ragen
MacKenzie. You should not rely on the information of Wells Fargo for the nine
months ended September 30, 1999 and 1998 or the information of Ragen MacKenzie
for the three months ended December 31, 1999 and 1998 as indicating the results
expected for the entire year.
WELLS FARGO & COMPANY AND SUBSIDIARIES
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
1999 1998 1998 1997 1996 1995 1994
--------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income..... $ 6,959 $ 6,689 $ 8,990 $ 8,648 $ 8,222 $ 5,923 $ 5,414
Net income.............. 2,777 2,144 1,950 2,499 2,228 1,988 1,642
Diluted earnings per
share.................. 1.65 1.29 1.17 1.48 1.36 1.62 1.36
Cash dividends per
share.................. 0.585 0.515 0.700 0.615 0.525 0.450 0.383
Book value per share.... 13.17 12.40 12.35 11.92 11.66 10.27 5.86
Total assets............ 207,060 195,863 202,475 185,685 188,633 122,200 112,674
Long-term debt.......... 24,911 18,486 19,709 17,335 18,142 16,726 12,039
RAGEN MACKENZIE AND SUBSIDIARIES
(Dollars in millions, except per share data)
<CAPTION>
Three Months Ended
December 31, Fiscal Years Ended
1999 1998 9/24/99 9/25/98 9/26/97 9/27/96 9/29/95
--------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $ 23.7 $ 21.7 $ 84.4 $ 76.0 $ 68.9 $ 63.6 $ 49.3
Net income.............. 4.2 4.6 15.9 11.9 15.4 10.5 6.1
Diluted earnings per
share.................. 0.31 0.34 1.20 1.01 1.44 1.04 0.68
Cash dividends per
share.................. -- -- -- -- -- -- --
Book value per share.... 9.73 8.49 9.34 8.13 6.86 5.31 4.06
Total assets............ 699.3 773.5 648.5 781.8 665.9 484.0 436.1
Long-term debt.......... -- -- -- -- -- -- --
</TABLE>
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<PAGE>
UNAUDITED COMPARATIVE PER COMMON SHARE DATA
The following table shows historical information about income per share,
dividends per share and book value per share for both ourselves and Wells
Fargo, as well as similar information as if the merger had been completed,
which we refer to as "pro forma" information. The pro forma amounts included in
the table assume that we complete the merger and are based on the purchase
method of accounting, including a preliminary determination and allocation of
the total purchase price. The adjustments included in the table are subject to
updating as additional information becomes available. An increase in the
unallocated portion of the purchase price remaining after assignment of fair
value to the Ragen MacKenzie assets and liabilities Wells Fargo acquires or
assumes in the merger would result in a greater final allocation to goodwill,
which would have a corresponding effect on amortization expense and would
reduce tangible common equity. A decrease in the unallocated portion of the
purchase price remaining after fair value adjustments would have the opposite
effects. Accordingly, the final pro forma combined amounts may differ from
those set forth in the table.
The pro forma information, while helpful in illustrating the financial
characteristics of the merger under one set of assumptions, does not reflect
anticipated financial benefits and, accordingly, does not attempt to predict or
suggest future results. It also does not necessarily reflect what the
historical results of the transaction would have been had the transaction taken
place at the beginning of the period.
The information in the table has been derived from the respective historical
financial statements of each of Wells Fargo and Ragen MacKenzie. Because Ragen
MacKenzie's fiscal year end is the last Friday in September and Wells Fargo's
year end is December 31, information with respect to Ragen MacKenzie has been
conformed to a December 31 calendar year for purposes of pro forma financial
data. The information in the table assumes that 0.4912 shares of Wells Fargo
common stock will be exchanged for each share of Ragen MacKenzie common stock
outstanding as well as common stock equivalents. For this purpose, the number
of common shares and potential common shares of Ragen MacKenzie is assumed to
be 14,937,610 shares. The pro forma equivalent for Ragen MacKenzie 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 assumed exchange ratio of 0.4912.
We present this information to reflect the fact that you will receive a
fraction of a share of Wells Fargo common stock for each Ragen MacKenzie share
you hold. The assumed exchange ratio of 0.4912 is based on a hypothetical
average closing price of Wells Fargo common stock of $38.1688, which is the
average closing price for the ten trading days ending February 2, 2000. The
actual exchange ratio will not be determined until shortly before the merger.
See "The Merger--Conversion of Stock."
The information in the following table is based on, and you should read it
together with, the historical financial information that we and Wells Fargo
have presented in our prior filings with the SEC. We are incorporating this
historical financial information into this document by reference. See "Where
You Can Find More Information" on page 72 for a description of where you can
find these prior filings.
7
<PAGE>
UNAUDITED COMPARATIVE PER COMMON SHARE DATA
OF WELLS FARGO AND RAGEN MACKENZIE
<TABLE>
<CAPTION>
Wells Fargo Ragen MacKenzie
-------------------- ---------------------
Pro Forma Pro Forma
Historical Combined Historical Equivalent
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Earnings Per Common Share
Basic
Nine months ended September 30,
1999............................ $ 1.67 $ 1.67 $ 0.88 $ 0.82
Year ended December 31, 1998..... 1.18 1.18 1.01 0.58
Diluted
Nine months ended September 30,
1999............................ 1.65 1.65 0.86 0.81
Year ended December 31, 1998..... 1.17 1.17 0.99 0.57
Cash Dividends Declared Per Common
Share
Nine months ended September 30,
1999............................ 0.585 0.585 -- 0.287
Year ended December 31, 1998..... 0.700 0.700 -- 0.344
Stockholders' Equity Per Share
September 30, 1999............... 13.17 13.18 9.34 6.47
December 31, 1998................ 12.35 12.36 8.49 6.07
</TABLE>
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SPECIAL MEETING
This section contains information about the shareholder meeting we have
called to consider and approve the merger agreement.
We are mailing this document to you on or about February 15, 2000. Together
with this document, we are also sending to you a notice of the special meeting
and a form of proxy that our board is soliciting for use at the special
meeting. The special meeting will be held at The Rainier Club, 820 Fourth
Avenue, Seattle, Washington on March 16, 2000, at 8:00 a.m., local time.
MATTERS TO BE CONSIDERED
The purpose of the special meeting is to vote on the approval of the merger
agreement, dated September 28, 1999, by and among Ragen MacKenzie, Wells Fargo
and Romero Acquisition Corp. (the "merger sub"), and the transactions
contemplated in that agreement. These include the acquisition of Ragen
MacKenzie by Wells Fargo, which will be accomplished by the merger of the
merger sub, which is a wholly-owned subsidiary of Wells Fargo, into Ragen
MacKenzie, and any other matters that may properly be submitted to a vote at
the special meeting. You may also be asked to vote upon a proposal to adjourn
or postpone the special meeting. We could use any adjournment or postponement
for the purpose, among other things, of allowing more time to solicit votes to
approve the merger agreement.
PROXIES
You should use the proxy form accompanying this document if you are unable
or do not wish to attend the special meeting in person. You can revoke your
proxy at any time before the vote is taken at the special meeting by submitting
to our corporate secretary written notice of revocation or a properly submitted
proxy of a later date, or by attending the special meeting and voting in
person. Written notices of revocation and other communications about revoking
your proxy should be addressed to:
V. Lawrence Bensussen, Secretary
Ragen MacKenzie Group Incorporated
999 Third Avenue, Suite 4300
Seattle, Washington 98104
All shares represented by valid proxies we receive through this
solicitation, and not revoked before they are exercised, will be voted in the
manner specified in this paragraph. If you make no specification on your
returned proxy card, your proxy will be voted in favor of approval of the
merger agreement. Our board is presently unaware of any other matters that may
be presented for action at the special meeting. If other matters do properly
come before the special meeting, however, we intend that shares represented by
properly submitted proxies will be voted by and at the discretion of the
persons named in the proxies. However, proxies that indicate a vote against
approval of the merger agreement will not be voted in favor of any adjournment
or postponement of the special meeting for the purpose of soliciting additional
proxies to approve the merger agreement.
If you plan to attend the meeting you should promptly submit your proxy
indicating your intention to attend. You must also bring the admission ticket
attached to the proxy card included with this document to enter.
SOLICITATION OF PROXIES
We will bear the entire cost of soliciting proxies from you, except that we
and Wells Fargo have agreed to each pay one-half of the costs and expenses of
printing and mailing this document and all filing and other fees relating to
the merger paid to the SEC. In addition to solicitation of proxies by mail, we
will request banks, brokers and other record holders to send proxies and proxy
material to the beneficial owners of the stock and to secure their voting
instructions, if necessary. We will reimburse these record holders for their
reasonable
9
<PAGE>
expenses in taking those actions. We've also made arrangements with ChaseMellon
Consulting Services to help us in soliciting proxies from banks, brokers and
nominees and have agreed to pay approximately $6,500 plus expenses for these
services. If necessary, we may also use several of our regular employees, who
will not be specially compensated, to solicit proxies from our shareholders,
either personally or by telephone, the internet, telegram, fax, letter or
special delivery letter.
RECORD DATE AND VOTING RIGHTS
In accordance with Washington law, the Ragen MacKenzie bylaws and the rules
of the NYSE, we have fixed February 3, 2000 as the record date for determining
the Ragen MacKenzie shareholders entitled to notice of, and to vote at, the
special meeting. Accordingly, you are only entitled to notice of, and to vote
at, the special meeting if you were a record holder of Ragen MacKenzie common
stock at the close of business on the record date. At that time, 13,065,772
shares of Ragen MacKenzie common stock were outstanding, held by approximately
3,300 shareholders. To have a quorum that permits us to conduct business at the
special meeting, we require the presence, whether in person or through the
prior submission of a proxy, of the holders of Ragen MacKenzie common stock
representing a majority of the shares outstanding and entitled to vote on the
record date. You are entitled to one vote for each outstanding share of Ragen
MacKenzie common stock you held as of the close of business on the record date.
Shares of Ragen MacKenzie common stock present in person at the special
meeting but not voting, and shares of Ragen MacKenzie common stock for which we
have received proxies indicating that their holders have abstained, will be
counted as present at the special meeting for purposes of determining whether
we have a quorum for transacting business. Shares held in street name that have
been designated by brokers on proxy cards as not voted will not be counted as
votes cast for or against any proposal. These so-called broker non-votes will,
however, be counted for purposes of determining whether a quorum exists.
Under Washington law and the Ragen MacKenzie articles of incorporation,
approval of the merger agreement requires the affirmative vote of the holders
of a majority of the outstanding shares of Ragen MacKenzie common stock
entitled to vote at the special meeting.
BECAUSE APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF
THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF RAGEN MACKENZIE COMMON
STOCK ENTITLED TO VOTE AT THE SPECIAL MEETING, ABSTENTIONS AND BROKER NON-VOTES
WILL HAVE THE SAME EFFECT AS VOTES AGAINST APPROVAL OF THE MERGER AGREEMENT.
ACCORDINGLY, THE RAGEN MACKENZIE BOARD URGES YOU TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE.
As of the record date:
. Directors and executive officers of Ragen MacKenzie beneficially owned
approximately 1,911,001 shares of Ragen MacKenzie common stock, entitling
them to exercise approximately 14.6% of the voting power of the Ragen
MacKenzie common stock entitled to vote at the special meeting. Each of
our directors and our senior executive officers has entered into a
support agreement with Wells Fargo, under which they agreed to vote the
shares of Ragen MacKenzie common stock they beneficially own for approval
of the merger agreement. See "The Merger--Support Agreements" for a more
complete description of these agreements.
. The subsidiaries of Ragen MacKenzie, as fiduciaries, custodians or
agents, held a total of approximately 8,456,542 shares of Ragen MacKenzie
common stock, representing approximately 64.7% of the shares entitled to
vote at the special meeting, and maintained sole or shared voting power
with respect to none of these shares.
. The banking, trust and investment management subsidiaries of Wells Fargo,
as fiduciaries, custodians or agents, held no shares of Ragen MacKenzie
common stock. Wells Fargo directly holds 150,500 shares of Ragen
MacKenzie common stock.
10
<PAGE>
You can find additional information about beneficial ownership of Ragen
MacKenzie common stock by persons and entities owning more than 5% of the
stock, and more detailed information about beneficial ownership of Ragen
MacKenzie common stock by our directors and executive officers, in the
definitive proxy statement we filed with the SEC and sent to our shareholders
in connection with our 1999 annual meeting of shareholders. You can find
similar information regarding the beneficial ownership of Wells Fargo common
stock in the definitive proxy statement that Wells Fargo filed with the SEC in
connection with its 1999 annual meeting of stockholders. See "Where You Can
Find More Information" on page 72 for instructions on how you can obtain these
documents.
RECOMMENDATION OF THE RAGEN MACKENZIE BOARD
Our board has unanimously approved the merger agreement and the transactions
it contemplates, including the merger. Our board believes that the merger
agreement and the transactions it contemplates, including the merger, are fair
to, and are in the best interests of, Ragen MacKenzie and Ragen MacKenzie
shareholders and recommends that you vote "FOR" the approval of the merger
agreement.
See "The Merger--Reasons for the Merger" for a more detailed discussion of
our board's recommendation.
11
<PAGE>
THE MERGER
THIS SUMMARY OF THE MATERIAL TERMS AND PROVISIONS OF THE MERGER AGREEMENT
AND THE STOCK OPTION AGREEMENT WE'VE ENTERED INTO IN CONNECTION WITH THE MERGER
AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT AND
THE STOCK OPTION AGREEMENT. THE MERGER AGREEMENT IS ATTACHED AS APPENDIX A AND
THE STOCK OPTION AGREEMENT IS ATTACHED AS APPENDIX B TO THIS DOCUMENT, AND WE
INCORPORATE EACH OF THOSE DOCUMENTS INTO THIS SUMMARY BY REFERENCE.
Our 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 Ragen MacKenzie at the time the merger becomes effective, with
Ragen MacKenzie surviving as a wholly-owned subsidiary of Wells Fargo.
At the completion of the merger, each outstanding share of Ragen MacKenzie
common stock, with a par value of $0.01 per share, will be converted into the
right to receive a certain number of shares of Wells Fargo common stock, with a
par value of $1-2/3 per share. We refer to this number as the "exchange ratio."
The exchange ratio will depend on the average closing price of Wells Fargo
common stock during a measurement period equal to the ten consecutive NYSE full
trading days on which the stock is traded ending on the trading day before all
of the closing conditions of the merger, other than conditions related to the
delivery of documents, are met. As long as this average closing price is
between $42.00 and $36.00, inclusive, the exchange ratio will equal $18.75
divided by the average closing price. If the average closing price is above
$42.00, each share of Ragen MacKenzie common stock will be exchanged for 0.4464
shares of Wells Fargo common stock. If, however, the average price of Wells
Fargo common stock is below $36.00, each share of Ragen MacKenzie common stock
will be exchanged for 0.5208 shares of Wells Fargo common stock. Since the
price of Wells Fargo common stock will fluctuate, we cannot assure you as to
what the price of Wells Fargo common stock will be during the measurement
period used to determine the average closing price. Further details of
calculating the exchange ratio are described below under "--Conversion of
Stock."
When we refer to a "share" of Wells Fargo common stock in this document, we
are generally referring to that share together with one Series C Junior
Participating Preferred Stock Purchase Right (a "Wells Fargo Stockholder
Right") issued to Wells Fargo stockholders under a rights agreement (the "Wells
Fargo Rights Agreement"), dated as of October 21, 1998, between Wells Fargo and
ChaseMellon Shareholder Services, L.L.C., as rights agent. When you surrender
your shares of Ragen MacKenzie 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."
This section describes the material aspects of the merger, including the
principal provisions of the merger agreement and the stock option agreement.
Capitalized terms we use here without an express definition have the meanings
given to those terms in those agreements.
BACKGROUND OF THE MERGER
From time to time, our senior management team has reviewed the potential
long-term and short-term impact of various trends in the retail securities
brokerage business, including those toward consolidation in the financial
services industry and increased competition, on our competitive position and
our ability to continue to increase shareholder value. At a regularly scheduled
board meeting in April 1999, our board discussed with senior management the
strategic opportunities and challenges arising in connection with our business.
In May, 1999 we retained Lazard Freres & Co. LLC to assist us in this strategic
review of our business and to help us evaluate strategic alternatives.
Lazard conducted a review of our business, operations and financial position
and presented the results of its investigation to the executive committee of
our board in June 1999. This presentation included a survey of potential
strategic alternatives, including continuing our existing strategy of building
our business internally and possible strategic alliances or combinations with
third parties. Lazard was authorized to contact selected parties that could
potentially be interested in a transaction with us. After being initially
contacted by Lazard, Wells Fargo indicated that it would be interested in
discussing a possible transaction.
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<PAGE>
Thereafter, we entered into a confidentiality agreement with Wells Fargo,
and representatives of Wells Fargo later met with Lazard and members of our
senior management team to review financial and operating information about our
business.
In mid-July 1999, Lesa Sroufe, our Chief Executive Officer, and other
representatives of Ragen MacKenzie met with Dennis Mooradian, President of
Wells Fargo Private Client Services, and other representatives of Wells Fargo
to discuss the potential benefits of an affiliation between the two companies.
During August and September of 1999, representatives of Ragen MacKenzie held
a series of discussions and communications with representatives of Wells Fargo
concerning the terms of a possible business combination. During this time,
representatives and advisors of each company conducted due diligence
investigations of the other. Beginning in mid-September, legal counsel to each
company began to negotiate the terms of the definitive documentation with
respect to a possible merger between our two companies, including drafts of a
merger agreement, a stock option agreement and shareholder support agreements.
The terms of retention arrangements with our key personnel were also discussed
and negotiated during this period. Throughout these discussions and
negotiations, our executive officers and legal and financial advisors met
several times with our board to update them with regard to the status of the
discussions.
On September 27, 1999, our board met to discuss the terms of the proposed
merger. Lazard outlined the proposed transaction with Wells Fargo, and
discussed its financial terms. During this meeting, our board received the oral
opinion of Lazard subsequently confirmed by a written opinion dated September
27, 1999, that, as of that date, and subject to certain matters stated therein,
the exchange ratio set forth in the merger agreement was fair from a financial
point of view to the holders of our common stock. Ragen McKenzie's legal
counsel, Perkins Coie LLP, reviewed the terms of the merger agreement, the
stock option agreement, the employee retention arrangements and other relevant
legal issues, including a discussion of the several drafting points in the
documents that were subject to being finalized with Wells Fargo. After further
discussion of these matters, our board unanimously determined that the merger
was fair to, and in the best interests of, us and our shareholders, approved
the merger and the merger agreement and related agreements, subject to the
resolution of the unresolved issues, resolved to recommend that our
shareholders vote to approve and adopt the merger agreement, and authorized
senior management to take such action as was needed to finalize these documents
and, if satisfactorily finalized, to execute the documents and to effectuate
the transactions contemplated in them.
During the evening of September 27 and the morning of September 28, our
representatives and representatives of Wells Fargo resolved the remaining open
issues in the merger agreement, retention arrangements and related documents.
On the afternoon of September 28, 1999, the merger agreement and related
documents were signed by us and Wells Fargo and we issued a joint press release
that same day announcing the proposed merger.
REASONS FOR THE MERGER
Our board believes that the proposed merger with Wells Fargo is in the best
interests of Ragen MacKenzie and its shareholders. In making its determination,
the board considered a number of factors, including the following:
. the consideration our shareholders will receive if the merger is effected
and the likelihood that it will deliver greater value to our shareholders
than that expected if Ragen MacKenzie remained independent
. the board's consideration of Lazard's September 27, 1999 presentation
including Lazard's opinion that the exchange ratio is fair to our
shareholders from a financial point of view as of that date
. the complementary nature of our business, services and products with
Wells Fargo's, and the opportunity to create a combined business that
offers a wider variety of services to our clients and enhances the
ability to attract new clients
13
<PAGE>
. the historical performance of Wells Fargo's common stock and Wells
Fargo's historical financial performance
. our board's review of other strategic alternatives potentially available
to Ragen MacKenzie
. the opinion of our advisors that the merger will be accomplished on a
tax-free basis for our shareholders for U.S. federal income tax purposes
(except for cash received instead of fractional shares)
. the likelihood of a smooth integration of our business with that of Wells
Fargo
. retention arrangements with key employees of our business in connection
with the merger
. the terms and conditions of the merger agreement and the option agreement
. the judgment and advice of our senior management
. the board's conclusion that the merger would provide our shareholders
with an opportunity for continued equity participation in a larger
enterprise, and with greater liquidity.
OPINION OF RAGEN MACKENZIE'S FINANCIAL ADVISOR
The fairness opinion of Lazard, our financial advisor, is described below.
We retained Lazard to act as our financial advisor in connection with the
merger and related matters based on Lazard's qualifications, expertise,
reputation, and its knowledge of the business and affairs of Ragen MacKenzie.
At the September 27, 1999, meeting of our board, Lazard reviewed and
considered the terms of the merger and rendered its oral opinion to our board
that, as of that date, the exchange ratio provided in the merger agreement was
fair from a financial point of view to the holders of Ragen MacKenzie common
stock. Lazard subsequently delivered to our board a written opinion, dated the
date of this proxy, confirming its oral opinion. No limitations were imposed by
our board upon Lazard with respect to the investigations made or procedures
followed by it in rendering its opinion.
We have attached the full text of Lazard's opinion, dated the date of this
document, as Appendix C to this document. Lazard's opinion describes, among
other things, the assumptions made, procedures followed, matters considered and
limits on the review undertaken in connection with that opinion. You should
read the entire opinion carefully. Lazard addressed its opinion to our board.
The opinion relates only to the fairness of the exchange ratio from a financial
point of view to the holders of Ragen MacKenzie common stock and does not
address any other aspect of the merger, nor does it constitute a recommendation
to you as to how to vote at the meeting. The summary of Lazard's opinion in
this document is qualified in its entirety by reference to the full text of the
opinion.
In connection with rendering its opinion, Lazard, among other things:
. reviewed the financial terms and conditions of the merger agreement and
ancillary agreements
. analyzed historical business and financial information relating to Ragen
MacKenzie and Wells Fargo
. reviewed various financial forecasts for the 1999 fiscal year and other
data provided to it by the management of Ragen MacKenzie
. held discussions with members of the senior management of Ragen MacKenzie
and Wells Fargo with respect to the businesses and prospects of Ragen
MacKenzie and Wells Fargo, respectively, and the strategic objectives of
each
14
<PAGE>
. reviewed public information with respect to certain other companies in
lines of businesses it believed to be generally comparable to the
business of Ragen MacKenzie and Wells Fargo
. reviewed the financial terms of certain business combinations involving
companies in lines of businesses it believed to be generally comparable
to that of Ragen MacKenzie
. reviewed the historical stock prices and trading volumes of Ragen
MacKenzie common stock and Wells Fargo common stock
. conducted such other financial studies, analyses and investigations as
deemed appropriate.
In rendering its opinion, Lazard relied upon the accuracy and completeness
of the financial and other information reviewed by Lazard for the purposes of
its opinion and assumed no responsibility for any independent verification of
this information. With respect to financial forecasts, Lazard assumed that they
had been reasonably prepared on bases reflecting the best currently available
estimates and judgments of management of Ragen MacKenzie as to the future
financial performance of Ragen MacKenzie, and Lazard assumed that these
forecasts and projections would be realized in the amounts and at the times
contemplated thereby. Lazard assumed no responsibility for and expressed no
view as to these forecasts and projections or the assumptions on which they
were based. Lazard did not receive financial forecasts from Wells Fargo. Lazard
is not an expert in the evaluation of loan portfolios or the allowances for
loan losses with respect to loan portfolios and assumed that the allowances for
Wells Fargo were in the aggregate adequate to cover loan losses. In addition,
Lazard did not review individual credit files of Wells Fargo, nor did Lazard
make or obtain any independent evaluation or appraisal of the assets and
liabilities of Ragen MacKenzie or Wells Fargo or any of their respective
subsidiaries, and Lazard was not furnished with any such evaluation or
appraisal.
Lazard's opinion was necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to Lazard
as of, the date of its opinion. In rendering its opinion, Lazard assumed that
the merger would be consummated on the terms described in the merger agreement,
without any waiver of any material terms or conditions by Ragen MacKenzie, and
that obtaining the necessary regulatory approvals for the merger would not have
an adverse effect on Ragen MacKenzie. Lazard expressed no opinion as to the
underlying business decision to effect the merger.
The following is a summary of material financial analyses performed by
Lazard in preparation of its oral opinion rendered on September 27, 1999, and
reviewed with our board on that date. These summaries of financial analyses
include information presented in tabular format. In order to fully understand
the financial analyses used by Lazard, the tables must be read together with
the accompanying text of each summary. The tables alone do not constitute a
complete description of the financial analyses.
Overview of Ragen MacKenzie. Lazard presented an overview of Ragen
MacKenzie, including a review of Ragen MacKenzie's historical financial data
and lines of business, and a comparison of Ragen MacKenzie's financial
performance, market multiples and stock price performance to that of a
brokerage company index comprised of a group of securities firms. This
brokerage company index included data for eleven publicly traded regional
brokerage companies that Lazard considered comparable to Ragen MacKenzie for
the purposes of this analysis and included the following companies:
. Advest, Inc.
. Legg Mason Inc.
. A.G. Edwards & Sons, Inc.
. Morgan Keegan Inc.
. Dain Rauscher Incorporated
. Raymond James Financial Inc.
. Fahnestock Viner Holdings Inc.
. Stifel Financial Corp.
. First Albany Companies Inc.
. Southwest Securities Group
. Freedom Securities Corporation Inc.
15
<PAGE>
With regard to Ragen MacKenzie's financial performance, Lazard compared
various financial statistics to analyze the operating performance of Ragen
MacKenzie versus this brokerage company index using financial data for the
twelve months ended June 30, 1999, or the most recently available information.
Comparative data from this analysis is shown in the following table:
<TABLE>
<CAPTION>
Brokerage Company
Index
Ragen ------------------
MacKenzie Low High Median
--------- ----- ----- ------
<S> <C> <C> <C> <C>
Pre-tax margin................................ 31.1% 4.7% 20.9% 10.4%
Return on average equity...................... 15.0% 11.0% 19.2% 15.5%
Tangible equity as a percent of Adjusted
Assets....................................... 27.2% 6.3% 42.4% 15.5%
</TABLE>
"Adjusted Assets" as used in the above table is equal to total assets net of
matched book assets and segregated cash.
Lazard also compared Ragen MacKenzie's current market multiples and stock
performance since June 23, 1998, the date of Ragen MacKenzie's initial public
offering, to respective statistics for the brokerage company index. With
respect to these analyses, Lazard noted that beginning July 15, 1999, Ragen
MacKenzie common stock outperformed both the brokerage company index and the
S&P 500 Index as follows:
<TABLE>
<CAPTION>
Percent change in
stock price
July 15, 1999 to
September 24, 1999
------------------
<S> <C>
Ragen MacKenzie........................................... 45.8 %
Brokerage Company Index................................... (10.9)%
S&P 500 Index............................................. (9.4)%
</TABLE>
Lazard estimated a range of adjusted prices for Ragen MacKenzie common stock
as of September 24, 1999 in order to eliminate the observed market
outperformance by assuming that Ragen MacKenzie common stock performed in line
with the brokerage company index and the S&P 500 Index during the July 15, 1999
to September 24, 1999 period. The range of adjusted prices for Ragen MacKenzie
common stock as of September 24, 1999 based on the changes in the brokerage
company index and the S&P 500 Index over this time period was $10.58-$10.76
(the "Adjusted Prices"), compared to the closing price of Ragen MacKenzie
common stock of $17.31 on September 24, 1999 (the "Closing Price").
With regard to market multiples, the comparative analysis was presented
using the Closing Price and Adjusted Prices for Ragen MacKenzie common stock.
Historical information was based on data for the twelve months ended June 30,
1999 or the most recent available information. Estimates of diluted earnings
per share for Ragen MacKenzie for the fiscal year ended September 24, 1999 were
based on management estimates. Estimates of diluted earnings per share for
those companies contained in the brokerage company index for the 1999 and 2000
fiscal years and for Ragen MacKenzie for the fiscal year ended September 29,
2000 were based on median estimates available from the Institutional Brokers
Estimate System ("IBES") as of September 24, 1999. IBES is a data service that
monitors and publishes a compilation of earnings estimates produced by selected
research analysts on companies of interest to investors. Comparative data from
this analysis is shown in the following table:
<TABLE>
<CAPTION>
Brokerage Company
Ragen MacKenzie Index
----------------------------- -------------------
Closing Price Adjusted Prices Low High Median
------------- --------------- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Price as a multiple of:
Estimated current
fiscal year EPS....... 14.0x 8.5x -8.7x 7.8x 18.5x 10.2x
Estimated next fiscal
year EPS.............. 12.8x 7.8x -8.0x 7.3x 17.2x 8.6x
Tangible book value per
share................. 1.94x 1.19x-1.21x 1.08x 4.29x 1.44x
</TABLE>
16
<PAGE>
With regard to stock performance, Lazard compared the performance of Ragen
MacKenzie common stock since June 23, 1998, the date of Ragen MacKenzie's IPO,
through September 24, 1999, based on Ragen MacKenzie's Closing Price and
Adjusted Prices, with the stock performance of the Brokerage Company Index and
the S&P 500 Index over the same time period. Comparative data from this
analysis is shown in the following table:
<TABLE>
<CAPTION>
Annual Return
-------------------------------------
From June 23, 1998 For the one-year
through period ended
September 24, 1999 September 24, 1999
------------------ ------------------
<S> <C> <C>
Ragen MacKenzie common stock based
on:
Closing Price..................... 10.0 % 68.1%
Midpoint of Adjusted Prices....... (20.1)% 3.5%
Brokerage Company Index............. (9.7)% 14.7%
S&P 500 Index....................... 11.6 % 24.0%
</TABLE>
Overview of Wells Fargo. Lazard presented an overview of Wells Fargo,
including a review of Wells Fargo's historical financial data and lines of
business, and a comparison of Wells Fargo's financial performance, market
multiples and stock price performance to that of an index comprised of a group
of commercial banks. This commercial bank index included data for thirteen
publicly traded commercial banks that Lazard considered comparable to Wells
Fargo for the purposes of this analysis, and included:
. Bank One Corporation
. Mellon Financial Corporation
. Bank of America Corporation
. National City Corporation
. The Bank of New York Company, Inc.
. PNC Bank Corp.
. Firstar Corporation
. SunTrust Banks, Inc.
. First Union Corporation
. U.S. Bancorp
. Fleet Boston Corporation
. Wachovia Corporation
. KeyCorp
With regard to Wells Fargo's financial performance, Lazard compared various
financial statistics to analyze the operating performance of Wells Fargo versus
this commercial bank index using financial data for the twelve months ended
June 30, 1999, or the most recently available information. Comparative data
from this analysis is shown in the following table:
<TABLE>
<CAPTION>
Commercial Bank
Index
------------------
Wells Fargo Low High Median
----------- ----- ----- ------
<S> <C> <C> <C> <C>
Return on average assets.................... 1.7% 1.1% 2.0% 1.7%
Return on average tangible equity........... 29.0% 17.2% 46.2% 26.5%
Leverage ratio.............................. 7.1% 6.0% 8.8% 7.3%
Non-performing assets as a percent of total
loans plus other real estate owned......... 1.2% 0.6% 1.0% 0.8%
</TABLE>
17
<PAGE>
With regard to market multiples, Lazard compared market multiples of the
common stock of Wells Fargo with those of the commercial bank index. Historical
information was based on data for the twelve months ended June 30, 1999, or the
most recent available information. Earnings per share estimates for Wells Fargo
and for those contained in the commercial bank index for the 1999 and 2000
fiscal years were based on IBES median estimates as of September 24, 1999.
Comparative data from this analysis is shown in the following table:
<TABLE>
<CAPTION>
Commercial Bank
Index
-------------------
Wells Fargo Low High Median
----------- ----- ------ ------
<S> <C> <C> <C> <C>
Price as a multiple of:
Estimated current fiscal year EPS.......... 17.8x 9.7x 19.7x 13.3x
Estimated next fiscal year EPS............. 15.5x 8.7x 17.5x 12.0x
Tangible book value per share.............. 4.95x 2.06x 8.21x 3.40x
</TABLE>
With regard to stock performance, Lazard compared the performance of the
common stock of Wells Fargo over the one-, three- and five-year periods, in all
cases ending September 24, 1999, with the performance of the commercial bank
index and the S&P 500 Index over the same time periods. Comparative data from
this analysis is shown in the following table:
<TABLE>
<CAPTION>
Annual return over a period
ending September 24, 1999
-----------------------------
One Year Three Year Five Year
-------- ---------- ---------
<S> <C> <C> <C>
Wells Fargo Common Stock....................... 11.7 % 28.1% 28.9%
Commercial Bank Index.......................... (3.7)% 18.3% 23.2%
S&P 500 Index.................................. 23.9 % 25.0% 25.1%
</TABLE>
Lazard also reviewed the recommendations of the research analysts that
follow the common stock of Wells Fargo and summarized their current
recommendations.
Valuation. As part of its analysis, Lazard employed two valuation
methodologies: (1) a comparable transactions analysis and (2) a discounted cash
flow analysis.
Comparable Transactions Analysis. Lazard performed an analysis of the
consideration paid in precedent transactions comprised of seven acquisitions of
retail securities firms that Lazard considered comparable for the purpose of
this analysis. The consideration paid as a multiple of net revenue, net income,
tangible book value and as a premium to market price at the time of
announcement in these precedent transactions was compared to the multiples and
premiums implied by the consideration offered by Wells Fargo to holders of
Ragen MacKenzie common stock. The precedent transactions included the following
transactions (acquiror/acquiree):
. BB&T Corporation/Scott & . KeyCorp/McDonald & Company
Stringfellow Financial, Inc. Investments, Inc.
. First Union Corporation/Everen . PNC Bank Corp./Hilliard-Lyons,
Capital Corporation Inc.
. First Union Corporation/Wheat . U.S. Bancorp/Piper Jaffray
First Butcher Singer, Inc. Companies, Inc.
. Wachovia Corporation/Interstate
Johnson/Lane, Inc.
The multiples of net revenues and net income for these precedent
transactions were based on the acquired company's net revenues and net income
for the most recent twelve months prior to announcement of the relevant
transaction. The multiples of tangible book value for the precedent
transactions were based on the acquired company's most recently reported
tangible book value per share prior to announcement of the relevant
18
<PAGE>
transaction. The market premiums for the precedent transactions were based on
the market price of the common stock of the acquired company on the day prior
to announcement of the transaction. The multiples for the merger were based on
a value of $18.75 of Wells Fargo common stock per share of Ragen MacKenzie
common stock. Comparative data from this analysis is shown in the following
table:
<TABLE>
<CAPTION>
Precedent
Transactions
--------------------- Proposed
Low High Median Merger
------- ------ ------ ------------
<S> <C> <C> <C> <C>
Multiples of consideration to:
Net revenues.......................... 0.9x 2.0x 1.3x 3.2x
Net income............................ 13.5x 20.6x 17.7x 15.6x
Tangible book value................... 2.52x 4.07x 3.00x 2.23x
Premium/(discount).................... (13.5)% 73.5% 24.1%
(based on Closing
Price) 8.3%
(based on Adjusted
Prices) 74.3%-77.2%
Employee retention payments as a
percentage of:
Total consideration received by
shareholders......................... 8.1% 18.0% 12.5% 5.5%
Net revenues.......................... 8.2% 21.4% 18.0% 17.6%
</TABLE>
Discounted Cash Flow Analyses. Lazard performed a series of discounted cash
flow analyses to determine a range of present values per share of Ragen
MacKenzie common stock assuming Ragen MacKenzie continued to operate as a
stand-alone entity. These ranges were determined by adding the present value of
the estimated future dividend stream that Ragen MacKenzie could generate over
the five-year period ending September 30, 2004, and the present value of the
"terminal value" of Ragen MacKenzie common stock at the end of the 2004 fiscal
year. To determine a projected dividend stream, Lazard assumed that Ragen
MacKenzie would maintain a marginal level of net capital to aggregate debits of
20%. The earnings projections which formed the basis for the dividends and the
terminal value were adapted from the IBES estimate for fiscal year 2000, and
the IBES projected growth rate of 11% for fiscal years 2001 through 2004. The
terminal value for Ragen MacKenzie common stock was determined by applying a
range of price-to-earnings multiples of 9.0x-11.0x to fiscal year 2004
projected earnings. The dividend stream and terminal values were discounted to
present values using a range of discount rates of 11% to 13%, which Lazard
viewed as the appropriate discount rate range for a company with Ragen
MacKenzie's risk characteristics.
The discounted cash flow analysis was performed under two cases assuming (1)
no excess capital and (2) excess capital of $40 million to $70 million. Lazard
estimated the amount of excess capital based on input from Ragen MacKenzie
management and a comparison of the ratio of net capital to aggregate debit
items for Ragen MacKenzie and the brokerage company index at June 30, 1999. In
estimating the appropriate levels of excess capital, Lazard assumed a pre-tax
investment rate of 5.5%. Comparative data from this analysis is shown in the
following table:
<TABLE>
<CAPTION>
Ratio of net capital to
aggregate debit items
-----------------------
<S> <C>
Ragen MacKenzie...................................... 63.9%
Brokerage Company Index:
Low................................................ 7.3%
High............................................... 39.5%
Median............................................. 15.0%
</TABLE>
Based on the above assumptions, Lazard calculated that the fully-diluted
stand-alone value of Ragen MacKenzie common stock was as follows:
<TABLE>
<CAPTION>
Price per share range
---------------------
<S> <C>
Assuming no excess capital............................. $14.30-$17.56
Assuming excess capital of $40 million................. $16.20-$19.29
Assuming excess capital of $70 million................. $17.63-$20.59
</TABLE>
19
<PAGE>
The summaries set forth above do not purport to be complete descriptions of
the analyses conducted by Lazard. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to a partial analysis or
summary description. Lazard believes that its analyses must be considered as a
whole and that selecting portions of its analyses, without considering the
analyses taken as a whole, would create an incomplete view of the analyses
underlying its opinion. In addition, Lazard considered the results of all such
analyses and did not assign relative weights to any of the analyses, so that
the ranges of valuations resulting from any particular analysis described above
should not be taken to be Lazard's view of the actual value of Ragen
MacKenzie's common stock.
In performing its analyses, Lazard made numerous assumptions with respect to
industry performance, general business, economic and regulatory conditions and
other matters, many of which are beyond the control of Ragen MacKenzie or Wells
Fargo. The analyses performed by Lazard are not necessarily indicative of
actual values, trading values or actual future results that might be achieved,
all of which may be significantly more or less favorable than suggested by
these analyses. Lazard's analyses were prepared solely as a part of its
analysis of the fairness of the exchange ratio to the holders of Ragen
MacKenzie common stock from a financial point of view and do not purport to be
appraisals or to reflect the prices at which Ragen MacKenzie might be sold.
No company or transaction used in any of the analyses is identical to Ragen
MacKenzie or the merger. Accordingly, an analysis of the results of the
foregoing necessarily involves complex considerations and judgments concerning
financial and operating characteristics of Ragen MacKenzie and other factors
that could affect the public trading value of the companies to which they are
being compared. Mathematical analysis (such as determining the average or
median) is not in itself a meaningful method of using comparable transaction
data or comparable company data.
In addition, as described above, Lazard's opinion was one of many factors
taken into consideration by our board in making its determination to approve
the merger. Consequently, the analyses described above should not be viewed as
determinative of the opinion of our board with respect to the value of Ragen
MacKenzie or whether Ragen MacKenzie's board would be willing to agree to a
different consideration. The exchange ratio was determined through negotiations
between Ragen MacKenzie and Wells Fargo, and was approved by our board.
Lazard is an internationally recognized investment banking and advisory
firm. As part of its investment banking business, Lazard is continuously
engaged in the valuation of businesses and securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. In the course of its market
making and other trading activities, Lazard may, from time to time, have a long
or short position in, and may buy and sell, securities of Ragen MacKenzie,
Wells Fargo and other institutions.
Under a letter agreement, Ragen MacKenzie has agreed to pay Lazard a
transaction fee of approximately $2.5 million which is payable upon the
completion of the merger. In addition, Ragen MacKenzie has agreed, among other
things, to reimburse Lazard for all reasonable out-of-pocket expenses incurred
in connection with the services provided by Lazard, and to indemnify and hold
harmless Lazard and other related parties from and against various liabilities
and expenses, which may include liabilities under the federal securities laws,
in connection with its engagement.
THE MERGER
Subject to the terms and conditions of the merger agreement and in
accordance with Washington law, at the time the merger becomes effective a
subsidiary of Wells Fargo will merge into Ragen MacKenzie. Ragen MacKenzie will
be the surviving corporation in the merger and will continue its corporate
existence under the laws of Washington as a wholly-owned subsidiary of Wells
Fargo. The articles of incorporation and bylaws of Ragen MacKenzie will be the
articles of incorporation and bylaws of the surviving corporation. However,
since
20
<PAGE>
you will receive shares of Wells Fargo common stock in the merger, your rights
as a shareholder after the completion of the merger will be governed by the
restated certificate of incorporation and by-laws of Wells Fargo. See
"Comparison of Rights of Ragen MacKenzie Shareholders and Wells Fargo
Stockholders."
CONVERSION OF STOCK
When the merger is complete, each share of Ragen MacKenzie common stock will
automatically convert into the right to receive a number of shares of Wells
Fargo common stock equal to the exchange ratio. The exchange ratio will depend
on the "average closing price," which is a term we use to describe the average
closing price of Wells Fargo common stock during a measurement period equal to
the ten consecutive NYSE full trading days on which the stock is traded ending
on the trading day before all of the closing conditions of the merger, other
than conditions related to the delivery of documents, are met. The exchange
ratio will be calculated as follows:
. If the average closing price is equal to or greater than $42.00 per
share, the exchange ratio will be fixed at 0.4464 shares of Wells Fargo
common stock, in which case you will receive more than $18.75 of Wells
Fargo common stock for each share of Ragen MacKenzie common stock.
. If the average closing price is between $42.00 and $36.00, inclusive, the
exchange ratio will equal $18.75 divided by the average closing price.
Under these circumstances, you would receive a number of shares of Wells
Fargo common stock required to provide you with value equal to $18.75 for
each share of Ragen MacKenzie common stock.
. If the average closing price is equal to or less than $36.00 per share,
the exchange ratio will be fixed at 0.5208 shares of Wells Fargo common
stock, in which case you will receive less than $18.75 of Wells Fargo
common stock for each share of Ragen MacKenzie common stock.
As a result, as long as the average closing price is between $36.00 and
$42.00, inclusive, the value of the merger consideration will be fixed. Outside
this range, the value of the consideration will fluctuate with the price of
Wells Fargo's common stock. Since the price of Wells Fargo common stock will
fluctuate, we cannot assure you as to what the price of Wells Fargo common
stock will be during the measurement period used to determine the average
closing price.
As an example, assume all of the conditions to the merger, other than those
related to the delivery of documents, occurred on February 3, 2000. The average
closing price of Wells Fargo common stock for the ten trading days ending
February 2, 2000, the trading day prior to February 3, 2000, was $38.1688. In
this example, you would receive 0.4912 shares of Wells Fargo common stock for
each share of Ragen MacKenzie common stock you own on the merger date.
The exchange ratio is subject to customary adjustments to preserve the
relative value of the consideration Ragen MacKenzie shareholders are to receive
in the event of stock splits, reverse stock splits or the like with respect to
Wells Fargo common stock before the merger is completed, as described below
under "--Antidilution Adjustments."
Some shares of Ragen MacKenzie common stock will not be converted in the
merger. These include shares as to which Ragen MacKenzie shareholders demand
appraisal rights in compliance with Washington law, as described below under
"Dissenters' Appraisal Rights." They also include shares held by Wells Fargo or
Ragen MacKenzie or any of our wholly-owned subsidiaries. Each outstanding share
of Ragen MacKenzie common stock owned by Wells Fargo, Ragen MacKenzie or any of
our wholly-owned subsidiaries will be canceled at the completion of the merger
and will cease to exist. No Wells Fargo common stock or other consideration
will be delivered in exchange for these shares. All shares of Wells Fargo
common stock that are owned by Ragen MacKenzie or any of its wholly-owned
subsidiaries will become authorized but unissued shares of Wells Fargo common
stock. All other shares of Wells Fargo common stock issued and outstanding
immediately before the completion of the merger will remain issued and
outstanding immediately after completion of the merger. They will not be
affected by the merger.
21
<PAGE>
TREATMENT OF OPTIONS
We have granted options to acquire Ragen MacKenzie common stock under our
"stock plans," which is a term we use to describe our stock option and
incentive plans. Each of these options outstanding and unexercised immediately
prior to the completion of the merger will be converted automatically into a
stock option to purchase Wells Fargo common stock, with the following
adjustments:
. the number of shares of Wells Fargo common stock subject to the new
option will be equal to the product of the number of shares of Ragen
MacKenzie common stock subject to the original option and the exchange
ratio
. the exercise price per share of Wells Fargo common stock subject to the
new option will be equal to the exercise price under the original option
divided by the exchange ratio.
The duration and other terms of each new Wells Fargo option will be
substantially the same as the original Ragen MacKenzie option, except that all
references to Ragen MacKenzie will be deemed to be references to Wells Fargo.
In any event, options that are incentive stock options under the U.S. tax code
will be adjusted in the manner prescribed by the U.S. tax code.
ANTIDILUTION ADJUSTMENTS
If, between September 28, 1999 and the completion of the merger, the issued
and outstanding shares of Wells Fargo common stock are increased, decreased,
changed into or exchanged for a different number or kind of shares or
securities as a result of a reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other similar change in
capitalization, an appropriate and proportionate adjustment will be made to the
exchange ratio.
EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
Exchange Procedures. Promptly after we and Wells Fargo complete the merger,
Wells Fargo will arrange to send a transmittal letter to you. The form of
transmittal letter will contain instructions about the surrender of Ragen
MacKenzie common stock certificates for Wells Fargo common stock certificates
and any cash in lieu of fractional shares of Wells Fargo common stock. Wells
Fargo will arrange to deliver certificates representing the shares of Wells
Fargo common stock and cash in lieu of any fractional shares to Ragen MacKenzie
shareholders upon delivery to Norwest Bank Minnesota, N.A., or any successor
approved by Wells Fargo (the "exchange agent"), of the transmittal letter and
the Ragen MacKenzie stock certificates. If your Ragen MacKenzie stock
certificates have been lost, stolen or destroyed, you will need to send to the
exchange agent the transmittal letter and indemnity satisfactory to Wells Fargo
and the exchange agent.
RAGEN MACKENZIE COMMON STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE
ENCLOSED PROXY CARD. THEY SHOULD NOT BE FORWARDED TO THE EXCHANGE AGENT UNLESS
AND UNTIL YOU RECEIVE A TRANSMITTAL LETTER FOLLOWING THE COMPLETION OF THE
MERGER.
After the completion of the merger, you will not be paid dividends or other
distributions declared on the Wells Fargo common stock into which your Ragen
MacKenzie common stock has been converted until you surrender Ragen MacKenzie
common stock certificates for exchange. When you surrender your Ragen MacKenzie
certificates, Wells Fargo will pay you any unpaid dividends or other
distributions, without interest. After the completion of the merger, there will
be no transfers on the stock transfer books of Ragen MacKenzie of shares of
Ragen MacKenzie common stock issued and outstanding immediately prior to the
completion of the merger.
No Fractional Shares Will Be Issued. The exchange agent will not issue
fractional shares of Wells Fargo common stock to you in the merger.
Accordingly, there will be no dividends or voting rights with respect to any
fractional shares. For each fractional share that would otherwise be issued,
the exchange agent will pay cash in an amount equal to the fraction of a whole
share that would otherwise have been issued, multiplied by the average closing
price. No interest will be paid or accrued on the cash in lieu of fractional
shares.
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None of the exchange agent, Wells Fargo, Ragen MacKenzie or any other person
will be liable to you for any amount of merger consideration due to you that is
properly delivered to a public official under applicable abandoned property,
escheat or similar laws.
For a description of the Wells Fargo common stock and a description of the
differences between the rights of Ragen MacKenzie shareholders and Wells Fargo
stockholders, see "Wells Fargo Capital Stock" and "Comparison of Rights of
Ragen MacKenzie Shareholders and Wells Fargo Stockholders."
EFFECTIVE TIME
The "effective time" will be the time set forth in the articles of merger
that we will file with the Secretary of State of the State of Washington on the
closing date of the merger. The "effective date" is the day on which the
effective time occurs. We will cause the merger to become effective:
. ten full NYSE trading days after the satisfaction or waiver of the last
remaining condition to the merger (other than conditions related solely
to the delivery of documents on the effective date), or, at the election
of Wells Fargo, on the last business day of the month in which this day
occurs; or
. another date on which we and Wells Fargo mutually agree.
The effective date, however, will not occur prior to March 16, 2000.
We anticipate that we will complete the merger by March 31, 2000. However,
completion could be delayed if there is a delay in obtaining the necessary
regulatory approvals. There can be no assurances as to if or when these
approvals will be obtained or that the merger will be completed. If we don't
complete the merger by June 30, 2000, either we or Wells Fargo may terminate
the merger agreement, unless the failure to complete the merger by this date is
due to the knowing action or inaction of the party seeking to terminate the
merger agreement. See "--Conditions to Completion of the Merger" and "--
Regulatory Approvals Required for the Merger" for a more complete description
of the conditions that must be satisfied and the regulatory approvals that must
be obtained before we can consummate the merger.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties of Ragen
MacKenzie as to, among other things:
. corporate organization, standing and authority
. corporate power
. corporate authority and action
. governmental and third party consents and approvals
. the compliance of the merger agreement with, and the need for consent or
approval under:
. applicable law and contracts
. our articles of incorporation and bylaws, or those of our subsidiaries
. capitalization
. subsidiaries
. financial statements and filings with the SEC
. the absence of certain specified changes in our business since June 25,
1999, including:
. material adverse changes
. amending the governing documents of Ragen MacKenzie or its subsidiaries
. incurring debt
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. creating liens on material assets
. making loans in excess of specified amounts
. changing accounting practices
. entering into employment agreements, granting severance benefits, or
changing compensation or benefits
. the disclosure of, and the absence of material defaults under, various
contracts
. compliance with contracts with clients
. matters related to the registration of each broker-dealer subsidiary
. compliance with applicable law
. good and marketable title to properties and securities
. the filing and accuracy of tax returns, the payment of taxes and the
absence of certain tax proceedings
. disclosure of legal proceedings and investigations
. employees and labor matters
. employee benefit plans and related matters
. the absence of environmental liabilities
. internal controls
. the use of derivative instruments such as swaps and options
. names and trademarks
. insurance
. broker's fees
. the tax treatment of the merger
. "Year 2000" millennium functionality and plan
. the administration of trust accounts.
The merger agreement also contains representations and warranties of Wells
Fargo as to, among other things:
. organization, standing and authority
. corporate power
. corporate authority
. governmental and third party consents and approvals
. the compliance of the merger agreement with, and the need for consent or
approval under:
. applicable law and contracts
. the restated certificate of incorporation and by-laws of Wells Fargo or
its subsidiaries
. capitalization
. subsidiaries
. financial statements and filings with the SEC
. absence of undisclosed litigation
. compliance with applicable law
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. broker's fees
. the absence of material changes in Wells Fargo's business since June 30,
1999
. the tax treatment of the merger
. the absence of any investments or activities on the part of the merger
sub.
CONDUCT OF BUSINESS PENDING THE MERGER
Except as expressly contemplated by the merger agreement, prior to the
effective time, we have agreed that without Wells Fargo's consent, we will not,
and will cause our subsidiaries not to:
. fail to use reasonable best efforts to maintain and preserve intact our
business organizations and assets and maintain our rights, franchises and
existing relations with clients, customers, correspondents, independent
contractors, suppliers, employees and business associates
. enter into any new line of business
. issue any additional shares of capital stock or any securities or
obligations convertible into or exchangeable for any shares of our
capital stock, enter into any contract to do so, or permit any additional
shares of Ragen MacKenzie stock to become subject to new grants of
employee or director stock options or any securities or obligations
convertible into, or giving any person any right to subscribe for, redeem
or acquire, any options, calls or commitments relating to Ragen MacKenzie
capital stock, with limited exceptions agreed to by Ragen MacKenzie and
Wells Fargo
. make, declare or pay any dividend or make any other distribution on any
shares of our capital stock, other than dividends from our wholly-owned
subsidiaries, or directly or indirectly adjust, split, combine, redeem,
reclassify, purchase or otherwise acquire any shares of our capital
stock, other than as required by our stock plans
. enter into, amend, modify or renew any employment, consulting, severance
or similar contract with directors, officers, employees or consultants,
or increase employee compensation or benefits, other than:
. changes required by law or contract
. grants to new employees in the ordinary course of business
. normal increases in compensation to non-executive employees in the
ordinary course of business
. certain bonuses with respect to fiscal year 1999 and a portion of fiscal
year 2000 prior to completion of the merger, paid according to standard
terms consistent with past practice
. enter into or amend any employee benefit, incentive or welfare plan, or
take any action that accelerates the vesting or exercisability of stock
options, restricted stock or other compensation or benefits payable under
employee benefit plans
. sell, transfer, mortgage, lease, encumber or otherwise dispose of or
discontinue any material part of our assets, business or properties,
except for sales of securities or other investments in the ordinary
course of business consistent with past practice
. acquire a material portion of the assets of any other individual,
corporation or other entity, except for the purchase of securities or
other investments in the ordinary course of business consistent with past
practice
. amend our articles of incorporation, our bylaws or the articles of
incorporation or bylaws (or similar governing documents) of any of our
subsidiaries
. implement any change in accounting principles, practices or methods,
other than as may be required by generally accepted accounting principles
. except in the ordinary course of business consistent with past practice,
enter into, renew or terminate any material contract; amend or modify any
material contract in any material respect; or waive any material right
under any material contract
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. settle any material claim, action or proceeding, except for any claim,
action or proceeding involving money damages of not more than $100,000
and which could not reasonably be expected to establish an adverse
precedent or basis for subsequent settlements
. take any action reasonably likely to prevent or impede the merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the U.S. tax code
. knowingly take any action that is intended or is reasonably likely to
result in any of our representations or warranties being or becoming
untrue in any material respect at any time at or prior to the effective
time, any of the conditions to the merger not being satisfied, or in a
material breach or violation of any provision of the merger agreement
. authorize or make any capital expenditures, other than previously
disclosed budgeted amounts or in the ordinary and usual course of
business consistent with past practice in amounts not exceeding $100,000
in the aggregate
. except as required by applicable law or regulation:
. change our risk management policies, procedures or practices in any
material way
. fail to use commercially reasonable means to avoid any material increase
in our aggregate exposure to risk from the general U.S. securities
markets
. materially restructure or change our investment securities portfolio, if
any, or the manner in which we classify or report the portfolio
. except as may not be material and are taken in the ordinary and usual
course of business, consistent with past practice:
. make or change any tax election, change any annual tax accounting
period, or adopt or change any method of tax accounting
. file any amended tax return
. enter into any closing agreement or settle any tax claim or assessment
. surrender or compromise any right to claim a tax refund
. consent to any extension or waiver of the limitations period applicable
to any tax claim or assessment
. initiate any new business activity that would be impermissible for a
"bank holding company" under the Bank Holding Company Act of 1956
. other than in the ordinary course of business consistent with past
practice:
. incur any indebtedness for borrowed money, other than short-term
indebtedness incurred to refinance short-term indebtedness, and our
indebtedness or that of any of our subsidiaries to ourselves or any of
our subsidiaries, and indebtedness under existing lines of credit
. assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or
other entity
. make any loan or advance
. other than with respect to customary concessions regarding margin
indebtedness of brokerage clients in the ordinary course of business
consistent with past practice, and with respect to the regularly
scheduled forgiveness of loans made to employees prior to the date of the
merger agreement in connection with the hiring of these employees under
existing contracts, forgive or extinguish any indebtedness to us or any
of our subsidiaries for borrowed money or otherwise waive any rights
under any instrument or arrangement under to which this indebtedness was
incurred
. agree or commit to do, or adopt any resolutions of our board in support
of, any of the actions listed above.
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Except as expressly contemplated by the merger agreement, prior to the
effective time, Wells Fargo has agreed that without our consent, it will not,
and will cause its subsidiaries not to:
. take any action reasonably likely to prevent or impede the merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the U.S. tax code
. knowingly take any action that is intended or is reasonably likely to
result in any of its representations or warranties being or becoming
untrue in any material respect at any time at or prior to the effective
time, in any of the conditions to the merger not being satisfied, or in a
material breach of any provision of the merger agreement.
OTHER AGREEMENTS
In addition to the agreements we've described above, we have also agreed
with Wells Fargo in the merger agreement to take several other actions:
. We and Wells Fargo both agreed to use our reasonable best efforts in good
faith to take all actions necessary, proper, desirable or advisable under
applicable laws to permit the consummation of the merger as promptly as
reasonably practicable, and to cooperate with each other in that effort.
. We agreed to use our reasonable best efforts to obtain the consent or
approval of all third parties necessary to consummate the merger.
. We agreed to take all action necessary to convene the special meeting to
consider and vote upon approval of the merger agreement and any other
matters required to be approved by our shareholders for the consummation
of the merger. We also agreed that our board would recommend approval of
the merger agreement unless, after having considered the written advice
of outside counsel, it has determined in good faith that to do so would
be a breach of its fiduciary duties under Washington law.
. Wells Fargo agreed to prepare the registration statement of which this
document forms a part, and we agreed to cooperate in that effort. We and
Wells Fargo both agreed to use reasonable best efforts to cause the
registration statement to be declared effective, and that the information
each of us provided for the registration statement would not contain any
material misstatement or omission.
. We and Wells Fargo both agreed, upon reasonable notice, to give the other
access to all of our books, records, properties, personnel and other
information as reasonably requested, and to keep each other's information
confidential. We agreed to provide Wells Fargo with a copy of our filings
with governmental entities and with other information upon request.
. We agreed not to solicit or encourage from any third party inquiries or
proposals with respect to, or engage in any negotiations or discussions
in respect of, or provide any confidential information in connection
with, any tender or exchange offer, proposal for a merger, consolidation
or other business combination involving Ragen MacKenzie or any of its
subsidiaries, or any proposal or offer to acquire a substantial equity
interest in, or a substantial portion of the assets or operations of,
Ragen MacKenzie or any of its subsidiaries other than as provided by the
merger agreement, unless:
. our board determines, based on the written advice of outside counsel,
that failure to do so would result in a breach of its fiduciary duties,
and
. we enter into a confidentiality agreement with the third party.
We also agreed to discontinue any negotiations or discussions initiated
prior to the date of the merger agreement, and to promptly notify Wells
Fargo of all of the relevant details relating to all inquiries and
proposals that we may receive relating to any of these matters.
. We agreed to provide Wells Fargo, 15 days prior to the mailing of this
document, with a schedule of our "affiliates," as that term is used in
the Securities Act, and to use our reasonable best efforts to cause each
of our affiliates to enter into an agreement with Wells Fargo restricting
the disposition of the affiliate's shares of Ragen MacKenzie common stock
and Wells Fargo common stock.
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. We and Wells Fargo both agreed not to take any action that would make the
merger subject to the antitakeover laws and regulations of any state, and
to take all actions to make the merger exempt from these laws.
. We agreed to take all reasonable steps to ensure that entering into the
merger agreement and completing the transactions contemplated by the
merger agreement would not result in the grant of any securities or
obligations convertible into, or give any person any right to subscribe
for, redeem or acquire, any options, calls or commitments relating to our
capital stock.
. Wells Fargo agreed to cause the shares of Wells Fargo common stock that
will be issued in the merger to be approved for listing on the NYSE,
subject to official notice of issuance, prior to the effective date.
. We and Wells Fargo both agreed to cooperate with each other and to use
our reasonable best efforts to promptly prepare and file all necessary
documentation to obtain as promptly as practicable all permits, consents,
approvals and authorizations of all third parties and governmental
entities necessary or advisable to consummate the merger. Wells Fargo,
however, will not be required to accept or agree to any condition imposed
by any governmental entity or self-regulatory organization that it deems
to be unreasonably burdensome.
. Wells Fargo agreed to provide indemnification to Ragen MacKenzie
directors and officers, as described under "--Interests in the Merger
That May Be Different From Yours."
. We and Wells Fargo both agreed to notify the other party of any fact,
event or circumstance that is reasonably likely to result in a material
breach of any provision of the merger agreement, and of any third party
that alleges that its consent is necessary to consummate the merger.
. We and Wells Fargo both agreed not to issue press releases relating to
the merger without the other's prior approval.
. We agreed to, upon Wells Fargo's request, conform our accrual and other
accounting policies to those of Wells Fargo.
EMPLOYEE RETENTION PROGRAM AND BENEFIT PLANS
Retention Program. The merger agreement provides that at the effective time,
Ragen MacKenzie, in cooperation with Wells Fargo, will have established a
retention program to retain designated Ragen MacKenzie employees. The retention
program will consist of cash and options to purchase Wells Fargo common stock,
which will be awarded to designated employees. In the case of employees who
have entered into retention agreements with Ragen MacKenzie in connection with
the proposed merger, including the executives as discussed under "--Interests
in the Merger That May Be Different From Yours--New Retention Agreements," the
retention payments, and the vesting of these payments, are governed by their
retention agreements. Other employees entitled to retention payments may elect
to receive their payments either 100% in options to purchase Wells Fargo common
stock or 50% in cash and 50% in options. For these employees:
. the stock options vest and become exercisable on the earlier of March 31,
2003 or the third anniversary of the effective date, if the employee is
still employed by Ragen MacKenzie on that date
. one-third of the cash portion of the retention payment is payable on the
second anniversary of the effective date, and the remaining two-thirds is
payable on the third anniversary of the effective date
. if Ragen MacKenzie terminates the employee other than for cause, or the
employee terminates his or her employment for good reason, the employee's
unpaid retention payment is accelerated and paid 100% in cash.
Employee Benefit Plans. In the merger agreement, we agreed with Wells Fargo
on the following points concerning employee benefit plans:
. Wells Fargo agreed to cover our employees who become employed by Wells
Fargo or its subsidiaries (the "covered employees") under the employee
benefit plans maintained by Wells Fargo in which the covered employees
are eligible to participate.
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. Wells Fargo will recognize each covered employee's prior service with
Ragen MacKenzie or its subsidiaries for the purposes of the Wells Fargo
employee benefit plans in which the covered employees are eligible to
participate following the effective time for purposes of eligibility and
vesting, but not for purposes of benefit accruals.
. Wells Fargo will waive, for covered employees and their eligible
dependents, any pre-existing conditions or limitations and eligibility
waiting periods under any health plans of Wells Fargo in which covered
employees are eligible to participate after the effective time, other
than the Wells Fargo Long Term Disability Plan and the Wells Fargo Long
Term Care Plan.
. Wells Fargo will give each covered employee credit for the plan year in
which the merger is completed towards applicable deductibles and annual
out-of-pocket limits for expenses incurred prior to completion of the
merger.
. Wells Fargo will honor all accrued employee benefit obligations to
current and former Ragen MacKenzie employees under our benefit plans.
SUPPORT AGREEMENTS
At the same time that the merger agreement was executed, the directors and
executive officers of Ragen MacKenzie who, as of September 28, 1999,
beneficially owned approximately 14.8% of the outstanding shares of Ragen
MacKenzie common stock, entered into support agreements with Wells Fargo, under
which they agreed, among other things, that:
. they will vote all of the shares of Ragen MacKenzie stock over which they
had voting power or control as of the date of the special meeting to
approve the merger agreement
. they will continue to own the shares owned by them when they signed the
support agreement
. they will not, directly or indirectly, solicit or encourage, including by
furnishing information, or take any other action to facilitate any
inquiries or the making of any proposal which constitutes, or may
reasonably be expected to lead to, any proposal that constitutes, or may
reasonably be expected to lead to, any acquisition proposal with respect
to Ragen MacKenzie or any of its subsidiaries.
Each support agreement terminates upon termination of the merger agreement
in accordance with its terms.
CONDITIONS TO COMPLETION OF THE MERGER
The obligations of Wells Fargo and Ragen MacKenzie to complete the merger
are subject to the satisfaction or waiver of the following conditions at or
prior to the effective time:
. the merger agreement and the transactions it contemplates will have been
duly approved by our shareholders
. all regulatory approvals required to consummate the merger will have been
obtained and will remain in full force and effect and any statutory
waiting periods required by law will have expired, and none of these
regulatory approvals will contain any condition or requirement that Wells
Fargo deems to be unreasonably burdensome
. no statute, rule, regulation, judgment, decree, injunction or other order
will have been enacted, issued, promulgated, enforced or entered by any
governmental authority with jurisdiction that prohibits consummation of
the merger and remains in effect
. the shares of Wells Fargo common stock that are to be issued upon
completion of the merger will have been authorized for listing on the
NYSE, subject to official notice of issuance
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. Wells Fargo will have received the opinion of Wachtell, Lipton, Rosen &
Katz, and we will have received the opinion of Perkins Coie LLP, dated
the effective date, substantially to the effect that, on the basis of
facts and assumptions stated in each of these opinions, the merger will
qualify as a reorganization under Section 368(a) of the U.S. tax code
. the representations and warranties of the other party to the merger
agreement will be true and correct in all material respects as of the
date of the merger agreement and as of the effective date as though made
on the effective date, except to the extent that the representations and
warranties speak as of an earlier date. However, for purposes of this
condition, no representation or warranty, except for our representation
and warranty as to our capitalization (which is required to be true and
correct in all material respects), will be deemed to be untrue or
incorrect as a result of the existence of any fact, event or circumstance
that is inconsistent with one or more representations or warranties
(without giving effect to any qualification as to materiality set forth
in the representations and warranties), unless the fact, event or
circumstance, individually or taken together with all facts, events or
circumstances that are inconsistent with any of our or Wells Fargo's
representations or warranties, would be "material" to the other party
. the other party to the merger agreement will have performed in all
material respects all obligations required to be performed by it under
the merger agreement at or prior to the closing date.
The merger agreement defines "material" to mean, with respect to any fact,
circumstance, event or thing, that such fact, circumstance, event or thing is
or would be reasonably expected to be material to:
. the financial position, results of operations, assets, properties or
business of Ragen MacKenzie, Wells Fargo or the surviving corporation and
their subsidiaries, as the case may be, taken as a whole, other than to
the extent that the fact, circumstance, event or thing is due to:
. general changes in conditions in the securities industry, or in the
global or U.S. economy or capital markets
. changes in applicable generally accepted accounting principles or in
laws or regulations of general applicability
. the ability of us or Wells Fargo, as the case may be, to complete in a
timely manner the transactions contemplated by the merger agreement.
In addition to the above, Wells Fargo's obligation to complete the merger is
subject to the satisfaction or waiver of the following conditions at or prior
to the effective time:
. employment agreements will have been entered into with our executive
officers and specified employees
. all third party consents and approvals required for the consummation of
the merger will have been obtained, unless the failure to obtain the
consent or approval is not reasonably likely to have a material adverse
effect on us
. there will be no feature of our or our subsidiaries' mission critical
data processing, operating, or platform systems that will prevent them
from running independently in all material respects after December 31,
1999 until a conversion to Wells Fargo's systems can be completed, and
the mission critical computer software operated by us and our
subsidiaries will provide uninterrupted millennium functionality for
calendar dates falling on or after January 1, 2000 with substantially the
same functionality and performance as for calendar dates falling on or
before December 31, 1999
. we will have complied with our obligations under the third bullet point
under "--Conduct of Business Pending the Merger"
. the total number of shares of our stock outstanding, including Ragen
MacKenzie common stock issuable under any obligations convertible into or
exchangeable for any shares of our capital stock or rights or other
obligations of us or any of our subsidiaries, other than the stock option
agreement, immediately prior to the effective time, will not be greater
than 14,937,610.
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REGULATORY APPROVALS REQUIRED FOR THE MERGER
We have agreed with Wells Fargo to use our reasonable best efforts to obtain
all regulatory approvals required to consummate the merger. We refer to these
approvals, along with the expiration of any statutory waiting periods related
to these approvals, as the "requisite regulatory approvals." These include
approval from, or notice to, the Board of Governors of the Federal Reserve
System, various state regulatory authorities and self-regulatory organizations.
We and Wells Fargo intend to complete the filing of applications and
notifications to obtain the requisite regulatory approvals promptly after the
date of this document. The merger cannot proceed in the absence of the
requisite regulatory approvals. We cannot assure you that the requisite
regulatory approvals will be obtained, and, if obtained, we cannot assure you
as to the date of any of these approvals or the absence of any litigation
challenging them. Likewise, we cannot assure you that the U.S. Department of
Justice or a state attorney general will not attempt to challenge the merger on
antitrust grounds, or, if such a challenge is made, what the result of that
challenge will be.
We are not aware of any other material governmental approvals or actions
that are required prior to the parties' consummation of the merger other than
those described below. We presently contemplate that if any additional
governmental approvals or actions are required, these approvals or actions will
be sought. However, we cannot assure you that any of these additional approvals
or actions will be obtained.
Federal Reserve Board. The merger is subject to prior notice to the Federal
Reserve Board under Section 4(c)(8) of the Bank Holding Company Act. Wells
Fargo has filed the required notification with the Federal Reserve Board in
connection with the merger. Copies of the notification are also provided to the
U.S. Department of Justice and other governmental agencies. The notification
describes the terms of the merger, the parties involved, the activities to be
conducted by Wells Fargo as a result of the merger, the merger's competitive
effects, the public benefits that may be expected to result from the merger,
the source of funds for the merger and provides other financial and managerial
information. In evaluating the notification, the Federal Reserve Board will
take into consideration 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 also
evaluate the capital adequacy of Wells Fargo before and after consummation of
the merger.
The Federal Reserve Board may deny a notification of an acquisition by a
bank holding company 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 a notification 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.
Applicable federal law provides for the publication of notice and public
comment on the notification filed by Wells Fargo with the Federal Reserve
Board. Under current law, the merger may not be completed until after Federal
Reserve Board approval is obtained.
Wells Fargo's right to exercise the stock option described under "--Stock
Option Agreement" is also subject to prior approval of the Federal Reserve
Board under current law, to the extent that its exercise would result in Wells
Fargo owning more than 5% of the outstanding shares of Ragen McKenzie common
stock. In considering whether to approve Wells Fargo's right to exercise the
option, including Wells Fargo's right to purchase more than 5% of the
outstanding shares of Ragen McKenzie common stock, the Federal Reserve Board
would generally apply the same statutory criteria it would apply to its
consideration of approval of the merger.
NYSE, NASD and Other Regulatory Approvals. The merger is subject to the
approval of the NYSE, the National Association of Securities Dealers (the
"NASD") and other state regulatory authorities and self-regulatory
organizations.
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FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated U.S. federal income
tax consequences of the merger to Ragen MacKenzie shareholders who hold Ragen
MacKenzie 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 Ragen MacKenzie shareholder subject to special
treatment under U.S. federal income tax law, including, for example:
. foreign persons . holders who dissent from the merger and
receive the fair value of their shares
of Ragen MacKenzie common stock in cash
. financial institutions
. dealers in securities . holders who acquired their shares of
Ragen MacKenzie common stock through
exercise of an employee stock option or
right, or otherwise as compensation
. traders in securities who
elect to apply a mark-to-
market method of
accounting
. holders who hold Ragen MacKenzie common
stock as part of a hedge, straddle,
conversion or constructive sale
transaction
. insurance companies
. tax-exempt entities
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 firms of Wachtell, Lipton, Rosen & Katz and
Perkins Coie LLP have delivered to Wells Fargo and Ragen MacKenzie,
respectively, opinions, dated the date of this document, addressing the U.S.
federal income tax consequences of the merger. These opinions have been
rendered on the basis of facts, representations and assumptions set forth or
referred to in the opinions. In rendering these opinions, Wachtell, Lipton,
Rosen & Katz and Perkins Coie LLP required and relied upon factual
representations contained in certificates of officers of Wells Fargo and Ragen
MacKenzie. The opinions are to the effect that, for U.S. federal income tax
purposes:
. the merger will qualify as a reorganization within the meaning of Section
368(a) of the U.S. tax code
. Ragen MacKenzie shareholders who exchange all of their Ragen MacKenzie
common stock solely for Wells Fargo common stock in the merger will
recognize no gain or loss on that exchange (except with respect to cash
received instead of a fractional share interest in Wells Fargo common
stock).
Neither we nor Wells Fargo will be required to complete the merger unless we
receive additional opinions of our respective counsel, dated the effective date
of the merger, substantially to the effect that, based on the facts and
assumptions stated in those opinions, the merger will qualify as a
reorganization within the meaning of Section 368(a) of the U.S. tax code. In
rendering those opinions, counsel may require and rely on customary
representations of our officers and Wells Fargo's officers.
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 we do not intend to request a
ruling from the IRS with respect to the merger.
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<PAGE>
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 share of Ragen
MacKenzie 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 is greater than
one year at the effective time. The holding period of a share of Wells Fargo
common stock received in the merger (including a fractional share interest
deemed received and redeemed as described above) will include the holding
period in the Ragen MacKenzie common stock surrendered in exchange for the
Wells Fargo common stock.
Information Reporting and Backup Withholding. Payments related to Ragen
MacKenzie common stock may be subject to information reporting to the IRS 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 we will include 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.
ACCOUNTING TREATMENT
Upon consummation of the merger, Wells Fargo will account for the
acquisition of Ragen MacKenzie using the purchase method of accounting.
Accordingly, the consideration to be paid in the merger will be allocated to
assets acquired and liabilities assumed based on their estimated fair values at
the effective time. To the extent the total purchase price exceeds the fair
value of the assets acquired and liabilities assumed, Wells Fargo will record
goodwill. Income (or loss) of Ragen MacKenzie subsequent to the effective time
will be included in the consolidated results of Wells Fargo.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated, and the merger may be abandoned:
. Mutual Consent--by the mutual consent of ourselves and Wells Fargo at any
time before the effective time
. Breach--by either ourselves or Wells Fargo, if:
. there has been a breach by the other party of a representation or
warranty as a result of the existence of any fact, event or circumstance
that would be material to the breaching party that cannot be or has not
been cured within 30 days, or
. there has been a breach by the other party of a covenant or agreement
contained in the merger agreement that cannot be or has not been cured
within 30 days, which would be reasonably likely, individually or in the
aggregate, to have a material adverse effect on the breaching party or
the surviving corporation
. Delay--by either ourselves or Wells Fargo if the merger is not completed
by June 30, 2000, unless the delay is caused by the knowing action or
inaction of the party seeking to terminate the merger agreement
. No Approval--by either ourselves or Wells Fargo, if:
. any approval of the merger that must be granted by a governmental entity
has been denied and this denial has become final and nonappealable, or
the governmental entity has requested the permanent withdrawal of the
approval application, or
. the shareholder approval required by the merger agreement is not
obtained
. Failure to Recommend--by Wells Fargo if, at any time prior to the special
meeting, our board fails to recommend the merger, withdraws its
recommendation or modifies or changes its recommendation in a manner
adverse to Wells Fargo's interests.
33
<PAGE>
In addition, the merger agreement provides us with a termination right in
the event that, generally, the price of Wells Fargo's common stock falls below
$32.00 per share and underperforms the price performance of a group of peer
bank holding companies by more than fifteen percentage points. More
specifically, during the five-day period starting on the first day after the
conditions to the merger set forth in the merger agreement are satisfied, our
board can terminate the merger agreement if both of the following conditions
are met:
. the average closing price of Wells Fargo's common stock as reported on
the NYSE composite transactions reporting system over the ten days ending
on the date that the conditions to the merger set forth in the merger
agreement are satisfied (the "measurement period") is less than $32.00,
and
. the ratio of Wells Fargo's average closing price to $38.50 (the closing
price of Wells Fargo's common stock on September 27, 1999, the last full
NYSE trading date before we executed the merger agreement), is more than
0.15 less than the ratio of the average closing price over the
measurement period of an index of Wells Fargo peer financial institutions
(the "index group") to the price of that index on September 27, 1999.
For three days after Wells Fargo receives notice that we intend to exercise
our termination right, Wells Fargo can opt to increase the exchange ratio
according to a formula in the merger agreement. This formula generally provides
for an increase with the effect that the dollar value of the revised merger
consideration per share of Ragen MacKenzie common stock, based on the Wells
Fargo average closing price, would be equal to the value that would have been
received by a Ragen MacKenzie shareholder if the Wells Fargo average closing
price were the minimum necessary so that one of the two conditions described
above would not have been met. If Wells Fargo elects to increase the exchange
ratio according to this formula, then we will no longer have our right to
terminate the merger agreement, and the exchange ratio will be revised
accordingly. Because the formula is dependent on the future price of Wells
Fargo's common stock and that of the index group, it is not possible at present
to determine what the adjusted conversion ratio would be, but, in general, the
ratio would be increased and, consequently, more shares of Wells Fargo's common
stock issued, to take into account the extent to which the average closing
price of Wells Fargo common stock was below $32.00 or trailed the performance
of the average stock price of the index group, as applicable.
The price of the index group on any date is determined based on the weighted
average closing prices on that date of each of 19 financial institutions. The
weightings are based on the number of outstanding shares of each of the
companies. The companies comprising the index group, and their weightings, are
as follows:
<TABLE>
<S> <C> <C> <C>
Bank of America Corporation...... 19.8 National City Corporation........ 7.1
Bank One Corporation............. 13.4 Northern Trust Corporation....... 1.3
BB&T Corporation................. 3.6 PNC Bank Corp.................... 3.4
Comerica Incorporated............ 1.8 Regions Financial Corporation.... 2.6
Fifth Third Bancorp.............. 3.1 State Street Corporation......... 1.8
First Union Corporation.......... 10.9 Summit Bancorp................... 2.0
Huntington Bancshares, Inc....... 2.6 SunTrust Banks, Inc.............. 3.7
KeyCorp.......................... 5.1 U.S. Bancorp..................... 8.4
Marshall & Illsley Corporation... 1.2 Wachovia Corporation............. 2.3
Mellon Bank Corporation.......... 5.9
</TABLE>
A company will be removed from the index group and the weights will be
redistributed proportionately among the remaining companies if:
. the common stock of that company stops being publicly traded
. the company announces a proposal to be acquired, or
. the company announces a proposal to acquire another company or companies
in transactions with a value of more than 25% of the acquiror's market
capitalization on September 27, 1999.
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<PAGE>
Whether or not we complete the merger, all fees and expenses incurred in
connection with the merger will be paid by the party incurring the expenses.
However, the costs and expenses of printing and mailing this document, and all
filing and other fees paid to the SEC in connection with the merger, will be
borne equally by us and Wells Fargo. Furthermore, termination will not relieve
a breaching party from liability for any willful breach of the merger agreement
or of its obligations under the stock option agreement.
WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
At any time before the effective time, any provision of the merger agreement
may be:
. waived by the party benefited by the provision, or
. amended or modified at any time, by an agreement authorized by our board
and the Wells Fargo board.
However, after our shareholders approve the merger agreement, there may not
be, without further approval of these shareholders, any amendment to the merger
agreement that under applicable law requires further approval of these
shareholders.
STOCK EXCHANGE LISTING
Wells Fargo has agreed to cause the shares of Wells Fargo common stock to be
issued in the merger to be approved for listing on the NYSE. Each party's
obligation to consummate the merger is conditioned on the shares of Wells Fargo
common stock being authorized for listing on the NYSE, subject to official
notice of issuance.
INTERESTS IN THE MERGER THAT MAY BE DIFFERENT FROM YOURS
Some members of Ragen MacKenzie's management and board have interests in the
merger that are in addition to the interests as Ragen MacKenzie shareholders
that they share with you. The Ragen MacKenzie board was aware of these
interests and considered them, among other matters, in approving the merger
agreement and the transactions it contemplates.
New Retention Agreements. In connection with the merger, Ragen MacKenzie
entered into retention agreements with Lesa A. Sroufe, James Kerr, V. Lawrence
Bensussen, Robert J. Mortell and Mark A. McClure, each of which contains
provisions related to noncompetition, nonsolicitation and retention of the
employee. Each retention agreement commences upon the completion of the merger
and expires upon the first to occur of the 36-month anniversary of the
consummation of the merger and March 31, 2003. Under their retention
agreements, Ms. Sroufe and Messrs. Kerr and Mortell will each receive
guaranteed annual compensation of not less than $500,000, and Mr. Bensussen
will receive guaranteed annual compensation of not less than $300,000.
The retention agreements also entitle each of the covered executives to
retention payments as of the completion of the merger. The retention payments
will be in the form of options to purchase shares of Wells Fargo common stock
that vest at the end of the executive's term of employment under his or her
employment agreement. Ms. Sroufe and Messrs. Kerr, Bensussen, Mortell and
McClure will receive Wells Fargo options with a value (determined as of the
completion of the merger based on the Black-Scholes valuation of Wells Fargo
common stock at that time) equal to $500,000, $750,000, $300,000, $500,000 and
$275,000, respectively. The retention agreements with Ms. Sroufe and Messrs.
Mortell, Kerr and Bensussen provide that if, during the term of the retention
agreement, the executive's employment is terminated without cause or the
executive terminates his or her employment for good reason, the executive is
entitled to receive:
. the guaranteed annual compensation that each executive would have
received if their employment had continued until the end of the term
. any unpaid annual base salary which has accrued for services already
performed as of the termination
. any unpaid retention payments, paid in cash instead of Wells Fargo
options.
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<PAGE>
The retention agreement with Mr. McClure provides that if, during the term
of the retention agreement, his employment is terminated without cause or he
terminates his employment for good reason, he is entitled to receive:
. any unpaid compensation which has accrued for services already performed
as of the termination
. any unpaid retention payments, paid in cash instead of Wells Fargo
options
. additional payments totaling $50,000, payable in equal installments over
the three months following termination.
If any of these executives is terminated for cause or terminates his or her
employment without good reason, the executive will only be entitled to any
unpaid compensation which has accrued for services already performed as of the
termination.
Each retention agreement contains provisions related to noncompetition and
nonsolicitation. These noncompetition and nonsolicitation obligations continue
during the executive's employment term, even if the executive's employment is
terminated, except that Mr. McClure's noncompete and nonsolicitation
obligations cease if his employment is terminated without cause or he
terminates his employment for good reason. Under the retention agreements, each
executive agrees not to:
. be employed by, perform services for, own, manage, operate, join or
control, or be related or connected to, any competitor of Ragen MacKenzie
. solicit, influence or entice:
. any employee or consultant of Ragen MacKenzie to cease his or her
relationship with Ragen MacKenzie
. any client, customer, distributor, partner, joint venturer, supplier or
service provider of Ragen MacKenzie to do business or in any way become
associated with any competitor of Ragen MacKenzie.
Under the retention agreements, a "competitor" of Ragen MacKenzie is any
organization that is subject to regulation by the SEC because of its activities
as a broker, dealer, investment advisor, investment company, underwriter or a
related business and that conducts business in any state or province in which
Ragen MacKenzie conducts business.
In addition, each retention agreement provides that during the executive's
employment and following termination of that employment, the executive will not
disclose any confidential information related to Ragen MacKenzie, and will
return all confidential information upon termination of employment. The
retention agreement with Mr. McClure provides that if he is no longer subject
to the noncompetition portion of his retention agreement, his list of personal
clients, other than clients introduced to him by Wells Fargo, will not be
covered by the confidentiality portions of his retention agreement.
Stock-Based Rights. The merger agreement provides that at the effective
time, each outstanding stock option to acquire shares of Ragen MacKenzie common
stock granted under our stock plans will cease to represent the right to
acquire shares of Ragen MacKenzie common stock and will be converted into and
become a right with respect to Wells Fargo common stock, and each Ragen
MacKenzie stock plan will be assumed by Wells Fargo. Under the terms of our
stock plans, the stock option awards held by the executive officers of Ragen
MacKenzie will become fully vested and exercisable if the holder's employment
is terminated within two years of a change in control, unless the termination
is for cause or by the holder voluntarily without good reason.
Indemnification and Insurance. Wells Fargo has agreed to ensure the survival
after the merger of all rights to indemnification and all limitations of
liability existing in Ragen MacKenzie's articles and bylaws in
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<PAGE>
favor of current or former directors and officers of Ragen MacKenzie or its
subsidiaries, or anyone who becomes a director or officer of Ragen MacKenzie
prior to the effective time, with respect to certain claims, whether asserted
before or after the merger. These claims include those arising from:
. facts or events that occurred before the effective time
. the merger agreement or any of the transactions contemplated by the
merger agreement.
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 Ragen MacKenzie and its subsidiaries under a director's and
officer's liability insurance policy with respect to claims arising out of
facts or events occurring at or prior to the effective time. This insurance
will provide at least the same coverage and amounts as the coverage currently
provided by Ragen MacKenzie for a total premium cost of not more than 150% of
the current amount expended by Ragen MacKenzie to provide this insurance.
STOCK OPTION AGREEMENT
Immediately after the execution of the merger agreement, we entered into a
stock option agreement with Wells Fargo, dated September 28, 1999, under which
we granted to Wells Fargo an option to purchase Ragen MacKenzie common stock
from us under the conditions we describe below.
The option agreement grants Wells Fargo an option on 19.9% of our
outstanding common stock. The option agreement is intended to increase the
likelihood that the merger will be completed in accordance with the terms of
the merger agreement and to compensate Wells Fargo if the merger is not
completed. Consequently, aspects of the option agreement may discourage persons
who might be interested in acquiring all of or a significant interest in us
from considering or proposing an acquisition, even if these persons were
prepared to offer to pay consideration to the Ragen MacKenzie shareholders that
had a higher current market price than the shares of Wells Fargo common stock
to be received under the merger agreement. An agreement to acquire us, or the
accumulation of 20% or more of our common stock by a third party, could cause
the option to become exercisable. The existence of the option could
significantly increase the cost to a potential acquiror of acquiring us. This
increased cost might discourage a potential acquiror from considering or
proposing an acquisition or might result in a potential acquiror proposing to
pay a lower per-share price to acquire us than it might otherwise have proposed
to pay. Moreover, following consultation with our respective independent
accountants, we believe that the exercise or repurchase of the option is likely
to prohibit another acquiror from accounting for any acquisition of us using
the "pooling of interests" accounting method for a period of two years.
The option agreement provides for the purchase by Wells Fargo of up to
2,570,093 shares (the "option shares") of Ragen MacKenzie common stock at an
exercise price of $15.50 per share, payable in cash. The option shares, if
issued under the option agreement, will in no event exceed 19.9% of the Ragen
MacKenzie common stock issued and outstanding without giving effect to the
issuance of any Ragen MacKenzie common stock subject to the option.
The number of shares of Ragen MacKenzie common stock subject to the option
will be increased or decreased, as appropriate, to the extent that additional
shares of Ragen MacKenzie common stock are either:
. issued or otherwise become outstanding, other than under an exercise of
the option, or
. redeemed, repurchased, retired or otherwise cease to be outstanding after
September 28, 1999
such that, thereafter, the number of option shares will continue to equal 19.9%
of the Ragen MacKenzie common stock then issued and outstanding before
considering the issuance of any Ragen MacKenzie common stock subject to the
option.
37
<PAGE>
Also, in the event of any change in, or distributions in respect of, the
number of shares of Ragen MacKenzie common stock by reason of a stock dividend,
split-up, merger, recapitalization, combination, subdivision, conversion,
exchange of shares, distribution on or in respect of Ragen MacKenzie common
stock or similar transaction, the type and number of option shares purchasable
upon exercise of the option, and the applicable option price, will be adjusted
in such a manner as will fully preserve the economic benefits of the option.
The option agreement provides that Wells Fargo or any other holder or
holders of the option (as used in this section, collectively, the "holder") may
exercise the option, in whole or in part, subject to regulatory approval, if
both an "Initial Triggering Event" and a "Subsequent Triggering Event" have
occurred prior to the occurrence of an "Exercise Termination Event"; so long as
the holder has sent to Ragen MacKenzie written notice of the exercise within 90
days following the Subsequent Triggering Event (subject to extension as
provided in the option agreement). Any exercise of the option will be deemed to
occur on the date this notice is sent.
The terms Initial Triggering Event and Subsequent Triggering Event generally
relate to attempts by one or more third parties to acquire a significant
interest in Ragen MacKenzie. For purposes of the option agreement, the term
"Initial Triggering Event" means the occurrence of any of the following events
or transactions on or after September 28, 1999:
. we or any of our subsidiaries, without Wells Fargo's prior written
consent, enters into an agreement to engage in, or our board recommends
that our shareholders approve or accept, an Acquisition Transaction with
any person or group, other than as contemplated by the merger agreement
. we or any of our subsidiaries, without Wells Fargo's prior written
consent, authorizes, recommends, proposes to engage in, or publicly
announces its intention to authorize, recommend or propose to engage in,
an Acquisition Transaction, or our board publicly withdraws or modifies,
or publicly announces its intention to withdraw or modify, in any manner
adverse to Wells Fargo, its recommendation that our shareholders approve
the merger agreement in anticipation of engaging in an Acquisition
Transaction
. any person other than Wells Fargo, any subsidiary of Wells Fargo or any
subsidiary of ours acting in a fiduciary capacity in the ordinary course
of business acquires beneficial ownership, or the right to acquire
beneficial ownership, of 10% or more of the outstanding shares of Ragen
MacKenzie common stock
. any person other than Wells Fargo or any subsidiary of Wells Fargo makes
a bona fide proposal to us or to our shareholders by public announcement,
or written communication that becomes the subject of public disclosure,
to engage in an Acquisition Transaction
. we breach any covenant or obligation in the merger agreement after any
person, other than Wells Fargo or any subsidiaries of Wells Fargo, has
proposed an Acquisition Transaction, and this breach both would entitle
Wells Fargo to terminate the merger agreement and is not remedied prior
to the date of Wells Fargo's notice to us of the exercise of the option
. any person other than Wells Fargo or any subsidiary of Wells Fargo, other
than in connection with a transaction to which Wells Fargo has given its
prior written consent, files an application or notice with the U.S.
Department of Justice, the FTC, the Federal Reserve Board, the NYSE or
the NASD or other federal or state regulatory authority or self-
regulatory organization for approval to engage or with respect to
engaging in an Acquisition Transaction.
For purposes of the option agreement, the term "Acquisition Transaction"
means:
. a merger or consolidation, or any similar transaction with us or any of
our Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X
of the SEC)
38
<PAGE>
. a purchase, lease or other acquisition or assumption of all or a
substantial portion of our assets or deposits or those of any of our
Significant Subsidiaries
. a purchase or other acquisition of securities representing 10% or more of
our voting power, or
. any substantially similar transaction, except that in no event will any
merger, consolidation, purchase or similar transaction involving only us
and one or more of our wholly-owned subsidiaries, or involving only any
two or more of its subsidiaries, be an Acquisition Transaction.
The term "Subsequent Triggering Event" means the occurrence of either of the
following events or transactions after September 28, 1999:
. the acquisition by any person of beneficial ownership of 20% or more of
the then-outstanding shares of Ragen MacKenzie common stock
. the occurrence of the Initial Triggering Event described above in the
first bullet point under the definition of "Initial Triggering Event,"
except that the percentage referred to in the third bullet point of the
definition of "Acquisition Transaction" will be 20%.
The option will expire upon the occurrence of an "Exercise Termination
Event," which includes:
. the effective time
. termination of the merger agreement in accordance with the provisions of
the merger agreement if prior to the occurrence of an Initial Triggering
Event, except a termination by Wells Fargo as a result of
. our uncured material breach of the merger agreement, unless the breach
is non-volitional
. the failure of our board to recommend that our shareholders approve of
the merger agreement, or if their recommendation is changed in a way
adverse to Wells Fargo's interests
. the date that is 12 months after the termination of the merger agreement
if the termination occurs after the occurrence of an Initial Triggering
Event or is a termination by Wells Fargo as a result of either of the two
factors listed above.
If an Initial Triggering Event continues or occurs beyond the termination of
the merger agreement and prior to the passage of this 12-month period, the
option will terminate 12 months from the expiration of the last Initial
Triggering Event to expire, but in no event more than 18 months after the
termination of the merger agreement.
As of the date of this document, to our knowledge, no Initial Triggering
Event or Subsequent Triggering Event has occurred.
Under some circumstances we may be required to repurchase the option, and
any shares for which the option was exercised, for a price specified in the
option agreement. Immediately prior to the occurrence of a Repurchase Event:
. following a request of a holder, delivered prior to an Exercise
Termination Event, we, or any successor to us, will repurchase the option
from the holder at a price (the "Option Repurchase Price") equal to the
amount by which
. the Market/Offer Price exceeds
. the exercise price, multiplied by the number of shares for which the
option may then be exercised and
. at the request of the owner of option shares from time to time (the
"owner"), delivered within 90 days of the occurrence of a Repurchase
Event (or a later period as provided in Section 10 of the option
agreement), Ragen MacKenzie will repurchase the number of option shares
from the owner as the owner will designate at a price (the "Option Share
Repurchase Price") equal to the Market/Offer Price multiplied by the
number of option shares so designated.
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<PAGE>
The term "Market/Offer Price" means the highest of:
. the price per share of Ragen MacKenzie common stock at which a tender
offer or exchange offer for the Ragen MacKenzie common stock has been
made
. the price per share of Ragen MacKenzie common stock to be paid by any
third party under an agreement with us
. the highest closing price for shares of Ragen MacKenzie common stock
within the six-month period immediately preceding the date the holder
gives notice of the required repurchase of the option or the owner gives
notice of the required repurchase of option shares, as the case may be
. in the event of a sale of all or a substantial portion of our assets, the
sum of the price paid in the sale for these assets and the current market
value of the remaining assets of ours 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 Ragen MacKenzie, divided
by the number of shares of Ragen MacKenzie common stock outstanding at
the time of the sale.
A "Repurchase Event" is deemed to have occurred:
. upon the consummation of an Acquisition Transaction
. upon the acquisition by any person of the beneficial ownership of 50% or
more of the then-outstanding Ragen MacKenzie common stock, as long as a
Subsequent Triggering Event has occurred prior to an Exercise Termination
Event.
In some situations, the option will convert into an option to purchase the
shares of our successor. In the event that, prior to an Exercise Termination
Event, we enter into any agreement:
. to consolidate with or merge into any person, other than Wells Fargo or
one of its subsidiaries, such that Ragen MacKenzie is not the continuing
or surviving corporation of the consolidation or merger
. to permit any person, other than Wells Fargo or one of its subsidiaries,
to merge into Ragen MacKenzie and Ragen MacKenzie is the continuing or
surviving corporation, but, in connection with the consolidation or
merger, the then-outstanding shares of the Ragen MacKenzie common stock
are 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
Ragen MacKenzie common stock after the merger will represent less than
50% of the outstanding voting shares and voting share equivalents of the
merged corporation
. to sell or otherwise transfer all or substantially all of its assets to
any person, other than Wells Fargo or any of its subsidiaries,
then the agreement governing these transactions must provide that, upon
consummation of the transaction and upon terms and conditions set forth in the
option agreement, the option will be converted into, or exchanged for, an
option having substantially the same terms as the option (the "Substitute
Option") to purchase securities, at the election of the holder, of either the
acquiring person or any person that controls the acquiring person.
At the request of the holder of the Substitute Option, the issuer of the
Substitute Option will repurchase it at a price, and subject to any other terms
and conditions, set forth in the option agreement.
Cash Surrender Value. Wells Fargo may, at any time during which Ragen
MacKenzie would be required to repurchase the option or any option shares as
described above, surrender the option (together with any option shares issued
to and then owned by the holder) to Ragen MacKenzie in exchange for a cash
payment equal to the Surrender Price, except that Wells Fargo may not exercise
this right if we have previously repurchased the option (or any portion of the
option) or any option shares as described above. The "Surrender Price" is
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<PAGE>
. $7,500,000, plus
. if applicable, the aggregate purchase price previously paid by Wells
Fargo with respect to any option shares, minus
. if applicable, the excess of:
. the net cash, if any, received by Wells Fargo in an arm's-length sale of
option shares (or any other securities into which these option shares
were converted or exchanged) to any party not affiliated with Wells
Fargo, over
. the purchase price paid by Wells Fargo with respect to these option
shares.
Some rights and obligations of Wells Fargo and us under the option agreement
are subject to receipt of required regulatory approvals. The approval of the
Federal Reserve Board may be required for the acquisition by Wells Fargo of
more than 5% of the outstanding shares of Ragen MacKenzie common stock if Wells
Fargo has not become a "financial holding company" prior to that time. See
"Regulation and Supervision of Wells Fargo--Financial Modernization
Legislation." The acquisition by Wells Fargo of Ragen MacKenzie common stock
under the option agreement may be subject to the provisions of the HSR Act,
which, if it applied, would require Wells Fargo to wait for a specified period
before completing the acquisition.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of Wells Fargo common stock to be issued to our shareholders in
the merger have been registered under the Securities Act. They may be traded
freely and without restriction by you if you are not deemed to be an affiliate
of ours under the Securities Act. An "affiliate" of ours, as defined by the
rules promulgated under the Securities Act, is a person who directly, or
indirectly through one or more intermediaries, controls us, is controlled by
us, or is under common control with us. Any subsequent transfer of these shares
by any person who is an affiliate of ours at the time the merger is submitted
for vote of our shareholders will, under existing law, require one of the
following:
. the further registration under the Securities Act of the proposed
transfer of these shares of Wells Fargo common stock
. compliance with Rule 145 under the Securities Act (permitting limited
sales in some circumstances)
. the availability of another exemption from the registration requirements
of the Securities Act.
We expect these restrictions to apply to our directors and executive
officers, to some of their family members and to entities in which they may
have a substantial ownership interest. Stop transfer instructions will be given
by Wells Fargo to its transfer agent with respect to the Wells Fargo common
stock to be received by persons subject to the restrictions described above,
and the certificates for this stock will bear appropriate legends.
We have agreed in the merger agreement to use our best efforts to cause each
person who is an affiliate of ours (for purposes of Rule 145) to deliver to
Wells Fargo a written agreement intended to ensure compliance with the
Securities Act.
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<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
WELLS FARGO
Wells Fargo common stock is listed on the NYSE and traded under the symbol
"WFC." The following table sets forth, for the periods indicated, the high and
low reported sale prices per share of Wells Fargo common stock on the NYSE
composite transactions reporting system and cash dividends declared per share
of Wells Fargo common stock.
<TABLE>
<CAPTION>
Price range of
common stock
--------------
Dividends
High Low declared
---- --- ---------
<S> <C> <C> <C>
1998
----
First Quarter.................................. 43 7/8 34 3/4 .165
Second Quarter................................. 43 3/4 34 .165
Third Quarter.................................. 39 3/4 27 1/2 .185
Fourth Quarter................................. 40 7/8 30 3/16 .185
1999
----
First Quarter.................................. 40 7/16 32 1/8 .185
Second Quarter................................. 44 7/8 34 3/8 .200
Third Quarter.................................. 45 5/16 36 7/16 .200
Fourth Quarter................................. 49 15/16 38 3/8 .200
2000
----
First Quarter (through February 8, 2000)....... 41 11/16 35 7/8 .220
</TABLE>
The timing and amount of future dividends will depend upon earnings, cash
requirements, the financial condition of Wells Fargo and its subsidiaries,
applicable government regulations and other factors deemed relevant by the
Wells Fargo board. As described under "Regulation and Supervision of Wells
Fargo--Dividend Restrictions," various U.S. state and federal laws limit the
ability of affiliate banks to pay dividends to Wells Fargo. Further, as a
Delaware corporation, Wells Fargo's dividends are restricted by Delaware law as
described under "Wells Fargo Capital Stock--Wells Fargo Common Stock--
Distributions."
42
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RAGEN MACKENZIE
Ragen MacKenzie common stock is listed on the NYSE and traded under the
symbol "RMG." The following table sets forth the high and low reported sales
prices per share of Ragen MacKenzie common stock for the fiscal periods
indicated, as listed in the NYSE composite transactions reporting system. Ragen
MacKenzie common stock began trading on June 23, 1998, and our initial public
offering was completed on June 26, 1998, which was the end of our third fiscal
quarter. Therefore, the information presented below for the third fiscal
quarter of 1998 covers only that period, and no data is presented before that
date.
<TABLE>
<CAPTION>
Price range of
common stock
------------------
High Low
-------- ---------
<S> <C> <C>
Fiscal 1998
-----------
Third Quarter (6/23/98--6/26/98).......................... 15 3/8 14
Fourth Quarter (6/27/98--9/25/98)......................... 15 1/2 9 13/16
Fiscal 1999
-----------
First Quarter (9/26/98--12/25/98)......................... 13 8 13/16
Second Quarter (12/28/99--3/26/99)........................ 12 3/4 10 11/16
Third Quarter (3/27/99--6/25/99).......................... 12 3/4 9 3/4
Fourth Quarter (6/26/99--9/24/99.......................... 18 7/16 11
Fiscal 2000
-----------
First Quarter (9/25/99--12/31/99)......................... 21 3/8 16 5/8
Second Quarter (through February 8, 2000)................. 18 5/8 17 1/4
</TABLE>
We have not paid or declared cash dividends on the Ragen MacKenzie common
stock since the shares were issued, and the merger agreement provides that we
cannot pay cash dividends on our common stock pending consummation of the
merger. See "The Merger--Conduct of Business Pending the Merger."
43
<PAGE>
INFORMATION ABOUT WELLS FARGO
Wells Fargo is a diversified financial services company. Through its
subsidiaries and affiliates, Wells Fargo provides retail, commercial, real
estate and mortgage banking, asset management and consumer finance, as well as
a variety of other financial services, including equipment leasing,
agricultural finance, securities brokerage and investment banking, insurance
agency services, computer and data processing services, trust services,
mortgage-backed securities servicing, and venture capital investment. At
September 30, 1999, Wells Fargo had consolidated total assets of $207.1
billion, consolidated total deposits of $131.6 billion and stockholders' equity
of $22.2 billion. Based on assets at September 30, 1999, Wells Fargo was the
7th largest commercial banking organization in the United States.
Wells Fargo expands its business in part by acquiring banking institutions
and other companies engaged in activities closely related to banking. Wells
Fargo continues to explore opportunities to acquire banking institutions and
other companies permitted by the Bank Holding Company Act of 1956. Discussions
are continually being carried on related to such acquisitions. Wells Fargo does
not presently know whether, or on what terms, such discussions will result in
further acquisitions. It is the policy of Wells Fargo not to comment on such
discussions or possible acquisitions until a definitive agreement with respect
thereto has been signed.
Wells Fargo is a legal entity separate and distinct from its banking and
nonbanking subsidiaries. As a result, the right of Wells Fargo--and thus the
right of Wells Fargo's creditors--to participate in any distribution of assets
or earnings of any subsidiary, other than in its capacity as a creditor of such
subsidiary, is subject to the prior payment of claims of creditors of such
subsidiary. The principal sources of Wells Fargo's revenues are dividends and
fees from its subsidiaries. See "Regulation and Supervision of Wells Fargo--
Dividend Restrictions" for a discussion of the restrictions on the subsidiary
banks' ability to pay dividends to Wells Fargo.
Wells Fargo's executive offices are located at 420 Montgomery Street, San
Francisco, California 94163, and its telephone number is (800) 411-4932.
MANAGEMENT AND ADDITIONAL INFORMATION
Wells Fargo's Annual Report on Form 10-K for the year ended December 31,
1998 incorporates by reference or sets forth information about executive
compensation, various benefit plans including stock option plans, voting
securities and their principal holders, various relationships and related
transactions and other related matters pertaining to Wells Fargo. You can also
find additional information about the beneficial ownership of Wells Fargo
common stock by persons and entities owning more than 5% of the stock, and by
Wells Fargo's directors and executive officers, in the definitive proxy
statement Wells Fargo filed with the SEC and sent to its shareholders in
connection with its 1999 annual meeting of shareholders. We incorporate both of
these documents into this document by reference. If you would like copies of
these documents, you may contact Wells Fargo at the address or telephone number
indicated under "Where You Can Find More Information."
INFORMATION ON WELLS FARGO'S WEB SITE
Information on the internet web site of Wells Fargo or any subsidiary of
Wells Fargo is not part of this document, and you should not rely on that
information in deciding whether to approve the merger unless that information
is also in this document or in a document that is incorporated by reference
into this document.
44
<PAGE>
INFORMATION ABOUT RAGEN MACKENZIE
Ragen MacKenzie was incorporated in April 1998 to serve as a holding company
for all of the operations of Ragen MacKenzie Incorporated. Ragen MacKenzie
Incorporated was incorporated as a Washington corporation in 1987, the year in
which it succeeded to the business of Cable, Howse & Ragen, a Washington
limited partnership formed in 1982. Ragen MacKenzie Incorporated is registered
with the SEC as a broker/dealer and is a member firm of the NYSE. On June 22,
1998, Ragen MacKenzie Incorporated merged with a wholly-owned subsidiary of
Ragen MacKenzie as part of a reorganization. As a result of the reorganization,
Ragen MacKenzie operates as a holding company and is the sole shareholder of
Ragen MacKenzie Incorporated and Ragen MacKenzie Investment Services, Inc. On
June 26, 1998, Ragen MacKenzie completed an initial public offering of its
common stock.
Our primary business is retail securities brokerage, which we conduct in our
Seattle headquarters and 32 additional offices in seven Western states, which
include 25 offices operated by independent contractors. This business is
directly supported by our proprietary research efforts, which are based on a
value-oriented, contrarian approach to investing. Our research department
covers approximately 90 publicly traded companies headquartered in the Pacific
Northwest and maintains a recommended list of selected regional and national
stocks. Other aspects of our business include proprietary trading of certain
fixed income securities, institutional brokerage services, correspondent
brokerage services and investment banking services.
At September 24, 1999, we had total assets of $649 million and total
shareholders' equity of $121 million. Net income totaled $16 million for the
fiscal year ending September 24, 1999. Revenues generated from our retail
securities brokerage services (including revenue from offices operated by
independent contractors and excluding interest earned on retail brokerage
customer account balances), proprietary trading of certain fixed income
securities (excluding interest income on the related securities inventory),
institutional brokerage services and correspondent brokerage services
(excluding interest earned on customer account balances) constituted 40.6%,
11.6%, 6.2% and 2.8%, respectively, of our total revenues in fiscal 1999. The
remaining percentage of total revenues in fiscal 1999 consists primarily of
interest income earned on retail brokerage customer account balances.
Our executive offices are located at 999 Third Avenue, Suite 4300, Seattle,
Washington 98104, and our telephone number is (206) 343-5000.
MANAGEMENT AND ADDITIONAL INFORMATION
Our Annual Report on Form 10-K for the year ended September 24, 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 and related
transactions and other related matters pertaining to our company. We
incorporate this Annual Report on Form 10-K in this document by reference. If
you would like copies of this document, you may contact us at our address or
telephone number indicated under "Where You Can Find More Information."
INFORMATION ON RAGEN MACKENZIE'S WEB SITE
Information on our internet web site or the web site of any of our
subsidiaries is not part of this document, and you should not rely on that
information in deciding whether to approve the merger unless that information
is also in this document or in a document that is incorporated by reference
into this document.
45
<PAGE>
REGULATION AND SUPERVISION OF WELLS FARGO
The following discussion briefly describes the material elements of the
regulatory framework governing bank holding companies and their subsidiaries,
and provides specific information relevant to Wells Fargo. This regulatory
framework is intended primarily for the protection of depositors and the
federal deposit insurance funds and not for the protection of security holders.
To the extent that the following information describes statutory and regulatory
provisions, it is qualified in its entirety by reference to those provisions. A
change in the statutes, regulations or regulatory policies applicable to our
companies or our subsidiaries may have a material effect on our businesses.
More information is contained in the documents incorporated in this document by
reference. See "Where You Can Find More Information" for information on how you
can obtain these documents.
As a bank holding company, Wells Fargo is subject to regulation under the
Bank Holding Company Act, and to inspection, examination and supervision by the
Federal Reserve Board. Under the Bank Holding Company Act, bank holding
companies generally may not acquire the ownership or control of more than 5% of
the voting shares, or substantially all the assets, of any company, including a
bank or another bank holding company, without the Federal Reserve Board's prior
approval. Also, bank holding companies generally may engage only in banking and
other activities that are determined by the Federal Reserve Board to be closely
related to banking. In the event a bank holding company has elected to become a
"financial holding company" (an "FHC"), it would no longer be subject to the
general requirements that it obtain the Federal Reserve Board's approval prior
to acquiring more than 5% of the voting shares, or substantially all of the
assets, of a company that is not a bank or bank holding company. Moreover, as
an FHC, it would be permitted to engage in activities that are jointly
determined by the Federal Reserve Board and the Treasury Department to be
"financial in nature or incidental to such financial activity." FHCs may also
engage in activities that are determined by the Federal Reserve Board to be
"complementary to financial activities."
Our affiliate national banking associations, such as Wells Fargo Bank, N.A.,
are subject to regulation and examination primarily by the Office of the
Comptroller of the Currency and, secondarily, by the Federal Deposit Insurance
Corporation and the Federal Reserve Board. Wells Fargo's state-chartered banks
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. Wells Fargo and its
subsidiaries also are affected by the fiscal and monetary policies of the
federal government and the Federal Reserve Board, and by various other
governmental requirements and regulations.
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 NASD 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.
LIABILITY FOR BANK SUBSIDIARIES
Under current Federal Reserve Board policy, a bank holding company is
expected to act as a source of financial and managerial strength to each of its
subsidiary banks and to maintain resources adequate to support each subsidiary
bank. This support may be required at times when the bank holding company may
not have the resources to provide it. In addition, Section 55 of the National
Bank Act permits the OCC to order the pro rata assessment of stockholders, such
as Wells Fargo, of a national bank whose capital has become impaired. If a
stockholder fails to pay that assessment within three months, the OCC can order
the sale of the stockholder's stock to cover the deficiency. In the event of a
bank holding company's bankruptcy, any commitment by the bank holding company
to a U.S. federal bank regulatory agency to maintain the capital of a
subsidiary bank would be assumed by the bankruptcy trustee and entitled to
priority of payment.
46
<PAGE>
All of Wells Fargo's banks are FDIC-insured depository institutions. Any
depository institutions that are insured by the FDIC, such as Wells Fargo's
bank subsidiaries, 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" generally means the appointment of a conservator or receiver. "In
danger of default" generally means the existence of certain conditions
indicating that a default is likely to occur in the absence of regulatory
assistance.
Also, if a default occurred with respect to a bank, any capital loans to
the bank from its parent holding company would be subordinate in right of
payment to payment of the bank's depositors and certain of its other
obligations.
CAPITAL REQUIREMENTS
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:
CORE ("TIER 1") SUPPLEMENTARY ("TIER 2") MARKET RISK ("TIER 3")
CAPITAL CAPITAL CAPITAL
- ------------------------ ------------------------ ------------------------
. common equity among other items: among other items:
. retained earnings . perpetual preferred . qualifying unsecured
stock not meeting the subordinated debt
. qualifying Tier 1 definition
noncumulative
perpetual preferred . qualifying mandatory
stock convertible
securities
. a limited amount of
qualifying cumulative . qualifying
perpetual preferred subordinated debt
stock at the holding
company level . allowances for loan
and lease losses,
. minority interests in subject to
equity accounts of limitations
consolidated
subsidiaries
. less goodwill and
most intangible
assets
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 September 30, 1999, Wells Fargo
met both requirements, with Tier 1 and total capital equal to 8.71% and 11.30%
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.
47
<PAGE>
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 rating and meets other requirements,
or of 3% plus an additional "cushion" of at least 100 to 200 basis points (one
to two percentage points) if the holding company does not meet these
requirements. Wells Fargo's leverage ratio at September 30, 1999 was 7.22%.
The Federal Reserve Board may set capital requirements higher than the
minimums we've described 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 (the "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 September 30, 1999, each bank and thrift subsidiary of Wells Fargo was
well capitalized, based on the prompt corrective action ratios and guidelines
described above. You should note, however, that 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 that the capital category may not constitute
an accurate representation of the bank's overall financial condition or
prospects for other purposes.
DIVIDEND RESTRICTIONS
Wells Fargo is a legal entity separate and distinct from its subsidiary
banks and other subsidiaries. Its principal source of funds to pay dividends on
its common and preferred stock and debt service on its debt is dividends from
its subsidiaries. Various federal and state statutory provisions and
regulations limit the amount of dividends that Wells Fargo's bank subsidiaries
may pay without regulatory approval. Dividends payable by a national bank
without the express approval of the OCC are limited to the bank's retained net
profits for the preceding two calendar years plus retained net profits up to
the date of any dividend declaration in the current calendar year. The OCC
defines retained net profits as net income less dividends declared during the
period, both of which are based on regulatory accounting principles. Wells
Fargo's state-chartered subsidiary banks also are subject to state regulations
that limit dividends.
Before Wells Fargo Bank, N.A. 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, N.A.
will likely be
48
<PAGE>
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.
DEPOSIT INSURANCE ASSESSMENTS
The deposits of Wells Fargo's subsidiary banks are insured up to regulatory
limits by the FDIC, and, accordingly, are subject to deposit insurance
assessments to maintain the Bank Insurance Fund (the "BIF") and/or the Savings
Association Insurance Fund (the "SAIF") administered by the FDIC. The FDIC has
adopted regulations establishing a permanent risk-related deposit insurance
assessment system. Under this system, the FDIC places each insured bank in one
of nine risk categories based on the bank's capitalization and supervisory
evaluations provided to the FDIC by the institution's primary federal
regulator. Each insured bank's insurance assessment rate is then determined by
the risk category in which it is classified by the FDIC.
The annual insurance premiums on bank deposits insured by the BIF and the
SAIF vary between $0.00 per $100 of deposits for banks classified in the
highest capital and supervisory evaluation categories to $0.27 per $100 of
deposits for banks classified in the lowest capital and supervisory evaluation
categories.
The Deposit Insurance Funds Act of 1996 provides for assessments to be
imposed on insured depository institutions with respect to deposits insured by
the BIF and the SAIF (in addition to assessments currently imposed on
depository institutions with respect to BIF- and SAIF-insured deposits) to pay
for the cost of Financing Corporation (the "FICO") funding. The FDIC
established the FICO assessment rates effective January 1, 1999 at $0.012 per
$100 annually for BIF-assessable deposits and $0.061 per $100 annually for
SAIF-assessable deposits. The FICO assessments do not vary depending upon a
depository institution's capitalization or supervisory evaluations.
DEPOSITOR PREFERENCE STATUTE
In the "liquidation or other resolution" of the institution by any receiver,
federal legislation provides that deposits and certain claims for
administrative expenses and employee compensation against the insured
depository institution would be afforded a priority over other general
unsecured claims against that institution, including federal funds and letters
of credit.
BROKERED DEPOSITS
Under FDIC regulations, no FDIC-insured depository institution can accept
brokered deposits unless it is well capitalized or both is adequately
capitalized and receives a waiver from the FDIC. In addition, these regulations
prohibit any depository institution that is not well capitalized from paying an
interest rate on deposits in excess of 75 basis points over certain prevailing
market rates or, unless it provides certain notice to affected depositors,
offering "pass-through" deposit insurance on certain employee benefit plan
accounts.
INTERSTATE BANKING AND BRANCHING
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, 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 or following the
proposed acquisition, more than 10% of the total amount of deposits of insured
depositary 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 a lesser or greater amount set by the state.
49
<PAGE>
The Riegle-Neal Act also authorizes banks to merge across state lines,
thereby creating interstate branches. States may opt out of the Riegle-Neal Act
and, by doing so, prohibit interstate mergers in the state. Wells Fargo will be
unable to consolidate its banking operations in one state with those of another
state if either state in question has opted out of the Riegle-Neal Act.
CONTROL ACQUISITIONS
The Change in Bank Control Act prohibits a person or group of persons from
acquiring "control" of a bank holding company, unless the Federal Reserve Board
has been notified and has not objected to the transaction. Under a rebuttable
presumption established by the Federal Reserve Board, the acquisition of 10% or
more of a class of voting stock of a bank holding company with a class of
securities registered under Section 12 of the Securities Exchange Act of 1934,
such as Wells Fargo, would, under the circumstances set forth in the
presumption, constitute acquisition of control of the bank holding company.
In addition, a company is required to obtain the approval of the Federal
Reserve Board under the Bank Holding Company Act before acquiring 25% (5% in
the case of an acquiror that is a bank holding company) or more of any class of
outstanding common stock of a bank holding company, or otherwise obtaining
control or a "controlling influence" over that bank holding company.
SECTION 20 SUBSIDIARIES
Section 20 of the Glass-Steagall Act, which has been repealed by the Gramm-
Leach-Bliley Act effective March 11, 2000, prohibited affiliations between
banks that are members of the Federal Reserve System and any firm "engaged
principally" in the issue, flotation, underwriting, public sale or distribution
of securities. The Federal Reserve Board has taken the position that a bank
holding company that has not become an FHC must comply with the limitations of
Section 20 as if it were still in effect. The Federal Reserve Board has
previously determined that a firm is not "engaged principally" in these
ineligible activities if its revenues from these activities do not exceed 25
percent of its total gross revenues over any two-year period. If Wells Fargo
has not become a FHC prior to the completion of the merger, the Federal Reserve
Board will impose this limitation on the revenues derived from the ineligible
securities activities currently conducted by Ragen MacKenzie. Wells Fargo
believes that these revenues will not exceed the Federal Reserve Board's
limitation. If these revenues were to exceed the limitation and Wells Fargo has
not yet become an FHC, Ragen MacKenzie would be required either to increase its
revenues from permissible activities or restrict ineligible activities in order
to reduce the revenues derived from the ineligible activities.
FINANCIAL MODERNIZATION LEGISLATION
On November 12, 1999, President Clinton signed into law the Gramm-Leach-
Bliley Act which will, 120 days thereafter, permit bank holding companies to
become financial holding companies and, by doing so, affiliate with securities
firms and insurance companies and engage in other activities that are financial
in nature or complementary thereto. A bank holding company may become an FHC,
if each of its subsidiary banks is well capitalized under the FDICIA prompt
corrective action provisions, well managed and has at least a satisfactory
rating under the Community Reinvestment Act, by filing a declaration that the
bank holding company wishes to become an FHC and meets all applicable
requirements.
No prior regulatory approval will be required for an FHC to acquire a
company, other than a bank or savings association, engaged in activities
permitted under the Gramm-Leach-Bliley Act. Activities cited by the Gramm-
Leach-Bliley Act as being "financial in nature" include:
. securities underwriting, dealing and market making
. sponsoring mutual funds and investment companies
. insurance underwriting and agency
50
<PAGE>
. merchant banking activities
. activities that the Board has determined to be closely related to
banking.
A national bank also may engage, subject to limitations on investment, in
activities that are financial in nature, other than insurance underwriting,
insurance company portfolio investment, real estate development and real estate
investment, through a financial subsidiary of the bank, if the bank is well
capitalized, well managed and has at least a satisfactory Community
Reinvestment Act rating. Subsidiary banks of an FHC or national banks with
financial subsidiaries must continue to be well capitalized and well managed in
order to continue to engage in activities that are financial in nature without
regulatory actions or restrictions, which could include divestiture of the
financial subsidiary or subsidiaries. In addition, an FHC or a bank may not
acquire a company that is engaged in activities that are financial in nature
unless each of the subsidiary banks of the FHC or the bank has at least a
satisfactory Community Reinvestment Act rating.
The Gramm-Leach-Bliley Act may change the operating environment of Wells
Fargo and its subsidiaries in substantial and unpredictable ways. We cannot
accurately predict the ultimate effect that this legislation, or implementing
regulations, will have upon the financial condition or results of operations of
Wells Fargo or any of its subsidiaries.
51
<PAGE>
WELLS FARGO CAPITAL STOCK
As a result of the conversion of shares of Ragen MacKenzie common stock to
shares of Wells Fargo common stock at the effective time, Ragen MacKenzie
shareholders will become Wells Fargo stockholders. Your rights as Wells Fargo
stockholders will be governed by Delaware law, the Wells Fargo restated
certificate of incorporation and the Wells Fargo by-laws. 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. 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 the Wells Fargo restated certificate
of incorporation, by-laws and the Wells Fargo Rights Agreement.
A copy of the Wells Fargo 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 description of Wells Fargo's common stock is
contained in Wells Fargo's current report on Form 8-K filed October 14, 1997. A
description of the preferred stock purchase rights that are attached to shares
of Wells Fargo common stock is included in Wells Fargo's registration statement
on Form 8-A dated October 21, 1998. These descriptions may be updated from time
to time by amendments or reports filed by Wells Fargo with the SEC. See "Where
You Can Find More Information" for information on how to obtain these
documents.
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 September 30, 1999, there were 1,649,763,637 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 by-laws 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 Rights of Ragen MacKenzie
Shareholders and Wells Fargo Stockholders--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.
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 shareholders of Wells Fargo
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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) is subject to regulation as a bank
holding company under the Bank Holding Company Act. See "Regulation and
Supervision of Wells Fargo--Control Acquisitions" for further description of
the effects of the Change in Bank Control Act.
Preferred Share Purchase Rights. Each issued share of Wells Fargo common
stock includes a Wells Fargo Stockholder Right. See "--Wells Fargo Rights
Plan."
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 September 30, 1999,
there were 6,550,197 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
(the "Wells Fargo Series C Preferred Shares") under the Wells Fargo Rights
Agreement. No Wells Fargo Series C Preferred Shares are outstanding as of the
date of this document. See "--Wells Fargo Rights Plan."
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WELLS FARGO RIGHTS PLAN
Each share of Wells Fargo common stock (including shares that will be issued
in the merger) has attached to it one preferred share purchase right. Once
exercisable, each right allows the holder to purchase a fractional share of
Wells Fargo's Series C Preferred Shares. A right, by itself, does not confer on
its holder any rights of a Wells Fargo stockholder, including the right to vote
or receive dividends, until the right is exercised. The rights trade
automatically with shares of Wells Fargo common stock. The rights are designed
to protect the interests of Wells Fargo and its stockholders against coercive
takeover tactics. The rights are intended to encourage potential acquirors to
negotiate on behalf of all stockholders the terms of any proposed takeover.
Although not their purpose, the rights may deter takeover proposals.
On October 21, 1998, the Wells Fargo board declared a dividend of one Wells
Fargo Stockholder Right for each outstanding share of Wells Fargo common stock.
The dividend was paid on November 23, 1998 (the "Rights Record Date") to the
Wells Fargo stockholders of record on that date. Each Wells Fargo Stockholder
Right entitles the registered holder to purchase from Wells Fargo one one-
thousandth of a Wells Fargo Series C Preferred Share, subject to adjustment, at
a price of $160 per one one-thousandth of a Wells Fargo Series C Preferred
Share (the "Purchase Price"). The description and terms of the Wells Fargo
Stockholder Rights are set forth in the Wells Fargo 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 the Wells Fargo Board 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 "Distribution Date"), the Wells Fargo
Stockholder Rights will be evidenced, with respect to any of the Wells Fargo
common stock certificates outstanding as of the Rights Record Date, by a Wells
Fargo common stock certificate with a copy of the Summary of Rights, attached
to the Wells Fargo Rights Agreement as Exhibit C (the "Summary of Rights"),
attached to the certificate.
The Wells Fargo Rights Agreement provides that, until the Distribution Date,
the Wells Fargo Stockholder 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 Wells Fargo Stockholder
Rights), new Wells Fargo common stock certificates issued after the Rights
Record Date, upon transfer or new issuance of Wells Fargo common stock, will
contain a notation incorporating the Wells Fargo Rights Agreement by reference.
Until the Distribution Date (or earlier redemption or expiration of the Wells
Fargo Stockholder Rights), the surrender for transfer of any certificates for
shares of Wells Fargo common stock, outstanding as of the Rights Record Date,
even without this notation or a copy of the Summary of Rights being attached to
the certificates, will also constitute the transfer of the Wells Fargo
Stockholder 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 Wells Fargo Stockholder
Rights ("Wells Fargo Right Certificates") 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 Wells Fargo Right Certificates alone will
evidence the Wells Fargo Stockholder Rights.
The Wells Fargo Stockholder Rights are not exercisable until the
Distribution Date. The Wells Fargo Stockholder Rights will expire on November
23, 2008 (the "Final Expiration Date"), unless the Final Expiration Date is
extended or unless the Wells Fargo Stockholder Rights are earlier redeemed by
Wells Fargo, in each case, as described below.
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The Purchase Price payable, and the number of Wells Fargo Series C Preferred
Shares or other securities or property issuable, upon exercise of the Wells
Fargo Stockholder 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 Preferred Shares
. upon the grant to holders of the Wells Fargo Series C Preferred Shares of
certain rights or warrants to subscribe for or purchase Wells Fargo
Series C Preferred Shares at a price, or securities convertible into
Wells Fargo Series C Preferred Shares with a conversion price, less than
the then-current market price of the Wells Fargo Series C Preferred
Shares
. upon the distribution to holders of the Wells Fargo Series C Preferred
Shares of evidences of indebtedness or assets (excluding regular
quarterly cash dividends or dividends payable in Wells Fargo Series C
Preferred Shares) or of subscription rights or warrants (other than those
referred to above).
The number of outstanding Wells Fargo Stockholder Rights and the number of
one one-thousandths of a Wells Fargo Series C Preferred Share issuable upon
exercise of each Wells Fargo Stockholder 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 Preferred Shares purchasable upon exercise of the Wells
Fargo Stockholder Rights will not be redeemable. Each Wells Fargo Series C
Preferred Share will be entitled to a minimum preferential quarterly dividend
payment of $10 per share but will be entitled to an aggregate dividend of 1,000
times the dividend declared per share of Wells Fargo common stock. In the event
of liquidation, the holders of the Wells Fargo Series C Preferred Shares will
be entitled to a minimum preferential liquidation payment of $1,000 per share
but will be entitled to an aggregate payment of 1,000 times the payment made
per share of Wells Fargo common stock. Each Wells Fargo Series C Preferred
Share will have 1,000 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
Wells Fargo Series C Preferred Share will be entitled to receive 1,000 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 Preferred Shares'
dividend, liquidation and voting rights, the value of the one one-thousandth
interest in a Wells Fargo Series C Preferred Share purchasable upon exercise of
each Wells Fargo Stockholder 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 Wells
Fargo Stockholder Right will then have the right to receive, upon the exercise
of the Wells Fargo Stockholder Right at its then-current exercise price, the
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 Wells Fargo Stockholder Right. In the event that any Acquiring Person
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
Wells Fargo Stockholder Right, other than Wells Fargo Stockholder 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 Wells Fargo Stockholder Right.
At any time after the acquisition by an Acquiring Person 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
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outstanding shares of Wells Fargo common stock, the Wells Fargo board may
exchange the Wells Fargo Stockholder Rights (other than Wells Fargo Stockholder
Rights owned by the Acquiring Person, 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 Wells Fargo Series C Preferred Share (or of a share of a
class or series of Wells Fargo preferred stock having equivalent rights,
preferences and privileges), per Wells Fargo Stockholder 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 Wells Fargo Series C Preferred Shares will be
issued (other than fractions which are integral multiples of one one-thousandth
of a Wells Fargo Series C Preferred Share, which may, at the election of Wells
Fargo, be evidenced by scrip or depositary receipts), and, in lieu of
fractional shares, an adjustment in cash will be made based on the market price
of the Wells Fargo Series C Preferred Shares on the last trading day prior to
the date of exercise.
At any time prior to the acquisition by an Acquiring Person of beneficial
ownership of 15% or more of the outstanding shares of Wells Fargo common stock,
the Wells Fargo board may redeem the Wells Fargo Stockholder Rights in whole,
but not in part, at a price of $.01 per Wells Fargo Stockholder Right (the
"Rights Redemption Price"). The redemption of the Wells Fargo Stockholder
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 Wells Fargo Stockholder Rights, the right to
exercise the Wells Fargo Stockholder Rights will terminate and the only right
of the holders of Wells Fargo Stockholder Rights will be to receive the Rights
Redemption Price.
The terms of the Wells Fargo Stockholder Rights may be amended by the Wells
Fargo board without the consent of the holders of the Wells Fargo Stockholder
Rights, including an amendment to lower the 15% triggering thresholds described
above to not less than the greater of:
. .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 Wells
Fargo Stockholder Rights.
Until a Wells Fargo Stockholder Right is exercised, the holder of the Wells
Fargo Shareholder Right, as such, will have no rights as a shareholder of Wells
Fargo, including, without limitation, the right to vote or to receive
dividends.
The Wells Fargo Stockholder Rights Have Anti-Takeover Effects. The Wells
Fargo 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 Wells
Fargo Stockholder Rights being acquired. The Wells Fargo Stockholder Rights
should not interfere with any merger or other business combination approved by
the Wells Fargo board, since the Wells Fargo Stockholder Rights may be redeemed
by Wells Fargo at the Rights Redemption Price prior to the time that an
Acquiring Person has acquired beneficial ownership of 15% or more of the shares
of Wells Fargo common stock.
The Wells Fargo Rights Agreement, specifying the terms of the Wells Fargo
Stockholder Rights and including, as an exhibit, the form of the certificate of
designation setting forth the terms of the Wells Fargo Series C Preferred
Shares, 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 Stockholder 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 RIGHTS OF RAGEN MACKENZIE SHAREHOLDERSAND WELLS FARGO
STOCKHOLDERS
The rights of Wells Fargo stockholders are currently governed by the
Delaware General Corporation Law, or DGCL, the Wells Fargo restated certificate
of incorporation and Wells Fargo by-laws. The rights of Ragen MacKenzie
shareholders are currently governed by the Washington Business Corporation Act,
or WBCA, and by the Ragen MacKenzie amended and restated articles of
incorporation and the Ragen MacKenzie bylaws. The following is a summary of the
material differences between the DGCL, the Wells Fargo restated certificate of
incorporation and the Wells Fargo by-laws, on the one hand, and the WBCA, the
Ragen MacKenzie articles and the Ragen MacKenzie bylaws, on the other hand.
This summary does not purport to be a complete discussion of, and is qualified
in its entirety by reference to, the Wells Fargo restated certificate of
incorporation, the Wells Fargo by-laws, the Ragen MacKenzie articles of
incorporation, the Ragen MacKenzie bylaws, the DGCL and the WBCA.
AUTHORIZED CAPITAL STOCK
Ragen MacKenzie
Wells Fargo
. 50,000,000 shares of common stock
. 10,000,000 shares of preferred . 4,000,000,000 shares of common
stock. stock
. 20,000,000 shares of preferred
stock
. 4,000,000 shares of preference
stock.
SIZE OF BOARD OF DIRECTORS
Ragen MacKenzie Wells Fargo
The WBCA provides that the board of The DGCL provides that the board of
directors of a Washington directors of a Delaware corporation
corporation shall consist of one or shall consist of one or more
more directors as fixed by the directors as fixed by the
corporation's articles of corporation's certificate of
incorporation or bylaws. incorporation or by-laws.
The Ragen MacKenzie bylaws provide Under Wells Fargo's restated
for a board of directors of not less certificate of incorporation, the
than 3 and no more than number of directors shall be as
15 directors, with the specific specified in the by-laws but in no
number to be set by resolution of event less than 3. Wells Fargo's by-
the board. There are currently 8 laws provide for a board of
Ragen MacKenzie directors. directors consisting of not less
than 10 and no more than 28 persons,
each serving a term of one year or
until his or her earlier death,
resignation or removal. The number
of directors of Wells Fargo is
currently fixed at 25.
CUMULATIVE VOTING FOR DIRECTORS
Cumulative voting entitles each shareholder 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 shareholder 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.
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CUMULATIVE VOTING FOR DIRECTORS (CONTINUED)
The WBCA provides for cumulative Under the DGCL, stockholders do not
voting for directors, unless a have the right to cumulate their
corporation's articles of votes in the election of directors
incorporation provide otherwise. unless such right is granted in the
Ragen MacKenzie's articles certificate of incorporation. The
expressly state that no cumulative Wells Fargo restated certificate of
voting exists with respect to incorporation does not provide for
shares of Ragen MacKenzie stock. cumulative voting.
CLASSES OF DIRECTORS
Ragen MacKenzie Wells Fargo
The WBCA permits classification of The DGCL permits classification of a
a Washington corporation's board of Delaware corporation's board of
directors, and for staggered terms. directors, and for staggered terms.
The Ragen MacKenzie articles The Wells Fargo board is not
provide that the board is divided classified.
into two classes as nearly equal in
number as possible, with each
director elected to a staggered
two-year term.
QUALIFICATIONS OF DIRECTORS
Ragen MacKenzie Wells Fargo
Under the WBCA, a director need not Under the DGCL, a director need not
be a resident of the state of be a resident of the state of
Washington or a shareholder of the Delaware unless the certificate of
corporation unless the articles of incorporation or by-laws so
incorporation or bylaws so prescribe. Otherwise, qualifications
prescribe. Otherwise, for directors may be set forth in the
qualifications for directors may be certification of incorporation or by-
set forth in a corporation's laws.
articles of incorporation or
bylaws. Neither the Ragen MacKenzie The Wells Fargo restated certificate
articles nor bylaws set forth of incorporation requires directors
qualifications for directors. to be shareholders.
FILLING VACANCIES ON THE BOARD
Ragen MacKenzie Wells Fargo
Under the WBCA and the Ragen The DGCL provides that, unless the
MacKenzie bylaws, any vacancy governing documents of a corporation
occurring in the Ragen MacKenzie provide otherwise, vacancies and
board may be filled by the newly created directorships resulting
shareholders, the board or, if the from a resignation or any increase in
remaining directors constitute less the authorized number of directors
than a quorum, by the affirmative elected by all of the stockholders
vote of a majority of the remaining having the right to vote as a single
directors. class may be filled by a majority of
the directors then in office.
Under the Wells Fargo restated
certificate of incorporation and by-
laws, vacancies on Wells Fargo's
board of directors may be filled by
majority vote of the remaining
directors or, in the event a vacancy
is not so filled or if no director
remains, by the stockholders.
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REMOVAL OF DIRECTORS
Ragen MacKenzie Wells Fargo
The WBCA provides that a The DGCL provides that a director or
corporation's shareholders may the entire board of directors may be
remove one or more directors with or removed, with or without cause, by
without cause unless the articles of the holders of a majority of the
incorporation provide that directors shares then entitled to vote at an
may be removed only for cause. election of directors. However, in
the case of a corporation whose
Ragen MacKenzie's articles provide board is classified, the directors
that directors may be removed only may be removed only for cause unless
for cause by the holders of at least the certificate of incorporation
two-thirds of the shares entitled to provides otherwise.
elect the director.
The Wells Fargo board is not
classified.
NOMINATION OF DIRECTORS FOR ELECTION
Ragen MacKenzie Wells Fargo
Under the Ragen MacKenzie bylaws, Under the Wells Fargo by-laws,
nominations for the Ragen MacKenzie nominations for the Wells Fargo
board may be made by the board or by board may be made by the board or by
any shareholder who complies with any shareholder who complies with
the notice procedures described in the notice procedures described in
the Ragen MacKenzie bylaws. These the Wells Fargo by-laws. These
procedures require the notice to be procedures require the notice to be
received by Ragen MacKenzie received by Wells Fargo not less
than 30 nor more than 60 days prior
. for elections of directors at to the meeting. However, if less
annual meetings, no later than the than 40 days' prior public
60th nor earlier than the 90th day disclosure of the date of the
prior to the first anniversary of meeting is given to stockholders,
the preceding year's annual then the notice must be received no
meeting. However, if the annual later than 10 days after the first
meeting is more than 30 days public announcement of the meeting
before or more than 60 days later date.
than this anniversary date, the
notice must be delivered no
earlier than 90 days and no later
than the later of 60 days prior to
the annual meeting or 10 days
after the first public
announcement of the meeting date;
. for elections of directors at
special meetings, no later than 7
days following the day notice of
the special meeting is first given
to shareholders.
ANTI-TAKEOVER PROVISIONS
Both the WBCA and the DGCL contain business combination statutes that
protect 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.
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ANTI-TAKEOVER PROVISIONS (CONTINUED)
Chapter 23B.19 of the WBCA, which Section 203 of the DGCL prohibits
applies to Washington corporations "business combinations," including
that have a class of voting stock mergers, sales and leases of assets,
registered with the SEC under the issuances of securities and similar
Exchange Act, prohibits a "target transactions by a corporation or a
corporation," with certain subsidiary with an "interested
exceptions, from engaging in stockholder" who beneficially owns
certain "significant business 15% or more of a corporation's voting
transactions" with a person or stock, within three years after the
group of persons that beneficially person or entity becomes an
owns 10% or more of the voting interested stockholder, unless:
securities of the target
corporation (i.e., an "acquiror") . the transaction that will cause the
for a period of five years after person to become an interested
such acquisition, unless the stockholder is approved by the
transaction or acquisition of board of directors of the target
shares is approved by a majority of prior to the transaction,
the members of the target
corporation's board of directors . after the completion of the
prior to the time of acquisition. transaction in which the person
These prohibited transactions becomes an interested stockholder,
include, among other things, a the interested stockholder holds at
merger or consolidation with, least 85% of the voting stock of
disposition of assets to, or the corporation not including
issuance or redemption of stock to (a) shares held by officers and
or from, the acquiror, termination directors of interested
of 5% or more of the Washington stockholders and (b) shares held by
State employees of the target specified employee benefit plans or
corporation or its subsidiary
following the acquiror's . after the person becomes an
acquisition of 10% or more of the interested stockholder, the
shares, or allowing the acquiror to business combination is approved by
receive any disproportionate the board of directors and holders
benefit as a shareholder. After the of at least 66 2/3% of the
five-year period, a significant outstanding voting stock, excluding
business transaction may take place shares held by the interested
if it complies with certain "fair stockholder.
price" provisions of the statute or
if it is approved by disinterested A Delaware corporation may elect not
shareholders. A public corporation to be governed by Section 203 of the
may not "opt out" of this statute DGCL by a provision contained in its
and, as such, Ragen MacKenzie is original certificate of incorporation
subject to it. The merger will not or an amendment thereto or to the by-
be subject to the provisions of the laws, which amendment must be
statute because the Ragen MacKenzie approved by a majority of the shares
board has approved the merger entitled to vote and may not be
agreement and the transactions further amended by the board of
contemplated by the merger directors. Such an amendment is not
agreement. effective until 12 months following
its adoption.
SHAREHOLDER/STOCKHOLDER RIGHTS PLAN
Ragen MacKenzie
Wells Fargo
Ragen MacKenzie has no shareholder Wells Fargo has implemented a
rights plan. stockholder rights plan, under which
a group of persons becomes an
Acquiring Person upon a public
announcement that they have acquired
or intend to acquire 15% of Wells
Fargo's voting stock. This threshold
can be reduced 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."
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SHAREHOLDER/STOCKHOLDER ACTION WITHOUT A MEETING
Ragen MacKenzie
Wells Fargo
Under the WBCA and the Ragen In accordance with Section 228 of
MacKenzie bylaws, shareholder action the DGCL, Wells Fargo's by-laws
may be taken without a meeting only provide that any action required or
if written consents setting forth permitted to be taken at a
such action are signed by all stockholders' meeting may be taken
holders of outstanding shares without a meeting pursuant to the
entitled to vote thereon. 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.
CALLING SPECIAL MEETINGS OF SHAREHOLDERS/STOCKHOLDERS
Ragen MacKenzie
Wells Fargo
Under the WBCA, a special meeting of Under the DGCL, a special meeting of
shareholders must be held upon the stockholders may be called by the
call of a corporation's board of board of directors or by any other
directors or other persons person authorized to do so in the
authorized by the corporation's certificate of incorporation or the
articles of incorporation or bylaws, by-laws. Wells Fargo's by-laws
or on written demand of holders of provide that a special meeting of
at least 10% of all votes entitled stockholders may be called only by
to be cast on any issue proposed to the chairman of the board, a vice
be considered at the proposed chairman, the president or a
special meeting. Public companies majority of Wells Fargo's board of
may further limit or deny the right directors. Holders of Wells Fargo
of shareholders to call special common stock do not have the ability
meetings in their articles of to call a special meeting of
incorporation. stockholders.
Both the Ragen MacKenzie articles
and bylaws provide that a special
meeting must be held upon written
demand of holders of 25% of all
votes entitled to be cast on the
issue to be considered at the
special meeting of the shareholders.
SUBMISSION OF SHAREHOLDER/STOCKHOLDER PROPOSALS
Ragen MacKenzie
Wells Fargo
The Ragen MacKenzie bylaws provide The Wells Fargo by-laws provide that
that in order for a shareholder to in order for a stockholder to bring
bring business before the annual business before the annual meeting,
meeting, the shareholder must give the stockholder must give timely
timely notice of the proposal to notice of the proposal to Wells
Ragen MacKenzie. To be timely, the Fargo. To be timely, the notice must
notice must be received not later be received not later than the 90th
than the 60th day nor earlier than day nor earlier than the 120th day
the 90th day prior to the first prior to the first anniversary of
anniversary of the preceding year's the preceding year's annual meeting.
annual meeting. However, if the However, if the annual meeting is
annual meeting is more than 30 days more than 30 days before or more
before or more than 60 days after than 60 days after the anniversary
the anniversary of the prior year's of the prior year's annual meeting,
annual meeting, to be timely the to be timely the notice must be
notice must be delivered no earlier delivered no earlier than 120 days
than 90 days prior to the annual prior to the annual meeting and no
meeting and no later than the later later than the later of 90 days
of 60 days prior to the annual prior to the annual meeting or
meeting or 10 days after the first 10 days after the first public
public announcement of the meeting announcement of the meeting date.
date.
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NOTICE OF SHAREHOLDER/STOCKHOLDER MEETINGS
Ragen MacKenzie
Wells Fargo
Both the WBCA and the Ragen The DGCL requires notice of
MacKenzie bylaws provide that Ragen stockholders' meetings to be sent to
MacKenzie must deliver a notice of all stockholders of record entitled
an annual or special meeting not to vote thereon not less than 10 nor
less than 10 nor more than 60 days more than 60 days prior to the date
before the date of the meeting, of the meeting.
except that notice of a shareholders
meeting to act on an amendment to The Wells Fargo by-laws provide for
the articles of incorporation, a written notice to stockholders of
plan of merger or a share exchange record at least 10 days prior to an
or certain other transactions must annual or special meeting.
be given not less than 20 nor more
than 60 days prior to the date of
the meeting.
SHAREHOLDER/STOCKHOLDER VOTE REQUIRED FOR MERGERS
Ragen MacKenzie
Wells Fargo
Under the WBCA, a merger, Under the DGCL, a merger,
consolidation or sale of consolidation or sale of all or
substantially all of a corporation's substantially all of a corporation's
assets other than in the regular assets must be approved by the board
course of business must be approved of directors and by a majority of
by the affirmative vote of a the outstanding stock of the
majority of directors and by two- corporation entitled to vote
thirds of all votes entitled to be thereon. However, under DGCL 251(f),
cast by each voting group entitled no vote of stockholders of a
to vote as a separate group, unless constituent corporation surviving a
another proportion (but not less merger is required, unless the
than a majority of all votes corporation provides otherwise in
entitled to be cast) is specified in its certificate of incorporation, if
the articles of incorporation.
However, no shareholder vote is . the merger agreement does not
required if: amend the certificate of
incorporation of the surviving
. the articles of incorporation of corporation
the surviving corporation will not
differ from its articles of . each share of stock of the
incorporation before the merger in surviving corporation outstanding
any way that would have required a before the merger is an identical
shareholder vote under the WBCA outstanding or treasury share
after the merger, and
. each shareholder of the surviving
corporation will hold exactly the . either no shares of common stock
same number of identical shares as of the surviving corporation are
they did before the merger to be issued or delivered pursuant
to the merger or, if such common
. the number of voting shares of the stock will be issued or delivered,
surviving corporation outstanding it will not increase the number of
immediately after the merger, plus shares of common stock outstanding
the number of voting shares immediately prior to the merger by
issuable as a result of the more than 20%.
merger, will not exceed the total
number of voting shares authorized
by the corporation's articles of
incorporation immediately prior to
the merger, and
. the number of shares of the
surviving corporation that entitle
their holders to participate
without limitation in
distributions that are outstanding
immediately after the merger, plus
the number of these shares
issuable as a result of the
merger, will not exceed the total
number of these shares authorized
by the corporation's articles of
incorporation immediately prior to
the merger.
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SHAREHOLDER/STOCKHOLDER VOTE REQUIRED FOR MERGERS (CONTINUED)
as described under "--Anti-Takeover
Provisions," or where no shareholder
vote would be required, the
affirmative vote of a majority of
all votes entitled to be cast by
each voting group entitled to vote
as a separate group is required to
approve any business combination
that has been approved by a majority
of the continuing directors.
The Ragen MacKenzie articles define
a "business combination" for this
purpose to include mergers or
consolidations, or dispositions of
all or substantially all assets,
involving Ragen MacKenzie or one of
its subsidiaries. The Ragen
MacKenzie articles define
"continuing director" as a director
who was a member of the board on
April 30, 1998 or who is elected to
the board after that date upon the
recommendation of a majority of the
continuing directors.
DIVIDENDS
Ragen MacKenzie
Wells Fargo
Under the WBCA, a corporation may Delaware corporations may pay
make a distribution in cash or in dividends out of surplus or, if
property to its shareholders upon there is no surplus, out of net
the authorization of its board of profits for the fiscal year in which
directors unless, after giving declared and for the preceding
effect to such distribution, fiscal year. Section 170 of the DGCL
also provides that dividends may not
. the corporation would be unable to be paid out of net profits if, after
pay its debts as they become due the payment of the dividend, capital
in the usual course of business, is less than the capital represented
or by the outstanding stock of all
classes having a preference upon the
. the corporation's total assets distribution of assets. Wells Fargo
would be less than the sum of its is also subject to Federal Reserve
total liabilities plus the amount Board policies regarding payment of
that would be needed, if the dividends, which generally limit
corporation were to be dissolved dividends to operating earnings. See
at the time of the distribution, "Regulation and Supervision of Wells
to satisfy the preferential rights Fargo."
of shareholders whose preferential
rights are superior to those The Wells Fargo by-laws provide that
receiving the distribution. the stockholders have the right to
receive dividends if and when
The Ragen MacKenzie articles permit declared by the Wells Fargo board.
the board of directors to authorize Dividends may be paid in cash,
distributions, subject to the property or shares of capital stock.
limitations of Washington Law.
For a comparison of dividends
historically paid by each of Ragen
MacKenzie and Wells Fargo, see
"Price Range of Common Stock and
Dividends."
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DISSENTERS' APPRAISAL RIGHTS
Ragen MacKenzie
Wells Fargo
Under the WBCA, a shareholder of a Section 262 of the DGCL provides
Washington corporation may exercise stockholders of a corporation
dissenters' rights in connection involved in a merger the right to
with any of the following corporate demand and receive payment of the
actions: fair value of their stock in certain
mergers. However, appraisal rights
. a plan of merger providing for a are not available to holders of
shareholder vote shares:
. a plan of exchange involving the
acquisition of the corporation's
shares providing for a shareholder . listed on a national securities
vote exchange
. designated as a national market
system security on an interdealer
. a sale or exchange of all, or quotation system operated by the
substantially all, of the property National Association of Securities
of the corporation other than in Dealers, Inc.
the usual and regular course of
business, providing for a . held of record by more than 2,000
shareholder vote stockholders
unless holders of stock are required
to accept in the merger anything
. a reverse stock split that results other than any combination of:
in the shareholder becoming a
fractional holder, and any . shares of stock or depository
corporate action taken by receipts of the surviving
shareholder vote for which the corporation in the merger
articles of incorporation, bylaws
or resolution of the board of . shares of stock or depository
directors provide for dissenters' receipts of another corporation
rights. that, at the effective date of the
merger, will be
Accordingly, Ragen MacKenzie
shareholders have the right to .listed on a national securities
dissent from the merger and receive exchange
payment of the fair value of their
shares of Ragen MacKenzie common .designated as a national market
stock. In order to exercise system security on an interdealer
dissenters' rights, a Ragen quotation system operated by the
MacKenzie shareholder must comply National Association of Securities
with the procedures set forth in Dealers, Inc., or
Chapter 23B.13 of the WBCA, which is
attached to this document as .held of record by more than 2,000
Appendix D. See "Dissenters' holders
Appraisal Rights."
. cash instead of fractional shares
of the stock or depository
receipts received.
Dissenters' 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 NYSE and the Chicago Stock
Exchange and currently held by more
than 2,000 stockholders. As a
result, assuming that the other
conditions described above are
satisfied, holders of Wells Fargo
common stock will not have appraisal
rights in connection with
consolidations and mergers involving
Wells Fargo.
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SHAREHOLDER/STOCKHOLDER PREEMPTIVE RIGHTS
Ragen MacKenzie
Wells Fargo
The WBCA provides for preemptive
rights, unless a corporation's The DGCL provides that no
articles of incorporation provide stockholder shall have any
otherwise. Ragen MacKenzie's preemptive rights to purchase
articles expressly state that no additional securities of the
preemptive rights exist with respect corporation unless the certificate
to shares of Ragen MacKenzie stock. of incorporation expressly grants
such rights. Wells Fargo's restated
certificate of incorporation does
not provide for preemptive rights.
SHAREHOLDER/STOCKHOLDER CLASS VOTING RIGHTS
Ragen MacKenzie Wells Fargo
The WBCA sets forth only procedural The DGCL requires voting by separate
requirements for voting by separate classes of shares only with respect
classes of shares. The Ragen to amendments to a corporation's
MacKenzie articles provide for class certificate of incorporation that
voting in connection with business adversely affect the holders of
combinations, as described under "-- those classes or that increase or
Anti-Takeover Provisions," and in decrease the aggregate number of
connection with amendments to the authorized shares or the par value
Ragen MacKenzie articles and bylaws of the shares of any of those
as described under "--Amendment of classes.
Articles/Certificate of
Incorporation" and "--Amendment of
Bylaws."
INDEMNIFICATION
Ragen MacKenzie
Wells Fargo
The WBCA provides that a
corporation's articles of The DGCL provides that, subject to
incorporation may include a certain limitations in the case of
provision that eliminates or limits "derivative" suits brought by a
the personal liability of a director corporation's stockholders in its
to the corporation or its name, a corporation may indemnify
shareholders for monetary damages any person who is made a party to
for conduct as a director. However, any third-party suit or proceeding
the provision may not eliminate or on account of being a director,
limit the liability of a director officer, employee or agent of the
for acts or omissions that involve corporation against expenses,
intentional misconduct by the including attorney's fees,
director or a knowing violation of judgments, fines and amounts paid in
law by the director, for unlawful settlement reasonably incurred by
distributions, or for any him in connection with the action,
transaction from which the director through, among other things, a
will personally receive a benefit in majority vote of a quorum consisting
money, property or services to which of directors who were not parties to
the director is not legally the suit or proceeding, if the
entitled. person:
The WBCA permits a corporation to . acted in good faith and in a
indemnify directors so long as the manner he reasonably believed to
director: be in or not opposed to the best
interests of the corporation or,
. acted in good faith in some circumstances, at least
not opposed to its best interests;
. if acting in an official capacity, and
reasonably believed that his or
her conduct was in the . in a criminal proceeding, had no
corporation's best interests reasonable cause to believe his
conduct was unlawful.
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<PAGE>
INDEMNIFICATION (CONTINUED)
. if acting in another capacity, To the extent a director, officer,
reasonably believed that his or employee or agent is successful in
her conduct was not opposed to the the defense of such an action, suit
corporation's best interests or proceeding, the corporation is
required by the DGCL to indemnify
. if involved in a criminal such person for reasonable expenses
proceeding, had no reason to incurred thereby.
believe his or her conduct was
unlawful. Wells Fargo's restated certificate
of incorporation provides that Wells
Even if these standards of conduct Fargo must indemnify, to the fullest
are not met, if authorized by the extent authorized by the DGCL, each
articles of incorporation or a bylaw person who was or is made a party
adopted or ratified by the to, is threatened to be made a party
shareholders or by a resolution to or is involved in any action,
adopted or ratified by the suit or proceeding because he is or
shareholders, a corporation has the was a director or officer of Wells
power to indemnify a director or Fargo (or was serving at the request
officer made a party to a of Wells Fargo as a director,
proceeding, or advance or reimburse trustee, officer, employee or agent
expenses incurred in a proceeding, of another entity) while serving in
except that no such indemnification such capacity against all expenses,
shall be allowed on account of: liabilities, or loss incurred by
such person in connection therewith,
. acts or omissions of a director or provided that indemnification in
officer finally adjudged to be connection with a proceeding brought
intentional misconduct or a by such person will be permitted
knowing violation of the law only if the proceeding was
authorized by Wells Fargo's board of
. conduct of a director or officer directors. Wells Fargo's restated
finally adjudged to be an unlawful certificate of incorporation also
distribution, or provides that Wells Fargo must pay
expenses incurred in defending the
. any transaction with respect to proceedings specified above in
which it was finally adjudged that advance of their final disposition,
such director or officer provided that, if so required by the
personally received a benefit in DGCL, such advance payments for
money, property or services to expenses incurred by a director or
which the director or officer was officer may be made only if he
not legally entitled. undertakes to repay all amounts so
advanced if it is ultimately
Unless limited by the corporation's determined that the person receiving
articles of incorporation, such payments is not entitled to be
Washington law requires indemnified. Wells Fargo's restated
indemnification if the director or certificate of incorporation
officer is wholly successful on the authorizes Wells Fargo to provide
merits of the action or otherwise. similar indemnification to employees
Any indemnification of a director or agents of Wells Fargo. Pursuant
must be reported to the shareholders to Wells Fargo's restated
in writing. certificate of incorporation, Wells
Fargo may maintain insurance, at its
The Ragen MacKenzie articles provide expense, to protect itself and any
for the limitation of director directors, officers, employees or
liability to the fullest extent agents of Wells Fargo or another
allowed by the WBCA. The Ragen entity against any expense,
MacKenzie bylaws provide for liability or loss, regardless of
indemnification of Ragen MacKenzie whether Wells Fargo has the power or
directors, officers and employees obligation to indemnify that person
consistent with the above provisions against such expense, liability or
of the WBCA. loss under the DGCL. The right to
indemnification is not exclusive of
any other right which any person may
have or acquire under any statute,
provision of Wells Fargo's restated
certificate of incorporation or
Wells Fargo by-laws, agreement, vote
of stockholders or disinterested
directors or otherwise.
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<PAGE>
INDEMNIFICATION (CONTINUED)
Further, Wells Fargo's restated
certificate of incorporation
provides that a director (including
an officer who is also a director)
of Wells Fargo shall not be liable
personally to Wells Fargo or its
stockholders for monetary damages
for breach of fiduciary duty as a
director, except for liability
arising out of (a) any breach of the
director's duty of loyalty to Wells
Fargo or its stockholders, (b) acts
or omissions not in good faith or
which involve intentional misconduct
or a knowing violation of law, (c)
payment of a dividend or approval of
a stock repurchase in violation of
Section 174 of the DGCL or (d) any
transaction from which the director
derived an improper personal
benefit. This provision protects
Wells Fargo's directors against
personal liability for monetary
damages from breaches of their duty
of care. It does not eliminate the
director's duty of care and has no
effect on the availability of
equitable remedies, such as an
injunction or rescission, based upon
a director's breach of his duty of
care.
AMENDMENT OF ARTICLES/CERTIFICATE OF INCORPORATION
Ragen MacKenzie
Wells Fargo
The WBCA authorizes a corporation's Under the DGCL, amendments to a
board of directors to make various corporation's certificate of
changes of an administrative nature incorporation require the approval
to the corporation's articles of of the board of directors and
incorporation without shareholder stockholders holding a majority of
action. These changes include a the outstanding stock of such class
change to the corporate name, entitled to vote on such amendment
changes to the number of outstanding as a class, unless a different
shares in order to effectuate a proportion is specified in the
stock split or stock dividend in the certificate of incorporation or by
corporation's shares and changes to other provisions of the DGCL.
or elimination of provisions with
respect to the par value of the Wells Fargo's restated certificate
corporation's stock. The WBCA of incorporation may be amended only
requires that other amendments to a if the proposed amendment is
corporation's articles of approved by Wells Fargo's board of
incorporation must be recommended to directors and thereafter approved by
the shareholders by the board of a majority of the outstanding stock
directors, unless the board entitled to vote thereon and by a
determines that, because of a majority of the outstanding stock of
conflict of interest or other each class entitled to vote thereon
special circumstances, it should as a class. Shares of Wells Fargo
make no recommendation and preferred stock and Wells Fargo
communicates the basis for its preference stock currently
determination to the shareholders. authorized in Wells Fargo's restated
Under the WBCA, such amendments must certificate of incorporation may be
be approved by each voting group issued by Wells Fargo's board of
entitled to vote on the amendment by directors without amending Wells
a majority of all the votes entitled Fargo's restated certificate of
to be cast by that voting group, incorporation or otherwise
unless another proportion is
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AMENDMENT OF ARTICLES/CERTIFICATE OF INCORPORATION (CONTINUED)
specified in the articles of obtaining the approval of Wells
incorporation, by the board of Fargo's stockholders.
directors as a condition to its
recommendation, or by the provisions
of the WBCA.
The Ragen MacKenzie articles
generally provide that shareholders
may amend the articles by majority
vote. However, the affirmative vote
of two-thirds of the outstanding
shares is required to amend articles
related to directors, the bylaws,
amendments to the articles, special
meetings and special voting
requirements.
AMENDMENT OF BYLAWS
Ragen MacKenzie
Wells Fargo
The WBCA vests the authority to Under the DGCL, holders of a
amend the bylaws of a Washington majority of the voting power of a
corporation in the hands of the corporation, and, when provided in
board of directors, unless the the certificate of incorporation,
articles of incorporation reserve the directors of the corporation,
this power exclusively for the have the power to adopt, amend and
shareholders. Ragen MacKenzie's repeal the by-laws of a corporation.
articles grant the board of
directors the power to amend the Wells Fargo's by-laws generally
bylaws, subject to the approval of a provide for amendment by a majority
majority of the continuing of Wells Fargo's board of directors
directors, as this term is defined or by a majority of the outstanding
under""--Shareholder/Stockholder stock entitled to vote thereon.
Vote Required for Mergers." However, Wells Fargo's by-laws
require the affirmative vote or
Both the WBCA and the Ragen consent of 80% of the common stock
MacKenzie articles also grant outstanding to amend a by-law
shareholders the right to amend the provision related to maintaining
bylaws. The Ragen MacKenzie articles local directorships at subsidiaries
require the affirmative vote of two- with which Wells Fargo has an
thirds of outstanding shares, voting agreement to so maintain local
as a class, to approve shareholder directorships.
proposals to adopt or amend a bylaw.
Further, both the WBCA and the Ragen
MacKenzie articles provide that the
board may not amend or repeal a
bylaw adopted by the shareholders
that expressly provides that it may
not be amended or repealed by the
board.
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DISSENTERS' APPRAISAL RIGHTS
The following discussion is not a complete statement of the law pertaining to
dissenters' rights under the WBCA and is qualified in its entirety by the full
text of Chapter 23B.13 of the WBCA, which is reprinted in its entirety as
Appendix D to this document.
Holders of Ragen MacKenzie common stock are entitled to dissenters' rights
under Chapter 23B.13 of the WBCA with respect to the merger agreement. This
means that you will have the right to dissent from the merger and, subject to
certain conditions, you will be entitled to receive a payment of the fair value
of your shares of Ragen MacKenzie common stock.
If you are the beneficial owner of Ragen MacKenzie common stock and choose
to dissent, you must assert dissenters' rights with respect to all shares of
which you are the beneficial owner or over which you have power to direct the
vote, and you must submit to us, with or prior to your assertion of dissenters'
rights, the record shareholder's written consent to the dissent. If you are the
record shareholder, you may assert dissenters' rights as to fewer than all the
shares registered in your name only if you dissent with respect to all shares
beneficially owned by any one person and notify us in writing of the name and
address of each person on whose behalf you are asserting dissenters' rights.
To dissent, you must:
. deliver to us, before the vote on the merger is taken, written notice of
your intent to demand payment for your shares if the merger is effected,
and
. not vote your shares in favor of the merger.
The notice described above should be delivered to us at our principal
executive offices, 999 Third Avenue, Suite 4300, Seattle, Washington 98104,
Attention: Secretary. If you do not satisfy both of these requirements, you
will not be entitled to dissenters' rights.
If the merger is approved by our shareholders, we will, within ten days
after the effective time, send written notice to each Ragen MacKenzie
shareholder who sent proper notice of his or her intent to exercise dissenters'
rights. This notice will:
. state where you must send your written payment demand
. state where and when certificates representing Ragen MacKenzie common
stock must be deposited
. contain a form for demanding payment that will require you to certify
whether or not you acquired beneficial ownership before the first public
announcement of the merger on September 28, 1999
. set a date by which the written payment demand must be received, and
. include another copy of Chapter 23B.13 of the WBCA.
You will not be entitled to dissenters' rights if you do not:
. demand payment
. certify whether or not you acquired the shares before September 28, 1999,
and
. deposit your share certificates within the time, and in the manner,
described in the notice.
Within 30 days after the effective time, we will pay to each Ragen MacKenzie
dissenting shareholder who complies with the procedures described above the
amount that we estimate to be the fair value of the dissenter's shares, plus
accrued interest. Along with this payment, we will provide, among other things:
. our balance sheet, income statement and statement of changes in
shareholders' equity for our last fiscal year, and our latest available
interim financial statements, if any
69
<PAGE>
. an explanation of how we estimated the fair value of the shares
. an explanation of how we calculated the accrued interest
. a statement of your right to demand further payment if you are
dissatisfied with our payment
. another copy of Chapter 23B.13 of the WBCA.
We may elect to withhold payment from you if you did not beneficially own
the shares of Ragen MacKenzie common stock as to which you are asserting
dissenters' rights before the date of first public announcement of the merger,
September 28, 1999. If we do so, we will send you an offer of payment for your
shares conditioned upon your agreement to accept the payment in full
satisfaction of your demand.
If you dissent, and are not satisfied with our payment or offer for payment,
you may, within 30 days of our payment or offer for payment, notify us in
writing of your estimate of the fair value of your shares and the amount of
interest due and demand further payment, or reject our offer and demand payment
of your estimate of the fair value of your shares and the amount of interest
due, if:
. you believe that the amount paid or offered is less than the fair value
of the shares or that the interest due was incorrectly calculated
. we failed to make our payment within 60 days after the date set for
demanding payment
. we do not consummate the merger and do not return the deposited
certificates or release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set for demanding
payment.
If we do not accept your estimate and we do not otherwise settle on a fair
value with you, Washington law requires that, within 60 days after we receive
your demand for further payment, we must start a proceeding in King County
Superior Court and petition the court to determine the fair value of the shares
and accrued interest, naming all Ragen MacKenzie dissenting shareholders whose
demands remain unsettled as parties to the proceeding. The court may appoint
one or more persons as appraisers to receive evidence and recommend the fair
value of the shares. The dissenters will be entitled to the same discovery
rights as parties in other civil actions. Each dissenter made a party to the
proceeding will be entitled to judgment for the amount, if any, by which the
court finds the fair value of his or her shares, plus accrued interest, exceeds
the amount we paid.
Court costs and approval fees would be assessed against us, except that the
court may assess these costs against some or all of the dissenters to the
extent that the court finds the dissenters acted arbitrarily, vexatiously or
not in good faith in demanding payment. The court may also assess the fees and
expenses of counsel and experts of the respective parties, in amounts that the
court finds equitable, against:
. us, if the court finds that we did not substantially comply with
provisions of the WBCA concerning dissenters' rights
. either the dissenter or us, if the court finds that the party against
whom the fees and expenses are assessed acted arbitrarily, vexatiously or
not in good faith.
If the court finds that services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
should not be assessed against us, the court may award to that counsel
reasonable fees to be paid out of the amounts awarded to dissenters who
benefited from the proceedings.
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LEGAL MATTERS
Stanley S. Stroup, Executive Vice President and General Counsel of Wells
Fargo, has rendered a legal opinion that the shares of Wells Fargo common stock
offered hereby, when issued in accordance with the merger agreement, will be
validly issued, fully paid and nonassessable. Mr. Stroup beneficially owns
shares of Wells Fargo common stock and options to purchase additional shares of
Wells Fargo common stock. As of the date of this proxy statement-prospectus,
the total number of shares Mr. Stroup owns or has the right to acquire upon
exercise of his options is less than 0.1% of the outstanding shares of Wells
Fargo common stock.
EXPERTS
The consolidated financial statements of Wells Fargo and its subsidiaries as
of December 31, 1998 and 1997, and for each of the years in the three-year
period ended December 31, 1998, incorporated in this document by reference,
have been incorporated in this document by reference in reliance on the report
with respect to those financial statements of KPMG LLP, independent public
accountants, given upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements and financial statement schedules of
Ragen MacKenzie Group Incorporated, incorporated in this document by reference
from Ragen MacKenzie's Annual Report on Form 10-K for the year ended September
24, 1999, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports, which are incorporated herein by reference and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
Representatives of Deloitte & Touche LLP will be present at the special
meeting. These representatives will have the opportunity to make a statement if
they desire to do so and are expected to be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS
We will hold a 2000 annual meeting of shareholders only if the merger is not
completed before the time of the meeting. In the event that an annual meeting
is held, any proposals of Ragen MacKenzie shareholders intended to be presented
at the meeting must have been received by our Secretary no later than August
19, 1999, in order to be considered for inclusion in our proxy materials
relating to the meeting. Any proposal from a Ragen MacKenzie shareholder that
is submitted outside the processes of Rule 14a-8 under the Exchange Act and
that therefore will not be included in proxy materials to be sent by us to our
shareholders must have been received by our Secretary not earlier than October
30, 1999, nor later than November 29, 1999, in order to be considered timely
received under our bylaws.
As of the date of this document, our board knows of no matters that will be
presented for consideration at the special meeting other than as described in
this document. If any other matters properly come before the special meeting,
or any adjournments or postponements of the meeting, and be voted upon, the
enclosed proxy will be deemed to confer discretionary authority on the
individuals that they name as proxies to vote the shares represented by the
proxy as to any of these matters. The individuals named as proxies intend to
vote or not to vote in accordance with the recommendation of our management.
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WHERE YOU CAN FIND MORE INFORMATION
Wells Fargo has filed a registration statement with the SEC under the
Securities Act that registers the distribution to Ragen MacKenzie shareholders
of the shares of Wells Fargo common stock to be issued in connection with the
merger. The registration statement, including the attached exhibits and
schedules, contains additional relevant information about Wells Fargo and Wells
Fargo common stock. The rules and regulations of the SEC allow us to omit some
information included in the registration statement from this document.
In addition, Wells Fargo (File No. 001-2979) and Ragen MacKenzie (File No.
1-14243) file reports, proxy statements and other information with the SEC
under the Exchange Act. In Wells Fargo's case, documents filed before November
3, 1998, were filed under the name Norwest Corporation. You may read and copy
this information at the following locations of the SEC:
<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.
The SEC also maintains an internet world wide web site that contains
reports, proxy statements and other information about issuers, like us and
Wells Fargo, who file electronically with the SEC. The address of that site is
http://www.sec.gov. Wells Fargo's address on the world wide web is
http://www.wellsfargo.com, and Ragen MacKenzie's address is
http://www.ragen-mackenzie.com. The information on our web sites is not a part
of this document.
You can also inspect reports, proxy statements and other information about
us and Wells Fargo at the offices of the NYSE, 20 Broad Street, New York, New
York 10005.
The SEC allows us and Wells Fargo to "incorporate by reference" information
into this document. This means that the companies can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is considered to be a part
of this document, except for any information that is superseded by information
that is included directly in this document.
This document incorporates by reference the documents listed below that we
and Wells Fargo have previously filed with the SEC. They contain important
information about our companies and their financial condition.
72
<PAGE>
<TABLE>
<CAPTION>
Wells Fargo SEC Filings Period
----------------------- ------
<C> <S>
Annual Report on Form 10-K....... Year ended December 31, 1998, as filed
March 17, 1999, as amended by the Form 10-
K/A, filed March 23, 1999
Quarterly Report on Form 10-Q.... Quarter ended March 31, 1999, as filed May
17, 1999
Quarterly Report on Form 10-Q.... Quarter ended June 30, 1999, as filed
August 16, 1999
Quarterly Report on Form 10-Q.... Quarter ended September 30, 1999, as filed
November 15, 1999
The description of Wells Fargo
common stock set forth in the
Wells Fargo Current Report on
Form 8-K filed on October 14,
1997, including any amendment or
report filed with the SEC for the
purpose of updating such
description.
The description of Wells Fargo
Preferred Stock Purchase Rights
set forth in the Wells Fargo
registration statement filed
under Section 12 of the Exchange
Act on Form 8-A on October 21,
1998, including any amendment or
report filed with the SEC for the
purpose of updating such
description.
Current Reports on Form 8-K...... Filed:
.January 19, 1999
.April 21, 1999
.April 28, 1999
.July 20, 1999
.July 28, 1999
.September 8, 1999
.September 29, 1999
.October 19, 1999
.January 18, 2000
.January 26, 2000
<CAPTION>
Ragen MacKenzie SEC Filings Period
--------------------------- ------
<C> <S>
Annual Report on Form 10-K....... Fiscal Year ended September 24, 1999, as
filed December 20, 1999
The description of Ragen
MacKenzie common stock set forth
in Item 1 of the Ragen MacKenzie
registration statement filed
under Section 12 of the Exchange
Act on Form 8-A on June 9, 1998,
including any amendment or report
filed with the SEC for the
purpose of updating such
description.
Current Report on Form 8-K....... Filed September 30, 1999
</TABLE>
Wells Fargo incorporates by reference additional documents that it may file
with the SEC between the date of this document and the completion of the
transactions contemplated by the merger agreement. We incorporate by reference
additional documents that we may file with the SEC between the date of this
document and the date of our special meeting. These documents include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K, as well as proxy statements.
73
<PAGE>
Wells Fargo has supplied all information contained or incorporated by
reference in this document relating to Wells Fargo, and we have supplied all
such information relating to Ragen MacKenzie.
You can obtain any of the documents incorporated by reference in this
document through us or Wells Fargo, as the case may be, or from the SEC through
the SEC's internet world wide web site at the address described above.
Documents incorporated by reference are available from each of our companies
without charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this document. You can
obtain documents incorporated by reference in this document by requesting them
in writing or by telephone from the appropriate company at the following
addresses:
<TABLE>
<S> <C>
WELLS FARGO RAGEN MACKENZIE
Corporate Secretary Investor Relations
Wells Fargo & Company Ragen MacKenzie Group Incorporated
MAC N9305-173 999 Third Avenue, Suite 4300
Sixth and Marquette Seattle, Washington 98104
Minneapolis, Minnesota 55479 Telephone (206) 343-5000
Telephone (612) 667-8655
</TABLE>
If you would like to request documents, please do so by March 9, 2000 to
receive them before the special meeting. If you request any incorporated
documents from either of our companies, the appropriate company will mail them
to you by first class mail, or another equally prompt means, within one
business day after we receive your request.
Neither of our companies has authorized anyone to give any information or
make any representation about the merger or our companies that is different
from, or in addition to, that contained in this document or in any of the
materials that we've incorporated into this document. Therefore, if anyone does
give you information of this sort, you should not rely on it. If you are in a
jurisdiction where offers to exchange or sell, or solicitations of offers to
exchange or purchase, the securities offered by this document or the
solicitation of proxies is unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer presented in this
document does not extend to you. The information contained in this document
speaks only as of the date of this document unless the information specifically
indicates that another date applies.
74
<PAGE>
FORWARD-LOOKING STATEMENTS
This document, including information included or incorporated by reference
in this document, contains forward-looking statements with respect to the
financial condition, results of operations and business of Wells Fargo and
Ragen MacKenzie and, assuming the consummation of the merger, Ragen MacKenzie
as a wholly-owned subsidiary of Wells Fargo, including statements relating to:
. business opportunities and strategies potentially available to Wells
Fargo and Ragen MacKenzie
. management, operations and policies of Wells Fargo and Ragen MacKenzie
after the merger
. statements preceded by, followed by or that include the words "believes,"
"expects," "anticipates," "intends," "estimates," "should" or similar
expressions.
These forward-looking statements involve some risks and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by these forward-looking statements include, among other things,
the following possibilities:
. expected cost savings from the merger or in other acquisitions by Wells
Fargo cannot be fully realized or realized within the expected time
. changes take place in Ragen MacKenzie's relationships with long-standing
customers as a result of the merger
. revenues following the merger are lower than expected
. competitive pressure among depository institutions increases
significantly
. competitive pressure faced by depository institutions from securities and
insurance firms increases as a result of the GLB Act
. costs or difficulties related to the integration of the businesses of
Wells Fargo and companies it acquires, including Ragen MacKenzie, are
greater than expected
. changes in the interest rate environment reduce interest margins
. general economic conditions, either nationally or in the region in which
Ragen MacKenzie will be doing business are less favorable than expected
. legislation or regulatory requirements or changes adversely affect the
business in which Wells Fargo and Ragen MacKenzie will be engaged
. changes may occur in the securities market.
All dividends on Wells Fargo common stock are subject to determination by
the Wells Fargo board in its discretion.
See "Where You Can Find More Information."
75
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Acquiring Person....................................................... 54
acquiror............................................................... 60
Acquisition Transaction................................................ 38
Adjusted Prices........................................................ 16
affiliate.............................................................. 41
average closing price.................................................. 21
BIF.................................................................... 49
business combinations.................................................. 60, 63
Closing Price.......................................................... 16
competitor............................................................. 36
continuing director.................................................... 63
covered employees...................................................... 28
default................................................................ 47
Distribution Date...................................................... 54
effective date......................................................... 23
effective time......................................................... 23
exchange agent......................................................... 22
exchange ratio......................................................... 12
Exercise Termination Event............................................. 39
FDICIA................................................................. 48
FHC.................................................................... 46
FICO................................................................... 49
Final Expiration Date.................................................. 54
holder................................................................. 38
IBES................................................................... 16
in danger of default................................................... 47
index group............................................................ 34
Initial Triggering Event............................................... 38
interested stockholder................................................. 60
leverage ratio......................................................... 48
</TABLE>
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Market/Offer Price..................................................... 40
material............................................................... 30
measurement period..................................................... 34
merger sub............................................................. 9
NASD................................................................... 31
Option Repurchase Price................................................ 39
Option Share Repurchase Price.......................................... 39
option shares.......................................................... 37
owner.................................................................. 39
Purchase Price......................................................... 54
Repurchase Event....................................................... 40
requisite regulatory approvals......................................... 31
Rights Record Date..................................................... 54
Rights Redemption Price................................................ 56
SAIF................................................................... 49
significant business transactions...................................... 60
stock plans............................................................ 22
Subsequent Triggering Event............................................ 39
Substitute Option...................................................... 40
Summary of Rights...................................................... 54
Surrender Price........................................................ 40
target corporation..................................................... 60
Tier 1................................................................. 47
Tier 2................................................................. 47
Tier 3................................................................. 47
total capital.......................................................... 47
Wells Fargo Right Certificates......................................... 54
Wells Fargo Rights Agreement........................................... 12
Wells Fargo Series C Preferred Shares.................................. 53
Wells Fargo Stockholder Right.......................................... 12
</TABLE>
76
<PAGE>
Appendix A
AGREEMENT AND PLAN OF MERGER
by and among
WELLS FARGO & COMPANY,
ROMERO ACQUISITION CORP.
and
RAGEN MACKENZIE GROUP INCORPORATED
September 28, 1999
A-1
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of September 28, 1999, by and among
RAGEN MACKENZIE GROUP INCORPORATED (the "Company"), WELLS FARGO & COMPANY (the
"Acquiror") and ROMERO ACQUISITION CORP., a wholly-owned subsidiary of the
Acquiror ("Merger Sub").
RECITALS
A. The Company. The Company is a Washington corporation, having its
principal place of business in the State of Washington.
B. The Acquiror; Merger Sub. The Acquiror is a Delaware corporation, and
Merger Sub is a Washington corporation, each having its principal place of
business in the State of California.
C. Certain Intentions of the Parties. Subject to the terms and conditions
contained in this Agreement, the parties to this Agreement intend to effect
the merger of Merger Sub with and into the Company, with the Company being the
corporation surviving such merger. It is the intention of the parties to this
Agreement that the business combination contemplated hereby be treated as a
"reorganization" under Section 368(a) of the Code.
D. Stock Option Agreement; Support Agreement. As a condition and inducement
to the Acquiror's willingness to enter into this Agreement, concurrently with
the execution and delivery of this Agreement, (1) the Company has executed and
delivered a stock option agreement with the Acquiror, pursuant to which the
Company is granting to the Acquiror an option to purchase, under certain
circumstances, shares of Company Common Stock (the "Stock Option Agreement"),
and (2) certain shareholders of the Company have executed and delivered an
agreement (the "Support Agreement") with the Acquiror pursuant to which, among
other things, such shareholders have agreed to vote all shares of the Company
owned by them in favor of the Merger.
E. Employment Arrangements. Certain employees of the Company have executed
and delivered employment and/or non-competition agreements with the Acquiror
(the "Employment Agreements").
F. Retention Program. The Acquiror and the Company have agreed to establish
a retention program on the terms described herein, the purpose of which is to
retain the services of certain employees of the Company and its Subsidiaries
following the Merger.
G. Board Action. The respective Boards of Directors of each of the
Acquiror, Merger Sub and the Company have determined that it is in the best
interests of their respective companies and their shareholders to consummate
the transactions provided for in this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties agree as follows:
ARTICLE I
Certain Definitions; Interpretation
1.1 Certain Definitions. The following terms are used in this Agreement
with the meanings set forth below:
"Acquiror" has the meaning assigned in the preamble to this Agreement.
"Acquiror Common Stock" means the common stock, par value $1-2/3 per
share, of the Acquiror.
"Acquiror Plans" has the meaning assigned in Section 6.12.
A-2
<PAGE>
"Acquisition Proposal" has the meaning assigned in Section 6.5.
"Affiliate" means, with respect to any specified person, any other
person directly or indirectly controlling, controlled by or under common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by Contract or
otherwise; and the terms "controlling" and "controlled" have correlative
meanings to the foregoing.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.2.
"AMEX" means the American Stock Exchange, Inc.
"Average Closing Price" means as of any date, the average of the daily
last sale price of a share of Acquiror Common Stock as reported on the NYSE
Composite Transactions Reporting System for the ten consecutive NYSE full
trading days (in which such shares are traded on the NYSE) ending at the
close of trading on the NYSE full trading day immediately preceding such
date.
"Benefit Plans" has the meaning assigned in Section 5.3(q)(1).
"Broker-Dealer Subsidiary" has the meaning assigned in Section
5.3(g)(4).
"Client" means any person to which the Company or any of its
Subsidiaries provides products or services under any Contract.
"Code" means the Internal Revenue Code of 1986, as amended.
"Condition Date" has the meaning assigned in Section 2.2.
"Company" has the meaning assigned in the preamble to this Agreement.
"Company Articles" means the Articles of Incorporation of the Company,
as amended.
"Company Board" means the Board of Directors of the Company.
"Company Bylaws" means the Bylaws of the Company, as amended.
"Company Common Stock" means the common stock, par value $.01 per share,
of the Company.
"Company Meeting" has the meaning assigned in Section 6.2.
"Company Preferred Stock" means the preferred stock, par value $.01 per
share, of the Company.
"Company Reports" has the meaning assigned in Section 5.3(l)(8).
"Company Stock" means, collectively, the Company Common Stock and the
Company Preferred Stock.
"Company Stock Option" means each option to purchase shares of Company
Common Stock under the Company Stock Plans as Previously Disclosed.
"Company Stock Plans" means the stock-based compensation and incentive
plans of the Company Previously Disclosed as of the date hereof and
includes, without limitation, the RMI 1989 Stock Option Plan, the RMI 1993
Stock Option Plan, the RMI 1996 Stock Incentive Compensation Plan and the
Company 1998 Stock Incentive Compensation Plan.
"Contract" means, with respect to any person, any agreement, indenture,
undertaking, debt instrument, contract, contractual obligation, lease or
other commitment to which such person or any of its Subsidiaries is a party
or by which any of them is bound or to which any of their properties is
subject.
"Covered Employees" has the meaning assigned in Section 6.12.
A-3
<PAGE>
"CSE" means the Chicago Stock Exchange.
"Disclosure Schedule" has the meaning assigned in Section 5.1.
"Dissenting Shares" has the meaning assigned in Section 3.1(d).
"Effective Date" means the date on which the Effective Time occurs.
"Effective Time" means the date and time at which the Merger becomes
effective.
"Employment Agreements" has the meaning assigned in the recitals hereto.
"Environmental Laws" means any federal, state or local law, regulation,
order, decree, permit, authorization, common law or agency requirement with
force of law relating to: (1) the protection or restoration of the
environment, health or safety (in each case as relating to the environment)
or natural resources, or (2) the handling, use, presence, disposal, release
or threatened release of any Hazardous Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has, with respect to any person, the meaning assigned
in Section 5.3(q)(6).
"ERISA Client" has the meaning assigned in Section 5.3(k)(7).
"ESPP" has the meaning assigned in Section 4.1(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Agent" has the meaning assigned in Section 3.4(a).
"Exchange Fund" has the meaning assigned in Section 3.4(a).
"Exchange Ratio" has the meaning assigned in Section 3.1(a).
"Federal Reserve System" means the Board of Governors of the Federal
Reserve System and the Federal Reserve Banks.
"Financial Statements" has the meaning assigned in Section 5.3(g)(2).
"FOCUS Reports" has the meaning assigned in Section 5.3(g)(4).
"Form ADV" has the meaning assigned in Section 5.3(k)(4).
"Form BD" has the meaning assigned in Section 5.3(k)(4).
"Governmental Authority" means any court, administrative agency or
commission or other foreign, federal, state or local governmental authority
or instrumentality.
"Hazardous Substance" means any hazardous or toxic substance, material
or waste, including those substances, materials and wastes listed in the
United States Department of Transportation Hazardous Materials Table (49
C.F.R. (S) 172.101), or by the United States Environmental Protection
Agency as hazardous substances (40 C.F.R. Part 302) and amendments thereto,
petroleum products or other such substances, materials and wastes that are
or become regulated under any applicable local, state or federal law,
including petroleum compounds, lead, asbestos and polychlorinated
biphenyls.
"Indemnified Party" has the meaning assigned in Section 6.13(a).
"Insurance Amount" has the meaning assigned in Section 6.13(b).
"Insurance Policies" has the meaning assigned in Section 5.3(v).
"Investment Advisers Act" means the Investment Advisers Act of 1940, as
amended, and the rules and regulations thereunder.
A-4
<PAGE>
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
"IRS" means the Internal Revenue Service.
"Liens" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Litigation" has the meaning assigned in Section 5.3(o).
"Material" means, with respect to any fact, circumstance, event or
thing, that such fact, circumstance, event or thing is or would reasonably
be expected to be material to (1) the financial position, results of
operations, assets, properties or business of the Acquiror and its
Subsidiaries, taken as a whole, the Company and its Subsidiaries, taken as
a whole, or the Surviving Corporation and its Subsidiaries, taken as a
whole, as the case may be (other than to the extent such fact,
circumstance, event or thing is due to (x) general changes in conditions in
the securities industry, or in the global or United States economy or
capital markets, or (y) changes in applicable generally accepted accounting
principles or in laws, regulations or regulatory policies of general
applicability), or (2) the ability of either the Acquiror or the Company,
as the case may be, timely to perform its obligations under this Agreement
or otherwise to consummate the transactions contemplated by this Agreement.
"Merger" has the meaning assigned in Section 2.1(a).
"Merger Consideration" has the meaning assigned in Section 2.3.
"Merger Sub" has the meaning assigned in the preamble hereto.
"Merger Sub Common Stock" has the meaning assigned in Section 3.1(e).
"MSRB" means the Municipal Securities Rulemaking Board.
"NASD" means the National Association of Securities Dealers, Inc.
"New Certificates" has the meaning assigned in Section 3.4(a).
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificates" has the meaning assigned in Section 3.4(a).
"Person" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust or unincorporated
organization.
"Previously Disclosed" has the meaning assigned in Section 5.1.
"Proxy Statement" has the meaning assigned in Section 6.3(a).
"Registration Statement" has the meaning assigned in Section 6.3(a).
"Representatives" means, with respect to any person, such person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"Rights" means, with respect to any person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person
any right to subscribe for, redeem or acquire, or any options, calls or
commitments relating to, or any stock appreciation right or other
instrument the value of which is determined in whole or in part by
reference to the market price or value of, shares of capital stock of such
person.
"RMI" means Ragen MacKenzie Incorporated.
"Scheduled Closing Date" has the meaning assigned in Section 2.2.
"SEC" means the Securities and Exchange Commission.
A-5
<PAGE>
"SEC Documents", with respect to the Company or the Acquiror, has the
meaning assigned in Section 5.3(g) or 5.4(g), as the case may be.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Securities Laws" means, collectively, the Securities Act, the Exchange
Act, the Investment Advisers Act, the Investment Company Act and any state
securities and "blue sky" laws.
"Self-Regulatory Organization" means the National Association of
Securities Dealers, Inc., the NYSE, the AMEX, the MSRB or other commission,
board, agency or body that is not a Governmental Authority but is charged
with the supervision or regulation of brokers, dealers, securities
underwriting or trading, stock exchanges, commodities exchanges, insurance
companies or agents, investment companies or investment advisers, or to the
jurisdiction of which the Company or one of its Subsidiaries is otherwise
subject.
"Stock Option Agreement" has the meaning assigned in the recitals
hereto.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed to
them in Rule 1-02 of SEC Regulation S-X.
"Support Agreement" has the meaning assigned in the recitals hereto.
"Surviving Corporation" has the meaning assigned in Section 2.1(a).
"Takeover Laws" has the meaning assigned in Section 5.3(c)(2).
"Taxes" means all federal, state, local and foreign taxes, levies or
other assessments imposed by any taxing authority, however denominated,
including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, goods and services, capital, transfer,
franchise, profits, license, withholding, payroll, employment, employer
health, excise, estimated, severance, stamp, occupation, property or other
taxes, and custom duties, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority.
"Tax Returns" means, collectively, all returns, declarations, reports,
estimates, information returns and statements required to be filed under
federal, state, local or any foreign tax laws.
"Treasury Shares" means shares of Company Common Stock owned by the
Company or a Subsidiary of the Company.
"WBCA" means the Washington Business Corporation Act.
1.2 Interpretation. When a reference is made in this Agreement to Recitals,
Sections, Annexes or Schedules, such reference shall be to a Recital, Section,
Annex or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." No rule of construction against
the draftsperson shall be applied in connection with the interpretation or
enforcement of this Agreement. Whenever this Agreement shall require a party to
take an action, such requirement shall be deemed to constitute an undertaking
by such party to cause its Subsidiaries, and to use its reasonable best efforts
to cause its other Affiliates, to take appropriate action in connection
therewith.
A-6
<PAGE>
ARTICLE II
The Merger
2.1 The Merger. At the Effective Time, the business combination
contemplated by this Agreement shall occur and in furtherance thereof:
(a) Structure and Effects of the Merger. Merger Sub shall be merged by
statutory merger with and into the Company with the Company as the
surviving corporation (sometimes referred to as the "Surviving
Corporation") (the "Merger"). The Surviving Corporation shall continue to
be governed by the laws of the State of Washington, and the separate
corporate existence of the Company, with all its rights, privileges,
immunities, powers and franchises, shall continue unaffected by the Merger.
The Merger shall have the effects specified in the WBCA.
(b) Certificate of Incorporation. The certificate of incorporation of
the Surviving Corporation shall be the Company Articles as in effect
immediately prior to the Effective Time, until duly amended in accordance
with the terms thereof and the WBCA.
(c) Bylaws. The Bylaws of the Surviving Corporation shall be the Company
Bylaws as in effect immediately prior to the Effective Time, until duly
amended in accordance with the terms thereof and the certificate of
incorporation referred to in Section 2.1(b).
(d) Directors. The directors of the Surviving Corporation shall be the
directors of Merger Sub immediately prior to the Effective Time, and such
directors shall hold such office until such time as their successors shall
be duly elected and qualified.
(e) Officers. The officers of the Surviving Corporation shall be the
officers of the Company immediately prior to the Effective Time.
2.2 Effective Time. The Merger shall become effective upon the filing, in
the office of the Secretary of State of the State of Washington, of articles of
merger in accordance with Section 23B.11.050 of the WBCA, or at such later date
and time as may be set forth in such articles. Subject to the terms of this
Agreement, the parties shall cause the Merger to become effective (1) on the
date that is the tenth full NYSE trading day (the "Scheduled Closing Date") to
occur after the date (the "Condition Date") on which last of the conditions set
forth in Article VII (other than conditions relating solely to the delivery of
documents dated the Effective Date) shall have been satisfied or waived in
accordance with the terms of this Agreement (or, at the election of the
Acquiror, on the last business day of the month in which such day occurs), or
(2) on such other date as the parties may agree in writing; provided that the
Effective Date shall not occur prior to March 16, 2000.
2.3 Reservation of Right to Revise Structure. At the Acquiror's election,
the Merger may alternatively be structured so that (1) the Company is merged
with and into any other direct or indirect wholly owned subsidiary of the
Acquiror, (2) any direct or indirect wholly owned subsidiary of the Acquiror is
merged with and into the Company, or (3) Company shall merge with and into
Acquiror; provided, however, that no such change shall (A) alter or change the
amount or kind of the consideration to be issued to the Company's shareholders
in the Merger or under such alternative structure (the "Merger Consideration"),
(B) adversely affect the tax treatment of the Company's shareholders as a
result of receiving the Merger Consideration or prevent the parties from
obtaining the opinion of Counsel referred to in Section 7.1(g), or (C)
materially impede or delay consummation of the Merger. In the event of such an
election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
A-7
<PAGE>
ARTICLE III
Consideration; Exchange
3.1 Merger Consideration. Subject to the provisions of this Agreement, at
the Effective Time, automatically by virtue of the Merger and without any
action on the part of any shareholder:
(a) Outstanding Company Common Stock. Each share of Company Common
Stock, other than Treasury Shares or Dissenting Shares, issued and
outstanding immediately prior to the Effective Time shall become and be
converted into the right to receive a number of shares of Acquiror Common
Stock, together with the appropriate number of attached Acquiror Rights,
equal to (i) if the Average Closing Price as of the Condition Date is equal
to or less than $36.00, 0.5208; (ii) if the Average Closing Price as of the
Condition Date is between $36.00 and $42.00, a quotient, the numerator of
which is $18.75 and the denominator of which is the Average Closing Price
as of the Condition Date (such quotient to be rounded to the nearest ten
thousandth); or (iii) if the Average Closing Price as of the Condition Date
is $42.00 or greater, 0.4464 (in each case, subject to adjustment pursuant
to Sections 3.5 and 8.1(f), the "Exchange Ratio").
(b) Outstanding Acquiror Common Stock. Each share of Acquiror Common
Stock issued and outstanding immediately prior to the Effective Time shall
be unchanged and shall remain issued and outstanding and unaffected by the
Merger.
(c) Treasury Shares. At the Effective Time, all shares of Company Common
Stock owned, directly or indirectly, by the Company or by the Acquiror, or
any of their respective wholly-owned Subsidiaries shall be canceled and
shall cease to exist, and no capital stock of the Acquiror or other
consideration shall be delivered in exchange therefor. All shares of
Acquiror Common Stock owned by the Company or any of its wholly-owned
Subsidiaries shall as of the Effective Time become Acquiror Treasury Stock.
(d) Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock outstanding immediately prior to
the Effective Time and respect to which dissenters' rights shall have been
properly demanded in accordance with Chapter 23B.13 of the WBCA
("Dissenting Shares") shall not be converted into the right to receive, or
be exchangeable for, Acquiror Common Stock or cash in lieu of fractional
shares but, instead, the holders thereof shall be entitled to payment of
the appraised value of such Dissenting Shares in accordance with the
provisions of Chapter 23B.13 of the WBCA; provided, however, that (i) if
any holder of Dissenting Shares shall subsequently deliver a written
withdrawal of such holder's demand for appraisal of such shares, or (ii) if
any holder fails to establish such holder's entitlement to dissenters
rights under Chapter 23B.13 of the WBCA, such holder or holders (as the
case may be) shall forfeit the right to appraisal of such shares of Company
Common Stock, and each of such shares shall thereupon be deemed to have
been converted into the right to receive, and to have become exchangeable
for, as of the Effective Time, Acquiror Common Stock and cash in lieu of
fractional shares, if any, without any interest thereon, as otherwise
provided in this Article III.
(e) Outstanding Merger Sub Common Stock. Each share of the common stock,
par value $.01 per share, of Merger Sub ("Merger Sub Common Stock") issued
and outstanding at the Effective Time shall be converted at the Effective
Time into one share of Company Common Stock.
3.2 Rights as Shareholders; Stock Transfers. At the Effective Time, holders
of Company Common Stock converted into the right to receive Acquiror Common
Stock and/or cash in lieu of fractional shares pursuant to Section 3.1(a) shall
cease to be, and shall have no rights as, shareholders of the Company, other
than to receive (a) any dividend or other distribution with respect to such
Company Common Stock with a record date occurring prior to the Effective Time
and (b) the consideration provided under this Article III. Following the
Effective Time, there shall be no transfers of Company Stock on the stock
transfer books of the Company or the Surviving Corporation.
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3.3 Fractional Shares. Notwithstanding any other provision in this
Agreement, no fractional shares of Acquiror Common Stock, and no certificates
or scrip therefor, or other evidence of ownership thereof, will be issued in
the Merger; instead, the Acquiror shall pay to each holder of Company Common
Stock who otherwise would be entitled to a fractional share of Acquiror Common
Stock (after taking into account all Old Certificates delivered by such holder)
an amount in cash (without interest) determined by multiplying such fraction by
the Average Closing Price as of the Effective Date.
3.4 Exchange Procedures. (a) Promptly after the Effective Date, the Acquiror
shall send, or cause to be sent, to each former holder of record of shares of
Company Common Stock (other than Treasury Shares) immediately prior to the
Effective Time transmittal materials for use in exchanging such shareholder's
certificates formerly representing shares of Company Common Stock ("Old
Certificates") for the Merger Consideration. The Acquiror will cause
certificates representing the shares of Acquiror Common Stock to be issued in
the Merger ("New Certificates"), and any check in respect of any fractional
share interests or dividends or distributions that a former holder of Company
Common Stock is entitled to receive, to be delivered to such shareholder upon
delivery to Norwest Bank Minnesota, N.A. (in such capacity and including any
successors that may from time to time be approved by the Acquiror, the
"Exchange Agent") of Old Certificates representing the shares of Company Common
Stock formerly owned by such shareholder as of the Effective Time (or indemnity
satisfactory to the Surviving Corporation and the Exchange Agent, if any of
such certificates are lost, stolen or destroyed), together with properly
completed transmittal materials; provided that such New Certificates, and any
such check, shall not be issued to any Company Affiliate unless and until such
Company Affiliate has delivered an agreement pursuant to Section 6.6. No
interest will be paid on any Merger Consideration, including cash to be paid in
lieu of fractional share interests, or in respect of dividends or distributions
which any such person may be entitled to receive pursuant to this Article III
upon such delivery.
(b) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of Company Stock for any
amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(c) No dividends or other distributions on Acquiror Common Stock with a
record date occurring after the Effective Time shall be paid to the holder
of any unsurrendered Old Certificate until the holder thereof shall be
entitled to receive New Certificates in exchange therefor in accordance
with this Article III, and no such shareholder shall be eligible to vote
such Acquiror Common Stock until the holder of such Old Certificates is
entitled to receive New Certificates in accordance with this Article III.
After becoming so entitled in accordance with this Article III, the record
holder thereof also shall be entitled to receive any such dividends or
other distributions, without any interest thereon, which theretofore had
become payable with respect to shares of Acquiror Common Stock such holder
had the right to receive upon surrender of the Old Certificate.
3.5 Adjustment of Exchange Ratio. If, after the date of this Agreement, but
prior to the Effective Time, the shares of Acquiror Common Stock issued and
outstanding shall, through a reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
similar change (regardless of the method of effectuation of any of the
foregoing, including by way of a merger or otherwise) in the capitalization of
the Acquiror, increase or decrease in number or be changed into or exchanged
for a different kind or number of securities, then an appropriate and
proportionate adjustment shall be made to the Exchange Ratio.
3.6 Options. At the Effective Time, all Company Stock Options which are then
outstanding and unexercised shall cease to represent a right to acquire shares
of Company Common Stock and shall be converted into options to purchase shares
of Acquiror Common Stock on the same terms and conditions under the applicable
Company Stock Plan and the stock option agreement by which such Company Stock
Option is evidenced. From and after the Effective Time:
(a) the number of shares of Acquiror Common Stock purchasable upon
exercise of such Company Stock Option shall equal the product (rounded down
to the nearest share) of (1) the number of shares of Company Common Stock
that were subject to such Company Stock Option immediately prior to the
Effective Time and (2) the Exchange Ratio, and
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(b) the per share exercise price under each such Company Stock Option
shall be equal to the result (rounded up to the nearest cent) of dividing
the per share exercise price of each such Company Stock Option by the
Exchange Ratio.
Notwithstanding the foregoing, each Company Stock Option that is intended to be
an "incentive stock option" (as defined in Section 422 of the Code) shall be
adjusted in accordance with the requirements of Section 424 of the Code.
ARTICLE IV
Actions Pending the Effective Time
4.1 Forebearances of the Company. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement, without the prior
written consent of the Acquiror, the Company will not, and will cause each of
its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of the Company or any of its
Subsidiaries other than in the ordinary and usual course, or, to the extent
consistent therewith, fail to use reasonable best efforts to preserve
intact any of their business organizations and assets and maintain their
rights, franchises and existing relations with clients, customers,
correspondents, independent contractors, suppliers, employees and business
associates; or engage in any new lines of business.
(b) Capital Stock. Other than pursuant to the exercise of Previously
Disclosed Rights outstanding on the date hereof, and other than pursuant to
the Stock Option Agreement, (1) issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any additional shares of Company
Stock or any Rights, (2) enter into any Contract with respect to the
foregoing or (3) permit any additional shares of Company Stock to become
subject to new grants of employee or director stock options, other Rights
or similar stock-based employee rights. Without limiting the generality of
the foregoing, the Company (1) will not issue, or agree or commit to issue,
any shares of Company Stock or Rights under the Company Stock Plans other
than pursuant to the exercise of Previously Disclosed Rights outstanding on
the date hereof and (2) shall take all actions necessary to (x) provide
that the "offering" that commenced on July 1, 1999 and that will end on
December 31, 1999 under the Company's Employee Stock Purchase Plan (the
"ESPP") is the final offering under such plan, (y) terminate the ESPP
effective as of December 31, 1999, and (z) provide that the Deferral Period
(as such term is defined in the Company's Deferred Compensation Plan as in
effect on the date hereof (the "Deferred Compensation Plan")) that
commenced on July 1, 1999 shall be the last Deferral Period with respect to
which any participant therein may elect to allocate any amounts to the
Company Stock Index (as defined in the Deferred Compensation Plan) for any
purpose, including the calculation of Account Earnings (as defined in the
Deferred Compensation Plan), such that no obligation to issue shares of
Company Common Stock shall arise thereunder with respect to any subsequent
Deferral Period.
(c) Dividends, Etc. (1) Make, declare, pay or set aside for payment any
dividend on or in respect of, or declare or make any distribution on, any
shares of its capital stock, other than dividends from wholly owned
Subsidiaries to the Company (in each case having record and payment dates
consistent with past practice) or (2) directly or indirectly adjust, split,
combine, redeem, reclassify, purchase or otherwise acquire, any shares of
its capital stock, other than as required by the Company Stock Plans upon
exercise of Previously Disclosed Rights outstanding on the date hereof.
(d) Compensation; Employment Agreements; Etc. Enter into, amend, modify
or renew any Contract regarding employment, consulting, severance or
similar arrangements with any directors, officers, employees of, or
independent contractors with respect to, the Company or its Subsidiaries,
or grant any salary, wage or other increase in compensation or increase in
any employee benefit (including incentive or bonus payments), except (1)
for changes that are required by applicable law, (2) to satisfy Previously
Disclosed Contracts existing on the date hereof, or (3) for employment
arrangements for, or grants of
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awards to, newly hired non-executive employees in the ordinary course of
business consistent with past practice or (4) for normal individual
increases in compensation to non-officer employees in the ordinary and
usual course of business consistent with past practice. Nothing herein
shall limit year-end or period-end bonuses with respect to fiscal year 1999
paid out in a manner or according to standard terms and consistent with
past practice. Bonuses paid to managerial employees who, in the ordinary
course of business, participate in the Company's fiscal year 1999 year-end
bonus program shall be accrued and paid in the ordinary course consistent
with past practice. Bonuses earned with respect to the Company's fiscal
year 2000 shall be calculated in the ordinary course consistent with past
practice on a prorated basis for that portion of fiscal year 2000 completed
prior to the Effective Date. The pro rata portion of such fiscal year 2000
bonuses for the first quarter of such fiscal year shall be accrued and paid
out at the earlier of (i) promptly following the Closing or (ii) March 31,
2000. Bonuses paid in respect of the first quarter of fiscal year 2000
shall not exceed in the aggregate $850,000. The pro rata portion of such
fiscal year 2000 bonuses for the period commencing at the beginning of the
second quarter of fiscal year 2000 and ending on the Effective Date shall
be paid at the time bonuses are paid to existing brokerage employees of the
Acquiror, but in no event later than March 31, 2001.
(e) Benefit Plans. Enter into, establish, adopt, amend or modify any
pension, retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare Contract, plan, program or arrangement, or
any trust agreement (or similar arrangement) related thereto, in respect of
any directors, officers, employees of, or independent contractors with
respect to, the Company or its Subsidiaries, including taking any action
that accelerates the vesting or exercisability of stock options, restricted
stock or other compensation or benefits payable thereunder, except, in each
such case, as may be required by applicable law or expressly required by
the terms of Contracts Previously Disclosed in Section 4.1(e) of the
Company Disclosure Schedule as such Contracts are in effect as of the date
hereof.
(f) Dispositions. Except for sales of securities or other investments or
assets in the ordinary course of business consistent with past practice,
sell, transfer, mortgage, lease, encumber or otherwise dispose of or
discontinue any material portion of its assets, business or properties.
(g) Acquisitions. Except for the purchase of securities or other
investments or assets in the ordinary course of business consistent with
past practice, acquire a material portion of the assets of any other
person.
(h) Governing Documents. Amend the Company Articles, the Company Bylaws
or the certificate of incorporation or bylaws (or similar governing
documents) of any of the Company's Subsidiaries.
(i) Accounting Methods. Implement or adopt any change in accounting
principles, practices or methods, other than as may be required by
generally accepted accounting principles.
(j) Contracts. Except in the ordinary course of business consistent with
past practice, enter into, renew or terminate any material Contract or
amend or modify in any material respect, or waive any material right under,
any of its existing material Contracts.
(k) Claims. Settle any claim, action or proceeding, except for any
claim, action or proceeding involving solely money damages in an amount,
individually and in the aggregate for all such settlements, not more than
$100,000 and which could not reasonably be expected to establish an adverse
precedent or basis for subsequent settlements.
(l) Adverse Actions. (1) Take any action reasonably likely to prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code or (2) knowingly take any action that is
intended or is reasonably likely to result in (A) any of its
representations and warranties set forth in this Agreement being or
becoming untrue in any material respect at any time at or prior to the
Effective Time, (B) any of the conditions to the Merger set forth in
Article VII not being satisfied, or (C) a material breach or violation of
any provision of this Agreement.
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(m) Capital Expenditures. Authorize or make any capital expenditures,
other than (1) annual budgeted amounts Previously Disclosed, or (2) in the
ordinary and usual course of business consistent with past practice in
amounts not exceeding $100,000 in the aggregate.
(n) Risk Management. Except as required by applicable law or regulation,
(1) implement or adopt any change in the risk management policies,
procedures or practices of the Company, which, individually or in the
aggregate with all such other changes, would be Material, (2) fail to use
commercially reasonable means to avoid any material increase in the
aggregate exposure of the Company to risk from the general United States
securities markets or (3) materially restructure or change its investment
securities portfolio, if any, or the manner in which such portfolio is
classified or reported.
(o) Tax Matters. Make or change any tax election, change any annual tax
accounting period, adopt or change any method of tax accounting, file any
amended Tax Return, enter into any closing agreement, settle any Tax claim
or assessment, surrender or compromise any right to claim a Tax refund or
consent to any extension or waiver of the limitations period applicable to
any Tax claim or assessment, other than any of the foregoing actions that
are (i) not, alone or in the aggregate, Material and (ii) taken in the
ordinary and usual course of business, consistent with past practice.
(p) New Activities. Initiate any new business activity that would be
impermissible for a "bank holding company" under the Bank Holding Company
Act of 1956, as amended.
(q) Indebtedness. (i) Other than in the ordinary course of business
consistent with past practice, (A) incur any indebtedness for borrowed
money (other than short-term indebtedness incurred to refinance existing
short-term indebtedness, and indebtedness of the Company or any of its
Subsidiaries to the Company or any of its Subsidiaries, and indebtedness
under existing lines of credit), (B) assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations of any
other Person, (C) make any loan or advance, or (ii) other than with respect
to customary concessions regarding margin indebtedness of brokerage clients
in the ordinary course of business consistent with past practice, and with
respect to the regularly scheduled forgiveness of loans made to employees
prior to the date hereof in connection with the hiring of such employees
when and as required by the express provisions Previously Disclosed
Contracts in full force and effect between such employees and the Company
or any of its Subsidiaries, forgive or extinguish any indebtedness to the
Company or any of its Subsidiaries for borrowed money or otherwise waive
any rights under any instrument or arrangement pursuant to which such
indebtedness was incurred.
(r) Commitments. Agree or commit to do, or adopt any resolutions of its
board of directors in support of, anything that would be precluded by
clauses (a) through (q).
4.2 Forbearances of the Acquiror and Merger Sub. From the date hereof until
the Effective Time, except as expressly contemplated by this Agreement, without
the prior written consent of the Company, each of the Acquiror and Merger Sub
will not, and will cause each of its Subsidiaries not to (1) take any action
reasonably likely to prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code or (2)
knowingly take any action that is intended or is reasonably likely to result in
(A) any of its representations and warranties set forth in this Agreement being
or becoming untrue in any material respect at any time at or prior to the
Effective Time, (B) any of the conditions to the Merger set forth in Article
VII not being satisfied, or (C) a material breach of any provision of this
Agreement.
ARTICLE V
Representations and Warranties
5.1 Disclosure Schedules. On or prior to the date hereof, the Company has
delivered to the Acquiror, and the Acquiror has delivered to the Company, a
schedule (respectively, its "Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either (1) in
response to an express informational requirement contained in or requested by a
provision hereof, or (2) as an exception to
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one or more representations or warranties contained in Section 5.3 or 5.4,
respectively, or to one or more of its covenants contained in Article IV or VI;
provided, that the mere inclusion of an item in a Disclosure Schedule as an
exception to a representation or warranty or covenant shall not be deemed an
admission by a party that such item (or any undisclosed item or information of
comparable or greater significance) represents a Material exception or fact,
event or circumstance with respect to the Company or the Acquiror,
respectively. "Previously Disclosed" means information set forth in a
Disclosure Schedule, whether in response to an express informational
requirement or as an exception to one or more representations or warranties or
covenants, in each case, that is contained in a correspondingly enumerated
portion of such Disclosure Schedule. To the extent information is Previously
Disclosed pursuant to the foregoing, the corresponding representation, warranty
or covenant shall be deemed to be modified by such Previously Disclosed
information and references herein (including in Section 5.2) to such
corresponding representation, warranty or covenant shall be deemed to be
references to such representation, warranty or covenant as so modified.
5.2 Standard. No representation or warranty of the Company, on the one hand,
or the Acquiror and Merger Sub, on the other, contained in Section 5.3 or 5.4
shall be deemed untrue or incorrect, and no party hereto shall be deemed to
have breached a representation or warranty, as a consequence of the existence
of any fact, event, or circumstance that is inconsistent with one or more
representations or warranties (with such representations and warranties being
read, for purposes of this Section 5.2, without regard to individual references
to "Materiality" or "Material adverse effect" set forth therein), unless such
fact, event or circumstance (individually or taken together with all other
facts, events or circumstances that are inconsistent with any representation or
warranty contained in Section 5.3 or 5.4) would be Material with respect to the
Company or the Acquiror, as the case may be.
5.3 Representations and Warranties of the Company. Except as Previously
Disclosed in a paragraph of its Disclosure Schedule corresponding to the
relevant paragraph below, the Company hereby represents and warrants to the
Acquiror as follows:
(a) Organization, Standing and Authority. The Company is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Washington, and is duly qualified to do business and is in good
standing in all jurisdictions where its ownership or leasing of property or
assets or the conduct of its business requires it to be so qualified.
(b) Corporate Power. The Company and each of its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own or lease all its properties and assets.
(c) Corporate Authority and Action. (1) The Company has the requisite
corporate power and authority, and has taken all corporate action
necessary, in order (A) to authorize the execution and delivery of, and
performance of its obligations under, this Agreement and the Stock Option
Agreement and (B) to consummate the transactions contemplated by the Stock
Option Agreement and, subject only to receipt of the requisite approval of
the plan of merger contained in this Agreement by the holders of a majority
of the outstanding shares of Company Common Stock, this Agreement. This
Agreement and the Stock Option Agreement each is a valid and legally
binding obligation of the Company, enforceable in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization and similar laws of general applicability
relating to or affecting creditors' rights or by general equity
principles).
(2) The Company has taken all action required to be taken by it in
order to exempt this Agreement, the Support Agreement (to the extent
applicable) and the Stock Option Agreement and the transactions
contemplated hereby and thereby from, and this Agreement, the Support
Agreement (to the extent applicable) and the Stock Option Agreement and
the transactions contemplated hereby and thereby are each exempt from,
the requirements of (1) any applicable "moratorium," "control share,"
"fair price" or other antitakeover laws and regulations of any state
(collectively, "Takeover Laws"), including Chapter 23B.19 of the WBCA
and (2) Article 10 of the Company Articles such that the prohibitions
of Section 23B.19.040 of the WBCA and
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supermajority vote requirement of Section 10.2.1 of the Company Articles do not
apply to this Agreement, the Support Agreement the Stock Option Agreement or
the transactions contemplated hereby or thereby.
(d) Regulatory Filings; No Defaults. (1) No consents or approvals of, or
filings or registrations with, any Governmental Authority, Self-Regulatory
Organization or with any third party are required to be made or obtained by the
Company in connection with the execution, delivery or performance by the
Company of this Agreement, or to consummate the Merger, except for (A) filings
of applications or notices with the NYSE, the NASD and other Previously
Disclosed securities licensing or supervisory authorities, (B) the filing with
the SEC of the Proxy Statement in definitive form, (C) approval of the
Company's shareholders as contemplated by Section 5.3(c), (D) approval of the
NYSE and consents of national securities exchanges to the transfer of ownership
of seats or memberships and (E) the filing of a certificate of merger with the
Secretary of State of the State of Washington pursuant to the WBCA. As of the
date hereof, the Company is not aware of any reason why the approvals of all
Governmental Authorities or Self-Regulatory Organizations necessary to permit
consummation of the transactions contemplated by this Agreement will not be
received.
(2) Subject only to the approval by the holders of a majority of the
outstanding shares of Company Common Stock, the receipt of the regulatory
approvals referred to in Section 5.3(d)(1), the expiration of applicable
waiting periods and the making of required filings under federal and state
securities laws, the execution, delivery and performance of this Agreement,
the Support Agreement and the Stock Option Agreement and the consummation
of the transactions contemplated hereby and thereby do not and will not (A)
constitute a breach or violation of, or a default under, or give rise to
any Lien, any acceleration of remedies or any right of termination (with or
without the giving of notice, passage of time or both) under, any law, rule
or regulation or any judgment, decree, order, governmental or
nongovernmental permit or license, or Contract of the Company or of any of
its Subsidiaries or to which the Company or any of its Subsidiaries or its
or their properties is subject or bound, (B) constitute a breach or
violation of, or a default under, the Company Articles or the Company
Bylaws or similar governing documents of any of its Subsidiaries, or (C)
require any consent or approval under any such law, rule, regulation,
judgment, decree, order, governmental or nongovernmental permit or license
or Contract.
(e) Company Stock. As of the date hereof, the authorized capital stock of
the Company consists solely of 50,000,000 shares of Company Common Stock, of
which not more than 13,500,000 shares are outstanding as of the date hereof,
and 10,000,000 shares of Company Preferred Stock, of which no shares are
outstanding. As of the date hereof, 542,347 shares of Company Common Stock are
held as Treasury Shares. The outstanding shares of Company Common Stock have
been duly authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any subscriptive or preemptive rights). As of the date hereof,
other than the Company Stock Options, there are no shares of Company Stock
authorized and reserved for issuance, the Company does not have any Rights
issued or outstanding with respect to Company Stock, and the Company does not
have any commitment to authorize, issue or sell any Company Stock or Rights,
except pursuant to this Agreement and the Stock Option Agreement. Section
5.3(e) of the Company Disclosure Schedule sets forth a list of the holders of
outstanding Company Stock Options, the date that each such Company Stock Option
was granted, the number of shares of Company Common Stock subject to each such
Company Stock Option, the expiration date of each such Option and the price at
which each such Company Stock Option may be exercised under the applicable
Company Stock Plan.
(f) Subsidiaries. The Company has Previously Disclosed a list of all its
Subsidiaries, including the states in which such Subsidiaries are organized, a
brief description of such Subsidiaries' principal activities, and if any of
such Subsidiaries is not wholly owned by the Company or one of its
Subsidiaries, the percentage owned by the Company or any such Subsidiary and
the names, addresses and percentage ownership by any other person. No equity
securities of any of the Company's Subsidiaries are or may become required to
be issued, transferred or otherwise disposed of (other than to the Company or a
wholly owned Subsidiary of the Company) by reason of any Rights with respect
thereto. There are no Contracts by which any of the Company's Subsidiaries is
or may be bound to sell or otherwise issue any shares of its capital stock, and
there are no Contracts relating to the rights or obligations of the Company to
vote or to dispose of such shares. All of
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the shares of capital stock of each of the Company's Subsidiaries are fully
paid and nonassessable and subject to no subscriptive or preemptive rights or
Rights and, except as Previously Disclosed, are owned by the Company or a
Company Subsidiary free and clear of any Liens. Each of the Company's
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized and is duly qualified to do
business and in good standing in each jurisdiction where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified.
(g) SEC Documents, Financial Statements. (1) The Company has provided or
made available to the Acquiror copies of each registration statement, offering
circular, report, definitive proxy statement or information statement filed by
the Company with the SEC or circulated by the Company through the date of this
Agreement and will promptly provide each such registration statement, offering
circular, report, definitive proxy statement or information statement filed or
circulated after the date hereof (collectively, the "Company SEC Documents"),
each in the form (including exhibits and any amendments thereto) filed with the
SEC (or, if not so filed, in the form used or circulated). As of their
respective dates (and without giving effect to any amendments or modifications
filed after the date of this Agreement), each of the SEC Documents, including
the financial statements, exhibits and schedules thereto, filed or circulated
prior to the date hereof complied (and each of the SEC Documents filed after
the date of this Agreement will comply) as to form with applicable Securities
Laws and did not (or in the case of reports, statements, or circulars filed
after the date of this Agreement, 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 made therein, in the light of the
circumstances under which they were made, not misleading.
(2) Each of the Company's statements of financial condition included in
or incorporated by reference into the SEC Documents, including the related
notes and schedules, fairly presented (or, in the case of SEC Documents
filed after the date of this Agreement, will fairly present) the
consolidated financial condition of the Company and its Subsidiaries as of
the date of such statement of financial condition and each of the
statements of income, cash flows and changes in shareholders' equity
included in or incorporated by reference into the SEC Documents, including
any related notes and schedules (collectively, the foregoing financial
statements and related notes and schedules are referred to as the
"Financial Statements"), fairly presented (or, in the case of SEC Documents
filed after the date of this Agreement, will fairly present) the
consolidated results of operations, cash flows and shareholders' equity, as
the case may be, of the Company and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments), in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved (except as may be noted therein and except that such unaudited
statements include no notes).
(3) There are no liabilities of the Company or any of its Subsidiaries
of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation or
set of circumstances known to the Company which could reasonably be
expected to result in such a liability, other than:
(A) liabilities provided for in the statement of financial condition
included in the SEC Documents most recently filed prior to the date
hereof, or disclosed in the notes thereto; or
(B) other undisclosed liabilities which, individually or in the
aggregate, are not Material.
(4) The Company has delivered or made available to the Acquiror true and
complete copies of the FOCUS Reports filed on Form X-17A-5 (the "FOCUS
Reports") as of March 26, 1999 and June 25, 1999 by each Subsidiary of the
Company that is a "broker" or "dealer", as such terms are defined in
Sections 2(a)(4) and 2(a)(5) of the Exchange Act (collectively, the
"Broker-Dealer Subsidiaries"). Each FOCUS Report complied (and with respect
to FOCUS Reports filed after the date hereof, will comply) at the date
thereof with the rules and regulations of the SEC relating thereto and
fairly presented (or will present, as the case may be) the information
required to be presented therein pursuant to Rule 17a-5 under the Exchange
Act.
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(h) Absence of Certain Changes. Since June 25, 1999, the business of the
Company and its Subsidiaries has been conducted in the ordinary and usual
course, consistent with past practice, and there has not been:
(1) any event, occurrence, development or state of circumstances or
facts which has had or could reasonably be expected to constitute or result
in a Material adverse change in the financial condition, results of
operations, business, assets, properties or shareholders' equity of the
Company and its Subsidiaries, taken as a whole;
(2) any amendment of any term of any outstanding security of the Company
or any of its Subsidiaries or to the Company or any of its Subsidiaries'
certificate of incorporation or bylaws (or similar governing documents);
(3) any (A) incurrence, assumption or guarantee by the Company or any of
its Subsidiaries of any indebtedness for borrowed money, or (B) assumption,
guarantee, endorsement or otherwise by the Company of any obligations of
any other person, in each case, other than in the ordinary and usual course
of business, consistent with past practice, and in amounts and on terms
consistent with past practices;
(4) any creation or assumption by the Company or any of its Subsidiaries
of any Lien on any material asset other than in the ordinary and usual
course of business consistent with past practices;
(5) prior to or on the date hereof, any making of any loan in excess of
$50,000, or aggregate loans in excess of $250,000, advance or capital
contributions to or investment in any person, in each case, other than in
the ordinary and usual course of business consistent with past practice;
(6) any change in any accounting policies or practices by the Company or
any of its Subsidiaries; or
(7) any (A) employment, deferred compensation, severance, retirement or
other similar agreement entered into with any director, officer,
consultant, partner or employee of the Company or any of its Subsidiaries
(or any amendment to any such existing agreement), (B) grant of any
severance or termination pay to any director, officer, consultant, partner
or employee of the Company or any of its Subsidiaries, or (C) change in
compensation or other benefits payable to any director, officer,
consultant, partner or employee of the Company or any of its Subsidiaries,
except, in each case, in the ordinary course of business or as required by
Contract or applicable law with respect to employees of the Company or any
of its Subsidiaries.
(i) Contracts. (1) The Company has Previously Disclosed each of the
following Contracts to which either the Company or any of its Subsidiaries is
a party, or by which any of them is bound or to which any of their properties
is subject:
(A) any lease of real property;
(B) any agreement in force as of the date hereof for the purchase of
materials, supplies, goods, services, equipment or other assets that
provides for either annual payments of $25,000 or more or aggregate
payments of $50,000 or more;
(C) any partnership, joint venture or other similar agreement or
arrangement, or any options or rights to acquire from any person any
capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities or such person, in each
case, entered into other than in the ordinary course of business;
(D) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise);
(E) any indenture, mortgage, promissory note, loan agreement, guarantee
or other agreement or commitment, outstanding as of the date hereof, for
the borrowing of money by the Company or one of its Subsidiaries or the
deferred purchase price of property in excess of $50,000 (in either case,
whether incurred, assumed, guaranteed or secured by any asset);
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(F) any agreement in force as of the date hereof that creates future
payment obligations in excess of $10,000 in the aggregate and which by its
terms does not terminate or is not terminable without penalty upon notice
of 90 days or less;
(G) any license, franchise or similar agreement material to the Company
or any of its Subsidiaries or any agreement relating to any trade name or
intellectual property right that is material to the Company or any of its
Subsidiaries;
(H) any exclusive dealing agreement or any agreement that limits the
freedom of the Company or any of its Subsidiaries to compete in any line of
business or with any person or in any area or that would so limit their
freedom after the Effective Date;
(I) any compensation, employment, severance, supplemental retirement or
other similar agreement or arrangement with any employee or former employee
of, or independent contractor with respect to, the Company or any of its
Subsidiaries, or any other agreement with any current or former Affiliate
of the Company; and
(J) any other Contract that is a "material contract" as defined in Item
601(b)(10) of SEC Regulation S-K and that has not been filed prior to the
date hereof as an exhibit to the Company's SEC Documents.
(2) Each Contract that has been, or is required to be, Previously
Disclosed pursuant to this Section is a valid and binding agreement of the
Company or one or more of its Subsidiaries, as the case may be, and is in
full force and effect, and the Company or its Subsidiaries parties thereto
are not in default or breach in any material respect under the terms of any
such Contract.
(j) Contracts with Clients. (1) Each of the Company and its Subsidiaries is
in compliance with the terms of each Contract with any Client, and each such
Contract is in full force and effect with respect to the applicable Client.
There are no disputes pending or threatened with any Client under the terms of
any such Contract or with any former Client.
(2) Each extension of credit by the Company or any of its Subsidiaries
to any Client (A) is in full compliance with Regulation T of the Federal
Reserve System or any substantially similar regulation of any governmental
or regulatory agency or authority, (B) is fully secured and (C) the Company
or one or more of its Subsidiaries, as the case may be, has a first
priority perfected security interest in the collateral securing such
extension of credit.
(k) Registration Matters. (1) Each Broker-Dealer Subsidiary is, and at the
Effective Time will be, duly registered under the Exchange Act as a broker-
dealer with the SEC, and is, and at the Effective Time will be, in compliance
with the applicable provisions of the Exchange Act and the applicable rules and
regulations thereunder, including, but not limited to the net capital
requirements thereof. Each Broker-Dealer Subsidiary is, and at the Effective
Time will be, a member in good standing with all required Self-Regulatory
Organizations and in compliance with all applicable rules and regulations of
the Self-Regulatory Organizations. Each Broker-Dealer Subsidiary is, and at the
Effective Time will be, duly registered as a broker-dealer under, and in
compliance with, the applicable laws, rules and regulations of all
jurisdictions in which it is required to be so registered.
(2) The Company has delivered or made available to the Acquiror, true,
correct and complete copies of (A) each Broker-Dealer Subsidiary's Uniform
Application for Broker-Dealer Registration on Form BD ("Form BD") and (B)
each Uniform Application for Investment Adviser Registration filed by the
Company or any Subsidiary ("Form ADV", and together with Form BD, "Forms"),
all of the Forms reflecting all amendments thereto filed with the NASD or
the SEC, as the case may be, on or prior to the date hereof. The Forms are
in compliance with the applicable requirements of the Exchange Act or the
Investment Advisers Act, as the case may be, and the rules and regulations
under such Acts and do 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, in light of the circumstances under which
they were made, not misleading. The Company has provided or made available
true and complete copies of all audit reports
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by the SEC or the NASD regarding the Company or its Subsidiaries. Each
director, officer, agent and employee of each Broker-Dealer Subsidiary who
is required to be registered as a representative, principal or agent with
the securities commission of any state or with any SRO is duly registered
as such and such registration is in full force and effect. Each registered
representative and principal of each Broker-Dealer Subsidiary has at least
the minimum series license for the activities which such registered
representative or principal performs for such Broker-Dealer Subsidiary.
(3) The net capital, as such term is defined in Rule 15c3-1 under the
Exchange Act, of each Broker-Dealer Subsidiary satisfies, and since their
inception has satisfied, the minimum net capital requirements of the
Exchange Act and of the laws of any jurisdiction in which the Broker-Dealer
Subsidiary conducts business, and has been sufficient to permit each
Broker-Dealer Subsidiary to operate without restriction on its ability to
expand its business under NASD Conduct Rule 3130 or NYSE Rule 326.
(4) None of the Broker-Dealer Subsidiaries nor any "associated person"
thereof (a) is subject to a "statutory disqualification" as such terms are
defined in the Exchange Act, (b) is ineligible to serve as a broker-dealer
or as an associated person to a registered broker-dealer or (c) is subject
to a disqualification that would be a basis for censure, limitations on the
activities, functions or operations of, or suspension or revocation of the
registration of any Broker-Dealer Subsidiary as broker-dealer, municipal
securities dealer, government securities broker or government securities
dealer under Section 15, Section 15B or Section 15C of the Exchange Act and
there is no reasonable basis for, or proceeding or investigation, whether
formal or informal, or whether preliminary or otherwise, that is reasonably
likely to result in, any such censure, limitations, suspension or
revocation.
(5) Except as Previously Disclosed, neither the Company nor its
Subsidiaries is or is required to be registered as an investment company,
investment adviser, commodity trading advisor, commodity pool operator,
futures commission merchant, introducing broker, insurance agent, or
transfer agent under any United States federal, state, local or foreign
statutes, laws, rules or regulations. No Broker-Dealer Subsidiary acts as
the "sponsor" of a "broker-dealer trading program", as such terms are
defined in Rule 17a-23 under the Exchange Act.
(6) Neither the Company, its Subsidiaries nor any "affiliated person"
(as defined in the Investment Company Act) thereof, as applicable, is
ineligible pursuant to Section 9(a) or 9(b) of the Investment Company Act
to serve as an investment adviser (or in any other capacity contemplated by
the Investment Company Act) to a registered investment company. Neither the
Company, its Subsidiaries nor any "associated person" (as defined in the
Advisers Act) thereof, as applicable, is ineligible pursuant to Section 203
of the Advisers Act to serve as an investment adviser or as an associated
person to a registered investment adviser. Neither the Company nor its
Subsidiaries provides investment advisory, subadvisory or management
services to or through (i) any issuer or other Person that is an investment
company (within the meaning of the Investment Company Act), (ii) any issuer
or other Person that would be an investment company (within the meaning of
the Investment Company Act) but for the exemptions contained in Section
3(c)(1), Section 3(c)(7), the final clause of Section 3(c)(3) or the third
or fourth clauses of Section 3(c)(11) of the Investment Company Act, or
(iii) any issuer or other Person that is or is required to be registered
under the laws of the appropriate securities regulatory authority in the
jurisdiction in which the issuer is domiciled (other than the United States
or the states thereof), which is or holds itself out as engaged primarily
in the business of investing, reinvesting or trading in securities.
(7) Each account to which the Company provides investment management,
advisory or subadvisory services that (i) is an employee benefit plan, as
defined in Section 3(3) of ERISA, that is subject to Title I of ERISA; (ii)
a Person acting on behalf of such a plan; or (iii) any entity whose
underlying assets are deemed, under 29 C.F.R. Section 2510.3-101, to
include the assets of such a plan by reason of such a plan's investment in
such entity (each, an "ERISA Client") has been managed or provided
brokerage services by the Company or a Subsidiary thereof, as applicable,
such that the Company or such Subsidiary
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in the exercise of such management or in the provision of such services is
in compliance in all material respects with the applicable requirements of
ERISA.
(l) Compliance with Laws. Each of the Company and its Subsidiaries, and, to
the best of the Company's knowledge, each of their respective officers and
employees:
(1) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders
or decrees applicable to the conduct of its businesses or to the employees
conducting such businesses, and the rules of all Self-Regulatory
Organizations applicable thereto;
(2) has all permits, licenses, authorizations, orders and approvals of,
and has made all filings, applications and registrations with, all
Governmental Authorities and Self-Regulatory Organizations that are
required in order to permit them to own or lease their properties and to
conduct their businesses as presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are in full force
and effect and are current and, to the best of the Company's knowledge, no
suspension or cancellation of any of them is threatened or is reasonably
likely; are in good standing with all relevant Governmental Authorities and
are members in good standing with all relevant Self-Regulatory
Organizations;
(3) has received, since January 1, 1997, no notification or written
communication (or, to the best knowledge of the Company, any other
communication) from any Governmental Authority or Self-Regulatory
Organization (A) asserting non-compliance with any of the statutes,
regulations, rules or ordinances that such Governmental Authority or Self-
Regulatory Organization enforces, (B) threatening any material penalty or
to revoke any license, franchise, seat on any exchange, permit, or
governmental authorization (nor, to the Company's knowledge, do any grounds
for any of the foregoing exist), (C) requiring any of them (including any
of the Company's or its Subsidiary's directors or controlling persons) to
enter into a cease and desist order, agreement, or memorandum of
understanding (or requiring the board of directors thereof to adopt any
resolution or policy), or (D) restricting or disqualifying their activities
(except for restrictions imposed by rule, regulation or administrative
policy on brokers or dealers generally);
(4) is not aware of any pending or threatened investigation, review or
disciplinary proceedings by any Governmental Authority or Self-Regulatory
Organization against the Company, any of its Subsidiaries or any officer,
director or employee thereof;
(5) in the conduct of its business with respect to employee benefit
plans subject to Title I of ERISA, has not (A) breached any applicable
fiduciary duty under Part 4 of Title I of ERISA which would subject it to
liability under Sections 405 or 409 of ERISA and (B) engaged in a
"prohibited transaction" within the meaning of Section 406 of ERISA or
Section 4975(c) of the Code which would subject it to liability or Taxes
under Sections 409 or 502(i) of ERISA or Section 4975(a) of the Code;
(6) The Company has made available to the Acquiror true and correct
copies of (A) each Form G-37/G-38 filed with the MSRB since January 1, 1997
and (B) all records required to be kept by the Company under Rule G-
8(a)(xvi) of the MSRB. Since January 1, 1997, other than as disclosed in
such Forms G-37/G-38 made available to the Acquiror, there have been no
contributions or payments, and there is no other information, that would be
required to be disclosed by the Company or any of the Company's
Subsidiaries;
(7) is not subject to any cease-and-desist or other order issued by, or
a party to any written agreement, consent agreement or memorandum of
understanding with, or a party to any commitment letter or similar
undertaking to, or subject to any order or directive by, a recipient of any
supervisory letter from or has adopted any board resolutions at the request
of, any Governmental Authority or Self-Regulatory Organization, or been
advised since January 1, 1997, by any Governmental Authority or Self-
Regulatory Organization that it is considering issuing or requesting any
such agreement or other action or has knowledge of any pending or
threatened regulatory investigation; and
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(8) since January 1, 1997, has timely filed all reports, registrations
and statements, together with any amendments required to be made with
respect thereto, that were required to be filed under any applicable law,
regulation or rule, with (A) any applicable Governmental Authority and (B)
any Self-Regulatory Organization (collectively, the "Company Reports"). As
of their respective dates, the Company Reports complied with the applicable
statutes, rules, regulations and orders enforced or promulgated by the
regulatory authority with which they were filed.
(m) Properties; Securities. (1) Except as may be reflected in the Company's
Financial Statements dated before the date hereof, the Company and its
Subsidiaries have good and marketable title, free and clear of all Liens (other
than Liens for current taxes not yet delinquent) to all of the Material
properties and assets, tangible or intangible, reflected in such financial
statements as being owned by the Company and its Subsidiaries as of the dates
thereof. To the best of the Company's knowledge, all buildings and all the
Material fixtures, equipment, and other property and assets held under leases
or subleases by any of the Company and its Subsidiaries are held under valid
leases or subleases, enforceable in accordance with their respective terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and to general equity principles). The Company has Previously Disclosed a list
of any and all real estate owned or leased by it or a Company Subsidiary as of
the date hereof. Each of the Company and its Subsidiaries has good and
marketable title to all securities held by it (except securities sold under
repurchase agreements or held in any fiduciary or agency capacity), free and
clear of any Lien, except to the extent such securities are pledged in the
ordinary course of business consistent with prudent business practices to
secure obligations of each of the Company or any of its Subsidiaries. Such
securities are valued on the books of the Company or its Subsidiaries in
accordance with generally accepted accounting principles.
(2) Except as Previously Disclosed, neither the Company nor any
Subsidiary thereof holds any equity securities for its own account
involving, in the aggregate, ownership or control of 5% or more of any
class of an issuer's voting securities or 25% or more of the issuer's
equity (treating subordinated debt as equity). Except as Previously
Disclosed, there are no partnerships, limited liability companies, joint
ventures or similar entities, in which the Company or any of its
Subsidiaries is a general partner, manager, managing member or holds some
other similar position or owns or controls any interest, directly or
indirectly, of 5% or more and the nature and amount of each such interest.
(n) Taxes. (1) All Tax Returns with respect to the Company or its
Subsidiaries including consolidated United States federal income tax returns of
it and its Subsidiaries, have been timely filed (taking into account any
Previously Disclosed extension of time within which to file), and such Tax
Returns were true, complete and accurate;
(2) All Taxes shown to be due on such Tax Returns have been paid in
full;
(3) All Taxes due with respect to completed examinations have been paid
in full;
(4) No issues have been raised in writing (or, to the knowledge of the
Company, through any other communication) with the Company or any of its
Subsidiaries by the relevant taxing authority in connection with the
examination of any such Tax Returns;
(5) No currently effective waivers of statutes of limitations (excluding
such statues that relate to years currently under examination by the IRS)
have been given by or requested with respect to any Taxes of the Company or
any of its Subsidiaries;
(6) Each of the Company and its Subsidiaries has duly paid or made
provision for the payment of all Taxes that have been incurred or are due
or claimed to be due from it by federal, state, foreign or local taxing
authorities other than Taxes that are not yet delinquent or are being
contested in good faith and have not been finally determined;
(7) The federal and state income Tax Returns of the Company and its
Subsidiaries have been examined by the IRS or the relevant state taxing
authorities, as the case may be, through 1995. The federal
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income tax returns of the Company and its Subsidiaries for the fiscal year
ended September 30, 1995 and for all fiscal years prior thereto are, for
purposes of routine audit by the IRS, closed because of the statute of
limitations, and no claims for additional taxes for such fiscal years are
pending. Except as previously disclosed, there are no audits by, or
disputes pending between the Company or any of its Subsidiaries and, any
taxing authority of which the Company or any of its Subsidiaries has
received written notice, or claims asserted in writing by any taxing
authority for, Taxes or assessments upon the Company or any of its
Subsidiaries. In addition, (A) proper and accurate amounts have been
withheld by the Company and its Subsidiaries from their employees for all
prior periods in compliance with the Tax withholding provisions of
applicable federal, state and local laws, (B) federal, state and local Tax
Returns that are complete and accurate have been filed by the Company and
its Subsidiaries for all periods for which Tax Returns were due with
respect to income Tax withholding, Social Security and unemployment Taxes,
(C) the amounts shown on such federal, state or local Tax Returns to be due
and payable have been paid in full and (D) there are no Tax liens upon any
property or assets of the Company or its Subsidiaries except liens for
current Taxes not yet due;
(8) Neither the Company nor any of its Subsidiaries has been required to
include in income any adjustment pursuant to Section 481 of the Code by
reason of a voluntary change in accounting method initiated by the Company
or any of its Subsidiaries, and the IRS has not initiated or proposed any
such adjustment or change in accounting method; and
(9) Neither the Company nor any of its Subsidiaries is a party to or is
bound by any Tax sharing, allocation or indemnification agreement or
arrangement. Neither the Company nor any of its Subsidiaries has any
liability for the Taxes of any person (other than the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as successor or transferee, by
contract or otherwise.
(o) Litigation. Company has furnished Acquiror copies of (i) all attorney
responses to the request of the independent auditors for Company with respect
to loss contingencies as of the end of its fiscal year most recently completed
as of the date hereof in connection with the Company's financial statements
included in the Company's most recent annual report on Form 10-K as filed with
the SEC, and (ii) a written list of legal litigation, proceedings,
investigations or controversy ("Litigation") before any court, arbitrator,
mediator, Governmental Authority or Self-Regulatory Organization involving
Company or any Company Subsidiary since the end of such fiscal year or which
have been previously disclosed in the Company's SEC Documents ("Litigation
List"). Except as disclosed in the Litigation List, no Litigation before any
court, arbitrator, mediator, Governmental Authority or Self-Regulatory
Organization is pending against the Company or any of its Subsidiaries, and, to
the best of the Company's knowledge, no such Litigation has been threatened.
(p) Employees; Labor Matters. (1) Each of the Company and its Subsidiaries
is in compliance with all currently applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
including the Immigration Reform and Control Act, the Worker Adjustment and
Retraining Notification Act, any such laws respecting employment
discrimination, harassment, disability rights or benefits, equal opportunity,
plant closure issues, affirmative action, workers' compensation, employee
benefits, severance payments, labor relations, employee leave issues, wage and
hour standards, occupational safety and health requirements and unemployment
insurance and related matters. None of the Company nor any of its Subsidiaries
are engaged in any unfair labor practice and there is no unfair labor practice
complaint pending or threatened against the Company or any of its Subsidiaries
before the National Labor Relations Board. There are no charges or complaints
against the Company or any of its Subsidiaries pending of threatened in writing
alleging sexual or other harassment, or other discrimination, by the Company,
any of its Subsidiaries or by any of their employees, agents or
representatives.
(2) Neither the Company nor any of its Subsidiaries is a party to, or is
bound by, any collective bargaining agreement, Contract or other agreement
or understanding with any labor union or organization, nor has it agreed to
recognize any union or other collective bargaining unit, nor has any union
or other
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collective bargaining unit been certified, or is seeking certification, as
representing any of the employees of any of the Companies or their
Subsidiaries.
(q) Employee Benefit Plans. (1) The Company has Previously Disclosed a
complete list of each employee or director benefit plan, arrangement or
agreement, whether or not written, including without limitation any employee
welfare benefit plan within the meaning of Section 3(1) of ERISA, any employee
pension benefit plan within the meaning of Section 3(2) of ERISA (whether or
not such plan is subject to ERISA) and any bonus, incentive, deferred
compensation, vacation, stock purchase, stock option, severance, employment,
change of control or fringe benefit plan, program or agreement that is
sponsored, maintained or contributed to by the Company or any of its
Subsidiaries for the benefit of current or former employees or directors or
their beneficiaries (the "Benefit Plans").
(2) The Company has heretofore made available to Acquiror (A) true and
complete copies of each of the Benefit Plans (or written explanations of
any unwritten Benefit Plans) as in effect on the date hereof; (B) the three
most recent Annual Reports (Form 5500 Series) and accompanying schedules,
if any; and (C) the most recent determination letter from the IRS (if
applicable) for such Benefit Plan.
(3) With respect to each Benefit Plan, the Company and its Subsidiaries
have complied, and are now in compliance, in all material respects with all
provisions of ERISA, the Code and all laws and regulations applicable to
such Benefit Plans and each Benefit Plan has been administered in all
material respects in accordance with its terms. The Internal Revenue
Service has issued a favorable determination letter with respect to each
Benefit Plan that is intended to be a "qualified plan" within the meaning
of Section 401(a) of the Code and the related trust that has not been
revoked, and, to the knowledge of the Company, no circumstances exist and
no events have occurred that could reasonably be expected to adversely
affect the qualified status of any such plan or the related trust (except
for changes in applicable law for which the remedial amendment period has
not yet expired). No Benefit Plan is intended to meet the requirements of
Code Section 501(c)(9).
(4) All contributions required to be made to any Benefit Plan by
applicable law or regulation or by any plan document or other contractual
undertaking, and all premiums due or payable with respect to insurance
policies funding any Plan, for any period through the date hereof have been
timely made or paid in full or, to the extent not required to be made or
paid on or before the date hereof, have been fully reflected on the
Financial Statements. Each Benefit Plan, if any, that is an employee
welfare benefit plan under Section 3(1) of ERISA is either (A) funded
through an insurance company contract and is not a "welfare benefit fund"
with the meaning of Section 419 of the Code or (B) unfunded.
(5) There is no pending or, to the knowledge of the Company, threatened
litigation relating to the Benefit Plans. Neither the Company nor any of
its Subsidiaries has engaged in a transaction with respect to any Benefit
Plan that would subject the Company or any of its Subsidiaries to a
Material tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA.
(6) No Benefit Plan is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code, and neither the Company nor any of its
Subsidiaries has contributed or been obligated to contribute to a
"multiemployer plan" (as defined in Section 3(37) of ERISA) or a plan that
has two or more contributing, but unrelated, sponsors and that is subject
to Title IV of ERISA at any time on or after September 26, 1980. No
liability under Subtitle C or D of Title IV of ERISA has been or is
reasonably expected to be incurred by the Company or any of its
Subsidiaries with respect to any ongoing, frozen or terminated "single-
employer plan," within the meaning of Section 4001 of ERISA, currently or
formerly maintained by any of them, or the single-employer plan of any
entity which is considered one employer with the Company under Section 4001
of ERISA or Section 414 of the Code (an "ERISA Affiliate"). No notice of a
"reportable event," within the meaning of Section 4043 of ERISA, for which
the 30-day reporting requirement has not been waived has been required to
be filed for any Benefit Plan or, to the knowledge of the Company, by any
ERISA Affiliate. Neither the Company nor any of its Subsidiaries or ERISA
Affiliates has provided, or is required to provide, security to any Benefit
Plan or any single-employer plan of an ERISA Affiliate.
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(7) Neither the Company nor any of its Subsidiaries has any obligation
for retiree health, life or other welfare benefits, except for benefits and
coverage required by applicable law, including, without limitation, Section
4980B of the Code and Part 6 of Title I of ERISA. There are no restrictions
on the rights of the Company or any of its Subsidiaries to amend or
terminate any such plan (other than reasonable and customary advance notice
requirements) without incurring any Material liability thereunder.
(8) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby (either standing alone
or in conjunction with any other event) will (A) result in any payment
(including severance, unemployment compensation, "excess parachute" (within
the meaning of 280G of the Code), forgiveness of indebtedness or otherwise)
becoming due to any director or any employee of the Company or any of its
Subsidiaries under any Benefit Plan, (B) increase any benefits otherwise
payable under any Benefit Plan, (C) result in any acceleration of the time
of payment or vesting of any such benefit or (D) affect in any way the
ability to amend, terminate, merge or administer any Benefit Plan.
(r) Environmental Matters. The Company and its Subsidiaries have complied at
all times with applicable Environmental Laws; no property (including buildings
and any other structures) currently or formerly owned or operated (or which the
Company or any of its Subsidiaries would be deemed to have owned or operated
under any Environmental Law) by the Company or any of its Subsidiaries or in
which the Company or any of its Subsidiaries (whether as fiduciary or
otherwise) has a Lien, has been contaminated with, or has had any release of,
any Hazardous Substance in such form or substance so as to create any liability
for the Company or its Subsidiaries; the Company is not subject to liability
for any Hazardous Substance disposal or contamination on any other third-party
property; within the last six years, the Company and its Subsidiaries have not
received any notice, demand letter, claim or request for information alleging
any violation of, or liability of the Company under, any Environmental Law; the
Company and its Subsidiaries are not subject to any order, decree, injunction
or other agreement with any Governmental Authority or any third party relating
to any Environmental Law; the Company and its Subsidiaries are not aware of any
reasonably likely liability relating to environmental circumstances or
conditions (including the presence of asbestos, underground storage tanks, lead
products or polychlorinated biphenyls) involving the Company or one of its
Subsidiaries, any currently or formerly owned or operated property (whether as
fiduciary or otherwise), or any reasonably likely liability related to any Lien
held by the Company or one of its Subsidiaries; and the Company has made
available to the Acquiror copies of all environmental reports, studies,
sampling data, correspondence, filings and other environmental information in
its possession or reasonably available to it relating to the Company or one of
its Subsidiaries or any currently or formerly owned or operated property or any
property in which the Company or one of its Subsidiaries (whether as fiduciary
or otherwise) has held a Lien.
(s) Internal Controls. The Company and its Subsidiaries have devised and
maintained a system of internal accounting controls sufficient to provide
reasonable assurances that (1) transactions are executed in accordance with
management's general or specific authorizations, (2) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principals and to maintain accountability for
assets, (3) access to assets is permitted only in accordance with management's
general or specific authorization, and (4) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(t) Derivatives; Etc. All exchange-traded, over-the-counter or other swaps,
caps, floors, collars, option agreements, futures and forward contracts and
other similar arrangements or Contracts, whether entered into for the Company's
own account, or for the account of one or more of the Company's Subsidiaries or
their customers, were entered into (1) in accordance with prudent business
practices and all applicable laws, rules, regulations and regulatory policies
and (2) with counterparties reasonably believed to be financially responsible
at the time; and each of them constitutes the valid and legally binding
obligation of the Company or one of its Subsidiaries, enforceable in accordance
with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors'
rights or by general equity principles), and are in full force and
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effect. Neither the Company nor its Subsidiaries, nor, to the best of the
Company's knowledge, any other party thereto, is in breach of any of its
obligations under any such agreement or arrangement. The Company's SEC
Documents disclose the value of such agreements and arrangements on a mark-to-
market basis in accordance with generally accepted accounting principles and,
since June 25, 1999, there has not been a material change in such value.
(u) Names and Trademarks. The Company and its Subsidiaries have the right to
use the names, service-marks, trademarks and other intellectual property
currently used by them in the conduct of their businesses; each of such names,
service-marks, trademarks and other intellectual property has been Previously
Disclosed; and, in the case of such names, service-marks and trademarks, in
each state of the United States, such right of use is free and clear of any
Liens, and no other person has the right to use such names, service-marks or
trademarks in any such state.
(v) Insurance. The Company has Previously Disclosed all of the insurance
policies, binders, or bonds maintained by the Company or its Subsidiaries
("Insurance Policies"). The Company and its Subsidiaries are insured with
reputable insurers against such risks and in such amounts as the management of
the Company reasonably has determined to be prudent in accordance with industry
practices. All of the Insurance Policies are in full force and effect; the
Company and its Subsidiaries are not in material default thereunder; and all
claims thereunder have been filed in due and timely fashion.
(w) No Brokers. No action has been taken by the Company that would give rise
to any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment with respect to the transactions
contemplated by this Agreement, excluding the fees to be paid by the Company to
Lazard Freres & Co. LLC in amounts and on terms Previously Disclosed.
(x) Tax Treatment. As of the date hereof, the Company has no reason to
believe that the Merger will not qualify as a "reorganization" within the
meaning of Section 368(a) of the Code.
(y) Year 2000. The mission-critical computer software operated by the
Company or any of its Subsidiaries is capable of providing, or will be adapted
in a timely manner to provide, uninterrupted millennium functionality to
properly record, store, process, present, refer to and use in calculations
calendar dates falling on or after January 1, 2000 in substantially the same
manner and with substantially the same functionality and performance as such
mission-critical software records, stores, processes, presents, refers to and
uses in calculations calendar dates falling on or before December 31, 1999, and
no failure to provide such functionality has been or could reasonably be
expected to be Material to the Company and its Subsidiaries taken as a whole.
The costs of any adaptations referred to in the immediately preceding sentence
will not be Material to the Company and its Subsidiaries taken as a whole. The
Company has made its Year 2000 project assessment and remediation plan
available to the Acquiror for review and has furnished the Acquiror with copies
of all communications between the Company or any Company Subsidiary and
Governmental Authorities having responsibility for overseeing compliance with
such Year 2000 compliance matters.
(z) Administration of Trust Accounts. The Company and each Company
Subsidiary has properly administered in all material respects 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. To the best knowledge of the Company, neither the Company, and
Company Subsidiary, nor any director, officer or employee of the 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 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.
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5.4 Representations and Warranties of the Acquiror. Except as Previously
Disclosed in a paragraph of its Disclosure Schedule corresponding to the
relevant paragraph below, each of the Acquiror and Merger Sub, as the case may
be, hereby represents and warrants to the Company as follows:
(a) Organization, Standing and Authority. Each of the Acquiror and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware (in the case of the
Acquiror) or the State of Washington (in the case of Merger Sub), and is
duly qualified to do business and is in good standing in all jurisdictions
where its ownership or leasing of property or assets or the conduct of its
business requires it to be so qualified.
(b) Corporate Power. The Acquiror and each of its Significant
Subsidiaries has the corporate power and authority to carry on its business
as it is now being conducted and to own all its properties and assets.
(c) Corporate Authority. Each of the Acquiror and Merger Sub has the
requisite corporate power and authority, and has taken all corporate action
necessary, in order to authorize the execution, delivery of and performance
of its obligations under, this Agreement and the Stock Option Agreement and
to consummate the transactions contemplated by this Agreement and the Stock
Option Agreement. This Agreement and the Stock Option Agreement each is a
valid and legally binding agreement of each of the Acquiror and Merger Sub,
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to
or affecting creditors' rights or by general equity principles).
(d) Regulatory Approvals; No Defaults. (1) No consents or approvals of,
or filings or registrations with, any Governmental Authority, Self-
Regulatory Organization or with any third party are required to be made or
obtained by the Acquiror or any of its Subsidiaries in connection with the
execution, delivery or performance by the Acquiror and Merger Sub of this
Agreement, or to consummate the Merger, except for (A) the filing of
applications and notices, as applicable, with the Federal Reserve System
and the Department of Justice; (B) approval of the listing on the NYSE and
the CSE of the Acquiror Common Stock to be issued as Merger Consideration
(and related Acquiror Rights); (C) the filing and declaration of
effectiveness of the Registration Statement; (D) the filing of a
certificate of merger with the Secretary of State of the State of
Washington pursuant to the WBCA; and (E) such filings as are required to be
made or approvals as are required to be obtained under the securities or
"Blue Sky" laws of various states in connection with the issuance of
Acquiror Common Stock in the Merger. As of the date hereof, the Acquiror is
not aware of any reason why the approvals of all Governmental Authorities
or Self-Regulatory Organizations necessary to permit consummation of the
transactions contemplated hereby will not be received.
(2) Subject only to receipt of the regulatory approvals referred to
in Section 5.4(d)(1), the expiration of applicable waiting periods and
the making of all required filings under federal and state securities
laws, the execution, delivery and performance of this Agreement and the
Stock Option Agreement and the consummation of the transactions
contemplated hereby and thereby do not and will not (A) constitute a
breach or violation of, or a default under, or give rise to any Lien,
any acceleration of remedies or any right of termination under, any
law, rule or regulation or any judgment, decree, order, governmental
permit or license, (B) constitute a breach or violation of, or a
default under, the certificate of incorporation or bylaws (or similar
governing documents) of the Acquiror or any of its Subsidiaries, or (C)
require any consent or approval under any such law, rule, regulation,
judgment, decree, order, governmental permit or license or Contract.
(e) Acquiror Capitalization. (1) As of June 30, 1999, the authorized
capital stock of Acquiror consists of (i) 20,000,000 shares of Preferred
Stock, without par value, of which as of the close of business on June 30,
1999, 955,000 shares of Cumulative Tracking Preferred Stock, at $200 stated
value, 9,596 shares of ESOP Cumulative Convertible Preferred Stock, at
$1,000 stated value, 19,903 shares of 1995 ESOP Cumulative Convertible
Preferred Stock, at $1,000 stated value, 21,288 shares of 1996 ESOP
Cumulative Convertible Preferred Stock, at $1,000 stated value, 18,639
shares of 1997 ESOP Cumulative
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Convertible Preferred Stock, at $1,000 stated value, 8,560 shares of 1998
ESOP Cumulative Convertible Preferred Stock, at $1,000 stated value, 45,508
shares of 1999 ESOP Cumulative Convertible Preferred Stock, at $1,000
stated value, 1,500,000 shares of Adjustable-Rate Cumulative Convertible
Preferred Stock, Series B, at $50 stated value, and 4,000,000 shares of
6.59% Adjustable Rate Noncumulative Preferred Stock, Series B, at $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 June 30, 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 June 30, 1999,
1,650,629,353 shares were outstanding and 15,465,932 shares were held in
the treasury. All of the outstanding shares of capital stock of Acquiror
have been duly and validly authorized and issued and are fully paid and
nonassessable.
(2) The shares of Acquiror Common Stock to be issued as Merger
Consideration, when issued in accordance with the terms of this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable and not in violation of any preemptive rights.
(f) Subsidiaries. Each of the Acquiror's Significant Subsidiaries has
been duly organized, is validly existing and in good standing under the
laws of the jurisdiction of its organization, and is duly qualified to do
business and in good standing in the jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified. The Acquiror has continuously owned all of the outstanding
capital stock of Merger Sub since the initial issuance by Merger Sub of its
capital stock.
(g) SEC Documents; Financial Statements. (1) Since December 31, 1996,
Acquiror and each Acquiror Subsidiary has filed all reports, registrations,
and statements it was required to file with the SEC under the Securities
Act, or under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act,
including, but not limited to Acquiror's Annual Reports on Form 10-K for
the fiscal years ended December 31, 1996, 1997 and 1998, Forms 10-Q,
registration statements, definitive proxy statements, and information
statements (collectively, the "Acquiror SEC Documents"). As of their
respective dates (and without giving effect to any amendments or
modification filed after the date of this Agreement) each of the Acquiror
SEC Documents, including the financial statements, exhibits, and schedules
thereto, filed or circulated prior to the date hereof complied (and each of
the Acquiror SEC Documents filed after the date of this Agreement will
comply) as to form with applicable Securities Laws and did not (or, in the
case of reports, statements, or circular filed after the date of this
Agreement, 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, in the light of the circumstances under which
they were made, not misleading.
(2) Each of the balance sheets included in or incorporated by
reference into the Acquiror SEC Documents, including the related notes
and schedules, fairly presented (or, in the case of Acquiror SEC
Documents filed after the date of this Agreement, will fairly present)
the consolidated financial condition of the Acquiror and its
Subsidiaries as of the date of such balance sheet and each of the
statements of income, cash flows and changes in shareholders' equity
and comprehensive income included in or incorporated by reference into
the Acquiror SEC Documents, including any related notes and schedules,
fairly presented (or, in the case of Acquiror SEC Documents filed after
the date of this Agreement, will fairly present) the consolidated
results of operations, cash flows and shareholders' equity, as the case
may be, of the Acquiror and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-
end audit adjustments), in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved (except as may be noted therein and except that such unaudited
statements include no notes).
(h) Litigation. Except as disclosed in the Acquiror's SEC Documents
filed before the date of this Agreement, no Litigation before any court,
arbitrator, mediator, Governmental Authority or Self-Regulatory
Organization that has been or would reasonably be expected to be Material
to the Acquiror and its Subsidiaries taken as a whole is pending against
the Acquiror or any of its Subsidiaries, and, to the best of the Acquiror's
knowledge, no such Litigation has been threatened.
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(i) Compliance with Laws. The Acquiror and each of its Significant
Subsidiaries: is in compliance with all applicable federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable to the conduct of its businesses or to the
employees conducting such businesses in all material respects, and the
rules of all Self-Regulatory Organizations applicable thereto and has all
permits, licenses, authorizations, orders and approvals of, and has made
all filings, applications and registrations with, all Governmental
Authorities and Self-Regulatory Organizations that are required in order to
permit them to own or lease their properties and to conduct their
businesses as presently conducted (all such permits, licenses, certificates
of authority, orders and approvals are in full force and effect and are
current and, to the best of the Acquiror's knowledge, no suspension or
cancellation of any of them is threatened or is reasonably likely).
(j) Brokers. No action has been taken by the Acquiror that would give
rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the
transactions contemplated by this Agreement.
(k) Absence of Certain Changes. Since June 30, 1999, there has not been
any event, occurrence, development or state of circumstances or facts which
has had or could reasonably be expected to constitute or result in a
Material adverse change in the financial condition, results of operations,
business, assets, properties or shareholders' equity of the Acquiror and
its Subsidiaries, taken as a whole.
(l) Tax Treatment. As of the date hereof, the Acquiror has no reason to
believe that the Merger will not qualify as a "reorganization" within the
meaning of Section 368(a) of the Code.
(m) Activities of Merger Sub. Merger Sub does not have any Subsidiaries
or material investments of any kind in any entity. Merger Sub has been
incorporated on behalf of the Acquiror solely for purposes of accomplishing
the Merger, has not engaged in any other business activity and has
conducted its operations only as contemplated hereby.
ARTICLE VI
Covenants
6.1 Reasonable Best Efforts. (a) Subject to the terms and conditions of this
Agreement, each of the Company and the Acquiror agrees to use its reasonable
best efforts in good faith to take, or cause to be taken (including causing any
of its Subsidiaries to take), all actions, and to do, or cause to be done, all
things necessary, proper or desirable, or advisable under applicable laws, so
as to permit consummation of the Merger as promptly as reasonably practicable
and otherwise to enable consummation of the transactions contemplated hereby,
and shall cooperate fully with the other party hereto to that end.
(b) Without limiting the generality of Section 6.1(a), the Company
agrees to use its reasonable best efforts to obtain the consent or approval
of all persons party to a Contract with the Company, to the extent the
failure to obtain such consent could reasonably be expected to have a
Material adverse effect on the Company and its Subsidiaries, taken as a
whole, or its business giving effect to the Merger, or is required in order
to consummate the Merger or for the Surviving Corporation to receive the
benefits thereof.
6.2 Shareholder Approval. The Company agrees to take, in accordance with
applicable law, applicable stock exchange rules, the Company Articles and the
Company Bylaws, all action necessary to convene, and shall hold, an appropriate
meeting of shareholders of the Company to consider and vote upon the approval
and adoption of this Agreement and any other matters required to be approved by
the Company's shareholders for consummation of the Merger (including any
adjournment or postponement, the "Company Meeting") as promptly as practicable
after the Registration Statement is declared effective, and on a date agreeable
to Acquiror. Unless the Company Board, after having consulted with and
considered the written advice of outside counsel, has determined in good faith
that to do so would constitute a breach of its directors' fiduciary duties
under the WBCA, the Company Board shall recommend such approval, and the
Company shall take all reasonable, lawful action to solicit such approval by
its shareholders.
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6.3 Registration Statement. (a) The Acquiror agrees to prepare a
registration statement on Form S-4 (the "Registration Statement"), to be filed
by the Acquiror with the SEC in connection with the issuance of Acquiror Common
Stock (and related Acquiror Rights) in the Merger (including the proxy
statement and prospectus and other proxy solicitation materials of the Company
constituting a part thereof (the "Proxy Statement") and all related documents).
The Company agrees to cooperate, and to cause its Subsidiaries to cooperate,
with the Acquiror, its counsel and its accountants, in preparation of the
Registration Statement and the Proxy Statement and the Company agrees to file
the Proxy Statement in preliminary form with the SEC as promptly as reasonably
practicable; and, provided that the Company and its Subsidiaries have
cooperated as required above, the Acquiror agrees to file the Registration
Statement with the SEC as soon as reasonably practicable after any SEC comments
with respect to the preliminary Proxy Statement are resolved. Each of the
Company and the Acquiror agrees to use all reasonable best efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as reasonably practicable after filing thereof. The Acquiror also
agrees to use all reasonable best efforts to obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement. The Company agrees to furnish to
the Acquiror all information concerning the Company, its Subsidiaries,
officers, directors and shareholders as may be reasonably requested in
connection with the foregoing.
(b) Each of the Company and the Acquiror agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it
for inclusion or incorporation by reference in (1) the Registration
Statement will, at the time the Registration Statement and each amendment
or supplement thereto, if any, becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and (2) the Proxy Statement and any
amendment or supplement thereto will, at the date of mailing to
shareholders and at the time of the Company Meeting, contain any untrue
statement which, at the time and in the light of the circumstances under
which such statement is made, will be false or misleading with respect to
any material fact, or which will omit to state any material fact necessary
in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier statement in the Proxy
Statement or any amendment or supplement thereto. Each of the Company and
the Acquiror further agrees that if it shall become aware prior to the
Effective Date of any information furnished by it that would cause any of
the statements in the Proxy Statement to be false or misleading with
respect to any material fact, or to omit to state any material fact
necessary to make the statements therein not false or misleading, to
promptly inform the other party thereof and to take the necessary steps to
correct the Proxy Statement.
(c) The Acquiror agrees to advise the Company, promptly after the
Acquiror receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has been
filed, of the issuance of any stop order or the suspension of the
qualification of the Acquiror Common Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of
the Registration Statement or for additional information.
6.4 Access; Information. (a) The Company and its Subsidiaries, on the one
hand, and the Acquiror and its Subsidiaries, on the other, shall, upon
reasonable notice, and subject to applicable law, afford the other party hereto
and such party's officers, employees, counsel, accountants and other authorized
representatives, such access during normal business hours and at such other
times as are reasonably necessary throughout the period prior to the Effective
Time to the books, records (including tax returns and work papers of
independent auditors), properties, personnel and to such other information as
such other party may reasonably request; and, during such period, the Company
shall furnish promptly to the Acquiror (1) a copy of each material report,
schedule and other document filed by it pursuant to the requirements of federal
or state securities or banking laws and (2) all other information concerning
the business, properties and personnel of it as the Acquiror may reasonably
request.
(b) Each of the Company and the Acquiror agrees that it will not, and
will cause its representatives not to, use any information furnished to the
other in connection with the transactions contemplated by this
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Agreement for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. Subject to the requirements of law, each
party will keep confidential, and will cause its representatives to keep
confidential, all information and documents furnished to the other in
connection with the transactions contemplated by this Agreement unless such
information (1) was already known to such party, (2) becomes available to
such party from other sources not known by such party to be bound by a
confidentiality obligation, (3) is disclosed with the prior written
approval of the party to which such information pertains, or (4) is or
becomes readily ascertainable from published information or trade sources.
In the event that this Agreement is terminated or the transactions
contemplated by this Agreement shall otherwise fail to be consummated, each
party shall promptly cause all copies of documents or extracts thereof
containing information and data as to another party hereto to be returned
to the party which furnished the same. No investigation by either party of
the business and affairs of the other shall affect or be deemed to modify
or waive any representation, warranty, covenant or agreement in this
Agreement, or the conditions to either party's obligation to consummate the
transactions contemplated by this Agreement.
6.5 Acquisition Proposals. The Company agrees that it shall not, and shall
cause its Subsidiaries and its and its Subsidiaries' officers, directors,
agents, advisors and affiliates not to, solicit or encourage inquiries or
proposals with respect to, or engage in any negotiations concerning, or provide
any confidential information to, or have any discussions with, any person
relating to, any tender or exchange offer, proposal for a merger, consolidation
or other business combination involving the Company or any of its Subsidiaries
or any proposal or offer to acquire in any manner a substantial equity interest
in, or a substantial portion of the assets or operations of, the Company or any
of its Subsidiaries, other than the transactions contemplated by this Agreement
(any of the foregoing, an "Acquisition Proposal"); provided, that, if the
Company is not otherwise in violation of this Section 6.5, the Company Board
may provide information to, and may engage in such negotiations or discussions
with, a person, directly or through representatives, if (1) the Company Board,
after having consulted with and considered the written advice of outside
counsel to such Board, has determined in good faith that the failure to provide
such information or to engage in such negotiations or discussions would
constitute a breach of its directors' fiduciary duties under the WBCA and (2)
the Company has entered into with such person a confidentiality agreement on
substantially the same terms as the confidentiality provisions in effect
between the Company and the Acquiror. The Company also agrees immediately to
cease and cause to be terminated any activities, discussions or negotiations
conducted prior to the date of this Agreement with any parties other than the
Acquiror with respect to any of the foregoing. The Company shall promptly (but
in any event within 24 hours) advise the Acquiror following the receipt by it
of any Acquisition Proposal and the substance thereof (including the identity
of the person making such Acquisition Proposal), and advise the Acquiror on a
current basis of any developments with respect to such Acquisition Proposal
promptly upon the occurrence thereof.
6.6 Affiliate Agreements. (a) Not later than the 15th day prior to the
mailing of the Proxy Statement, the Company shall deliver to the Acquiror a
schedule of each person that, to the best of its knowledge, is or is reasonably
likely to be, as of the date of the Company Meeting, deemed to be an
"affiliate" of the Company (each, a "Company Affiliate") as that term is used
in Rule 145 under the Securities Act.
(b) The Company shall use its reasonable best efforts to cause each
person who may be deemed to be a Company Affiliate to execute and deliver
to the Acquiror, on or before the date of mailing of the Proxy Statement,
an agreement in substantially the form attached hereto as Annex A.
6.7 Takeover Laws. No party shall take any action that would cause the
transactions contemplated by this Agreement to be subject to requirements
imposed by any Takeover Law and each of them shall take all necessary steps
within its control to exempt (or ensure the continued exemption of) the
transactions contemplated by this Agreement from, or if necessary challenge the
validity or applicability of, any applicable Takeover Law, as now or hereafter
in effect.
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6.8 No Rights Triggered. The Company shall take all reasonable steps
necessary to ensure that the entering into of this Agreement and the
consummation of the transactions contemplated hereby and any other action or
combination of actions contemplated hereby do not and will not result in the
grant of any Rights with respect to the Company or any of its Subsidiaries to
any person (1) under the Company Articles or Company Bylaws, or (2) under any
Contract to which the Company or any of its Subsidiaries is a party.
6.9 Stock Exchange Listing. The Acquiror shall use its reasonable best
efforts to list, prior to the Effective Date, on the NYSE, subject to official
notice of issuance, the shares of Acquiror Common Stock (and related Acquiror
Rights) to be issued to the holders of Company Common Stock in the Merger.
6.10 Regulatory Applications. (a) The Acquiror and the Company and their
respective Subsidiaries shall cooperate and use their respective reasonable
best efforts to prepare all documentation, to effect all filings and to obtain
all permits, consents, approvals and authorizations of all third parties and
Governmental Authorities necessary to consummate the transactions contemplated
by this Agreement as promptly as reasonably practicable. Notwithstanding the
foregoing, the Acquiror shall not be required to accept or agree to any
condition or requirement proposed by a Governmental Authority or Self-
Regulatory Organization relating to Acquiror, Company or its Subsidiaries that,
in the reasonable good faith judgment of Acquiror, is unreasonably burdensome
to Acquiror. Each of the Acquiror and the Company shall have the right to
review in advance, and to the extent practicable each will consult with the
other (subject in each case to applicable laws relating to the exchange of
information) with respect to, all material written information submitted to any
third party or Governmental Authority in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
Acquiror and the Company agrees to act reasonably and as promptly as
practicable. Each of the Acquiror and the Company agrees that it will consult
with the other party hereto with respect to the obtaining of all material
permits, consents, approvals and authorizations of all third parties and
Governmental Authorities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other party
apprised of the status of material matters relating to completion of the
transactions contemplated hereby.
(b) Each of the Acquiror and the Company agrees, upon request, to
furnish the other party with all information concerning itself, its
Subsidiaries, directors, officers and shareholders and such other matters
as may be reasonably necessary or advisable in connection with any filing,
notice or application made by or on behalf of such other party or any of
its Subsidiaries to any third party or Governmental Authority.
6.11 Retention Program. At the Effective Time, the Company, in cooperation
with the Acquiror, will have established a retention program on terms described
in Schedule 6.11 to be used to retain certain employees of the Company, and
Acquiror, the Company and the Surviving Corporation, as applicable, shall take
all actions necessary to implement the provisions of such Schedule 6.11.
6.12 Certain Employee Benefits. At the Effective Time, the Acquiror will
provide employees of the Company who as of the Effective Time become employed
by the Acquiror or any of its Subsidiaries (the "Covered Employees") with the
employee benefit plans, programs and arrangements maintained by or contributed
to the Acquiror or its Subsidiaries and in which Covered Employees are eligible
to participate after the Effective Time, substantially as and on the terms set
forth on Schedule 6.12 hereto (the "Acquiror Plans"). Except as set forth on
Schedule 12, for purposes of all Acquiror Plans, the Acquiror shall, or shall
cause its Subsidiaries to, cause each such plan, program or arrangement to
treat the prior service with the Company of each Covered Employee (to the same
extent such service is recognized under any analogous plans, programs or
arrangements of the Company immediately prior to the Effective Time to the
extent such a plan, program or arrangement is in effect immediately prior to
the Effective Time) as service rendered to the Acquiror or its Subsidiaries, as
the case may be, solely for purposes of eligibility to participate and for
vesting thereunder (but not for purposes of benefit accruals). The Acquiror and
its Subsidiaries will cause any and all pre-existing condition limitations (to
the extent such limitations did not apply to a pre-existing condition under the
Benefit Plans) and eligibility waiting periods, under any health plans
maintained by the Acquiror or its Subsidiaries in which Covered Employees are
eligible to participate after the Effective Time, other than the Wells Fargo
Long
A-30
<PAGE>
Term Disability Plan and the Wells Fargo Long Term Care Plan, to be waived with
respect to (a) Covered Employees who, immediately prior to the Effective Time,
participated in a Company-sponsored health plan and (b) their eligible
dependents. The Acquiror and its Subsidiaries will recognize, for purposes of
any annual deductible and out-of-pocket limits under its health plans,
deductible and out-of-pocket expenses paid by Covered Employees and their
dependents during the calendar year in which the Effective Time occurs under
the health plans of the Company and its Subsidiaries. The Acquiror and its
Subsidiaries shall honor, pursuant to the terms of the Previously Disclosed
Benefit Plans, and to the extent consistent with applicable law, all accrued
employee benefit obligations to current and former employees of the Company
under such plans. Nothing in this Section 6.12 shall prevent Acquiror from
amending or terminating any Benefit Plans or benefit plans of the Acquiror (or
its Subsidiaries) or any other contracts, arrangements, commitments or
understandings, in accordance with their terms and applicable law.
6.13 Indemnification. With respect to the indemnification of directors and
officers, Acquiror agrees as follows:
(a) Acquiror shall ensure that all rights to indemnification and all
limitations of liability existing in favor of any person who is now, or has
been at any time prior to the date hereof, or who becomes prior to the
Effective Time of the Merger, a director or officer of Company or any
Company Subsidiary (an "Indemnified Party" and, collectively, the
"Indemnified Parties"), in the Company Articles or Bylaws or similar
governing documents of any Company Subsidiary, as applicable in the
particular case and as in effect on the date hereof, shall, with respect to
claims arising from (A) facts or events that occurred before the Effective
Time of the Merger or (B) this Agreement or any of the transactions
contemplated by this Agreement, whether in any case asserted or arising
before or after the Effective Time of the Merger, survive the Merger and
shall continue in full force and effect. Nothing contained in this
paragraph 6.13(a) shall be deemed to preclude the liquidation,
consolidation, or merger of Company or any Company Subsidiary, in which
case all of such rights to indemnification and limitations on liability
shall be deemed to survive and continue as contractual rights
notwithstanding any such liquidation or consolidation or merger; provided,
however, that in the event of liquidation or sale of substantially all of
the assets of Company or a Company Subsidiary, the Acquiror shall
guarantee, to the extent of the net asset value of the Company or such
Company Subsidiary as of the Effective Date of the Merger, the
indemnification obligations of Company or such Company Subsidiary to the
extent of indemnification obligations of Company and the Company
Subsidiaries described above. Notwithstanding anything to the contrary
contained in this Section, nothing contained herein shall require Acquiror
to indemnify any person who was a director or officer of Company or any
Company Subsidiary to a greater extent than Company or any Company
Subsidiary is, as of the date of this Agreement, required to indemnify any
such person.
(b) Any Indemnified Party wishing to claim indemnification under this
Section, upon learning of such claim, action, suit, proceeding, or
investigation, shall promptly notify the Acquiror thereof, but the failure
to so notify shall not relieve the Acquiror of any liability it may have to
such Indemnified Party unless such failure has actually prejudiced the
Acquiror. In the event of any such claim, action, suit, proceeding, or
investigation (whether arising before or after the Effective Time) (i) if
the Acquiror agrees that the claim, action, suit, proceeding or
investigation is fully indemnifiable and that the Acquiror will pay any
liability resulting from such claim, action, suit, proceeding or
investigation, the Acquiror shall have the right to assume the defense
thereof and shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof, except that
if the Acquiror elects not to assume such defense or counsel for the
Indemnified Party advises that there are issues which raise conflicts of
interest between Acquiror and the Indemnified Party, the Indemnified Party
may retain counsel satisfactory to them, and the Acquiror shall pay the
reasonable fees and expenses of such counsel for the Indemnified Party
promptly as statements therefor are received; provided, however, that
Acquiror shall be obligated pursuant to this subparagraph (b) 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 (ii) such Indemnified Party
shall cooperate fully in the defense of any such matter.
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<PAGE>
(c) For a period of six years from the Effective Time, the Acquiror
shall use its reasonable best efforts to provide that portion of director's
and officer's liability insurance that serves to reimburse the present and
former officers and directors of the Company or any of its Subsidiaries
with respect to claims against such directors and officers arising from
fact or events which occurred before the Effective Time, 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 the
Company; provided, however, that in no event shall the Acquiror be required
to expend more than 150 percent of the current amount expended by the
Company (such limit on the premiums required to be expended by the
Acquiror, the "Insurance Amount") to maintain or procure such directors and
officers insurance coverage for a comparable six-year period; provided,
further, that if the Acquiror is unable to maintain or obtain the insurance
called for by this Section 6.13(b), the Acquiror shall use its reasonable
best efforts to obtain as much comparable insurance as is available for the
Insurance Amount; provided, further, that officers and directors of the
Company or any subsidiary may be required to make application and provide
customary representations and warranties to the Acquiror's insurance
carrier for the purpose of obtaining such insurance.
(d) If the Acquiror or any of its successors 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 of its assets
to any other entity, then, and in each case, proper provision shall be made
so that the successor and assigns of the Acquiror shall assume the
obligations set forth in this Section 6.13.
(e) The provisions of this Section 6.13 are intended to be for the
benefit of, and enforceable in accordance with their terms by, Indemnified
Parties.
6.14 Notification of Certain Matters. (a) Each of the Company and the
Acquiror shall give prompt notice to the other of any fact, event or
circumstance known to it that is reasonably likely, individually or taken
together with all other facts, events and circumstances known to it, to result
in a material breach of any of its representations, warranties, covenants or
agreements contained herein.
(b) The Company and each of its Subsidiaries shall promptly notify the
Acquiror, and the Acquiror shall promptly notify the Company, of any
written notice (or any other communication of which the Company and each of
its Subsidiaries, on the one hand, or the Acquiror, on the other hand,
becomes aware) from any person alleging that the consent of such person is
or may be required as a condition to the Acquisition or any notice or other
communication from any Governmental Authority or Self-Regulatory
Organization in connection with the transactions contemplated by this
Agreement.
6.15 Press Releases. Each of the Company and the Acquiror agrees that it
will not, without the prior approval of the other party, issue any press
release or written statement for general circulation relating to the
transactions contemplated hereby, except as otherwise required by applicable
law or regulation or the rules of any applicable Self-Regulatory Organization.
6.16 Certain Policies of the Company. Upon the request of the Acquiror, the
Company shall, consistent with generally accepted accounting principles and
regulatory accounting principles, use its reasonable best efforts to record
certain accounting adjustments intended to conform the accrual and reserve
policies of the Company so as to reflect the policies of the Acquiror;
provided, however, that the Company shall not be obligated to record any such
accounting adjustments pursuant to this Section 6.16 unless and until the
Acquiror has certified to the Company that the conditions to its obligation to
consummate the Merger will be satisfied or waived on or before the Effective
Time and in no event to be effective prior to the day prior to the Effective
Date. The Company's representations, warranties and covenants contained in this
Agreement shall not be deemed to be untrue or breached in any respect for any
purpose as a consequence of any modifications or changes undertaken solely on
account of this Section 6.16.
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<PAGE>
ARTICLE VII
Conditions to Consummation of the Merger
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of the Acquiror, Merger Sub and the Company to
consummate the Merger is subject to the fulfillment or written waiver by the
Acquiror and the Company prior to the Effective Time of each of the following
conditions:
(a) Shareholder Approval. This Agreement shall have been duly approved
by the requisite vote of the holders of outstanding shares of Company
Common Stock entitled to vote thereon in accordance with Section 23B.11.030
of the WBCA, other applicable law and the Company Articles and Company
Bylaws.
(b) Governmental and Regulatory Consents. All approvals and
authorizations of, filings and registrations with, and notifications to,
all Governmental Authorities and Self-Regulatory Organizations required for
the consummation of the Merger shall have been obtained or made and shall
be in full force and effect and all waiting periods required by law shall
have expired. No approvals, licenses, or consents granted by any
Governmental Authority or Self-Regulatory Organization shall contain any
condition or requirement relating to Acquiror, Company or its Subsidiaries
that, in the reasonable good faith judgment of Acquiror, is unreasonably
burdensome to Acquiror.
(c) No Injunction. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by this Agreement.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(e) Listing. The shares of Acquiror Common Stock (and related Acquiror
Rights) to be issued in the Merger shall have been approved for listing on
the NYSE, subject to official notice of issuance.
(f) Tax Opinions. The Acquiror shall have received an opinion of
Wachtell, Lipton, Rosen & Katz, counsel to the Acquiror, and the Company
shall have received an opinion of Perkins Coie LLP, counsel to the Company,
in each case dated the Effective Date, substantially to the effect that,
based on the facts and assumptions stated therein, for United States
federal income tax purposes, the Merger will qualify as a "reorganization"
within the meaning of Section 368(a) of the Code. In rendering their
respective opinions, such counsel may require and rely upon customary
representations of the officers of the Company and the Acquiror.
7.2 Conditions to Obligation of the Company. The obligation of the Company
to consummate the Merger is also subject to the fulfillment or written waiver
by the Company prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. Subject to the standard set forth in
Section 5.2, the representations and warranties of the Acquiror and Merger
Sub set forth in this Agreement shall be true and correct as of the date of
this Agreement and as of the Effective Date as though made on and as of the
Effective Date (except that representations and warranties that by their
terms speak as of the date of this Agreement or some other date shall be
true and correct only as of such date), and the Company shall have received
a certificate, dated the Effective Date, signed on behalf of the Acquiror
by the Chairman, the President, or any Vice Chairman, Executive Vice
President, or Senior Vice President of the Acquiror to such effect.
(b) Performance of Obligations of the Acquiror. The Acquiror shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Effective Time, and the
Company shall have received a certificate, dated the Effective Date, signed
on behalf of the Acquiror by the Chairman, the President, or any Vice
Chairman, Executive Vice President, or Senior Vice President of the
Acquiror to such effect.
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<PAGE>
7.3 Conditions to Obligation of the Acquiror and Merger Sub. The obligation
of the Acquiror and Merger Sub to consummate the Merger is also subject to the
fulfillment or written waiver by the Acquiror prior to the Effective Time of
each of the following conditions:
(a) Representations and Warranties. Subject to the standard set forth in
Section 5.2 (except with respect to Section 5.3(e), which shall be true and
correct in all material respects), the representations and warranties of
the Company set forth in this Agreement shall be true and correct as of the
date of this Agreement and as of the Effective Date as though made on and
as of the Effective Date (except that representations and warranties that
by their terms speak as of the date of this Agreement or some other date
shall be true and correct only as of such date) and the Acquiror shall have
received a certificate, dated the Effective Date, signed on behalf of the
Company by the Chief Executive Officer and the Chief Financial Officer of
the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Effective Time, and the
Acquiror shall have received, prior to the Effective Time, a certificate,
dated the Effective Date, signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to such
effect.
(c) Employment Agreements. The Employment Agreements for each individual
listed in Group A on Schedule 7.3(c) and each individual (each, a "Group B
individual") listed in Group B on Schedule 7.3(c) shall be in full force
and effect (other than as a consequence of death or disability) and, in
each case, such individual shall not have committed an act or omission that
would permit their termination for "cause" thereunder; provided, however,
that, if the preceding condition is not met with respect to any Group B
Individual, the Company may, in substitution for such Group B Individual,
designate (after consultation with the Acquiror) individuals (each, a
"Group C Individual") listed in Group C on Schedule 7.3(c) having an
aggregate production percentage (determined as of the date on which such
Group B Individual's Employment Agreement shall have ceased to be in full
force and effect or the Company shall have become aware of such cause for
termination) that is at least equal to such Group B Individual's production
percentage as set forth on Schedule 7.3(c).
(d) Third Party Consents. All consents or approvals of all persons,
other than Governmental Authorities, required for or in connection with the
execution, delivery and performance of this Agreement and the consummation
of the Merger shall have been obtained and shall be in full force and
effect, unless the failure to obtain any such consent or approval is not
reasonably likely to have, individually or in the aggregate, a Material
adverse effect on the Company or the Surviving Corporation.
(e) Year 2000. There shall be no feature of the Company's or Company's
Subsidiaries' mission critical data processing, operating, or platform
systems that would prevent those systems from continuing to run
independently in all material respects after December 31, 1999 until such
time as a subsequent conversion to Acquiror's systems can be completed. The
mission critical computer software operated by the Company and its
Subsidiaries will provide uninterrupted millennium functionality to
properly record, store, process, present, refer to and use in calculations
calendar dates falling on or after January 1, 2000 with substantially the
same functionality and performance as such mission critical software
records, stores, processes, presents, refers to, and uses in calculations
calendar dates falling on or before December 31, 1999.
(f) Company Stock. Company shall have complied with the provisions of
Section 4.1(b) hereof.
(g) Capitalization. As of immediately prior to the Effective Time, the
total number of shares of Company Stock outstanding (including Company
Stock issuable pursuant to any outstanding Rights or other obligations of
the Company or any of its Subsidiaries, other than the Stock Option
Agreement) will not be greater than 14,937,610.
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<PAGE>
ARTICLE VIII
Termination
8.1 Termination. This Agreement may be terminated, and the Merger may be
abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of the Acquiror and the Company.
(b) Breach. At any time prior to the Effective Time, by the Acquiror or
the Company in the event of either: (1) a breach by the other party of any
representation or warranty contained herein (subject to the standard set
forth in Section 5.2), which breach cannot be or has not been cured within
30 days after the giving of written notice to the breaching party of such
breach, or (2) 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 days after the giving of written notice to the breaching party of
such breach and which breach would be reasonably likely, individually or in
the aggregate, to have a Material adverse effect on the breaching party or
the Surviving Corporation.
(c) Delay. At any time prior to the Effective Time, by the Acquiror or
the Company in the event that the Merger is not consummated by June 30,
2000, except to the extent that the failure 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 Section 8.1(c).
(d) No Approval. By the Company or the Acquiror in the event (1) the
approval of any Governmental Authority required for consummation of the
Merger and the other transactions contemplated by this Agreement shall have
been denied by final nonappealable action of such Governmental Authority,
or such Governmental Authority shall have requested the permanent
withdrawal of any application therefor, or (2) the shareholder approval
required by Section 7.1(a) herein is not obtained at the Company Meeting or
at any adjournment or postponement thereof.
(e) Failure to Recommend, Etc. By the Acquiror, if at any time prior to
the Company Meeting, the Company Board shall have failed to make its
recommendation referred to in Section 6.2, withdrawn such recommendation or
modified or changed such recommendation in a manner adverse to the
interests of the Acquiror (whether in accordance with Section 6.2 or
otherwise).
(f) by the Board of Directors of the Company, upon written notice to the
Acquiror at any time during the five-day period commencing on the first day
after the Condition Date, if both of the following conditions are
satisfied:
(1) the Average Closing Price as of the Condition Date shall be less
than $32.00; and
(2) (A) the quotient obtained by dividing the Average Closing Price
as of the Condition Date by the Starting Price (such number being
referred to herein as the "Acquiror Ratio") shall be less than (B) the
quotient obtained by dividing the Average Index Price by the Index
Price on the Starting Date and subtracting 0.15 from the quotient in
this clause (ii)(B) (such number being referred to herein as the "Index
Ratio");
subject, however, to the following provisions. If the Company elects to
exercise its termination right pursuant to the immediately preceding sentence,
it shall give prompt written notice to the Acquiror; provided, however, that
such notice of election to terminate may be withdrawn at any time within the
aforementioned five-day period. During the three-day period commencing with its
receipt of such notice, the Acquiror shall have the option to elect to increase
the Exchange Ratio to equal the lesser of (i) the quotient obtained by dividing
(A) the product of $32.00 and the Exchange Ratio (as then in effect) by (B) the
Average Closing Price as of the Condition Date, and (ii) the quotient obtained
by dividing (A) the product of the Index Ratio and the Exchange Ratio (as then
in effect) by (B) the Acquiror Ratio. If the Acquiror makes such an election
within such three-day period, it shall give prompt written notice to the
Company of such election and of the revised Exchange
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<PAGE>
Ratio, whereupon no termination shall have occurred pursuant to this Section
8.1(f) and this Agreement shall remain in effect in accordance with its terms
(except as the Exchange Ratio shall have been so modified), and any references
in this Agreement to "Exchange Ratio" shall thereafter be deemed to refer to
the Exchange Ratio as adjusted pursuant to this Section 8.1(f).
For purposes of this Section 8.1(f), the following terms shall have the
meanings indicated:
"Average Index Price" means the average of the Index Prices for the ten
consecutive full NYSE trading days ending at the close of trading on the
Condition Date.
"Index Group" means the 19 bank holding companies listed below, the
common stocks of all of which shall be publicly traded and as to which
there shall not have been, since the Starting Date and before the Condition
Date, an announcement of a proposal for such company to be acquired or for
such company to acquire another company or companies in transactions with a
value exceeding 25% of the Acquiror's market capitalization as of the
Starting Date. In the event that the common stock of any such company
ceases to be publicly traded or any such announcement is made with respect
to any such company, such company shall be removed from the Index Group,
and the weights (which have been determined based on the number of
outstanding shares of common stock) redistributed proportionately for
purposes of determining the Index Price. The 19 bank holding companies and
the weights attributed to them are as follows:
<TABLE>
<CAPTION>
Weighting
Company (%)
------- ---------
<S> <C>
Bank of America Corporation..................................... 19.8
Bank One Corporation............................................ 13.4
BB&T Corporation................................................ 3.6
Comerica Incorporated........................................... 1.8
Fifth Third Bancorp............................................. 3.1
First Union Corporation......................................... 10.9
Huntington Bancshares, Inc...................................... 2.6
Keycorp......................................................... 5.1
Marshall & Illsley Corporation.................................. 1.2
Mellon Bank Corporation......................................... 5.9
National City Corporation....................................... 7.1
Northern Trust Corporation...................................... 1.3
PNC Bank Corp................................................... 3.4
Regions Financial Corporation................................... 2.6
State Street Corporation........................................ 1.8
Summit Bancorp.................................................. 2.0
SunTrust Banks, Inc............................................. 3.7
U.S. Bancorp.................................................... 8.4
Wachovia Corporation............................................ 2.3
</TABLE>
"Index Price" on a given date means the weighted average (weighted in
accordance with the factors listed above) of the closing prices on such
date of the companies comprising the Index Group.
"Starting Date" means the last full NYSE trading day ending prior to the
date of execution of this Agreement.
"Starting Price" shall mean the last sale price per share of Acquiror
Common Stock on the Starting Date, as reported on the NYSE.
If the Acquiror or any company belonging to the Index Group declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the Starting
Date and the Condition Date, the prices for the common stock of such
company shall be appropriately adjusted for the purposes of applying this
Section 8.1(f).
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<PAGE>
8.2 Effect of Termination and Abandonment. In the event of termination of
this Agreement and the abandonment of the Merger pursuant to this Article VIII,
no party to this Agreement shall have any liability or further obligation to
any other party hereunder except (1) as set forth in Sections 9.1 and 9.5 and
(2) that termination will not relieve a breaching party from liability for any
willful breach of this Agreement or of its obligations under the Stock Option
Agreement.
ARTICLE IX
Miscellaneous
9.1 Survival. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time or termination of
this Agreement if this Agreement is terminated prior to the Effective Time;
provided, however, that (a) to the extent the agreements of the parties
contained herein by their terms apply after the Effective Time, such agreements
shall survive the Effective Time, and (b) if this Agreement is terminated prior
to the Effective Time, the agreements of the parties contained in Sections
6.4(b), 8.2 and in this Article IX shall survive such termination.
9.2 Waiver; Amendment. Prior to the Effective Time, any provision of this
Agreement may be (1) waived by the party benefited by the provision, or (2)
amended or modified at any time, by an agreement in writing between the parties
hereto approved or authorized by their respective Boards of Directors and
executed in the same manner as this Agreement, except that, after approval of
the Merger by the shareholders of the Company, no amendment may be made which
under applicable law requires further approval of such shareholders without
obtaining such required further approval.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof
(except to the extent that mandatory provisions of federal law or provisions of
the WBCA or the Delaware General Corporation Law apply).
9.5 Expenses. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
that printing expenses and SEC registration fees shall be shared equally
between the Company and the Acquiror.
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<PAGE>
9.6 Notices. All notices, requests and other communications hereunder to a
party shall be in writing and shall be deemed given (1) on the date of
delivery, if personally delivered or telecopied (with confirmation), (2) on the
first business day following the date of dispatch, if delivered by a recognized
next-day courier service, or (3) on the third business day following the date
of mailing, if mailed by registered or certified mail (return receipt
requested), in each case to such party at its address or telecopy number set
forth below or such other address or numbers as such party may specify by
notice to the parties hereto.
<TABLE>
<CAPTION>
<S> <C>
If to the Acquiror or Merger Sub, to: With a copy to:
Wells Fargo & Company Wachtell, Lipton, Rosen & Katz
420 Montgomery Street 51 West 52nd Street
San Francisco, California 94163 New York, New York 10019
Attention: Randall J. Lewis Attention: Edward D. Herlihy, Esq.
Facsimile: (415) 646-0325 Facsimile: (212) 403-2000
If to the Company, to: With a copy to:
Ragen MacKenzie Group Incorporated Perkins Coie LLP
999 Third Avenue, Suite 4300 1201 Third Avenue, Suite 4800
Seattle, Washington 98104 Seattle, Washington 98101-3099
Attention: V. Lawrence Bensussen Attention: Stewart M. Landefeld, Esq.
Facsimile: (206) 464-8806 Facsimile: (206) 583-8500
</TABLE>
9.7 Entire Understanding, No Third Party Beneficiaries. This Agreement
(together with the Disclosure Schedules), the Stock Option Agreement and the
Support Agreement represent the entire understanding of the parties hereto with
reference to the transactions contemplated hereby and thereby and supersede any
and all other oral or written agreements heretofore made. Except for Section
6.12, insofar as such Section expressly provides certain rights to the persons
named therein, nothing in this Agreement, expressed or implied, is intended to
confer upon any person, other than the parties hereto or their respective
successors and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.8 Assignment. Neither this Agreement nor any of the rights or obligations
hereunder may be assigned by any party without the prior written consent of the
other parties hereto. Subject to the foregoing, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
* * *
A-38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
WELLS FARGO & COMPANY
By: /s/ John E. Ganoe
Name: John E. Ganoe
Title: Executive Vice President
RAGEN MACKENZIE GROUP INCORPORATED
By: /s/ Lesa A. Sroufe
Name: Lesa A. Sroufe
Title: Chairman and CEO
ROMERO ACQUISITION CORP.
By: /s/ John E. Ganoe
Name: John E. Ganoe
Title: Chairman, President and
Chief Executive Officer
A-39
<PAGE>
Appendix B
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND TO RESALE RESTRICTIONS UNDER
THE SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated September 28, 1999, between Ragen MacKenzie
Group Incorporated, a Washington corporation ("Issuer"), and Wells Fargo &
Company, a Delaware corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties thereto immediately prior to the execution of this
Stock Option Agreement (this "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, 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
2,570,093 fully paid and nonassessable shares of Issuer's common stock, par
value $.01 per share ("Common Stock"), at a price of $15.50 per share (the
"Option Price"); provided, however, that in no event shall the number of
shares of Common Stock for which this Option is exercisable exceed 19.9% of
the Issuer's issued and outstanding shares of Common Stock without giving
effect to any shares subject to or issued pursuant to the Option. 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 either (i)
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement) or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding after the date of the Agreement, the number
of shares of Common Stock subject to the Option shall be increased or
decreased, as appropriate, so that, after such issuance, such number 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 1(b) or elsewhere in this Agreement shall be
deemed to authorize Issuer or Grantee to breach any provision of the Merger
Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, 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 90 days following such Subsequent
Triggering Event. Each of the following shall be an "Exercise Termination
Event": (i) the Effective Time (as defined in the Merger Agreement) 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 (x) pursuant
to Section 8.1(b) of the Merger Agreement (unless the breach by Issuer
giving rise to such right of termination is non-volitional) or (y) pursuant
to Section 8.1(e) of the Merger Agreement; or (iii) the passage of 12
months after termination of the Merger Agreement, if such termination
follows the occurrence of an Initial Triggering Event or is a termination
by
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Grantee pursuant to (x) Section 8.1(b) of the Merger Agreement (unless the
breach by Issuer giving rise to such right of termination is non-
volitional) or (y) pursuant to Section 8.1(e) of the Merger Agreement
(provided that if an Initial Triggering Event continues or occurs beyond
such termination and prior to the passage of such 12-month period, the
Exercise Termination Event shall be 12 months from the expiration of the
Last Triggering Event but in no event more than 18 months after such
termination). "Last Triggering Event" shall mean the last Initial
Triggering Event to expire. The term "Holder" shall mean the holder or
holders of the Option.
(b) 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 Subsidiaries (each an "Issuer Subsidiary"),
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 shall
have recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction. For purposes of this Agreement, "Acquisition
Transaction" shall mean (w) a merger or consolidation, or any similar
transaction, involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer, (x) a purchase, lease or other
acquisition or assumption of all or a substantial portion of the assets or
deposits of Issuer or any Significant Subsidiary of Issuer, (y) 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 (z) any substantially similar transaction; provided,
however, that in no event shall any merger, consolidation, purchase or
similar transaction involving only the Issuer and one or more of its
wholly-owned Subsidiaries or involving only any two or more of such
Subsidiaries be deemed to be an Acquisition Transaction;
(ii) Issuer, or any Issuer Subsidiary, without having received Grantee's
prior written consent, shall have authorized, recommended or proposed to
engage in (or publicly announced its intention to authorize, recommend or
propose to engage in) an Acquisition Transaction with any person other than
Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer shall
have publicly withdrawn or modified, or publicly announced its interest to
withdraw or modify, in any manner adverse to Grantee, its recommendation
that the shareholders of Issuer approve the transactions contemplated by
the Merger Agreement, in anticipation of engaging in an Acquisition
Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
its business 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);
(iv) Any person other than Grantee or any Grantee Subsidiary shall have
made a bona fide proposal to Issuer or its shareholders by public
announcement, or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
shareholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as hereinafter
defined); or
(vi) Any person other than Grantee or any Grantee Subsidiary, other than
in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice
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with the United States Department of Justice, the United States Federal
Trade Commission, the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), the New York Stock Exchange, Inc. or the National
Association of Securities Dealers (or other federal or state regulatory
authority or self-regulatory organization) for approval to engage or with
respect to engaging in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 20% or more
of the then-outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event of which it has notice
(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, 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, any regulatory agency is
required in connection with such purchase, the Holder shall promptly file the
required notice or application for approval 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 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,
provided that failure or refusal of Issuer to designate such a bank account
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, and the
Holder shall deliver to Issuer a copy of this Agreement and a letter agreeing
that the Holder will not offer to sell or otherwise dispose of such shares in
violation of applicable law or the provisions of this Agreement.
(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 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,
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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; 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, subject to the receipt of applicable regulatory
approvals, to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding the stock transfer books of Issuer then
being closed or certificates representing such shares of Common Stock not then
being 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, without limitation, (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. (S) 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or any other federal or state
banking or thrift law or regulations thereunder, prior approval of or notice to
the Federal Reserve Board or other federal or any such state 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 other federal or any such state
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 Stock Option
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 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, or
distributions in respect of, the Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock, or the
like, the type and
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number of shares of Common Stock purchasable upon exercise hereof and the
Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
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 90 days 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 shelf registration statement under the 1933
Act covering this Option and any shares issued and issuable pursuant to this
Option, and shall use its reasonable best efforts to cause such registration
statement to become effective as promptly as practicable and remain current and
effective in order to permit the sale or other disposition of this Option and
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 first 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 foregoing notwithstanding, if, at the time of any
request by Grantee for registration of the Option or Option Shares as provided
above, Issuer is in registration with respect to an underwritten public
offering 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 inclusion of the Holder's
Option or 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;
and 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 25% 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 the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur. 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 representations,
warranties, indemnities and other agreements customarily included in secondary
offering underwriting agreements for the 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
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
hereinafter defined), (i) following a request of the Holder, delivered prior to
an Exercise Termination Event, 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 hereinafter
defined) 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 within 90 days of such
occurrence (or such later period as provided in Section 10), Issuer 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 offer 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
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of the required repurchase of Option Shares, as the case may be, or (iv) in the
event of a sale of all or a substantial portion of Issuer's assets, the sum of
the price paid in such sale for such assets and the current market value of the
remaining 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 the 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 the 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.
Within the latter to occur of (x) five business days after the surrender of the
Option and/or certificates representing Option Shares and the receipt of such
notice or notices relating thereto and (y) the time that is immediately prior
to the occurrence of a Repurchase Event, 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, if any, 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 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 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 from 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 best efforts to obtain all required regulatory and legal approvals and
to file any required notices, in each case as promptly as practicable in order
to accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either 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 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 Stock Option 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 Stock Option
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, or (B) to the Owner, a certificate for
the Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed to
have occurred (i) upon the consummation of any merger, consolidation or similar
transaction involving Issuer or any purchase, lease or other acquisition of all
or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the proviso to Section 2(b)(i) hereof, or (ii) upon the acquisition by any
person of beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not terminate
upon the occurrence of an Exercise Termination Event unless no Subsequent
Triggering Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
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 one of its Subsidiaries, and shall not be the
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continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its Subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, 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 represent less than 50% of the outstanding voting
shares and voting share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its Subsidiaries, 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 (A) the continuing or surviving
corporation or other organization or person of a consolidation or merger
with Issuer (if other than Issuer), (B) Issuer in a merger in which Issuer
is the continuing or surviving person, and (C) the transferee of all or
substantially all of Issuer's assets.
(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 the one 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 that 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, which 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 is then exercisable,
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 is then exercisable 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 or the Owner, as the case may be, and reasonably acceptable to the
Acquiring Corporation.
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(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 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.
(b) The Substitute Option Holder and the Substitute Share Owner, as the case
may be, may exercise its respective right 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 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 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, in either case, 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 from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer following a
request for repurchase pursuant to this Section 9 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 Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five 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 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 best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as
practicable, in order to accomplish such repurchase), the Substitute Option
Holder 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
the 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
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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, or (B) to the Substitute Share Owner, a
certificate for the Substitute Common Shares it is then so prohibited from
repurchasing.
10. The 90-day or 6-month periods for exercise of certain rights under
Sections 2, 6, 7, 13 and 15 shall be extended: (i) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights, 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 of such exercise;
and (iii) during any period in which Grantee is precluded from exercising such
rights due to an injunction or other legal restriction, plus in each case such
additional period as is reasonably necessary for the exercise of such rights
promptly following the obtaining of such approvals or the expiration of such
periods.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full 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 Board of Directors of Issuer 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.
(b) 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 hereto, 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.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock 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 of except in a transaction registered or
exempt from registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent 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 within 90
days following such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the date 15 days
following the date on which the Federal Reserve Board approves an application
by Grantee under the BHCA 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.
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14. Each of Grantee and Issuer will use its 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 any state authority for approval to
acquire the shares of Common Stock issuable hereunder until such time, if ever,
as it deems appropriate to do so.
15. (a) Grantee in its sole discretion may, at any time during which Issuer
would be required to repurchase the Option or any Option Shares pursuant to
Section 7, surrender the Option (together with any Option Shares issued to and
then owned by the Holder) to Issuer in exchange for a cash payment equal to the
Surrender Price (as hereinafter defined); provided, however, that Grantee may
not exercise its rights pursuant to this Section 15 if Issuer has previously
repurchased the Option (or any portion thereof) or any Option Shares pursuant
to Section 7. The "Surrender Price" shall be equal to (i) $7,500,000.00, plus
(ii) if applicable, the aggregate purchase price previously paid pursuant
hereto by Grantee with respect to any Option Shares, minus (iii) if applicable,
the excess of (A) the net cash, if any, received by Grantee pursuant to the
arm's-length sale of Option Shares (or any other securities into which such
Option Shares were converted or exchanged) to any party not affiliated with
Grantee, over (B) the purchase price paid by Grantee with respect to such
Option Shares.
(b) Grantee may exercise its right to surrender the Option and any Option
Shares pursuant to this Section 15 by surrendering for such purchase 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 surrender the Option and Option Shares, if any, in accordance
with the provisions of this Section 15 and (ii) the Surrender Price. Within two
business days after the surrender of the Option and the Option Shares, if
applicable, Issuer shall deliver or cause to be delivered to Grantee the
Surrender Price.
(c) To the extent that the Issuer is prohibited under applicable law or
regulation 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, that portion of the Surrender Price that Issuer
is not or no longer prohibited from paying, within two 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 Section
15(b) is prohibited under applicable law or regulation from paying to Grantee
the Surrender Price in full, (i) Issuer shall (A) use its 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
two business 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 and 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, the
Exercise Termination Event shall be extended to a date six months from the date
on which the Exercise Termination Event would have occurred if not for the
provisions of this Section 15(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
15).
(d) Grantee shall have rights substantially identical to those set forth in
paragraphs (a), (b) and (c) of this Section 15 with respect to the Substitute
Option and the Substitute Option Issuer during any period in which the
Substitute Option Issuer would be required to repurchase the Substitute Option
pursuant to Section 9.
16. 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.
17. 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
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agency determines that the Holder is not permitted to acquire, or Issuer or
Substitute Option Issuer, as the case may be, is not permitted to repurchase
pursuant to Section 7 or Section 9, as the case may be, the full number of
shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to
Section 1(b) or 5 hereof), or Issuer or Substitute Option Issuer is not
permitted to pay the full Surrender Price, it is the express intention of
Issuer (which shall be binding on the Substitute Option Issuer) to allow the
Holder to acquire or to require Issuer or the Substitute Option Issuer, as the
case may be, to repurchase such lesser number of shares, or to pay such portion
of the Surrender Price, as may be permissible, without any amendment or
modification hereof.
18. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof (except to the
extent that mandatory provisions of federal law or provisions of the Washington
Business Corporation Act or the Delaware General Corporation Law apply).
20. 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.
21. 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.
22. 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
assigns. 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 assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
RAGEN MACKENZIE GROUP
INCORPORATED
By: /s/ Lesa A. Sroufe
Chairman and CEO
WELLS FARGO & COMPANY
By: /s/ John E. Ganoe
Executive Vice President
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Appendix C
[LETTERHEAD OF LAZARD FRERES & CO. LLC]
February 9, 2000
The Board of Directors
Ragen MacKenzie Group Incorporated
999 Third Avenue, Suite 4300
Seattle, WA 98104
Dear Members of the Board:
We understand that Ragen MacKenzie Group Incorporated ("RMG" or the
"Company") and Wells Fargo & Company ("WFC") have entered into an Agreement
and Plan of Merger, dated as of September 28, 1999 (the "Agreement"), which
provides, among other things, for the merger (the "Merger") of RMG with a
direct or indirect wholly owned subsidiary of WFC. Pursuant to the Merger,
each outstanding share of common stock, par value $0.01 per share, of RMG (the
"RMG Common Stock"), other than shares held in treasury or held by
stockholders exercising statutory dissenter's rights, will be converted into
the right to receive a certain number of shares (the "Exchange Ratio") of
common stock, par value $1 2/3 per share, of WFC (the "WFC Common Stock")
equal to $18.75, subject to (i) a collar arrangement providing in certain
circumstances for adjustments upward or downward pursuant to a formula as set
forth in the Agreement and (ii) termination in certain circumstances. The
terms and conditions of the Merger are more fully set forth in the Agreement.
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of shares of RMG Common Stock of the Exchange Ratio.
In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of the Agreement and
ancillary agreements;
(ii) Analyzed certain historical business and financial information
relating to WFC and RMG;
(iii) Reviewed various financial forecasts for the 2000 fiscal year and
other data provided to us by the management of RMG;
(iv) Held discussions with members of the senior managements of RMG and
WFC with respect to the businesses and prospects of RMG and WFC,
respectively, and the strategic objectives of each;
(v) Reviewed public information with respect to certain other companies
in lines of businesses we believe to be generally comparable to the
businesses of RMG and WFC;
(vi) Reviewed the financial terms of certain business combinations
involving companies in lines of businesses we believe to be generally
comparable to that of RMG;
(vii) Reviewed the historical stock prices and trading volumes of RMG
Common Stock and WFC Common Stock; and
(viii) Conducted such other financial studies, analyses and
investigations as we deemed appropriate.
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Lazard Freres & Co. LLC
We have relied upon the accuracy and completeness of the foregoing financial
and other information, and have not assumed any responsibility for any
independent verification of such information. With respect to financial
forecasts, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of management
of RMG as to the future financial performance of RMG, and we have assumed that
such forecasts and projections will be realized in the amounts and at the times
contemplated thereby. We assume no responsibility for and express no view as to
such forecasts and projections or the assumptions on which they are based. We
did not receive financial forecasts from WFC. We are not experts in the
evaluation of loan portfolios or the allowances for loan losses with respect
thereto and have assumed, with your consent, that such allowances for WFC are
in the aggregate adequate to cover such losses. In addition, we have not
reviewed individual credit files of WFC nor have we made or obtained any
independent evaluation or appraisal of the assets and liabilities of RMG or WFC
or any of their respective subsidiaries, and we have not been furnished with
any such evaluation or appraisal.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
In rendering our opinion, we have assumed that the Merger will be
consummated on the terms described in the Agreement, without any waiver of any
material terms or conditions by the Company, and that obtaining the necessary
regulatory approvals for the Merger will not have an adverse effect on the
Company. We express no opinion as to the underlying business decision to effect
the Merger.
Lazard Freres & Co. LLC is acting as investment banker to the Company in
connection with the Merger and will receive a fee for our services a
substantial portion of which is contingent upon the closing of the Merger.
Our engagement and the opinion expressed herein are for the benefit of the
Company's Board of Directors and our opinion is rendered to the Company's Board
in connection with its consideration of the Merger. This opinion is not
intended to and does not constitute a recommendation to any holder of RMG
Common Stock as to whether such stockholder should vote for the Merger. It is
understood that this letter may not be disclosed or otherwise referred to
without our prior consent, except as may otherwise be required by law or by a
court of competent jurisdiction or as provided in our engagement letter.
Based on and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Agreement is fair to the holders
of shares of RMG Common Stock from a financial point of view.
Very truly yours,
LAZARD FRERES & CO LLC
By /s/ Gary S. Shedlin
---------------------
Gary S. Shedlin
Managing Director
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Appendix D
WASHINGTON BUSINESS CORPORATION ACT
CHAPTER 23B.13
DISSENTERS' RIGHTS
23B.13.010. Definitions
As used in this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RCW 23B.13.020 and who exercises that right when and
in the manner required by RCW 23B.13.200 through 23B.13.280.
(3) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effective date of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action unless exclusion would be
inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
23B.13.020. Right to dissent
(1) A shareholder is entitled to dissent from, and obtain payment of the
fair value of the shareholder's shares in the event of, any of the following
corporate actions:
(a) Consummation of a plan of merger to which the corporation is a party
(i) if shareholder approval is required for the merger by RCW 23B.11.030,
23B.11.080, or the articles of incorporation and the shareholder is
entitled to vote on the merger, or (ii) if the corporation is a subsidiary
that is merged with its parent under RCW 23B.11.040;
(b) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale;
(d) An amendment of the articles of incorporation that materially
reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional share so created is to be acquired for cash under
RCW 23B.06.040; or
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(e) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter may not challenge the corporate action
creating the shareholder's entitlement unless the action fails to comply with
the procedural requirements imposed by this title, RCW 25.10.900 through
25.10.955, the articles of incorporation, or the bylaws, or is fraudulent with
respect to the shareholder or the corporation.
(3) The right of a dissenting shareholder to obtain payment of the fair
value of the shareholder's shares shall terminate upon the occurrence of any
one of the following events:
(a) The proposed corporate action is abandoned or rescinded;
(b) A court having jurisdiction permanently enjoins or sets aside the
corporate action; or
(c) The shareholder's demand for payment is withdrawn with the written
consent of the corporation.
23B.13.030. Dissent by nominees and beneficial owners
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the shareholder's name only if the shareholder
dissents with respect to all shares beneficially owned by any one person and
notifies the corporation in writing of the name and address of each person on
whose behalf the shareholder asserts dissenters' rights. The rights of a
partial dissenter under this subsection are determined as if the shares as to
which the dissenter dissents and the dissenter's other shares were registered
in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder does so with respect to all shares of
which such shareholder is the beneficial shareholder or over which such
shareholder has power to direct the vote.
23B.13.200. Notice of dissenters' rights
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert
dissenters' rights under this chapter and be accompanied by a copy of this
chapter.
(2) If corporate action creating dissenters' rights under RCW 23B.13.020 is
taken without a vote of shareholders, the corporation, within ten days after
[the] effective date of such corporate action, shall notify in writing all
shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in RCW 23B.13.220.
23B.13.210. Notice of intent to demand payment
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights must (a) deliver to the corporation
before the vote is taken written notice of the shareholder's intent to demand
payment for the shareholder's shares if the proposed action is effected, and
(b) not vote such shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section is not entitled to payment for the shareholder's shares under
this chapter.
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23B.13.220. Dissenters' notice
(1) If proposed corporate action creating dissenters' rights under RCW
23B.13.020 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of RCW 23B.13.210.
(2) The dissenters' notice must be sent within ten days after the effective
date of the corporate action, and must:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the person acquired beneficial
ownership of the shares before that date;
(d) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty nor more than sixty days after the
date the notice in subsection (1) of this section is delivered; and
(e) Be accompanied by a copy of this chapter.
23B.13.230. Duty to demand payment
(1) A shareholder sent a dissenters' notice described in RCW 23B.13.220 must
demand payment, certify whether the shareholder acquired beneficial ownership
of the shares before the date required to be set forth in the dissenters'
notice pursuant to RCW 23B.13.220(2)(c), and deposit the shareholder's
certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits the shareholder's share
certificates under subsection (1) of this section retains all other rights of a
shareholder until the proposed corporate action is effected.
(3) A shareholder who does not demand payment or deposit the shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
chapter.
23B.13.240. Share restrictions
(1) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is effected or the restriction is released under RCW 23B.13.260.
(2) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until the effective date of
the proposed corporate action.
23B.13.250. Payment
(1) Except as provided in RCW 23B.13.270, within thirty days of the later of
the effective date of the proposed corporate action, or the date the payment
demand is received, the corporation shall pay each dissenter who complied with
RCW 23B.13.230 the amount the corporation estimates to be the fair value of the
shareholder's shares, plus accrued interest.
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(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(b) An explanation of how the corporation estimated the fair value of
the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under RCW
23B.13.280; and
(e) A copy of this chapter.
23B.13.260. Failure to take action
(1) If the corporation does not effect the proposed action within sixty days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release any transfer
restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation wishes to undertake the proposed action, it must
send a new dissenters' notice under RCW 23B.13.220 and repeat the payment
demand procedure.
23B.13.270. After-acquired shares
(3) A corporation may elect to withhold payment required by RCW 23B.13.250
from a dissenter unless the dissenter was the beneficial owner of the shares
before the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action.
(4) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of the dissenter's demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares, an explanation of
how the interest was calculated, and a statement of the dissenter's right to
demand payment under RCW 23B.13.280.
23B.13.280. Procedure if shareholder dissatisfied with payment or offer
(1) A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and amount of interest
due, and demand payment of the dissenter's estimate, less any payment under RCW
23B.13.250, or reject the corporation's offer under RCW 23B.13.270 and demand
payment of the dissenter's estimate of the fair value of the dissenter's shares
and interest due, if:
(a) The dissenter believes that the amount paid under RCW 23B.13.250 or
offered under RCW 23B.13.270 is less than the fair value of the dissenter's
shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under RCW 23B.13.250 within
sixty days after the date set for demanding payment; or
(c) The corporation does not effect the proposed action and does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(2) A dissenter waives the right to demand payment under this section unless
the dissenter notifies the corporation of the dissenter's demand in writing
under subsection (1) of this section within thirty days after the corporation
made or offered payment for the dissenter's shares.
D-4
<PAGE>
23B.13.300. Court action
(1) If a demand for payment under RCW 23B.13.280 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding
within the sixty-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the superior court of
the county where a corporation's principal office, or, if none in this state,
its registered office, is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic
corporation merged with or whose shares were acquired by the foreign
corporation was located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled, parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The corporation may join as a party to the proceeding any shareholder
who claims to be a dissenter but who has not, in the opinion of the
corporation, complied with the provisions of this chapter. If the court
determines that such shareholder has not complied with the provisions of this
chapter, the shareholder shall be dismissed as a party.
(5) The jurisdiction of the court in which the proceeding is commenced under
subsection (2) of this section is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled
to the same discovery rights as parties in other civil proceedings.
(6) Each dissenter made a party to the proceeding is entitled to judgment
(a) for the amount, if any, by which the court finds the fair value of the
dissenter's shares, plus interest, exceeds the amount paid by the corporation,
or (b) for the fair value, plus accrued interest, of the dissenter's after-
acquired shares for which the corporation elected to withhold payment under RCW
23B.13.270.
23B.13.310. Court costs and counsel fees
(1) The court in a proceeding commenced under RCW 23B.13.300 shall determine
all costs of the proceeding, including the reasonable compensation and expenses
of appraisers appointed by the court. The court shall assess the costs against
the corporation, except that the court may assess the costs against all or some
of the dissenters, in amounts the court finds equitable, to the extent the
court finds the dissenters acted arbitrarily, vexatiously, or not in good faith
in demanding payment under RCW 23B.13.280.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of RCW 23B.13.200 through 23B.13.280; or
(b) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by chapter 23B.13 RCW.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
D-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes
indemnification of directors and officers of a Delaware corporation under
certain circumstances against expenses, judgments and the like in connection
with an action, suit or proceeding. Article Fourteenth of the Registrant's
Restated Certificate of Incorporation provides for broad indemnification of
directors and officers.
ITEM 21. Exhibits and Financial Statement Schedules
(a) Exhibits.
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger, dated as of September 28, 1999, by and among
Ragen MacKenzie Group Incorporated, a Washington corporation, Wells Fargo
& Company, a Delaware corporation, and Romero Acquisition Corp., a
Washington corporation (included as Appendix A to the Proxy
Statement/Prospectus included in this Registration Statement).
3.1 Restated Certificate of Incorporation, incorporated by reference to
Exhibit 3(b) to the Registrant's Current Report on Form 8-K dated June 28,
1993. Certificates of Amendment of Certificate of Incorporation,
incorporated by reference to Exhibit 3 to the Registrant's Current Report
on Form 8-K dated July 3, 1995 (authorizing preference stock), and
Exhibits 3(b) and 3(c) to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998 (changing the Registrant's name
and increasing authorized common and preferred stock, respectively).
3.2 Certificate of Designations for the Registrant's ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 4 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31,
1994.
3.3 Certificate of Designations for the Registrant's Cumulative Tracking
Preferred Stock, incorporated by reference to Exhibit 3 to the
Registrant's Current Report on Form 8-K dated January 9, 1995.
3.4 Certificate of Designations for the Registrant's 1995 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 4 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995.
3.5 Certificate Eliminating the Certificate of Designations for the
Registrant's Cumulative Convertible Preferred Stock, Series B,
incorporated by reference to Exhibit 3(a) to the Registrant's Current
Report on Form 8-K dated November 1, 1995.
3.6 Certificate Eliminating the Certificate of Designations for the
Registrant's 10.24% Cumulative Preferred Stock, incorporated by reference
to Exhibit 3 to the Registrant's Current Report on Form 8-K dated February
20, 1996.
3.7 Certificate of Designations for the Registrant's 1996 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the
Registrant's Current Report on Form 8-K dated February 26, 1996.
3.8 Certificate of Designations for the Registrant's 1997 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the
Registrant's Current Report on Form 8-K dated April 14, 1997.
3.9 Certificate of Designations for the Registrant's 1998 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 3 to the
Registrant's Current Report on Form 8-K dated April 20, 1998.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
3.10 Certificate of Designations for the Registrant's Adjustable Cumulative
Preferred Stock, Series B, incorporated by reference to Exhibit 3(j) to
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998.
3.11 Certificate of Designations for the Registrant's Fixed/Adjustable Rate
Noncumulative Preferred Stock, Series H, incorporated by reference to
Exhibit 3(k) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
3.12 Certificate of Designations for the Registrant's Series C Junior
Participating Preferred Stock, incorporated by reference to Exhibit 3(l)
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998.
3.13 Certificate Eliminating the Certificate of Designations for the
Registrant's Series A Junior Participating Preferred Stock, incorporated
by reference to Exhibit 3(a) to the Registrant's Current Report on
Form 8-K dated April 21, 1999.
3.14 Certificate of Designations for the Registrant's 1999 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 3(b) to
the Registrant's Current Report on Form 8-K dated April 21, 1999.
3.15 By-Laws, incorporated by reference to Exhibit 3(m) to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1998.
4.1 See Exhibits 3.1 through 3.15.
4.2 Rights Agreement, dated as of October 21, 1998, between the Registrant
and ChaseMellon Shareholder Services, L.L.C., as Rights Agent,
incorporated by reference to Exhibit 4.1 to the Registrant's Registration
Statement on Form 8-A dated October 21, 1998.
5.1 Opinion of Stanley S. Stroup as to the legality of the shares to be
issued (including consent).
8.1 Opinion of Wachtell, Lipton, Rosen & Katz regarding the U.S. federal
income tax consequences of the merger, including consent.
8.2 Opinion of Perkins Coie LLP regarding the U.S. federal income tax
consequences of the merger, including consent.
23.1 Consent of KPMG LLP relating to the audited financial statements of Wells
Fargo & Company.
23.2 Consent of Deloitte & Touche LLP relating to the audited financial
statements of Ragen MacKenzie Group Incorporated.
23.3 Consent of Stanley S. Stroup (included in Exhibit 5.1).
23.4 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.1).
24.1 Powers of Attorney.
99.1 Stock Option Agreement, dated September 28, 1999, between Ragen MacKenzie
Group Incorporated, a Washington corporation, as issuer, and Wells Fargo
& Company, a Delaware corporation, as grantee (included as Appendix B to
the Proxy Statement/Prospectus included in this Registration Statement).
99.2 Form of proxy for special meeting of shareholders of Ragen MacKenzie
Group Incorporated.
99.3 Chapter 23B.13 of the Washington Business Corporation Act (included as
Appendix D to the Proxy Statement/Prospectus included in this
Registration Statement).
99.4 Consent of Lazard Freres LLC relating to Ragen MacKenzie Group
Incorporated.
</TABLE>
(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:
II-2
<PAGE>
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act.
(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 SEC pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum aggregate 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 in such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, 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 the time will be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act 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 SEC such indemnification is against
public policy as expressed in the Securities 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 Securities Act and will be governed
by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) 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.
(d) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(e) The undersigned registrant hereby undertakes that every prospectus: (i)
that is filed pursuant to paragraph (d) immediately preceding, or (ii) that
purports to meet the requirements of Sections 10(a)(3) of the Securities Act
and is used in connection with an offering of securities subject to Rule 415,
will be filed as a
II-3
<PAGE>
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, 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.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 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-4
<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 February 9, 2000.
Wells Fargo & Company
/s/ Richard M. Kovacevich
By: _________________________________
Richard M. Kovacevich
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on February 9, 2000 by the following
persons in the capacities indicated:
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Richard M. Kovacevich President and Chief
___________________________________________ Executive Officer
Richard M. Kovacevich (Principal Executive
Officer)
/s/ Ross J. Kari Executive Vice President
___________________________________________ and Chief Financial
Ross J. Kari Officer (Principal
Financial Officer)
/s/ Les L. Quock Senior Vice President and
___________________________________________ Controller (Principal
Les L. Quock Accounting Officer)
</TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement or amendment thereto has been signed by the following persons in the
capacities indicated on February 9, 2000.
Les S. Biller Richard D. McCormick |
J.A. Blanchard III Cynthia H. Milligan |
Michael R. Bowlin Philip J. Quigley |
Edward M. Carson Donald B. Rice |
David A. Christensen Ian M. Rolland |
William S. Davila Judith M. Runstad | A majority of the
Susan E. Engel Susan G. Swenson | Board of Directors*
Paul Hazen Daniel M. Tellep |
William A. Hodder Chang-Lin Tien |
Reatha Clark King Michael W. Wright |
Richard M. Kovacevich John A. Young |
- --------
* Richard M. Kovacevich, by signing his name hereto, does hereby sign this
document on behalf of each of the directors named above pursuant to powers of
attorney duly executed by such persons.
/s/ Richard M. Kovacevich
_____________________________________
Richard M. Kovacevich
Attorney-in-Fact
S-1
<PAGE>
Exhibit 5.1
[LETTERHEAD OF STANLEY S. STROUP
EXECUTIVE VICE PRESIDENT AND GENERAL
COUNSEL OF WELLS FARGO & COMPANY]
February 9, 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 7,779,508 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 Ragen MacKenzie Group Incorporated, I have examined such corporate
records and other documents, including the registration statement on Form S-4
relating to the Shares, and have reviewed such matters of law as I have deemed
necessary for this opinion, and I advise you that in my opinion:
1. The Company is a corporation duly organized and existing under
the laws of the state of Delaware.
2. All necessary corporate action on the part of the Company has
been taken to authorize the issuance of the Shares in connection
with the Merger, and when issued as described in the
registration statement, the Shares will be legally and validly
issued, fully paid and nonassessable.
I consent to the filing of this opinion as an exhibit to the registration
statement.
Sincerely,
/s/ Stanley S. Stroup
<PAGE>
Exhibit 8.1
[LETTERHEAD OF WACHTELL, LIPTON, ROSEN & KATZ]
February 9, 2000
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94163
Ladies/Gentlemen:
We have acted as counsel to Wells Fargo & Company, a Delaware
corporation ("Wells Fargo"), in connection with the proposed merger (the
"Merger") of Romero Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Wells Fargo ("Merger Sub"), with and into Ragen MacKenzie Group
Incorporated ("Ragen MacKenzie") upon the terms and conditions set forth in the
Agreement and Plan of Merger, dated as of September 28, 1999, by and among Ragen
MacKenzie, Wells Fargo, and Merger Sub (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 Wells Fargo and the consent of Ragen MacKenzie, 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 Wells Fargo and Ragen
MacKenzie dated the date hereof, and have assumed that such statements and
representations will be complete and accurate at the Effective Time 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").
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 Wells Fargo, Merger Sub and Ragen MacKenzie 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 Washington.
<PAGE>
Wells Fargo & Company
February 9, 2000
Page 2
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 qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, and (ii) Ragen MacKenzie shareholders who exchange all of their Ragen
MacKenzie common stock solely for Wells Fargo common stock in the Merger will
recognize no gain or loss on that exchange (except with respect to cash received
instead of a fractional share interest in Wells Fargo common stock).
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 Ragen MacKenzie common stock in cash, holders who do not hold
their shares of Ragen MacKenzie common stock as capital assets, holders who
acquired their shares of Ragen MacKenzie common stock through the exercise of an
employee stock option or right or otherwise as compensation, and holders who
hold Ragen MacKenzie 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--Federal Income Tax Consequences"
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.
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,
/s/ WACHTELL, LIPTON, ROSEN & KATZ
<PAGE>
Exhibit 8.2
February 9, 2000
Ragen MacKenzie Group Incorporated
999 Third Avenue, Suite 4300
Seattle, WA 98104
RE: TAX OPINION REGARDING MERGER OF ROMERO ACQUISITION CORPORATION INTO
RAGEN MACKENZIE GROUP INCORPORATED
Ladies and Gentlemen:
We have been asked, as counsel to Ragen MacKenzie Group Incorporated, a
Washington corporation ("Ragen MacKenzie"), 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 (including the proxy
statement/prospectus contained therein) (the "Registration Statement") to render
this opinion regarding certain U.S. federal income tax consequences of the
merger (the "Merger") of Ragen MacKenzie with and into Romero Acquisition
Corporation ("Merger Sub"), a Washington corporation and wholly-owned subsidiary
of Wells Fargo & Company, a Delaware corporation ("Wells Fargo"), pursuant to
that certain Agreement and Plan of Merger, dated as of September 28, 1999 by and
between Ragen MacKenzie, Merger Sub and Wells Fargo (the "Merger Agreement").
Capitalized terms not otherwise defined herein shall have the same meanings
given to them in the Merger Agreement.
In connection with our opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
the relevant documents related to the Merger, including the Merger Agreement and
the Registration Statement. Furthermore, we have examined that certain
certificates of Wells Fargo and Ragen MacKenzie, dated as of the date hereof
(the "Tax Certificates").
Our opinion is conditioned on, among other things, the initial and
continuing accuracy of the facts, information, covenants and representations set
forth in the documents referred to above, and the representations given by Wells
Fargo and Ragen MacKenzie in their respective Tax Certificates. In rendering
our opinion, we have assumed the accuracy of all information and representations
and the performance of all undertakings contained in the reviewed documents as
set forth above, the conformity of all copies to the original documents, and the
genuineness of all signatures, that the merger will be reported by Wells Fargo,
Merger Sub, Ragen MacKenzie and the Ragen
<PAGE>
Ragen MacKenzie Group Incorporated
February 9, 2000
Page 2
MacKenzie shareholders on their respective federal income tax returns in a
manner consistent with the opinion set forth below, and that the Merger will
qualify as a statutory merger under the applicable laws of the State of
Washington. We have not attempted to verify independently the accuracy of any
information in any reviewed document, and we have assumed that such documents
accurately and completely set forth all material facts relevant to this opinion.
If any of these facts or assumptions are not correct, please advise us at once
as our opinion may be affected by a change in such facts or assumptions.
Opinion. It is the opinion of Perkins Coie LLP that, subject to the
foregoing and the limitations referred to below,
(a) the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended.
(b) Ragen MacKenzie shareholders who exchange all of their Ragen Mackenzie
common stock solely for Wells Fargo common stock in the Merger will recognize no
gain or loss on that exchange (except with respect to cash received instead of a
fractional share interest in Wells Fargo common stock).
However, as discussed above and as indicated in the Registration Statement, if
any of the assumptions or representations set forth above prove incorrect, then
the conclusions set forth above may not be accurate.
Limitations. We give no opinion with respect to other tax matters, whether
federal, state, local, or foreign that may relate to the Merger or the
consequences to shareholders subject to special tax 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 fair value of their
shares of the Ragen MacKenzie common stock in cash, holders who do not hold
their shares of Ragen MacKenzie common stock as capital assets, holders who
acquired their shares of Ragen MacKenzie common stock through the exercise of an
employee stock option or right or otherwise as consumption, and holders who hold
Ragen MacKenzie common stock as part of a hedge, straddle, conversion or
constructive sale transaction). Our opinion may not address issues that are
material to an individual stockholder based on his or her particular tax
situation. No ruling will be requested from the Internal Revenue Service
("IRS") regarding the Merger. Our opinion is not binding on the IRS or the
courts and does not constitute a guarantee that the IRS will not challenge the
tax treatment of the Merger.
In rendering our opinion, we have considered the applicable provisions of
the Code, the regulations of the United States Treasury Department, and court
and
<PAGE>
Ragen MacKenzie Group Incorporated
February 9, 2000
Page 3
administrative rulings and decisions in effect on the date hereof. These
authorities may change, possibly retroactively, and any change could affect the
continuing validity of this opinion.
The opinions expressed herein are for your benefit and the benefit of your
shareholders and may not be relied upon in any manner or for any purpose by any
other person or entity, or quoted in whole or in part, without our prior written
consent. We disclaim any undertaking to advise you of any subsequent changes
of the facts stated or assumed herein or any subsequent changes in applicable
law. We consent to the reference to our firm under the heading "THE MERGER--
Federal Income Tax Consequences" and to the filing of this opinion as an exhibit
to the Registration Statement. In giving such consent we do not admit that we
are among the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended.
Very truly yours,
/s/ PERKINS COIE LLP
PERKINS COIE LLP
<PAGE>
Exhibit 23.1
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 Ragen MacKenzie Group Incorporated of our report
dated January 19, 1999, with respect to the consolidated balance sheet of Wells
Fargo & Company and Subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, changes in stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 1998, and to the reference to our firm under the
heading "Experts" in the proxy statement-prospectus.
____________
/s/ KPMG LLP
San Francisco, California
February 9, 2000
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
of Wells Fargo & Company
We consent to the incorporation by reference in this Registration Statement of
Wells Fargo & Company on Form S-4 of our reports dated November 18, 1999,
appearing in the Annual Report on Form 10-K of Ragen MacKenzie Group
Incorporated for the year ended September 24, 1999, and to the reference to our
firm under the heading "Experts" in the prospectus, which is part of this
Registration Statement.
__________________________
/s/ DELOITTE & TOUCHE LLP
Seattle, Washington
February 9, 2000
<PAGE>
Exhibit 24.1
WELLS FARGO & COMPANY
POWERS OF ATTORNEY
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 PAUL HAZEN, RICHARD M. KOVACEVICH, LES BILLER, RODNEY L.
JACOBS, STANLEY S. STROUP, AND LAUREL A. HOLSCHUH, and each or any one of them,
the undersigned's true and lawful attorneys-in-fact, with power of substitution,
for the undersigned and in the undersigned's name, place and stead, to sign and
affix the undersigned's name as such director and/or officer of said Company to
a Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 8,000,000 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 Ragen
MacKenzie Group Incorporated 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 28th day of September, 1999.
Signature Title
--------- -----
/s/ Les S. Biller
__________________________ Director
Les S. Biller
/s/ J.A. Blanchard III
__________________________ Director
J.A. Blanchard III
/s/ Michael R. Bowlin
__________________________ Director
Michael R. Bowlin
/s/ Edward M. Carson
__________________________ Director
Edward M. Carson
/s/ David A. Christensen
__________________________ Director
David A. Christensen
/s/ William S. Davila
__________________________ Director
William S. Davila
/s/ Susan E. Engel
__________________________ Director
Susan E. Engel
/s/ Paul Hazen
__________________________ Director
Paul Hazen
<PAGE>
/s/ William A. Hodder
_________________________ Director
William A. Hodder
/s/ Reatha Clark King
_________________________ Director
Reatha Clark King
/s/ Richard M. Kovacevich
_________________________ Director
Richard M. Kovacevich
/s/ Richard D. McCormick
_________________________ Director
Richard D. McCormick
/s/ Cynthia H. Milligan
_________________________ Director
Cynthia H. Milligan
/s/ Philip J. Quigley
__________________________ Director
Philip J. Quigley
/s/ Donald B. Rice
__________________________ Director
Donald B. Rice
/s/ Ian M. Rolland
__________________________ Director
Ian M. Rolland
/s/ Judith M. Runstad
__________________________ Director
Judith M. Runstad
/s/ Susan G. Swenson
__________________________ Director
Susan G. Swenson
/s/ Daniel M. Tellep
__________________________ Director
Daniel M. Tellep
/s/ Chang-Lin Tien
__________________________ Director
Chang-Lin Tien
/s/ Michael W. Wright
__________________________ Director
Michael W. Wright
/s/ John A. Young
__________________________ Director
John A. Young
<PAGE>
Exhibit 99.2
<TABLE>
<S> <C>
Please mark your vote [X]
as indicated in this example
</TABLE>
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE SHAREHOLDER
IN THE SPACE PROVIDED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
THE PROPOSALS LISTED.
<TABLE>
<C> <S>
1. Approval of an Agreement and Plan of Merger, dated as of September 28, 1999, by and among Wells
Fargo & Company ("Wells Fargo"), a Delaware corporation, Romero Acquisition Corp. ("Merger Sub"), a
Washington corporation, and Ragen MacKenzie Group Incorporated ("Ragen MacKenzie"), and the
transactions contemplated thereby, including the merger of Merger Sub, a wholly-owned subsidiary of
Wells Fargo, with and into Ragen MacKenzie upon the terms and subject to the conditions set forth in
the merger agreement, as more fully described in the enclosed Proxy Statement-Prospectus.
[_] FOR [_] AGAINST [_] ABSTAIN
2. In their discretion, to transact any other business as may properly be brought before the special
meeting or any adjournments or postponements of the special meeting.
[_] FOR [_] AGAINST [_] ABSTAIN
</TABLE>
Signature(s) ___________________________________________ Date ________________
Please sign exactly as your name appears hereon. Attorneys, trustees, executors
and other fiduciaries acting in a representative capacity should sign and give
their titles. An authorized person should sign on behalf of corporations,
partnerships, associations, etc. and give his or her title. If your shares are
held by two or more persons, each person must sign. Receipt of the notice of
mailing and the proxy statement is hereby acknowledged.
................................................................................
PROXY
RAGEN MACKENZIE GROUP INCORPORATED
This Proxy is solicited by the Board of Directors for the Special Meeting of
Shareholders -- March 16, 2000.
The undersigned hereby appoint(s) Lesa A. Sroufe and V. Lawrence Bensussen
and each of them as proxies with full power of substitution, to represent and
vote as designated all shares of Common Stock of Ragen MacKenzie Group
Incorporated held by record by the undersigned on February 3, 2000 at the
special meeting of shareholders of Ragen MacKenzie Group Incorporated to be
held at The Rainier Club, 820 Fourth Avenue, Seattle, Washington, at 8:00 a.m.
local time, on Thursday, March 16, 2000, with authority to vote upon the matter
listed below and with discretionary authority as to any other matters that may
properly come before the meeting or any adjournment or postponement thereof.
IMPORTANT -- PLEASE DATE AND SIGN ON THE OTHER SIDE
<PAGE>
Exhibit 99.4
CONSENT OF LAZARD FRERES & CO. LLC
February 9, 2000
The Board of Directors
Ragen MacKenzie Group Incorporated
999 Third Avenue, Suite 4300
Seattle, WA 98104
Members of the Board:
We hereby consent to the references to our firm and to the inclusion
of an opinion of our firm to be dated the date of the Proxy Statement/Prospectus
of Wells Fargo & Company in the Registration Statement on Form S-4 of Wells
Fargo & Company, of which the Proxy Statement/Prospectus is to be a part, filed
with the Securities and Exchange Commission on February 9, 2000. In giving the
foregoing 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 1993, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
LAZARD FRERES & CO. LLC
By: /s/ Gary S. Shedlin
--------------------------
Managing Director
