<PAGE>
As filed with the Securities and Exchange Commission on April 19, 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 charter)
Delaware 6712 41-0449260
(State or other (Primary Standard Industrial (IRS Employer
jurisdiction of Classification Code Number) Identification
incorporation or 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
Executive Vice President and General Counsel
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94163
415-396-6019
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Robert J. Kaukol Ernest J. Panasci
Wells Fargo & Company Jones & Keller, P.C.
1050 17th Street, Suite 120 1625 Broadway, 16th Floor
Denver, Colorado 80265 Denver, Colorado 80202
(303) 899-5802 (303) 573-1600
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this registration statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<CAPTION>
Proposed
Proposed Maximum
Maximum Aggregate Amount Of
Title Of Securities To Amount To Be Offering Price Offering Registration
Be Registered Registered Per Share Price(1) Fee(2)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, $1 2/3 par
value (and associated
preferred stock
purchase rights)....... 2,100,000 N/A $28,688,640 $7,573.80
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
(1) Based on the book value, as of March 31, 2000, of the securities to be
received by Wells Fargo & Company in the transaction described herein.
(2) Based on .000264 of the proposed maximum aggregate offering price.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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- --------------------------------------------------------------------------------
<PAGE>
1ST CHOICE FINANCIAL CORP.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
June 9, 2000
To the Shareholders of 1st Choice Financial Corp.:
A special meeting of shareholders of 1st Choice Financial Corp. ("1st
Choice") will be held on Friday, June 9, 2000, at 10:00 a.m., Greeley, Colorado
time, at the 1st Choice Bank Boardroom, 5801 West 11th Street, Greeley,
Colorado. The purposes of the meeting are to:
1. Vote on a proposal to approve the Agreement and Plan of Reorganization,
dated as of February 3, 2000 (the "Merger Agreement"), between 1st
Choice and Wells Fargo & Company ("Wells Fargo"), pursuant to which,
among other things, a wholly-owned subsidiary of Wells Fargo will merge
with and into 1st Choice (the "Merger") upon the terms and subject to
the conditions set forth in the Merger Agreement, as more fully
described in the proxy statement-prospectus that follows this notice. As
a result of the Merger, 1st Choice will become a wholly-owned subsidiary
of Wells Fargo.
2. Act on any other matters that may properly come before the meeting.
Only shareholders of record on April 30, 2000 may vote at the special meeting
or at any adjournment thereof.
As described in the proxy statement-prospectus that follows this notice,
under Article 113 of the Colorado Business Corporation Act, 1st Choice
shareholders are entitled to assert dissenters' appraisal rights in connection
with the Merger. A copy of Article 113 is included in the proxy statement-
prospectus as Appendix C. Shareholders who do not satisfy the requirements for
asserting dissenters' appraisal rights will forfeit their right to demand and
receive cash payment for their shares under Article 113.
By Order of the Board of Directors
/s/ Robert N. Hinderaker
----------------------------------
Robert N. Hinderaker
Corporate Secretary
May 8, 2000
Please promptly complete, sign, date and return the enclosed proxy sheet
whether or not you plan to attend the meeting. Failure to return a properly
executed proxy or to vote at the meeting will have the same effect as a vote
against the Merger Agreement and the Merger. You may still vote in person at
the meeting even if you have previously returned your proxy sheet.
<PAGE>
[1st Choice logo]
The board of directors of 1st Choice Financial Corp. has approved the sale of
1st Choice to Wells Fargo & Company. The sale requires the approval of 1st
Choice's shareholders and will be voted on at a special meeting. The time and
place of the meeting are set forth in the notice of special meeting that
precedes this proxy statement-prospectus.
If the sale is completed, each share of 1st Choice common stock will be
converted into the right to receive a fraction of a share of Wells Fargo common
stock based on the following factors:
. the average closing price of Wells Fargo common stock during a 20-day
measurement period;
. the tangible equity of 1st Choice as of five days before the sale is
completed; and
. the number of shares of 1st Choice common stock outstanding immediately
before the sale is completed.
The formula to be used to determine the number of shares of Wells Fargo
common stock that you will receive is described in more detail later in this
document.
Wells Fargo common stock is listed on the New York and Chicago Stock
Exchanges under the symbol "WFC." On May , 2000, Wells Fargo common stock
closed at $ a share.
If the total number of shares of Wells Fargo common stock you will receive in
the merger does not equal a whole number, you will receive cash instead of the
fractional share.
The merger is expected to be generally tax free to 1st Choice shareholders
except for cash received instead of fractional shares.
This proxy statement-prospectus provides detailed information about the
proposed sale. Please read this entire document carefully. You can find
additional information about Wells Fargo from documents filed by Wells Fargo
with the Securities and Exchange Commission.
Whether or not you plan to attend the meeting, please complete and mail the
enclosed proxy sheet. If you sign, date and mail your proxy sheet without
indicating how you want to vote, your proxy will be voted in favor of the sale.
If you fail to return your proxy sheet, or if you fail to instruct your broker
how to vote shares held for you in the broker's name, the effect will be the
same as a vote against the sale.
Approval of the sale of 1st Choice to Wells Fargo requires the affirmative
vote of a majority of the outstanding shares of 1st Choice common stock. No
vote of Wells Fargo's stockholders is required to complete the transaction.
/s/ Darrell D. McAllister
- -------------------------------
Darrell D. McAllister
Chairman of the Board and Chief Executive Officer
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Wells Fargo common stock to be
issued or determined if this proxy statement-prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The shares of Wells Fargo common stock to be issued in the merger are not
savings or deposit accounts or other obligations of any bank or non-bank
subsidiary of Wells Fargo, and they are not insured by the Federal Deposit
Insurance Corporation, the Bank Insurance Fund or any other governmental
agency.
----------------
Proxy Statement-Prospectus dated May 8, 2000.
First mailed to 1st Choice shareholders on or about May 8, 2000.
<PAGE>
ADDITIONAL INFORMATION
This proxy statement-prospectus incorporates important business and financial
information about Wells Fargo that is not included in or delivered with this
document. See "Where You Can Find More Information" on page for a list of
the documents that Wells Fargo has incorporated into this proxy statement-
prospectus. The documents are available to you without charge upon written or
oral request made as follows:
Corporate Secretary
Wells Fargo & Company
MAC N9305-173
Sixth and Marquette
Minneapolis, Minnesota 55479
(612) 667-8655
To obtain documents in time for the special meeting, your request should be
received by June 2, 2000.
i
<PAGE>
ABOUT THIS DOCUMENT
What is the purpose of this document?
This document serves as both a proxy statement of 1st Choice and a prospectus
of Wells Fargo. As a proxy statement, it's being provided to you by 1st Choice
because 1st Choice's board of directors is soliciting your proxy for use at the
special meeting of shareholders called to vote on the proposed sale of 1st
Choice to Wells Fargo. As a prospectus, it's being provided to you by Wells
Fargo because Wells Fargo is offering shares of its common stock in exchange
for your shares of 1st Choice common stock if the sale is completed.
Do I need to read the entire document?
Absolutely. Parts of this proxy statement-prospectus summarize information
that is presented in greater detail elsewhere in this document or in the
appendices to this document. Each summary discussion is qualified by reference
to the full text. For example, the summary of the terms of the merger agreement
is qualified by the actual terms of the merger agreement, a copy of which is
included as Appendix A.
Is there other information I should consider?
Yes. Much of the business and financial information about Wells Fargo that
may be important to you is not physically included in this document. Instead,
this information is incorporated into this document by reference to documents
filed by Wells Fargo with the Securities and Exchange Commission (SEC). This
means that Wells Fargo may satisfy some of its disclosure obligations to you by
referring you to documents filed by it with the SEC. See "Where You Can Find
More Information" on page for a list of documents that Wells Fargo has
incorporated by reference into this proxy statement-prospectus and for
instructions on how to obtain copies of these documents. The documents are
available to you without charge.
What if there is a conflict between documents?
You should rely on the most recently filed document. Information in this
proxy statement-prospectus may update information contained in the Wells Fargo
documents incorporated by reference. Similarly, information in documents that
Wells Fargo may file after the date of this proxy statement-prospectus may
update information contained in this proxy statement-prospectus or information
contained in previously filed documents.
What if I choose not to read the incorporated documents?
Information contained in a document that is incorporated by reference is part
of this proxy statement-prospectus, unless it is superseded by information
contained directly in this proxy statement-prospectus or in documents filed
with the SEC after the date of this proxy statement-prospectus. Information
that is incorporated from another document is considered to have been disclosed
to you whether or not you choose to read the document.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.................................................................... 1
The Merger............................................................... 1
The Companies............................................................ 1
What You Will Receive In The Merger...................................... 1
Market Price Of Wells Fargo Stock Will Fluctuate......................... 2
Merger Generally Tax Free To 1st Choice Shareholders..................... 3
1st Choice's Board Recommends Approval Of The Merger..................... 3
1st Choice's Financial Advisor Believes The Merger Is Fair To 1st Choice
Shareholders............................................................ 3
Additional Merger Benefits To 1st Choice's Management.................... 3
Dissenters' Appraisal Rights Available................................... 3
Surrender Of 1st Choice Shares........................................... 4
1st Choice Special Meeting............................................... 4
Record Date; Vote Required To Approve Merger............................. 4
Agreements To Vote For The Merger........................................ 4
Merger Requires Federal Reserve Board Approval........................... 4
Other Conditions To Completing The Merger................................ 5
Termination Of The Merger Agreement...................................... 5
Your Rights Will Differ As A Wells Fargo Stockholder..................... 5
Wells Fargo Expects To Use Purchase Accounting........................... 5
Wells Fargo Is Heavily Regulated......................................... 5
Financial Modernization Will Increase Competition........................ 6
Forward-Looking Statements May Prove Inaccurate.......................... 6
Wells Fargo Selected Financial Data...................................... 6
1ST CHOICE SPECIAL MEETING................................................. 8
Time And Place Of The Meeting............................................ 8
Matters To Be Considered At The Meeting.................................. 8
Record Date.............................................................. 8
Outstanding Shares....................................................... 8
Quorum................................................................... 8
Vote Required............................................................ 8
Share Ownership.......................................................... 9
Agreements To Vote For The Merger........................................ 9
Voting And Revocation Of Proxies......................................... 9
Solicitation Of Proxies.................................................. 9
Postponement Or Adjournment Of The Meeting............................... 9
Other Matters Considered At The Meeting.................................. 10
THE MERGER................................................................. 11
Effect Of The Merger..................................................... 11
Background Of And Reasons For The Merger................................. 11
Opinion Of 1st Choice's Financial Advisor................................ 13
Additional Interests Of 1st Choice Management............................ 16
Dissenters' Rights....................................................... 19
Exchange Of Certificates................................................. 20
Regulatory Approvals..................................................... 21
Effect Of Merger On 1st Choice's Employee Benefit Plans.................. 22
U.S. Federal Income Tax Consequences Of The Merger....................... 22
Support Agreements....................................................... 23
Resale Of Wells Fargo Common Stock Issued In The Merger.................. 23
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Stock Exchange Listing.................................................... 24
Accounting Treatment...................................................... 24
THE MERGER AGREEMENT........................................................ 25
Basic Plan Of Reorganization.............................................. 25
Representations And Warranties............................................ 26
Certain Covenants......................................................... 26
Conditions To The Merger.................................................. 29
Termination Of The Merger Agreement....................................... 29
Effect Of Termination..................................................... 29
Waiver And Amendment...................................................... 29
Expenses.................................................................. 29
INFORMATION ABOUT WELLS FARGO............................................... 30
General................................................................... 30
Management And Additional Information..................................... 30
Information On Wells Fargo's Web Site..................................... 30
Competition............................................................... 30
FIRST SECURITY MERGER....................................................... 32
The First Security Merger Transaction..................................... 32
About First Security Corporation.......................................... 32
REGULATION AND SUPERVISION OF WELLS FARGO................................... 33
Introduction.............................................................. 33
Regulatory Agencies....................................................... 33
Bank Holding Company Activities........................................... 34
Dividend Restrictions..................................................... 35
Holding Company Structure................................................. 35
Capital Requirements...................................................... 36
Deposit Insurance Assessments............................................. 37
Fiscal And Monetary Policies.............................................. 38
Future Legislation........................................................ 38
INFORMATION ABOUT 1ST CHOICE................................................ 39
History of the Bank....................................................... 39
Business of the Bank...................................................... 39
Banking Premises.......................................................... 39
Lending Activities........................................................ 40
Investment Activities..................................................... 41
Source of Funds........................................................... 41
Competition............................................................... 42
Employees................................................................. 42
WELLS FARGO CAPITAL STOCK................................................... 43
Wells Fargo Common Stock.................................................. 43
Wells Fargo Preferred Stock............................................... 44
Wells Fargo Rights Plan................................................... 45
COMPARISON OF STOCKHOLDER RIGHTS............................................ 48
Authorized Capital Stock.................................................. 48
Size of Board of Directors................................................ 48
Cumulative Voting......................................................... 49
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Classes of Directors...................................................... 49
Qualifications of Directors............................................... 49
Filling Vacancies on the Board............................................ 49
Removal of Directors...................................................... 50
Nomination of Directors for Election...................................... 50
Anti-Takeover Provisions.................................................. 50
Stockholder Rights Plan................................................... 51
Stockholder Action Without a Meeting...................................... 51
Calling Special Meetings of Stockholders.................................. 52
Submission of Stockholder Proposals....................................... 52
Notice of Stockholder Meetings............................................ 52
Stockholder Vote Required for Mergers..................................... 53
Dividends................................................................. 54
Dissenters' Appraisal Rights.............................................. 55
Stockholder Preemptive Rights............................................. 56
Stockholder Class Voting Rights........................................... 56
Indemnification........................................................... 56
Limitations on Directors' Liability....................................... 58
Amendment of Certificate of Incorporation................................. 58
Amendment of Bylaws....................................................... 59
PRICE RANGE OF COMMON STOCK AND DIVIDENDS................................... 60
Wells Fargo Share Prices And Dividends.................................... 60
1st Choice Share Prices And Dividends..................................... 60
EXPERTS..................................................................... 61
OPINIONS.................................................................... 61
Share Issuance............................................................ 61
Tax Matters............................................................... 61
WHERE YOU CAN FIND MORE INFORMATION......................................... 62
Registration Statement.................................................... 62
Other Wells Fargo SEC Filings............................................. 62
Documents Incorporated By Reference....................................... 62
Documents Available Without Charge........................................ 63
FORWARD-LOOKING STATEMENTS.................................................. 64
APPENDIX A Agreement and Plan of Reorganization
APPENDIX B Fairness Opinion of Alex Sheshunoff & Co. Investment Banking
APPENDIX C Colorado Dissenters' Appraisal Rights Statute
</TABLE>
v
<PAGE>
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger fully, and for a more complete description of the legal terms of the
merger, you should carefully read this document and the other documents to
which this document refers you. See "Where You Can Find More Information" on
page . Each item in this summary includes a page reference to a more complete
description of that item.
The Merger (page )
In the proposed transaction, a Wells Fargo subsidiary will merge with 1st
Choice. 1st Choice will survive the merger as a subsidiary of Wells Fargo.
Wells Fargo will exchange shares of its common stock for all of the outstanding
stock of 1st Choice. After the merger is completed, Wells Fargo will own all of
the outstanding stock of 1st Choice.
The merger agreement is included in this proxy statement-prospectus as
Appendix A. Please read the merger agreement as it is the document that governs
the merger.
The Companies (pages and )
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94163
(800) 411-4932
Wells Fargo & Company is a diversified financial services company whose
subsidiaries and affiliates provide banking, insurance, investments, and
mortgage and consumer finance through stores located across North America. At
March 31, 2000, Wells Fargo had assets of $ billion, th largest among
U.S. bank holding companies.
1st Choice Financial Corp.
5801 West 11th Street
Greeley, Colorado
(970) 356-7700
1st Choice Financial Corp. is a privately-held bank holding company that owns
1st Choice Bank, a Colorado banking corporation with seven locations in
Northern Colorado. At March 31, 2000, 1st Choice had assets of $446 million.
What You Will Receive In The Merger (page )
If the merger is completed, you will receive a fraction of a share of Wells
Fargo common stock for each share of 1st Choice common stock that you own. That
fraction of a share is referred to in this document as the "exchange ratio."
Under a formula specified in paragraph 1(a) of the merger agreement, the
exchange ratio will be determined by dividing (1) the total number of shares of
Wells Fargo common stock to be issued in the merger by (2) the total number of
shares of 1st Choice common stock outstanding immediately before the merger.
. The total number of shares of Wells Fargo common stock to be issued in
the merger will be determined by dividing $63,000,000, subject to
reduction as described below, by a measurement price for Wells Fargo
common stock.
1
<PAGE>
. The measurement price will be the average closing price of Wells Fargo
during the period of 20 consecutive trading days ending on the day
before the special meeting.
The numerator of $63,000,000 will be reduced dollar for dollar by the amount,
if any, the tangible equity of 1st Choice is less than $30,700,000 as of five
days prior to the date the merger is completed. Tangible equity will be
determined under generally accepted accounting principles, subject to the
variations and adjustments specified in the merger agreement.
As of April 17, 2000, there were outstanding 3,267,094 shares of 1st Choice
common stock and options to purchase 220,000 shares of 1st Choice common stock.
If all of the options are exercised, there will be 3,487,094 shares of 1st
Choice common stock outstanding immediately before the merger. Based on this,
and assuming that the tangible equity of 1st Choice as of five days before the
merger is at least $30,700,000, the following measurement prices would result
in the following exchange ratios:
<TABLE>
<CAPTION>
Measurement Price Exchange Ratio
----------------- --------------
<S> <C>
$32.50 0.555896
$35.00 0.516189
$37.50 0.481777
$40.00 0.451665
$42.50 0.425097
</TABLE>
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.
Market Price Of Wells Fargo Stock Will Fluctuate (page )
Wells Fargo common stock is listed on the New York and Chicago Stock
Exchanges under the symbol "WFC." The following table shows the closing prices
of Wells Fargo common stock on February 3, 2000, the day before the proposed
merger was announced, and on May , 2000. The table also shows the equivalent
value as of each of those dates of 1st Choice common stock based on the
possible exchange ratios shown in the table above. There is no established
public market for shares of 1st Choice common stock.
<TABLE>
<CAPTION>
1st Choice Common Stock Equivalent Values
Based on Possible Exchange
Ratios (see table above)
Wells Fargo --------------------------------------------
Closing Price 0.555896 0.516189 0.481777 0.451665 0.425097
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
February 3, 2000.... $38.88 $21.61 $20.07 $18.73 $17.56 $16.53
May , 2000........
</TABLE>
No adjustments to the exchange ratio will be made to reflect fluctuations in
the price of Wells Fargo common stock occurring after the special meeting.
The following table shows the cash dividends paid per share of Wells Fargo
common stock for the quarters indicated. 1st Choice has never paid dividends.
<TABLE>
<CAPTION>
Wells Fargo
Quarter Ended Common Stock
------------- ------------
<S> <C>
June 30, 1999............... $0.20
September 30, 1999.......... 0.20
December 31, 1999........... 0.20
March 31, 2000.............. 0.22
</TABLE>
2
<PAGE>
Merger Generally Tax Free To 1st Choice Shareholders (page )
1st Choice shareholders generally will not recognize gain or loss for U.S.
federal income tax purposes from the exchange of their shares of 1st Choice
common stock for shares of Wells Fargo common stock. 1st Choice shareholders
will be taxed on cash they receive instead of fractional shares.
The tax treatment described above may not apply to every 1st Choice
shareholder. Determining the tax consequences of the merger to you may be
complicated. You should consult your own advisor for a full understanding of
the merger's tax consequences.
1st Choice is not obligated to complete the merger unless it receives an
opinion of counsel that no gain or loss will be recognized by the holders of
1st Choice common stock upon receipt of Wells Fargo common stock except for
cash received instead of fractional shares.
1st Choice's Board Recommends Approval Of The Merger (page )
1st Choice's board of directors believes that the merger is in the best
interests of 1st Choice shareholders and recommends that 1st Choice
shareholders approve the merger. 1st Choice's board believes that the merger
will provide 1st Choice shareholders with the potential for greater stock value
appreciation and greater investment liquidity than if 1st Choice had remained
independent.
1st Choice's Financial Advisor Believes The Merger Is Fair To 1st Choice
Shareholders (page )
Alex Sheshunoff & Co. Investment Banking has given its opinion to 1st
Choice's board of directors that the consideration to be received in the merger
by 1st Choice shareholders is fair from a financial point of view. The opinion
is included in this proxy statement-prospectus as Appendix B.
Additional Merger Benefits To 1st Choice's Management (page )
1st Choice's directors and executive officers have interests in the merger
that are different from yours. These interests include:
. Darrell D. McAllister, chairman of the board and chief executive officer
of 1st Choice, has entered into an employment and non-compete agreement
with Wells Fargo that provides for his employment after the merger with
a subsidiary of Wells Fargo. The agreement also provides for non-compete
payments following the merger.
. Robert Hindraker and Michael K. Sanders have entered into separate non-
compete agreements with Wells Fargo that provide for non-compete
payments following the merger.
. Some of 1st Choice's directors and executive officers have stock options
that will accelerate in connection with the merger. Some of these
individuals will also receive cash payments in connection with their
stock option exercise.
. The merger agreement provides for specified rights to indemnification
and liability insurance in favor of directors and officers of 1st
Choice.
The board of directors of 1st Choice was aware of these additional interests
when it approved the merger agreement.
Dissenters' Appraisal Rights Available (page )
1st Choice shareholders who dissent from the merger are entitled to receive
the fair value in cash of their shares of 1st Choice common stock. To exercise
this right, you must follow the procedures outlined in
3
<PAGE>
Appendix C, including notifying 1st Choice prior to the merger of your
intention to exercise your dissenters' appraisal rights. You must also not vote
for the merger. If you sign and return your proxy without voting instructions,
and do not revoke the proxy, your proxy will be voted for the merger and you
will lose your dissenters' appraisal rights. You will also lose your
dissenters' appraisal rights if you fail to comply with the other required
procedures.
Surrender Of 1st Choice Shares (page )
To receive certificates for your shares of Wells Fargo common stock, you will
need to surrender your 1st Choice share certificates. After the merger is
completed, Wells Fargo's stock transfer agent will send you written
instructions for exchanging your stock certificates. Please do not send in your
certificates until you receive these instructions.
1st Choice Special Meeting (page )
1st Choice will hold a special meeting of shareholders at 10:00 a.m.,
Greeley, Colorado time, on Friday, June 9, 2000, at the 1st Choice Bank
Boardroom, 5801 West 11th Street, Greeley, Colorado. The purposes of the
meeting are to:
1. Vote on the merger agreement.
2. Act on any other matters that may properly come before the meeting.
Record Date; Vote Required To Approve Merger (page )
The record date for the special meeting is April 30, 2000. You can vote at
the meeting if you owned 1st Choice common stock at the close of business on
that date. On the record date, there were 3,267,094 shares of 1st Choice common
stock outstanding and entitled to vote. You can cast one vote for each share of
1st Choice common stock that you owned on the record date.
Approval of the merger agreement requires the affirmative vote of a majority
of the outstanding shares of 1st Choice common stock entitled to vote at the
special meeting. Not voting will have the same effect as voting against the
merger.
Agreements To Vote For The Merger (page )
At the same time that the merger agreement was signed, all but one of 1st
Choice's directors entered into individual support agreements with Wells Fargo.
Under the support agreements, these individuals have agreed, among other
things, to vote in favor of the merger all shares of 1st Choice common stock
beneficially owned by them at the record date for the meeting.
At the record date for the meeting, the individuals who signed support
agreements beneficially owned a total of 792,560 shares of 1st Choice common
stock, constituting approximately 24.3% of the shares of 1st Choice common
stock entitled to vote at the meeting.
Merger Requires Regulatory Approvals (page )
The Board of Governors of the Federal Reserve System and the Colorado
Division of Banking must approve the merger before it can be completed. Wells
Fargo has filed applications with the Federal Reserve Board and the Colorado
Division of Banking requesting approval of the merger. As of the date of this
proxy statement-prospectus, neither the Federal Reserve Board nor the Colorado
Division of Banking had acted on Wells Fargo's application. Although Wells
Fargo expects that the Federal Reserve Board and the Colorado
4
<PAGE>
Division of Banking will approve the merger, it cannot be certain when or if,
or on what terms and conditions, the required approvals will be given.
Other Conditions To Completing The Merger (page )
In addition to the receipt of regulatory approvals, there are a number of
other conditions that must be met before the merger can be completed. These
conditions include:
. approval of the merger agreement by 1st Choice shareholders;
. receipt by 1st Choice of an opinion of counsel concerning the tax
consequences of the merger;
. authorization for listing on the New York and Chicago Stock Exchanges of
the shares of Wells Fargo common stock to be issued in the merger to 1st
Choice shareholders;
. absence of any court or governmental authority order prohibiting the
merger;
. material compliance by each party with the terms and provisions of the
merger agreement; and
. the tangible equity of 1st Choice, as of five days before the merger and
as determined under the merger agreement, must be at least $30,700,000.
Wells Fargo or 1st Choice may waive a condition it is entitled to assert so
long as the law does not require the condition to be met.
Termination Of The Merger Agreement (page )
Wells Fargo and 1st Choice can agree to terminate the merger agreement at any
time without completing the merger. Also, either company can terminate the
merger agreement without the consent of the other under the following
circumstances:
. a court or other governmental authority prohibits the merger; or
. the merger is not completed by July 31, 2000, unless the failure to
complete the merger on or before that date is due to the failure of the
party seeking to terminate to perform or observe in all material
respects the covenants and agreements to be performed or observed by the
party.
Your Rights Will Differ As A Wells Fargo Stockholder (page )
Your rights as a 1st Choice shareholder are currently governed by Colorado
law and 1st Choice's articles of incorporation and bylaws. Upon completion of
the merger, you will become a Wells Fargo stockholder, and your rights will be
governed by Delaware law and Wells Fargo's restated certificate of
incorporation and bylaws.
Wells Fargo Expects To Use Purchase Accounting (page )
Wells Fargo expects to account for the merger under the purchase method of
accounting. Wells Fargo will record, at fair value, the acquired assets and
assumed liabilities of 1st Choice. To the extent the total purchase price
exceeds the fair value of the assets acquired and liabilities assumed, Wells
Fargo will record goodwill.
Wells Fargo Is Heavily Regulated (page )
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 certain states
5
<PAGE>
and pay dividends on its stock. It may also require Wells Fargo to provide
financial support to one or more of its subsidiary banks, maintain capital
balances in excess of those desired by management and pay higher deposit
premiums as a result of the deterioration in the financial condition of
depository institutions in general.
Financial Modernization Will Increase Competition (page )
Bank holding companies that elect to become financial holding companies may
affiliate with securities firms and insurance companies and engage in other
activities that are financial in nature. "Financial in nature" includes:
. securities underwriting, dealing and market making;
. sponsoring mutual funds and investment companies;
. insurance underwriting and agency;
. merchant banking activities; and
. activities that the Federal Reserve Board has determined to be closely
related to banking.
Securities firms and insurance companies that elect to become financial
holding companies may acquire banks and other financial institutions. This may
significantly change the competitive environment in which Wells Fargo and its
subsidiaries conduct business.
Forward-Looking Statements May Prove Inaccurate (page )
This proxy statement-prospectus, including information incorporated by
reference into this document, may contain forward-looking statements about
Wells Fargo. There are a number of factors that may cause actual conditions,
events or results to differ significantly from those described in the forward-
looking statements. Some of these factors are described or referenced in
"Forward-Looking Statements" on page .
Wells Fargo Selected Financial Data
The following financial information is to aid you in your analysis of the
financial aspects of the merger. The Wells Fargo balance sheet data for 1995
through 1999 is derived from Wells Fargo's audited consolidated balance sheets
as of December 31, 1999, 1998, 1997 and 1996 and its unaudited financial
information for 1995. The Wells Fargo income statement data for 1995 through
1999 is derived from Wells Fargo's audited consolidated statement of income for
each of the years in the five-year period ended December 31, 1999. The Wells
Fargo income statement and balance sheet data as of and for the three months
ended March 31, 2000 and 1999 are derived from Wells Fargo's unaudited
financial statements. The information in the table is only a summary and should
be read with the full financial statements and related notes of Wells Fargo,
incorporated by reference into this document. See "Where You Can Find More
Information." You should not rely on the information for the three months ended
March 31, 2000 as being indicative of the results expected for the entire year.
----------------
6
<PAGE>
Wells Fargo & Company and Subsidiaries
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months
Ended March 31, Years Ended December 31,
---------------- --------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net interest income..... $ 2,266 $ 9,355 $ 8,990 $ 8,648 $ 8,222 $ 5,923
Net income.............. 884 3,747 1,950 2,499 2,228 1,988
Diluted earnings per
share.................. 0.53 2.23 1.17 1.48 1.36 1.62
Cash dividends per
share.................. 0.185 0.785 0.700 0.615 0.525 0.450
Book value per share.... 12.60 13.44 12.35 11.92 11.66 10.27
Total assets............ 201,430 218,102 202,475 185,685 188,633 122,200
Long-term debt.......... 20,363 23,375 19,709 17,335 18,142 16,726
</TABLE>
7
<PAGE>
1ST CHOICE SPECIAL MEETING
The board of directors of 1st Choice is soliciting proxies from its
shareholders for use at a special meeting of 1st Choice shareholders and at any
adjournments of the meeting. This proxy statement-prospectus, together with the
form of proxy, is expected to be mailed to 1st Choice shareholders on or about
May 8, 2000.
Time And Place Of The Meeting
The time and place of the special meeting of 1st Choice shareholders are:
Friday, June 9, 2000
10:00 a.m., Greeley, Colorado time
1st Choice Bank Boardroom
5801 West 11th Street
Greeley, Colorado
Matters To Be Considered At The Meeting
The special meeting of 1st Choice shareholders will be held to:
1. Vote on a proposal to approve the Agreement and Plan of Reorganization,
dated as of February 3, 2000, by and between 1st Choice and Wells Fargo.
The Agreement and Plan of Reorganization is included in this proxy
statement-prospectus as Appendix A and is referred to in this document
as the "merger agreement." The merger agreement provides for the merger
of a wholly-owned subsidiary of Wells Fargo with and into 1st Choice
upon the terms and subject to the conditions set forth in the merger
agreement. As a result of the merger, 1st Choice will become a
subsidiary of Wells Fargo. See "The Merger Agreement--Basic Plan Of
Reorganization."
2. Act on any other matters that may properly come before the meeting.
Record Date
1st Choice's board of directors has established April 30, 2000 as the record
date for the meeting. Only shareholders of record on that date are entitled to
attend and vote at the meeting or at any adjournment of the meeting.
Outstanding Shares
On April 17, 2000, there were 3,267,094 shares of 1st Choice common stock
outstanding and entitled to vote at the meeting. Each outstanding share is
entitled to one vote.
Quorum
A quorum consisting of the holders of a majority of the shares of 1st Choice
common stock outstanding at the record date must be present in person or
represented by proxy for the transaction of business at the special meeting.
Shares of 1st Choice common stock present in person at the meeting that are not
voted, and shares of 1st Choice common stock for which proxies have been
received but that abstain from voting, are counted in determining whether a
quorum is present.
Vote Required
Approval of the merger agreement requires the affirmative vote of a majority
of the shares of 1st Choice common stock outstanding at the record date.
8
<PAGE>
Share Ownership
Directors And Executive Officers Of 1st Choice. At the record date for the
meeting, 1st Choice's directors and executive officers beneficially owned a
total of 1,337,060 shares of 1st Choice common stock, representing
approximately 40.8 % of the shares of 1st Choice common stock entitled to vote
at the special meeting.
Wells Fargo. At the record date, Wells Fargo and its subsidiaries
beneficially owned no shares of 1st Choice common stock.
Agreements To Vote For The Merger
All but one of 1st Choice's directors has agreed to vote in favor of the
merger all shares of 1st Choice common stock beneficially owned by the director
at the record date for the meeting. At the record date, the individuals who
executed support agreements beneficially owned a total of 792,560 shares of 1st
Choice common stock, constituting approximately 24.3% of the shares of 1st
Choice common stock entitled to vote at the meeting. See "The Merger--Support
Agreements."
Voting And Revocation Of Proxies
All shares of 1st Choice common stock represented at the special meeting by a
properly executed proxy will be voted in accordance with the instructions
indicated on the proxy, unless the proxy is revoked before a vote is taken. If
you sign and return a proxy without voting instructions, and do not revoke the
proxy, the proxy will be voted "FOR" the proposal to approve merger agreement.
You may revoke your proxy at any time before it is voted by (a) filing either
an instrument revoking the proxy or a duly executed proxy, in either case
bearing a later date, with the corporate secretary of 1st Choice before or at
the special meeting or (b) voting the shares subject to the proxy in person at
the special meeting. Attendance at the special meeting will not by itself
result in your proxy being revoked.
The proposal to approve the merger must be approved by the holders of a
majority of the shares of 1st Choice common stock outstanding at the record
date. Because approval of the merger requires the affirmative vote of a
specified percentage of outstanding shares, not voting on the proposal, or
failing to instruct your broker how to vote shares held for you by the broker,
will have the same effect as voting against the proposal.
Solicitation Of Proxies
In addition to solicitation by mail, directors, officers and employees of 1st
Choice and its subsidiaries may solicit proxies from 1st Choice shareholders,
either personally or by telephone or other form of communication. None of the
foregoing persons who solicit proxies will be specifically compensated for such
services. 1st Choice does not anticipate that anyone will be specifically
engaged to solicit proxies or that special compensation will be paid for that
purpose, but 1st Choice reserves the right to do so should it conclude that
such efforts are necessary or advisable.
Nominees, fiduciaries and other custodians will be requested to forward
soliciting materials to beneficial owners and will be reimbursed for their
reasonable expenses incurred in sending proxy material to beneficial owners.
1st Choice will bear its own expenses in connection with any solicitation of
proxies for the special meeting.
Postponement Or Adjournment Of The MeetingOther Matters Considered At The
Meeting
If an insufficient number of votes for the merger is received before the
scheduled meeting date, Wells Fargo and 1st Choice may decide to postpone or
adjourn the special meeting. If this happens, proxies that have
9
<PAGE>
been received that either have been voted for the merger or contain no
instructions will be voted for adjournment.
Other Matters Considered At The Meeting
1st Choice's board of directors is not aware of any business to be brought
before the special meeting other than the proposal to approve the merger. If
other matters are properly brought before the special meeting or any
adjournments or postponements of the meeting, the persons appointed as proxies
will have authority to vote the shares represented by properly executed proxies
in accordance with their discretion and judgment as to the best interests of
1st Choice.
10
<PAGE>
THE MERGER
Effect Of The Merger
As a result of the merger:
. Wells Fargo will exchange shares of its common stock for shares of 1st
Choice common stock.
. Wells Fargo will acquire all of the outstanding common stock of 1st
Choice, resulting in 1st Choice becoming a wholly-owned subsidiary of
Wells Fargo.
. 1st Choice shareholders will become Wells Fargo stockholders, with their
rights governed by Delaware law and Wells Fargo's restated certificate
of incorporation and bylaws. See "Comparison Of Stockholder Rights."
Background Of And Reasons For The Merger
Background of the Merger
The board of directors of 1st Choice has considered enhancement of the value
and liquidity of 1st Choice as among its most important obligations to 1st
Choice's shareholders. Accordingly, management and the board have continually
sought to identify and evaluate various possible ways to improve 1st Choice's
performance and thereby maximize returns to shareholders. At the same time, the
board has also acknowledged the inherent difficulty of enhancing the liquidity
of 1st Choice's stock in light of the small number of shareholders and the
absence of a ready market.
Beginning in June of 1998 the board began exploring possibilities for
increasing shareholder value and shareholder liquidity. The investment banking
firm of Alex Sheshunoff & Co. Investment Banking was hired to explore possible
alternatives. When the stock market had a significant correction in August of
1998, the board decided not to continue any acquisition or merger. In June of
1999, Wells Fargo (then known as Norwest Corporation) had approached 1st Choice
with an interest in acquiring 1st Choice in order to allow for a strong
combined presence in 1st Choice's market. Additionally, the Financial
Accounting Standards Board issued proposals that would discontinue the use of
pooling of interests as a form of accounting for mergers and acquisitions. The
board had major concerns as to what effect this would have on the values of
independent banks and bank holding companies and specifically 1st Choice.
The board once again decided to hire Alex Sheshunoff to evaluate strategic
alternatives for maximizing shareholder value and to render advice in
connection with a possible sale or merger. Alex Sheshunoff's first order of
business was to update its general knowledge of 1st Choice by thoroughly
familiarizing itself with 1st Choice's structure, lines of business, products
and customer base. Believing that a business combination with another banking
organization would be the optimal means of maximizing shareholder value, Alex
Sheshunoff next undertook a review and analysis of 1st Choice's local and
regional banking markets in order to identify potential merger candidates.
Based upon its review and analysis, Alex Sheshunoff identified a number of
banking organizations (including Wells Fargo) that it considered to be
potential candidates for combination with 1st Choice, based upon, among other
factors, each organization's financial condition and capacity, stock price and
trading volume and perceived or known interest in expanding through mergers or
acquisitions. These institutions had total assets ranging from approximately $2
billion to approximately $207 billion and included both in-state and out of
state organizations. Alex Sheshunoff then contacted these institutions to gauge
their interest in acquiring or combining with 1st Choice. In some cases, Alex
Sheshunoff specifically identified 1st Choice as the organization that it was
representing. In other cases, Alex Sheshunoff determined it to be in 1st
Choice's best interest to describe it only generically (e.g., by asset size and
location) when approaching a potential merger partner.
Several institutions (including Wells Fargo) that had responded with
preliminary indications of interest in acquiring or merging with 1st Choice
executed confidentiality agreements and initiated substantive analysis and
11
<PAGE>
work in order to enter into a possible transaction with 1st Choice. Discussions
with these organizations (other than Wells Fargo) were discontinued when it
became clear that they were either unable or unwilling to meet the threshold of
financial requirements for a business combination that 1st Choice's management
and board had established in consultation with Alex Sheshunoff. Alex Sheshunoff
also had conversations with two other institutions. These institutions decided
not to pursue a possible transaction with 1st Choice because it would be
inconsistent with their strategic plans. With the exception of Wells Fargo, the
larger institutions that were approached by Alex Sheshunoff on 1st Choice's
behalf (to which Alex Sheshunoff described 1st Choice only generically)
generally indicated a lack of interest in merging with or acquiring an
institution of 1st Choice's size.
Alex Sheshunoff had identified Wells Fargo as a potentially suitable merger
partner for 1st Choice because Wells Fargo satisfied the initial screening
criteria established by 1st Choice and Alex Sheshunoff for potential merger
candidates and because of Wells Fargo's perceived interest in making strategic
acquisitions of community banking organizations in Colorado. In addition, 1st
Choice and Alex Sheshunoff believed that combining 1st Choice with an
institution such as Wells Fargo, with its diversified product line, multiple
delivery channels and ready access to the capital markets would greatly enhance
1st Choice's competitive position and prospects. Encouraged by Wells Fargo's
response to its initial inquiry, Alex Sheshunoff recommended to the 1st Choice
board that it engage in further discussions with Wells Fargo about Wells
Fargo's interest in acquiring 1st Choice. Further discussions continued between
1st Choice and its advisors and Wells Fargo, including due diligence and the
negotiation of the merger agreement.
In evaluating whether to affiliate with Wells Fargo, 1st Choice's board, in
consultation with 1st Choice's management and outside advisors, considered the
following:
. Alternatives for improving performance and maximizing shareholder value
without entering into a business combination;
. The value of Wells Fargo common stock;
. The appreciation in the price of Wells Fargo common stock in recent
years and Wells Fargo's dividend history;
. The fact that Wells Fargo stock is widely traded, thereby representing a
substantially more liquid investment than 1st Choice common stock;
. Wells Fargo's financial condition;
. The business strategies of 1st Choice and Wells Fargo, and Wells Fargo's
prospects for success in the communities served by 1st Choice; and
. The terms and conditions of the proposed merger agreement.
Following arm's-length negotiations between representatives of 1st Choice and
Wells Fargo, the parties entered into the merger agreement on February 3, 2000.
The aggregate price to be paid to holders of 1st Choice common stock resulted
from negotiations which considered, among other things, the historical earnings
and dividends of Wells Fargo and 1st Choice; the potential growth in 1st
Choice's market and earnings, both as an independent entity and as part of a
larger organization such as Wells Fargo; 1st Choice's and Wells Fargo's asset
quality and credit standards; and the effect of the merger on the shareholders,
customers and employees of 1st Choice.
1st Choice's Board of Directors' Reasons for the Merger
The 1st Choice board believes that the merger agreement and the merger are in
the best interests of 1st Choice and its shareholders. Accordingly, 1st
Choice's board of directors has approved and adopted the merger agreement and
recommends approval of the merger by 1st Choice shareholders. In reaching its
decision, the board, as noted above, consulted with 1st Choice's management,
legal counsel and financial advisor. The
12
<PAGE>
board also considered a number of factors (to which relative weights were not
assigned) including, in addition to those mentioned above, the following:
. 1st Choice's business, results of operations, financial conditions and
future prospects;
. 1st Choice's lack of liquidity in its stock and the growing number of
shareholders seeking a ready market for their stock;
. Wells Fargo's business, results of operations, financial condition and
overall prospects, which the board believes would complement and greatly
enhance and strengthen the 1st Choice franchise and help ensure its
long-term growth and success;
. The impact of the merger on 1st Choice's customers, shareholders and
employees, and on the communities served by 1st Choice;
. A comparison of key financial measures of recent comparable transactions
(including, but not limited to, the price-to-book value and the price-
to-earnings ratios) to those implied by Wells Fargo's proposal; and
. Alex Sheshunoff's presentation to the board and its opinion, as 1st
Choice's financial advisor, that the merger consideration to be paid by
Wells Fargo was fair from a financial point of view to the shareholders
of 1st Choice.
After giving careful consideration to all of the above factors, the 1st
Choice board concluded that the merger would be in the best interests of 1st
Choice shareholders, customers and employees. Accordingly, for the reasons set
forth above, 1st Choice's board of directors recommends that 1st Choice
shareholders approve the merger agreement and the merger.
Opinion Of 1st Choice's Financial Advisor
1st Choice retained Alex Sheshunoff to provide its opinion of the fairness,
from a financial viewpoint, of the merger consideration to be received by the
shareholders of 1st Choice in connection with the merger with Wells Fargo. As
part of its investment banking business, Alex Sheshunoff is regularly engaged
in the valuation of securities in connection with mergers and acquisitions and
valuations for estate, corporate and other purposes. The board of directors of
1st Choice retained Alex Sheshunoff based upon its experience as a financial
advisor in mergers and acquisitions of financial institutions and its knowledge
of financial institutions.
On February 3, 2000, Alex Sheshunoff rendered its opinion that, as of such
date, the merger consideration was fair, from a financial point of view, to the
shareholders of 1st Choice. Alex Sheshunoff rendered its updated fairness
opinion as of the date of this proxy statement-prospectus. The full text of the
fairness opinion, which sets forth, among other things, assumptions made,
procedures followed, matters considered, and limitations on the review
undertaken, is attached as Appendix B to this proxy statement-prospectus. The
shareholders of 1st Choice are urged to read Alex Sheshunoff's fairness opinion
carefully and in its entirety. The fairness opinion is addressed to the board
of directors of 1st Choice, and does not constitute a recommendation to any
shareholder of 1st Choice as to how such shareholder should vote at the 1st
Choice special meeting.
In connection with the fairness opinion, Alex Sheshunoff:
. reviewed the merger agreement;
. reviewed certain publicly available regulatory information concerning
1st Choice;
. reviewed certain internal financial statements and other financial and
operating data of 1st Choice provided to Alex Sheshunoff by the
management of 1st Choice;
. discussed the past and current operations, financial condition, and
future prospects of 1st Choice with its executive management;
13
<PAGE>
. compared 1st Choice from a financial point of view with certain other
banking companies that Alex Sheshunoff deemed to be relevant;
. reviewed the financial terms, to the extent publicly available, of
certain comparable merger transactions in the Southwestern and Western
Regions of the U.S. (as defined by SNL Securities, LP);
. reviewed the financial terms, to the extent publicly available, of
certain comparable merger transactions in the U.S.; and
. performed such other analyses and reviews as Alex Sheshunoff deemed
appropriate.
In connection with its review, Alex Sheshunoff relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
made publicly available, and Alex Sheshunoff did not assume any responsibility
for independent verification of such information. Alex Sheshunoff assumed that
internal confidential financial projections provided by 1st Choice were
reasonably prepared reflecting the best currently available estimates and
judgments of the future financial performance of 1st Choice and did not
independently verify the validity of such assumptions. Alex Sheshunoff did not
make any independent evaluation or appraisal of the assets or liabilities of
1st Choice nor was Alex Sheshunoff furnished with any such appraisals. Alex
Sheshunoff did not examine any individual loan files of 1st Choice. Alex
Sheshunoff is not an expert in the evaluation of loan portfolios for the
purposes of assessing the adequacy of the allowance for losses with respect
thereto and has assumed that such allowance is, in the aggregate, adequate to
cover such losses.
With respect to Wells Fargo, Alex Sheshunoff did not conduct any independent
evaluation or appraisal of the assets, liabilities or business prospects of
Wells Fargo, was not furnished with any evaluations or appraisals, and did not
review any individual credit files of Wells Fargo.
The fairness opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to Alex
Sheshunoff, as of the date of this proxy statement-prospectus.
In rendering the fairness opinion, Alex Sheshunoff performed a variety of
financial analyses. The preparation of an opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances.
Consequently, the fairness opinion is not readily susceptible to partial
analysis or summary description. Moreover, the evaluation of fairness, from a
financial point of view, of the merger consideration is to some extent
subjective, based on the experience and judgment of Alex Sheshunoff, and not
merely the result of mathematical analysis of financial data. Accordingly,
notwithstanding the separate factors summarized below, Alex Sheshunoff believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and of the factors considered by it, without considering all
analyses and factors, could create an incomplete view of the evaluation process
underlying its opinion. The ranges of valuations resulting from any particular
analysis described below should not be taken to be Alex Sheshunoff's view of
the actual value of 1st Choice.
In performing its analyses, Alex Sheshunoff made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of 1st Choice. The analyses
performed by Alex Sheshunoff are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than
suggested by such analyses, nor are they appraisals. In addition, Alex
Sheshunoff's analyses should not be viewed as determinative of the opinion of
the board of directors or the management of 1st Choice with respect to the
value of 1st Choice.
The following is a summary of the analyses performed by Alex Sheshunoff in
connection with its opinion updated as of the date of this proxy statement-
prospectus. The following discussion contains financial information concerning
1st Choice as of December 31, 1999.
14
<PAGE>
Analysis of Selected Transactions
Alex Sheshunoff performed an analysis of premiums paid in selected pending or
recently completed acquisitions of banking organizations in the Southwestern
and Western Regions of the U.S. (as defined by SNL Securities, LP) and the
premiums paid in selected acquisitions of banking organizations in the U.S.
with comparable characteristics to the merger. Two sets of comparable
transactions were analyzed to ensure a thorough comparison.
The first set of comparable transactions consisted of a group of comparable
transactions in the Southwest and Western Regions of the U.S. for which pricing
data were available. These comparable transactions consisted of twelve mergers
and acquisitions of banks located in these regions with assets between $250
million and $500 million which were announced or completed between January 1,
1999 and as of the date of this proxy statement-prospectus. Nine of these
transactions have closed as of the date of this proxy statement-prospectus. The
analysis yielded multiples of the purchase price in these transactions at
completion relative to:
. Tangible book value ranging from 1.80 times to 3.66 times with an
average of 2.83 times and a median of 2.85 times (compared with the
multiples implied in the merger of 2.43 times December 31, 1999 tangible
book value for 1st Choice);
. Last twelve months earnings ranging from 9.2 times to 24.0 times with an
average of 18.0 times and a median of 19.4 times (compared with the
multiples implied in the merger of 18.2 times last twelve months
earnings as of December 31, 1999 for 1st Choice);
. Total assets ranging between 16.9% and 33.8% with an average of 23.7%
and a median of 21.4% (compared with the multiples implied in the merger
of 15.0% of December 31, 1999 total assets for 1st Choice); and
. Total deposits ranging from 19.5% to 38.2% with an average of 26.9% and
a median of 23.5% (compared with the multiples implied in the merger of
21.2% of deposits as of December 31, 1999 for 1st Choice).
The second set of comparable transactions consisted of a group of comparable
stock transactions based upon an asset size similar to 1st Choice and
geographical market area of the U.S. for which pricing data were available.
These comparable transactions specifically consisted of nine mergers and
acquisitions of banks with total assets between $250 million and $500 million
that were accounted for as a purchase. Eight of these transactions were
completed as of the date of this proxy statement-prospectus. The analysis
yielded multiples of the purchase price in these transactions at completion
relative to:
. Tangible book value ranging from 1.80 times to 3.26 times with an
average of 2.55 times and a median of 2.60 times (compared with the
multiples implied in the merger of 2.43 times December 31, 1999 tangible
book value for 1st Choice);
. Last twelve months earnings ranging from 10.7 times to 24.5 times with
an average of 18.3 times and a median of 19.2 times (compared with the
multiples implied in the merger of 18.2 times last twelve months
earnings as of December 31, 1999 for 1st Choice);
. Total assets ranging between 18.1% and 33.8% with an average of 22.9%
and a median of 19.5% (compared with the multiples implied in the merger
of 15.0% of December 31, 1999 total assets for 1st Choice); and
. Total deposits ranging from 21.1% to 38.2% with an average of 26.9% and
a median of 25.1% (compared with the multiples implied in the merger of
21.2% of deposits as of December 31, 1999 for 1st Choice).
15
<PAGE>
Discounted Cash Flow Analysis
Using discounted cash flow analysis, Alex Sheshunoff estimated the present
value of the future after-tax cash flow stream that 1st Choice could produce
through the year 2004, under various circumstances, assuming that each
performed in accordance with the earnings/return projections management
provided for the bank.
Alex Sheshunoff estimated the terminal value for 1st Choice at the end of
2004 by capitalizing the final period projected earnings by the quotient of (i)
the assumed annual growth rate of the earnings of 1st Choice plus one and (ii)
the difference between a range of required rates of return and the assumed
annual growth rate of earnings in (i) above. This produced a range of terminal
values per share of $18.00 to $21.00. Alex Sheshunoff then discounted the
annual cash flow streams (defined as all earnings in excess of that required to
maintain a tangible equity to asset ratio of 7% based on the operating history
of 1st Choice) and the terminal values using discount rates ranging from 14% to
16%. The discount range was chosen to reflect different assumptions regarding
the required rates of return of 1st Choice and the inherent risk surrounding
the underlying projections. This discounted cash flow analysis indicated a
range of values per share of $11.00 to $13.00, compared to the value per share
of the merger consideration to 1st Choice shareholders of $19.28 or $18.06 on a
fully diluted basis.
No company or transaction used in the comparable company and comparable
transaction analyses is identical to 1st Choice or the merger. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of 1st Choice 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.
Pursuant to an engagement letter dated September 13, 1999 between 1st Choice
and Alex Sheshunoff, 1st Choice agreed to pay Alex Sheshunoff a fee based on
the following schedule:
<TABLE>
<CAPTION>
Consideration Amount Transaction Fee
-------------------- ----------------------------
<S> <C>
Less than or equal to $66 million............. 0.75% of total consideration
Equal to or greater than $67 million, but less
than or equal to $72 million................. 0.85% of total consideration
Greater than $73 million...................... 0.95% of total consideration
</TABLE>
1st Choice also agreed to indemnify and hold harmless Alex Sheshunoff and its
officers and employees against certain liabilities in connection with its
services under the engagement letter, except for liabilities resulting from the
negligence, violation of law or regulation or bad faith of Alex Sheshunoff or
any matter for which Alex Sheshunoff may have strict liability.
The fairness opinion is directed only to the question of whether the merger
consideration is fair and equitable from a financial perspective and does not
constitute a recommendation to any 1st Choice shareholder to vote in favor of
the merger. No limitations were imposed on Alex Sheshunoff regarding the scope
of its investigation or otherwise by 1st Choice.
Based on the results of the various analyses described above, Alex Sheshunoff
concluded that the merger consideration to be received by 1st Choice
shareholders pursuant to the merger is fair, from a financial point of view, to
the shareholders of 1st Choice.
Additional Interests Of 1st Choice Management
1st Choice's directors and executive officers have interests in the merger
that are in addition to their interests as shareholders of 1st Choice
generally. 1st Choice's board of directors was aware of these interests and
considered them, among other things, when it approved the merger agreement.
16
<PAGE>
Employment And Non-Compete Agreements
Mr. McAllister. In connection with the merger agreement, Darrell D.
McAllister, chairman of the board and chief executive officer of 1st
Choice, entered into an employment and non-compete agreement with Wells
Fargo. Under the employment provisions of his agreement, for a term of one
year beginning on the effective date of the merger, Mr. McAllister will
become a regular employee of a subsidiary of Wells Fargo performing the
duties of president or others as assigned by Wells Fargo. For his services,
Mr. McAllister will receive an annual salary of $100,000. Mr. McAllister
will also be eligible for all benefits available to other similarly
situated regular employees of Wells Fargo except for the Wells Fargo &
Company Salary Continuation Pay Plan.
Under the non-compete provisions of his agreement, for a period beginning
on the date Mr. McAllister's employment terminates and continuing until the
later of (a) 12 months after termination of employment or (b) March 3,
2003, Mr. McAllister has agreed that he will not, by himself or through
associates, agents, employees or others, directly or indirectly, do any of
the following within Weld and Larimer Counties, Colorado:
. engage in the commercial banking or thrift business;
. aid or assist anyone in engaging in or entering into the commercial
banking or thrift business;
. attempt to divert any business of 1st Choice, 1st Choice Bank or Wells
Fargo or any business that 1st Choice, 1st Choice Bank or Wells Fargo
has a reasonable expectation of obtaining by soliciting or contacting
for the purpose of establishing a business relationship any customers
and/or potential customers of 1st Choice, 1st Choice Bank or Wells
Fargo;
. communicate to or use for the benefit of any person, any of the
confidential information, trade or business secrets used by 1st Choice,
1st Choice Bank or Wells Fargo nor disclose the proprietary methods of
conducting the business of 1st Choice, 1st Choice Bank or Wells Fargo;
. establish, open, reestablish or reopen any business substantially the
same as all or any part of the business of 1st Choice, 1st Choice Bank
or Wells Fargo;
. in any manner become interested directly or indirectly, as employee,
owner, partner, stockholder, director, officer or otherwise, in a
commercial banking or thrift business, provided, however, that for
purposes of this provision, the term "stockholder" does not include any
investment in an organization where Mr. McAllister owns less than 5% of
the stock issued and outstanding;
. solicit, directly or indirectly, an employee of 1st Choice, 1st Choice
Bank or Wells Fargo for the purpose of encouraging that employee to
leave said employment.
As consideration for the foregoing restrictions, Mr. McAllister will
receive four annual payments of $220,000 each.
By entering into the employment and non-compete agreement with Wells
Fargo, Mr. McAllister relinquished all rights under his employment
agreement dated March 8, 1999 with 1st Choice and 1st Choice Bank.
Messrs. Hindraker and Sanders. Also in connection with the merger
agreement, Messrs. Robert N. Hindraker and Michael K. Sanders, president of
1st Choice Bank's Weld County market and president of 1st Choice Bank's
Larimer County market, respectively, entered into non-compete agreements
with Wells Fargo. Under their respective non-compete agreements, for a term
beginning on the effective date of the merger and ending on June 30, 2002,
Messrs. Hindraker and Sanders will be subject to non-compete restrictions
substantially identical to those agreed to by Mr. McAllister, as described
above. As consideration for observing these restrictions, Messrs. Hindraker
and Sanders will each receive one lump sum payment of $242,179 and
$273,370, respectively.
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Under their respective agreements, Messrs. Hindraker and Sanders has each
agreed that, if he and Wells Fargo enter into an employment relationship
during the term of his non-compete restrictions, he will be an "at-will"
employee. If Mr. Hindraker or Sanders, as the case may be, enters into an
employment relationship during this period with Wells Fargo and, on or
before January 1, 2002, Wells Fargo terminates his employment as a result
of a position elimination or Mr. Hindraker or Mr. Sanders, as the case may
be, terminates his employment because Wells Fargo reduces his base salary,
Wells Fargo will pay Mr. Hindraker or Mr. Sanders, as the case may be, a
lump sum separation payment equal to two months of his salary in effect at
the time of termination. Mr. Hindraker or Mr. Sanders, as the case may be,
will not be eligible for a separation payment if (a) he terminates his
employment with Wells Fargo for a reason other than a Wells Fargo-initiated
reduction in his base salary, or (b) Wells Fargo changes his job
responsibilities and/or reporting structure, demotes him to a lower
position due to declining performance, or terminates him for a reason other
than position elimination. Neither Mr. Hindraker nor Mr. Sanders will be
eligible for participation in the Wells Fargo & Company Salary Continuation
Pay Plan through January 1, 2002.
By entering into the non-compete agreements with Wells Fargo, Messrs.
Hindraker and Sanders relinquished all rights under their respective
existing employment agreements with 1st Choice and 1st Choice Bank.
Accelerated Vesting of Stock Options
In connection with the merger, currently non-vested options to purchase
194,000 shares of 1st Choice common stock will vest and become exercisable
prior to the effective date of the merger. The options would have otherwise
vested periodically until January 1, 2009. The options will expire if not
exercised as of immediately before the merger. The following table sets forth
the names of the directors and executive officers of 1st Choice and/or 1st
Choice Bank who have options that will accelerate in connection with the
merger, together with the number of shares of 1st Choice common stock subject
to the accelerated options and the exercise prices of the accelerated options.
<TABLE>
<CAPTION>
Name Position Option Shares Exercise Price
---- -------- ------------- --------------
<S> <C> <C> <C>
Darrell McAllister......... Director and Officer 50,000 $15.00
Robert Hinderacker......... Director and Officer 20,000 2.56
3,000 15.00
6,000 10.00
Mike Sanders............... Director and Officer 20,000 9.00
3,000 15.00
Carroll Miller............. Director 20,000 2.56
W. West Foster............. Director 20,000 2.56
Sue A. Foster.............. Director 20,000 2.56
John Zurbrigen............. Director 20,000 2.56
Marsha Sword............... Officer 4,000 10.00
2,000 15.00
Patricia Gates............. Officer 4,000 10.00
2,000 15.00
</TABLE>
Cash Payments in Connection With Stock Option Exercises
The 1st Choice board issued options to key individuals within the
organization under a stock option plan approved by the shareholders. The intent
of the board was to issue "incentive stock options" to employees to reward them
for their performance and encourage them to align their rewards and interests
with that of the shareholders. In administrating the program the options were
inadvertently issued as "non-qualified options." The tax treatment of a non-
qualified option is substantially different from an incentive option. The
holder of an incentive option generally does not recognize income at the time
of exercise but rather recognizes income at the
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<PAGE>
time he or she sells the shares issued on exercise. By contrast, the holder of
a non-qualified option generally recognizes income at the time he or she
exercises the option. The company that issued the non-qualified stock option is
entitled to take a deduction for tax purposes based on the amount of income
recognized by the holder.
For example, in 1999, Mr. McAllister exercised non-qualified options for a
total of 72,000 shares of 1st Choice common stock. As a result of this
exercise, Mr. McAllister recognized ordinary income in the amount of $895,000
and 1st Choice realized a reduction in its tax liability of $331,335.
To correct this situation and make the affected individuals "whole," the 1st
Choice board approved the payment of compensation to the affected individuals
in connection with their exercise of the options. The total of compensation
paid or accrued is $893,450. The compensation is conditional upon the stock
options being exercised. Following are the amounts approved for the executive
officers:
<TABLE>
<S> <C>
Mr. Darrell McAllister.......... $480,000
Mr. Robert Hinderacker.......... $202,900
Mr. Mike Sanders................ $104,800
Ms. Marsha Sword................ $ 21,000
Ms. Patty Gates................. $ 21,000
Others (not executive
officers)...................... $ 63,750
--------
Total......................... $893,450
========
</TABLE>
Indemnification and Insurance
Wells Fargo has agreed to ensure that all rights to indemnification and all
limitations of liability existing in 1st Choice's articles of incorporation or
bylaws in favor of the present and former directors and officers of 1st Choice
with respect to claims arising from (a) facts or events that occurred before
the effective time of the merger or (b) the merger agreement, or any of the
transactions contemplated thereby, will survive the merger and continue in full
force and effect.
Subject to certain exceptions and limitations, Wells Fargo has agreed to use
its best efforts to cause to be maintained for a period of three years
following the merger the current policies of directors' and officers' liability
insurance maintained by 1st Choice with respect to claims arising from facts or
events that occurred before the merger becomes effective.
Dissenters' Rights
Shareholders of 1st Choice are entitled to assert dissenters' appraisal
rights under Article 113 of the Colorado Business Corporation Act in connection
with the merger. A copy of Article 113 is included in this proxy statement-
prospectus as Appendix C. The following discussion of dissenters' rights is
qualified in its entirety by reference to Appendix C.
Notice of Intent to Demand Payment. Any shareholder who wishes to assert
dissenters' appraisal rights must do both of the following:
1. Cause 1st Choice to receive, before the vote on the merger is taken at
the special meeting, written notice of the shareholder's intention to
demand payment for the shareholder's shares if the merger is
effectuated; and
2. Not vote the shares in favor of the merger.
Any shareholder who does not satisfy the requirements of items 1 and 2 above
is not entitled to demand payment for the shareholder's shares under Article
113.
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<PAGE>
Demanding Payment for Shares. If the merger is approved, 1st Choice will give
a written dissenters' notice to all shareholders who have satisfied the
requirements of items 1 and 2 above and are entitled to demand payment for
their shares. The notice will be given no later than 10 days after the
effective date of the merger and will describe the procedures dissenting
shareholders must follow to demand payment for their shares. The notice will
also inform dissenting shareholders of any restrictions on the transfer of
their shares after the payment demand is received by 1st Choice. Subject to
very limited exceptions, the demand for payment and the deposit of share
certificates are irrevocable.
Shareholders who demand payment for their shares retain all rights of a
shareholder, except the right to transfer the shares, until the effective date
of the merger. After the effective date of the merger, these shareholders have
only the right to receive payment for their shares.
Shareholders who do not demand payment and do not deposit their share
certificates in the manner required, and by the date or dates set forth in the
dissenters' notice given by 1st Choice, are not entitled to payment for their
shares under Article 113.
Payment for Shares. Subject to certain limited exceptions, upon the later of
the effective date of the merger or the receipt of a payment demand, 1st Choice
will pay to the dissenting shareholder the amount 1st Choice estimates to be
the fair value of the dissenting shareholder's shares, plus accrued interest.
The payment will be accompanied by, among other things, financial statements of
1st Choice, a statement of 1st Choice's estimate of the fair value of the
shares, and an explanation of how interest was calculated.
Procedure if Dissatisfied With Payment Amount. If a dissenting shareholder
believes that the amount paid or offered by 1st Choice is less than the fair
value of the shares or that interest due was incorrectly calculated, the
shareholder may give written notice to 1st Choice of the shareholder's estimate
of the fair value of the shares and the amount of interest due and may demand
payment of such estimate, less any payment made by 1st Choice. A dissenting
shareholder waives this right unless the shareholder causes 1st Choice to
receive the notice within 30 days after 1st Choice pays or offers to pay the
shareholder for the shares.
Court Action to Resolve Payment Amount. If any dissenting shareholder demands
payment as provided in the immediately preceding paragraph, 1st Choice may,
within 60 days after receiving the payment demand, commence a proceeding and
petition a court to determine the fair value of the shares and accrued
interest. If 1st Choice does not commence the proceeding within this 60-day
period, it must pay to each dissenting shareholder whose demand remains
unresolved the amount demanded by the shareholder.
Each dissenting shareholder who is made a party to the court action is
entitled to the amount, if any, by which the court finds the fair value of the
dissenting shareholder's shares, plus interest, exceeds the amount paid by 1st
Choice.
Exchange Of Certificates
After completion of the merger, Norwest Bank Minnesota, National Association,
acting as exchange agent for Wells Fargo, will mail to each holder of record of
shares of 1st Choice common stock a form of letter of transmittal, together
with instructions for the exchange of the holder's 1st Choice stock
certificates for a certificate representing Wells Fargo common stock.
1st Choice shareholders should not send in their certificates until they
receive the letter of transmittal form and instructions.
No dividend or other distribution declared on Wells Fargo common stock after
completion of the merger will be paid to the holder of any certificates for
shares of 1st Choice common stock until after the certificates have been
surrendered for exchange.
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<PAGE>
When the exchange agent receives a surrendered certificate or certificates
from a shareholder, together with a properly completed letter of transmittal,
it will issue and mail to the shareholder a certificate representing the number
of whole shares of Wells Fargo common stock to which the shareholder is
entitled, plus cash for the amount of any remaining fractional share and any
cash dividends that are payable with respect to the shares of Wells Fargo
common stock so issued. No interest will be paid on the fractional share amount
or amounts payable as dividends or other distributions.
A certificate for Wells Fargo common stock may be issued in a name other than
the name in which the surrendered certificate is registered if (a) the
certificate surrendered is properly endorsed and accompanied by all documents
required to transfer the shares to the new holder and (b) the person requesting
the issuance of the Wells Fargo common stock certificate either pays to the
exchange agent in advance any transfer and other taxes due or establishes to
the satisfaction of the exchange agent that such taxes have been paid or are
not due.
The exchange agent will issue stock certificates for Wells Fargo common stock
in exchange for lost, stolen or destroyed certificates for 1st Choice common
stock upon receipt of a lost certificate affidavit and a bond indemnifying
Wells Fargo for any claim that may be made against Wells Fargo as a result of
the lost, stolen or destroyed certificates.
After completion of the merger, no transfers will be permitted on the books
of 1st Choice. If, after completion of the merger, certificates for 1st Choice
common stock are presented for transfer to the exchange agent, they will be
canceled and exchanged for certificates representing Wells Fargo common stock.
None of Wells Fargo, 1st Choice, the exchange agent or any other person will
be liable to any former holder of 1st Choice common stock for any amount
delivered in good faith to a public official pursuant to applicable abandoned
property, escheat or similar laws.
Regulatory Approvals
The merger is subject to the prior approval of the Board of Governors of the
Federal Reserve System and the Colorado Division of Banking.
The approval of the Federal Reserve Board is required because Wells Fargo is
a bank holding company registered under the Bank Holding Company Act that is
proposing to acquire another bank holding company. Wells Fargo has filed an
application with the Federal Reserve Board requesting approval of the merger.
Wells Fargo has provided copies of the application to the U.S. Department of
Justice and other governmental agencies. The application describes the terms of
the merger, the parties involved, the activities to be conducted by Wells Fargo
as a result of the merger, the source of funds for the merger and provides
other financial and managerial information. In evaluating the application, the
Federal Reserve Board will consider the financial and managerial resources and
prospects of the existing and combined institutions and the benefits that may
be expected from the merger. Among other things, the Federal Reserve Board will
evaluate the capital adequacy of Wells Fargo before and after completion of the
merger.
The Federal Reserve Board may deny an application if it determines that the
transaction would result in a monopoly or be in furtherance of any combination
or conspiracy to monopolize or attempt to monopolize a given business activity
in any part of the United States. The Federal Reserve Board may also deny an
application if it determines that the transaction would substantially lessen
competition or would tend to create a monopoly in any section of the country,
or would in any other manner result in a restraint of trade, unless the Federal
Reserve Board finds that the anti-competitive effects of the transaction are
clearly outweighed by the probable effects of the transaction in providing
benefits to the public.
Applicable federal law provides for the publication of notice and public
comment on the application filed by Wells Fargo with the Federal Reserve Board.
Under current law, the merger may not be completed until the
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<PAGE>
Federal Reserve Board has approved the merger. As of the date of this proxy
statement-prospectus, the Federal Reserve Board had not acted on Wells Fargo's
application.
Because the merger will result in the acquisition by Wells Fargo of 1st
Choice Bank, the Colorado Division of Banking must certify that the merger
complies with Colorado law. Wells Fargo has filed an application with the
Colorado Division of Banking requesting such certification. As of the date of
this proxy statement-prospectus, the Colorado Division of Banking had not made
the required certification.
The approval of an application means only that the regulatory criteria for
approval have been satisfied or waived. It does not mean that the approving
authority has determined that the consideration to be received by 1st Choice
shareholders is fair. Regulatory approval does not constitute an endorsement or
recommendation of the merger.
Wells Fargo and 1st Choice are not aware of any governmental approvals or
compliance with banking laws and regulations that are required for the merger
to become effective other than those described above. Wells Fargo and 1st
Choice intend to seek any other approval and to take any other action that may
be required to effect the merger. There can be no assurance that any required
approval or action can be obtained or taken prior to the special meeting.
The merger cannot be completed unless all necessary regulatory approvals are
granted. In addition, Wells Fargo may elect not to complete the merger if any
condition under which any regulatory approval is granted is unreasonably
burdensome to Wells Fargo. See "The Merger Agreement--Conditions To The Merger"
and "--Termination Of The Merger Agreement."
Effect Of Merger On 1st Choice's Employee Benefit Plans
The merger agreement provides that, subject to any eligibility requirements
applicable to such plans, employees of 1st Choice will be entitled to
participate in those Wells Fargo employee benefit and welfare plans specified
in the merger agreement. Eligible employees of 1st Choice will enter each of
such plans no later than the first day of the calendar quarter which begins at
least 32 days after completion of the merger.
U.S. Federal Income Tax Consequences Of The Merger
The following is a summary of the anticipated material U.S. federal income
tax consequences of the merger to 1st Choice shareholders who are citizens or
residents of the United States and who, on the date of disposition of their
shares of 1st Choice common stock, hold such shares as capital assets. This
summary does not purport to deal with all aspects of taxation that may be
relevant to particular investors in light of their personal investment
circumstances, or to certain types of investors, including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, "S"
corporations, limited liability corporations, foreign corporations and
taxpayers subject to alternative minimum tax.
The summary is based on the U.S. federal income tax laws as currently in
effect and as currently interpreted. It does not cover issues of state, local
or foreign taxation, nor does it address all aspects of U.S. federal income
taxation that may be important to particular shareholders in light of their
personal circumstances or to shareholders subject to special rules under U.S.
federal income tax laws. Future legislation, regulations, administrative
rulings and court decisions may alter the tax consequences summarized below.
The anticipated U.S. federal income tax consequences to 1st Choice
shareholders are as follows:
. A shareholder who receives shares of Wells Fargo common stock in
exchange for shares of 1st Choice common stock will not recognize any
gain or loss on the receipt of the shares of Wells Fargo common stock,
except for cash received in lieu of a fractional share. The
shareholder's gain or loss on the receipt of cash in lieu of a
fractional share will equal the difference between the cash received and
the basis of the fractional share exchanged.
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<PAGE>
. A shareholder's tax basis in the shares of Wells Fargo common stock
received will be the same as the shareholder's tax basis in the shares
of 1st Choice common stock exchanged in the merger, less any cash
received in lieu of fractional shares.
. The holding period of the shares of Wells Fargo common stock received by
a shareholder will include the holding period of the shareholder's
shares of 1st Choice common stock exchanged in the merger, but only if
the shares of 1st Choice common stock were held as a capital asset at
the time the merger is completed.
1st Choice is not required to complete the merger unless it receives an
opinion of counsel that these will be the U.S. federal income tax consequences
of the merger. The opinion may make certain assumptions and may rely on
representations of the parties to the merger as to factual matters. It will
reflect the opinion giver's judgment as to the tax status of the merger under
the Code and will not be binding on the Internal Revenue Service. There is no
assurance that the IRS will not take a contrary position regarding the tax
consequences of the merger, nor is there any assurance that the IRS would not
prevail in the event the tax consequences of the merger were litigated.
The U.S. federal income tax summary set forth above is included for general
information only and may or may not be applicable depending upon a
shareholder's particular situation. Shareholders should consult their tax
advisors with respect to the tax consequences to them of the merger, including
the tax consequences under state, local, foreign and other tax laws and the
possible effects of changes in federal or other tax law.
Support Agreements
At the same time that the merger agreement was signed, all but one of 1st
Choice's directors entered into individual support agreements with Wells Fargo.
Under the support agreements, these individuals agreed, among other things:
. to vote in favor of the merger all shares of 1st Choice common stock
owned by them at the record date for any meeting of shareholders of 1st
Choice called to consider and vote on the merger;
. not to sell or transfer any shares of 1st Choice common stock held by
them except (a) pursuant to the merger, or (b) with Wells Fargo's prior
written consent;
. not to solicit any inquiries or proposals or enter into any discussions,
negotiations or agreements relating to a business combination, merger or
consolidation of 1st Choice with any person other than Wells Fargo; and
. not to vote in favor of any business combination, merger or
consolidation of 1st Choice with any person other than Wells Fargo.
At the record date for the special meeting, the individuals who entered into
the support agreements beneficially owned a total of 792,560 shares of 1st
Choice common stock, representing approximately 24.3% of the shares of 1st
Choice common stock entitled to vote at the special meeting.
Resale Of Wells Fargo Common Stock Issued In The Merger
The Wells Fargo common stock issued in the merger will be freely transferable
under the Securities Act of 1933, except for shares issued to 1st Choice
shareholders who are considered to be "affiliates" of 1st Choice or Wells Fargo
under Rule 145 under the Securities Act or of Wells Fargo under Rule 144 under
the Securities Act. The definition of "affiliate" is complex and depends on the
specific facts, but generally includes directors, executive officers, 10%
shareholders and other persons with the power to direct the management and
policies of the company in question.
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<PAGE>
Affiliates of 1st Choice may not sell the shares of Wells Fargo common stock
received in the merger except (a) pursuant to an effective registration
statement under the Securities Act, (b) in compliance with an exemption from
the registration requirements of the Securities Act or (c) in compliance with
Rule 144 and Rule 145 under the Securities Act. Generally, those rules permit
resales of stock received by affiliates so long as Wells Fargo has complied
with certain reporting requirements and the selling shareholder complies with
certain volume and manner of sale restrictions.
1st Choice has agreed to use its best efforts to deliver to Wells Fargo
signed representations by each person who may be deemed to be an affiliate of
1st Choice that the person will not sell, transfer or otherwise dispose of the
shares of Wells Fargo common stock to be received by the person in the merger
except in compliance with the applicable provisions of the Securities Act and
the rules and regulations promulgated thereunder.
This proxy statement-prospectus does not cover any resales of Wells Fargo
common stock received by affiliates of 1st Choice.
Stock Exchange Listing
The shares of Wells Fargo common stock to be issued in the merger will be
listed on the New York Stock Exchange and the Chicago Stock Exchange. The
listing of the Wells Fargo common stock to be issued in the merger is a
condition to 1st Choice's obligation to complete the merger.
Accounting Treatment
Wells Fargo will account for the merger as a purchase. Wells Fargo will
record, at fair value, the acquired assets and assumed liabilities of 1st
Choice. To the extent the total purchase price exceeds the fair value of the
assets acquired and liabilities assumed, Wells Fargo will record goodwill.
Wells Fargo will include in its results of operations the results of 1st
Choice's operations after the merger.
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<PAGE>
THE MERGER AGREEMENT
The following is a summary of certain provisions of the merger agreement. A
copy of the merger agreement is attached to this proxy statement-prospectus as
Appendix A and is incorporated by reference into this proxy statement-
prospectus. This summary is qualified in its entirety by reference to the full
text of the merger agreement. 1st Choice shareholders are encouraged to read
the merger agreement carefully and in its entirety. Parenthetical references
are to the relevant paragraph or paragraphs of the merger agreement.
Basic Plan Of Reorganization
The merger agreement provides that a wholly-owned subsidiary of Wells Fargo
will merge by statutory merger with and into 1st Choice, with 1st Choice as the
surviving corporation. (paragraph 1(a))
Exchange Of Wells Fargo Shares For 1st Choice Shares
Under the merger agreement, each share of 1st Choice common stock outstanding
immediately before the merger, other than shares as to which statutory
dissenters' appraisal rights have been exercised, is to be converted into the
right to receive the number of shares of Wells Fargo common stock determined by
dividing the Adjusted Wells Fargo Shares by the number of shares of 1st Choice
common stock then outstanding. (paragraph 1(a))
. ""Adjusted Wells Fargo Shares" will be a number equal to $63,000,000,
reduced dollar for dollar by the amount, if any, by which the tangible
equity of 1st Choice, determined as described below, is less than
$30,700,000, divided by the Wells Fargo Measurement Price.
. ""Wells Fargo Measurement Price" will be the average of the closing
prices of a share of Wells Fargo common stock as reported on the
consolidated tape of the New York Stock Exchange during the period of 20
consecutive trading days ending on the day immediately before the
special meeting.
Under the merger agreement, the tangible equity of 1st Choice will be
determined in accordance with generally accepted accounting principles
excluding FAS 115 adjustments and including adjustments for the exercise of
220,000 outstanding options at an average exercise price of $8.34 but excluding
any tax benefits attributable to exercise of the options.
No adjustment will be made to the number of shares of Wells Fargo common
stock you will receive for your shares of 1st Choice common stock to reflect
fluctuations in the price of Wells Fargo common stock occurring after the
special meeting.
Adjustments For Changes In Capitalization
If before the merger is completed the outstanding shares of Wells Fargo are
increased or decreased in number or changed into or exchanged for a different
number or kind of shares or securities as a result of a reorganization,
reclassification, recapitalization, stock dividend, stock split or other
similar change in capitalization, then an appropriate and proportionate
adjustment will be made to the exchange ratio. (paragraph 1(b))
Cash Instead Of Fractional Shares
If the aggregate number of shares of Wells Fargo common stock you will
receive in the merger does not equal a whole number, you will receive cash
instead of the fractional share. The cash payment will be equal to the product
of the fractional part of the share of Wells Fargo common stock multiplied by
the Wells Fargo Measurement Price. (paragraph 1(c))
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<PAGE>
Effective Date And Time Of The Merger
The effective date of the merger will be the day on which articles of merger
are filed with and accepted by the Colorado Secretary of State. The merger
agreement provides that articles of merger will be filed within 10 business
days after the satisfaction or waiver of all conditions to the merger or on
such other date as Wells Fargo and 1st Choice may agree. See "Conditions To The
Merger." The effective time of the merger will be 11:59 p.m., Denver, Colorado
time, on the effective date of the merger. (paragraph 1(d))
Representations And Warranties
The merger agreement contains various representations and warranties by Wells
Fargo and 1st Choice concerning, among other things:
. corporate organization, standing and authority;
. subsidiaries;
. capitalization;
. corporate authority and action;
. compliance of the merger agreement with, and the need for consent or
approval under:
. applicable law and contracts; and
. organizational documents;
. governmental and third party consents and approvals;
. financial statements and filings with the SEC and other governmental
agencies;
. absence of material changes in business since December 31, 1998;
. contracts and commitments;
. absence of undisclosed litigation;
. employee benefit plans;
. absence of undisclosed environmental liabilities; and
. absence of undisclosed broker's fees (paragraphs 2 and 3).
Certain Covenants
The merger agreement has a number of covenants and agreements that govern the
actions of 1st Choice and Wells Fargo pending completion of the merger. Some of
the covenants and agreements are summarized below.
Conduct Of Business
1st Choice
Except as otherwise permitted or required by the merger agreement, or as
otherwise agreed to in writing by Wells Fargo, 1st Choice and each 1st Choice
subsidiary will:
. maintain its corporate existence in good standing;
. maintain the general character of its business;
. conduct its business in the ordinary and usual manner; and
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<PAGE>
. extend credit in accordance with existing lending policies and provide
Wells Fargo access to its loan files, except that it will not, without
the prior written consent of Wells Fargo, which consent will be deemed
waived under certain specified circumstances, make any new loan or
modify, restructure or renew any existing loan (except pursuant to
commitments made prior the merger agreement) to any borrower if the
amount of the resulting loan, when aggregated with all other loans or
extensions of credit to such person, would exceed $150,000.
Except as otherwise permitted or required by the merger agreement, or as
otherwise agreed to in writing by Wells Fargo, until the effective date of the
merger, 1st Choice and each 1st Choice subsidiary will not:
. amend or otherwise change its articles of incorporation or association
or bylaws;
. issue or sell or authorize for issuance or sale, or grant any options or
make other agreements with respect to the issuance or sale or conversion
of, any shares of its capital stock, phantom shares or other share
equivalents, or any other of its securities, except that 1st Choice may
issue shares of 1st Choice common stock upon exercise of stock options;
. authorize or incur any long-term debt (other than deposit liabilities);
. mortgage, pledge or subject to a lien or other encumbrance any of its
properties, except in the ordinary course of business;
. enter into any material agreement, contract or commitment in excess of
$25,000 except banking transactions in the ordinary course of business
and in accordance with policies and procedures in effect as of the date
of the merger agreement;
. make any investments except investments made by bank subsidiaries in the
ordinary course of business for terms of up to one year and in amounts
of $100,000 or less;
. amend or terminate any employee benefit plans except as required by law
or the terms of the merger agreement;
. declare, set aside, make or pay any dividend or other distribution with
respect to its capital stock except any dividend declared by a 1st
Choice subsidiary's board of directors in accordance with applicable law
and regulation, provided that 1st Choice's board of directors may
declare and pay cash dividends, in accordance with applicable law and
regulation, in an amount not to exceed 50% of the amount by which the
tangible equity of 1st Choice, as determined under the merger agreement
and as of five days prior to the effective date of the merger, exceeds
$30,700,000;
. redeem, purchase or otherwise acquire any capital stock of 1st Choice;
. increase the compensation of any officers, directors or executive
employees, except pursuant to existing compensation plans, agreements
and practices and except as permitted under the merger agreement;
. sell or otherwise dispose of any shares of capital stock of any 1st
Choice subsidiary; or
. sell or otherwise dispose of any of its assets or properties other than
in the ordinary course of business. (paragraphs 4(a) and (b))
Wells Fargo
Wells Fargo has agreed to conduct its business and to cause its significant
subsidiaries to conduct their respective businesses in compliance with all
material obligations and duties imposed by laws, regulations, rules and
ordinances or by judicial orders, judgments and decrees applicable to them or
to their businesses or properties.
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Competing Transactions
Neither 1st Choice or any 1st Choice subsidiary nor any director, officer,
representative or agent of 1st Choice or any 1st Choice subsidiary may,
directly or indirectly, solicit, authorize the solicitation of or enter into
any discussions with any entity or group (other than Wells Fargo) concerning
any offer or possible offer to:
. purchase its common stock, any security convertible into its common
stock, or any other equity security of 1st Choice or any of its
subsidiaries;
. make a tender or exchange offer for any shares of its common stock or
other equity security of 1st Choice or any of its subsidiaries;
. purchase, lease or otherwise acquire the assets of 1st Choice or any of
its subsidiaries except in the ordinary course of business; or
. merge, consolidate or otherwise combine with 1st Choice or any of its
subsidiaries.
1st Choice and each of its subsidiaries, as applicable, has also agreed to
promptly inform Wells Fargo if any such entity or group makes an offer or
inquiry concerning any of the foregoing. (paragraph 4(h))
Bank Loan
1st Choice has agreed, on or before the effective date of the merger, to
repay the loan from Bankers' Bank of the West in the original principal amount
of $3,000,000 and to have released the lien on the shares of 1st Choice Bank
stock that are held as collateral for the loan.
Terminate Stock Option Plan
1st Choice has agreed to terminate, as of the effective date of the merger,
the 1995 Stock Option Plan. All options issued under the 1995 Stock Option Plan
that are not exercised will expire as of the effective time of the merger.
"Golden parachute" Limitations
1st Choice has agreed to use its best efforts to amend all employment
agreements between 1st Choice or any of 1st Choice's subsidiaries and their
respective officers and employees to provide that amounts payable under each of
these agreements accelerated solely because of the merger will be capped at or
adjusted to an amount that, when aggregated with all other payments to the
officer or employee would not exceed the applicable "golden parachute"
limitations under Section 280(G) of the Internal Revenue Code.
Year 2000 Compliance
1st Choice will comply with the Year 2000 project management process as set
forth in the May 5, 1997 Federal Financial Institutions Examination Council
(FFIEC) Interagency Statement on the Year 2000 and subsequent guidance
documents. 1st Choice will not rely on the completion of the merger to satisfy
its FFIEC requirements. (paragraph 4(p))
Other Covenants
The merger agreement contains various other covenants, including covenants
relating to the preparation and distribution of this proxy statement-
prospectus, access to information, and the listing on the New York and Chicago
Stock Exchanges of the shares of Wells Fargo common stock to be issued in the
merger. In addition, 1st Choice has agreed to (a) establish such additional
accruals and reserves as are necessary to conform its accounting and credit
loss reserve practices and methods to those of Wells Fargo and Wells Fargo's
plans with respect to the conduct of 1st Choice's business after the merger and
(b) use its best efforts to deliver to Wells Fargo prior to completion of the
merger signed representations substantially in the form attached as Exhibit B
to the merger agreement from each executive officer, director or shareholder of
1st Choice who may reasonably
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be deemed an "affiliate" of 1st Choice within the meaning of such term as used
in Rule 145 of the Securities Act. (paragraphs 4(l) and 4(m) and Exhibit B) See
"The Merger--Resale Of Wells Fargo Common Stock Issued In The Merger."
Conditions To The Merger
Under the merger agreement, various conditions are required to be met before
the parties are obligated to complete the merger. These conditions are
customary and include such items as the receipt of shareholder, regulatory and
listing approval, and the receipt by 1st Choice of a favorable tax opinion.
(paragraphs 6 and 7) See "The Merger--U.S. Federal Income Tax Consequences Of
The Merger."
The obligations of the parties are also subject to the continued accuracy of
the other party's representations and warranties, the performance by the other
party of its obligations under the merger agreement, and, subject to certain
exceptions, the absence of any changes that have had or might be reasonably
expected to have an adverse effect on 1st Choice or Wells Fargo. Some of the
conditions to the merger are subject to exceptions and/or a "materiality"
standard. Certain conditions to the merger may be waived by the party seeking
to assert the condition. (paragraphs 6 and 7)
Termination Of The Merger Agreement
Wells Fargo and 1st Choice can mutually agree to terminate the merger
agreement at any time before completion of the merger. (paragraph 9(a)(i) Also,
either Wells Fargo or 1st Choice can terminate the merger agreement without the
consent of the other if any of the following occurs:
. The merger has not been completed by July 31, 2000, unless the failure
to complete the merger is due to the failure of the party seeking to
terminate to perform or observe in all material respects the covenants
and agreements to be observed or performed by the party; or
. A court or governmental authority of competent jurisdiction has issued a
final order restraining, enjoining or otherwise prohibiting the
transactions contemplated by the merger agreement. (paragraph 9(a)(ii)
and (iii))
Effect Of Termination
Generally, if either party terminates the merger agreement, it becomes void
without any liability to either party other than for willful and material
breaches of representations or warranties, or willful and material failure in
performance of covenants, agreements, duties or obligations arising under the
merger agreement. The provisions of the merger agreement governing confidential
information and expenses incurred in connection with the merger continue in
effect after termination of the merger agreement. (paragraph 9(b))
Waiver And Amendment
Either Wells Fargo or 1st Choice may waive any inaccuracies in the
representations and warranties of the other party or compliance by the other
party with any of the covenants or conditions contained in the merger
agreement. (paragraph 16)
Wells Fargo and 1st Choice can amend the merger agreement at any time before
the merger is completed; however, the merger agreement prohibits them from
amending the merger agreement after 1st Choice shareholders approve the merger
if the amendment would change in a manner adverse to 1st Choice shareholders
the consideration to be received by 1st Choice shareholders in the merger.
(paragraph 17)
Expenses
Wells Fargo and 1st Choice will each pay their own expenses in connection
with the merger, including fees and expenses of their respective independent
auditors and counsel. (paragraph 10)
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INFORMATION ABOUT WELLS FARGO
General
Wells Fargo is a diversified financial services company. Through its
subsidiaries and affiliates, Wells Fargo provides retail, commercial, real
estate and mortgage banking, asset management and consumer finance, as well as
a variety of other financial services, including equipment leasing,
agricultural finance, securities brokerage and investment banking, insurance
agency services, computer and data processing services, trust services,
mortgage-backed securities servicing, and venture capital investment.
At March 31, 2000, Wells Fargo had consolidated total assets of $
billion, consolidated total deposits of $ billion and stockholders' equity
of $ billion. Based on assets at March 31, 2000, Wells Fargo was the th
largest commercial banking organization in the United States.
Wells Fargo expands its business in part by acquiring banking institutions
and other companies engaged in activities closely related to banking. Wells
Fargo continues to explore opportunities to acquire banking institutions and
other companies permitted by the Bank Holding Company Act of 1956. Discussions
are continually being carried on related to such acquisitions. It is not
presently known whether, or on what terms, such discussions will result in
further acquisitions. It is the policy of Wells Fargo not to comment on such
discussions or possible acquisitions until a definitive agreement with respect
thereto has been signed.
Wells Fargo is a legal entity separate and distinct from its banking and
nonbanking subsidiaries. As a result, the right of Wells Fargo--and thus the
right of Wells Fargo's creditors--to participate in any distribution of assets
or earnings of any subsidiary, other than in its capacity as a creditor of such
subsidiary, is subject to the prior payment of claims of creditors of such
subsidiary. The principal sources of Wells Fargo's revenues are dividends and
fees from its subsidiaries. See "Regulation And Supervision Of Wells Fargo--
Dividend Restrictions" for a discussion of the restrictions on the subsidiary
banks' ability to pay dividends to Wells Fargo.
Wells Fargo's executive offices are located at 420 Montgomery Street, San
Francisco, California 94163, and its telephone number is (800) 411-4932.
Management And Additional Information
Information concerning executive compensation, the principal holders of
voting securities, certain relationships and related transactions, and other
related matters concerning Wells Fargo is included or incorporated by reference
in its annual report on Form 10-K for the year ended December 31, 1999. Wells
Fargo's annual report on Form 10-K is incorporated by reference into this proxy
statement-prospectus. 1st Choice shareholders who want a copy of this annual
report or any document incorporated by reference into the report may contact
Wells Fargo at the address or phone number indicated below under "Where You Can
Find More Information."
Information On Wells Fargo's Web Site
Information on the Internet web site of Wells Fargo or any subsidiary of
Wells Fargo is not part of this proxy statement-prospectus, and you should not
rely on that information in deciding whether to approve the merger unless that
information is also in this document or in a document that is incorporated by
reference into this proxy statement-prospectus.
Competition
The financial services industry is highly competitive. Wells Fargo's
subsidiaries compete with financial services providers, such as banks, savings
and loan associations, credit unions, finance companies, mortgage banking
companies, insurance companies, and money market and mutual fund companies.
They also face
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increased competition from non-banking institutions such as securities firms
and insurance companies, as well as from financial services subsidiaries of
commercial and manufacturing companies. Many of these competitors enjoy the
benefits of advanced technology, fewer regulatory constraints and lower cost
structures.
Securities firms and insurance companies that elect to become financial
holding companies may acquire banks and other financial institutions. This may
significantly change the competitive environment in which Wells Fargo and its
subsidiaries conduct business. See "Financial Modernization" below. The
financial services industry is also likely to become more competitive as
further technological advances enable more companies to provide financial
services. These technological advances may diminish the importance of
depository institutions and other financial intermediaries in the transfer of
funds between parties.
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FIRST SECURITY MERGER
The following information describes the pending merger transaction between
Wells Fargo & Company and First Security Corporation. Wells Fargo will acquire
First Security as a result of the transaction. The description is not complete
and is qualified in its entirety by reference to the more detailed information
contained in Wells Fargo's Current Report on Form 8-K, dated as of April 9,
2000 and filed on April 12, 2000. The Form 8-K is incorporated herein by
reference.
The First Security Merger Transaction
On April 9, 2000, Wells Fargo and First Security entered into a merger
agreement that provides for the merger of a wholly-owned subsidiary of Wells
Fargo into First Security, with First Security surviving as a wholly-owned
subsidiary of Wells Fargo. If the First Security merger is completed, each
outstanding share of First Security common stock will be converted into 0.355
of a share of Wells Fargo common stock. Wells Fargo expects to issue
approximately 71.6 million shares of its common stock in the First Security
merger, representing approximately of Wells Fargo common stock
outstanding as of March 31, 2000. First Security has granted to Wells Fargo an
option exercisable, in whole or in part, upon the occurrence of specified
conditions, to purchase up to 19.9% of the outstanding shares of First Security
common stock.
The First Security merger is subject to a number of conditions, including
approvals by First Security stockholders and regulatory agencies. No vote of
Wells Fargo stockholders is required to complete the First Security merger.
Wells Fargo expects to complete the First Security merger in the third quarter
of 2000, after the Wells Fargo/1st Choice merger closes. Wells Fargo cannot
guarantee when or if the merger with First Security will be completed.
About First Security Corporation
First Security is the nation's oldest multistate bank holding company and is
the parent corporation for First Security Bank, N.A. and several other banking
subsidiaries and subsidiaries that engage in banking-related services. First
Security is headquartered in Salt Lake City, Utah. Through its subsidiaries,
First Security operated banking stores in the state of California, Idaho,
Nevada, New Mexico, Oregon, Utah and Wyoming as of March 31, 2000. At that
date, First Security had assets of $ billion, deposits of $ billion
and stockholders' equity of $ billion. Spencer F. Eccles, chairman and
chief executive officer of First Security, is expected to be elected as a
director of Wells Fargo upon completion of the First Security merger.
You may find more information about First Security from its reports filed
with the SEC under SEC file number 005-15790.
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REGULATION AND SUPERVISION OF WELLS FARGO
To the extent that the following information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to the full
text of those provisions. Also, such statutes, regulations and policies are
continually under review by Congress and state legislatures and federal and
state regulatory agencies. A change in statutes, regulations or regulatory
policies applicable to Wells Fargo could have a material effect on the business
of Wells Fargo.
Introduction
Wells Fargo, its banking subsidiaries and many of its nonbanking subsidiaries
are subject to extensive regulation by federal and state agencies. The
regulation of bank holding companies and their subsidiaries is intended
primarily for the protection of depositors, federal deposit insurance funds and
the banking system as a whole and not for the protection of security holders.
As discussed in more detail below, this regulatory environment, among other
things, may restrict Wells Fargo's ability to diversify into certain areas of
financial services, acquire depository institutions in certain states and pay
dividends on its capital stock. It may also require Wells Fargo to provide
financial support to one or more of its banking subsidiaries, maintain capital
balances in excess of those desired by management and pay higher deposit
insurance premiums as a result of the deterioration in the financial condition
of depository institutions in general.
Additional information about the regulation and supervision of Wells Fargo is
contained in Wells Fargo's annual and quarterly reports filed with the SEC. See
"Where You Can Find More Information."
Regulatory Agencies
Bank Holding Company
Wells Fargo & Company, as a bank holding company, is subject to regulation
under the Bank Holding Company Act of 1956 (the Bank Holding Company Act) and
to inspection, examination and supervision by the Board of Governors of the
Federal Reserve System (Federal Reserve Board) under the Bank Holding Company
Act.
Subsidiary Banks
Wells Fargo's national banking subsidiaries are subject to regulation and
examination primarily by the Office of the Comptroller of the Currency (OCC)
and secondarily by the Federal Reserve Board and the Federal Deposit Insurance
Corporation (FDIC). Wells Fargo's state-chartered banking subsidiaries are
subject to primary federal regulation and examination by the FDIC or the
Federal Reserve Board and, in addition, are regulated and examined by banking
departments of the states where they are chartered.
Nonbank Subsidiaries
Many of Wells Fargo's nonbank subsidiaries also are subject to regulation by
the Federal Reserve Board and other applicable federal and state agencies.
Wells Fargo's brokerage subsidiaries are regulated by the SEC, the National
Association of Securities Dealers, Inc. and state securities regulators. Wells
Fargo's insurance subsidiaries are subject to regulation by applicable state
insurance regulatory agencies. Other nonbank subsidiaries of Wells Fargo are
subject to the laws and regulations of both the federal government and the
various states in which they conduct business.
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Bank Holding Company Activities
"Financial in Nature" Requirement
As a bank holding company that has elected also to become a financial holding
company pursuant to the Bank Holding Company Act, Wells Fargo may affiliate
with securities firms and insurance companies and engage in other activities
that are financial in nature or are incidental or complementary to activities
that are financial in nature. "Financial in nature" activities include
securities underwriting, dealing and market making, sponsoring mutual funds and
investment companies, insurance underwriting and agency, merchant banking, and
activities that the Federal Reserve Board determines from time to time to be so
closely related to banking or managing or controlling banks as to be a proper
incident thereto. A bank holding company that is not also a financial holding
company is limited to engaging in banking and such other activities as
determined by the Federal Reserve Board to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto.
No Federal Reserve Board approval is required for Wells Fargo to acquire a
company (other than a bank holding company, bank or savings association)
engaged in activities that are financial in nature or incidental to activities
that are financial in nature, as determined by the Federal Reserve Board. Prior
Federal Reserve Board approval is required before Wells Fargo may acquire the
beneficial ownership or control of more than 5% of the voting shares or
substantially all of the assets of a bank holding company, bank or savings
association.
If any subsidiary bank of Wells Fargo ceases to be "well capitalized" or
"well managed" under applicable regulatory standards, the Federal Reserve Board
may, among other actions, order Wells Fargo to divest the subsidiary bank.
Alternatively, Wells Fargo may elect to conform its activities to those
permissible for a bank holding company that is not also a financial holding
company. If any subsidiary bank of Wells Fargo receives a rating under the
Community Reinvestment Act of 1977 of less than satisfactory, Wells Fargo will
be prohibited from engaging in new activities or acquiring companies other than
bank holding companies, banks or savings associations.
Interstate Banking
Under the Riegle-Neal Interstate Banking and Branching Act (Riegle-Neal Act),
a bank holding company may acquire banks in states other than its home state,
subject to any state requirement that the bank has been organized and operating
for a minimum period of time, not to exceed five years, and the requirement
that the bank holding company not control, prior to or following the proposed
acquisition, more than 10% of the total amount of deposits of insured
depository institutions nationwide or, unless the acquisition is the bank
holding company's initial entry into the state, more than 30% of such deposits
in the state, or such lesser or greater amount set by the state.
The Riegle-Neal Act also authorizes banks to merge across state lines,
thereby creating interstate branches. States may opt out of the interstate
merger authority provided by 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. Banks are also permitted to
acquire and to establish de novo branches in other states where authorized
under the laws of those states.
Regulatory Approval
In determining whether to approve a proposed bank acquisition, federal
banking regulators will consider, among other factors, the effect of the
acquisition on competition, the public benefits expected to be received from
the acquisition, the projected capital ratios and levels on a post-acquisition
basis, and the acquiring institution's record of addressing the credit needs of
the communities it serves, including the needs of low and moderate income
neighborhoods, consistent with the safe and sound operation of the bank, under
the Community Reinvestment Act of 1977.
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Dividend Restrictions
Wells Fargo & Company is a legal entity separate and distinct from its
subsidiary banks and other subsidiaries. Its principal source of funds to pay
dividends on its common and preferred stock and debt service on its debt is
dividends from its subsidiaries. Various federal and state statutory provisions
and regulations limit the amount of dividends that Wells Fargo's bank
subsidiaries may pay without regulatory approval. Dividends payable by a
national bank are limited to the lesser of the bank's undivided profits and the
bank's retained net income for the current year plus its retained net income
for the preceding two years (less any required transfers to capital surplus) up
to the date of any dividend declaration in the current calendar year. Wells
Fargo's state-chartered subsidiary banks also are subject to state regulations
that limit dividends.
Before Wells Fargo Bank, National Association can declare dividends in 2000
without the prior approval of the OCC, it must have net income of approximately
$500 million plus an amount equal to or greater than the dividends declared in
2000. Because it is not expected to meet this requirement, Wells Fargo Bank,
National Association will likely be required to obtain the prior approval of
the OCC before it declares any dividends in 2000.
Federal bank regulatory agencies have the authority to prohibit Wells Fargo's
subsidiary banks from engaging in unsafe or unsound practices in conducting
their businesses. The payment of dividends, depending on the financial
condition of the bank in question, could be deemed an unsafe or unsound
practice. The ability of Wells Fargo's subsidiary banks to pay dividends in the
future is currently influenced, and could be further influenced, by bank
regulatory policies and capital guidelines.
Holding Company Structure
Transfer of Funds from Banking Subsidiaries
Wells Fargo's banking subsidiaries are subject to restrictions under federal
law that limit the transfer of funds or other items of value from these
subsidiaries to Wells Fargo and its nonbanking subsidiaries, including
affiliates, whether in the form of loans and other extensions of credit,
investments and asset purchases, or as other transactions involving the
transfer of value from a subsidiary to an affiliate or for the benefit of an
affiliate. Unless an exemption applies, these transactions by a banking
subsidiary with a single affiliate are limited to 10% of the subsidiary bank's
capital and surplus and, with respect to all covered transactions with
affiliates in the aggregate, to 20% of the subsidiary bank's capital and
surplus. Moreover, loans and extensions of credit to affiliates generally are
required to be secured in specified amounts. A bank's transactions with its
nonbank affiliates are also generally required to be on arm's-length terms.
Source of Strength Doctrine
Under current Federal Reserve Board policy, Wells Fargo is expected to act as
a source of financial and managerial strength to each of its subsidiary banks
and, under appropriate circumstances, to commit resources to support each such
subsidiary bank. This support could be required at times when Wells Fargo might
not have the resources to provide it. In addition, the OCC may order the pro
rata assessment of Wells Fargo if the capital of one of its national bank
subsidiaries were to become impaired. If Wells Fargo failed to pay the
assessment within three months, the OCC could order the sale of its stock in
the national bank subsidiary to cover the deficiency.
Capital loans from Wells Fargo to any of its subsidiary banks are subordinate
in right of payment to deposits and certain other indebtedness of the
subsidiary bank. In the event of Wells Fargo's bankruptcy, any commitment by
Wells Fargo to a federal bank regulatory agency to maintain the capital of a
subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
Depositor Preference
The Federal Deposit Insurance Act (FDI Act) provides that, in the event of
the "liquidation or other resolution" of an insured depository institution, the
claims of depositors of the institution, including the claims
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of the FDIC as subrogee of insured depositors, and certain claims for
administrative expenses of the FDIC as a receiver will have priority over other
general unsecured claims against the institution. If an insured depository
institution fails, insured and uninsured depositors, along with the FDIC, will
have priority in payment ahead of unsecured, nondeposit creditors, including
Wells Fargo, with respect to any extensions of credit they have made to such
insured depository institution.
Liability of Commonly Controlled Institutions
All of Wells Fargo's banks are insured by the FDIC. FDIC-insured depository
institutions can be held liable for any loss incurred, or reasonably expected
to be incurred, by the FDIC due to the default of an FDIC-insured depository
institution controlled by the same bank holding company, or for any assistance
provided by the FDIC to an FDIC-insured depository institution controlled by
the same bank holding company that is in danger of default. "Default" means
generally the appointment of a conservator or receiver. "In danger of default"
means generally the existence of certain conditions indicating that a default
is likely to occur in the absence of regulatory assistance.
Capital Requirements
General
Wells Fargo is subject to risk-based capital requirements and guidelines
imposed by the Federal Reserve Board. These are substantially similar to the
capital requirements and guidelines imposed by the OCC and the FDIC on the
depository institutions under their jurisdictions. For this purpose, a
depository institution's or holding company's assets, and some of its specified
off-balance sheet commitments and obligations, are assigned to various risk
categories. A depository institution's or holding company's capital, in turn,
is classified in one of three tiers, depending on type:
Core Supplementary Market Risk
("Tier 1") ("Tier 2") ("Tier 3")
Capital Capital Capital
------- ------- -------
. common equity among other items: . qualifying unsecured
subordinated debt
. retained earnings . perpetual preferred
stock not meeting the
. qualifying Tier 1 definition
noncumulative
perpetual preferred . qualifying mandatory
stock convertible securities
. a limited amount of . qualifying subordinated
qualifying cumulative debt
perpetual preferred
stock at the holding . allowances for loan
company level and lease losses,
subject to limitations
. minority interests in
equity accounts of
consolidated
subsidiaries
. less goodwill, most
intangible assets and
certain other 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
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6% and 10% on a risk-adjusted basis, respectively. At March 31, 2000, Wells
Fargo met both requirements, with Tier 1 and total capital equal to % and
% of its respective total risk-weighted assets.
Federal Reserve Board, FDIC and OCC rules require Wells Fargo to incorporate
market and interest rate risk components into its risk-based capital standards.
Under these market risk requirements, capital is allocated to support the
amount of market risk related to a financial institution's ongoing trading
activities.
The Federal Reserve Board also requires bank holding companies to maintain a
minimum "leverage ratio" (Tier 1 capital to adjusted total assets) of 3% if the
holding company has the highest regulatory 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 March 31, 2000 was %.
The Federal Reserve Board may set capital requirements higher than the
minimums described above for holding companies whose circumstances warrant it.
For example, holding companies experiencing or anticipating significant growth
may be expected to maintain capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets. The
Federal Reserve Board has also indicated that it will consider a "tangible Tier
1 capital leverage ratio" (deducting all intangibles) and other indications of
capital strength in evaluating proposals for expansion or new activities.
Wells Fargo's banking subsidiaries are subject to similar risk-based and
leverage capital requirements adopted by its applicable federal banking agency.
Wells Fargo's management believes that each of Wells Fargo's subsidiary banks
meet 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. The FDICIA generally prohibits
a bank from paying any dividend or making any capital distribution or paying
any management fee to its holding company if the bank would thereafter be
undercapitalized. An undercapitalized bank or thrift must develop a capital
restoration plan, and its parent holding company must guarantee the bank's or
thrift's compliance with the plan up to the lesser of 5% of the bank's or
thrift's assets at the time it became undercapitalized and the amount needed to
comply with the plan.
As of March 31, 2000, Wells Fargo believes that each of its significant bank
subsidiaries was well capitalized, based on the prompt corrective action ratios
and guidelines described above. A bank's capital category is determined solely
for the purpose of applying the OCC's (or the FDIC's) prompt corrective action
regulations, and the capital category may not constitute an accurate
representation of the bank's overall financial condition or prospects for other
purposes.
Deposit Insurance Assessments
Through the Bank Insurance Fund (BIF), the FDIC insures the deposits of Wells
Fargo's depository institution subsidiaries up to prescribed limits for each
depositor. The amount of FDIC assessments paid by
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each BIF member institution is based on its relative risk of default as
measured by regulatory capital ratios and other factors. Specifically, the
assessment rate is based on the institution's capitalization risk category and
supervisory subgroup category. An institution's capitalization risk category is
based on the FDIC's determination of whether the institution is well
capitalized, adequately capitalized or less than adequately capitalized. An
institution's supervisory subgroup category is based on the FDIC's assessment
of the financial condition of the institution and the probability that FDIC
intervention or other corrective action will be required.
The BIF assessment rate currently ranges from zero to 27 cents per $100 of
domestic deposits. The FDIC may increase or decrease the assessment rate
schedule on a semi-annual basis. An increase in the BIF assessment rate could
have a material adverse effect on Wells Fargo's earnings, depending on the
amount of the increase. The FDIC is authorized to terminate a depository
institution's deposit insurance upon a finding by the FDIC that the
institution's financial condition is unsafe or unsound or that the institution
has engaged in unsafe or unsound practices or has violated any applicable rule,
regulation, order or condition enacted or imposed by the institution's
regulatory agency. The termination of deposit insurance for one or more of
Wells Fargo's subsidiary depository institutions could have a material adverse
effect on Wells Fargo's earnings, depending on the collective size of the
particular institutions involved.
All FDIC-insured depository institutions must pay an annual assessment to
provide funds for the payment of interest on bonds issued by the Financing
Corporation, a federal corporation chartered under the authority of the Federal
Housing Finance Board. The bonds, commonly referred to as FICO bonds, were
issued to capitalize the Federal Savings and Loan Insurance Corporation. The
FDIC established the FICO assessment rates effective for the second quarter of
2000 at approximately $.021 per $100 annually for BIC-assessable deposits. The
FICO assessments are adjusted quarterly to reflect changes in the assessment
bases of the FDIC's insurance funds and do not vary depending on a depository
institution's capitalization or supervisory evaluations.
FDIC-insured depository institutions pay an assessment rate equal to the rate
assessed on deposits insured by the Savings Association Insurance Fund.
Fiscal And Monetary Policies
Wells Fargo's business and earnings are affected significantly by the fiscal
and monetary policies of the federal government and its agencies. Wells Fargo
is particularly affected by the policies of the Federal Reserve Board, which
regulates the supply of money and credit in the United States. Among the
instruments of monetary policy available to the Federal Reserve are (a)
conducting open market operations in United States government securities, (b)
changing the discount rates of borrowings of depository institutions, (c)
imposing or changing reserve requirements against depository institutions'
deposits, and (d) imposing or changing reserve requirements against certain
borrowing by banks and their affiliates. These methods are used in varying
degrees and combinations to directly affect the availability of bank loans and
deposits, as well as the interest rates charged on loans and paid on deposits.
For that reason alone, the policies of the Federal Reserve Board have a
material effect on the earnings of Wells Fargo.
Future Legislation
Various legislation, including proposals to substantially change the
financial institution regulatory system and to expand or contract the powers of
banking institutions and bank holding companies, is from time to time
introduced in the Congress. This legislation may change banking statutes and
the operating environment of Wells Fargo and its subsidiaries in substantial
and unpredictable ways. If enacted, such legislation could increase or decrease
the cost of doing business, limit or expand permissible activities or affect
the competitive balance among banks, savings associations, credit unions, and
other financial institutions. Wells Fargo cannot predict whether any of this
potential legislation will be enacted, and if enacted, the effect that it, or
any implementing regulations, would have on the financial condition or results
of operations of Wells Fargo or any of its subsidiaries.
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INFORMATION ABOUT 1ST CHOICE
1st Choice Financial Corp. is a Colorado corporation registered as a bank
holding company under the Bank Holding Company Act. Its principal asset is its
investment in 1st Choice Bank.
History of the Bank
In June 1992, 1st Choice Bank was chartered under the laws of the state of
Colorado. 1st Choice Bank opened for business in Greeley on July 3, 1992 as a
full service commercial bank. In December 1994, 1st Choice Bank opened its
facility in Fort Collins.
Business of the Bank
1st Choice Bank is a full service bank offering a wide variety of banking
services to its community. 1st Choice Bank offers customary types of demand
deposit accounts, individual retirement accounts, installment, commercial and
real estate commercial lines of credit, safe deposit, night depository
services, auto services, cashiers checks, money orders, travelers checks, and
wire transfer services that may be tailored to fit the needs of a diverse
customer base.
Cash letters are transported by 1st Choice Bank runners to Bankers Bank of
the West, which acts as clearing agent for 1st Choice Bank.
1st Choice Bank offers its customers credit cards directly. 1st Choice Bank
provides automatic teller machine cards and Visa debit cards for its customers
directly.
1st Choice Bank has correspondent relationships with the following banks:
Bankers Bank of the West, Colorado National Bank, Federal Home Loan Bank and
Federal Reserve Bank of Kansas City, Denver Branch. These correspondent banks
provide certain services to 1st Choice Bank such as investing federal funds,
handling fund transfers, ordering and shipping cash, providing securities
safekeeping, handling loan participations, securities accounting, and
furnishing management advice on 1st Choice Bank's securities portfolio. As
compensation for these services, 1st Choice Bank may maintain certain balances
with its correspondents in non-interest bearing accounts.
Banking Premises
1st Choice Bank owns all of its buildings. Its current headquarters is
located at 5801 West 11th Avenue, Greeley, Colorado in a 32,000 square foot
office building. Approximately 18,000 square feet are leased to various tenants
under mid to long term leases.
The first bank office was built in 1993 and is located at 2164 35th Avenue,
in Greeley, Colorado. The building which is located in a shopping center,
contains approximately 11,000 square feet and is fully utilized in the banking
operations.
In Greeley, 1st Choice Bank has an additional building in a downtown location
at 1229 10th Avenue with approximately 2,000 square feet.
1st Choice Bank owns a 20,000 square foot building in Fort Collins, at the
corner of Horsetooth and South College. 1st Choice Bank leases approximately
10,000 square feet to various tenants including Starbucks Coffee for various
durations.
In downtown Fort Collins, 1st Choice Bank owns a 3,000 square foot building
in Old Downtown at 100 South College Avenue. The building includes one drive-up
lane and is utilized by customers on the opposite end of Fort Collins from our
primary location at 3600 South College.
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In Loveland, 1st Choice Bank owns a 6,000 square foot building at 2529 N.
Lincoln Avenue. 1st Choice Bank occupies approximately 2,000 square feet of the
building and leases the remainder to various tenants.
In Windsor, 1st Choice Bank owns a 2,000 square foot building and occupies
the entire building.
Lending Activities
General
1st Choice Bank provides a range of commercial and retail lending services,
including automobile loans, commercial business loans, residential real estate
construction loans, residential real estate mortgage loans, loan
participations, consumer loans and letters of credit. Currently, the primary
focus of 1st Choice Bank is on commercial and residential real estate loans and
commercial business lending to small to medium-sized businesses. 1st Choice
Bank places a strong emphasis on asset quality and maintains strict
underwriting standards.
1st Choice Bank is not normally a transaction lender and generally requires a
full banking relationship with its customers. 1st Choice Bank seeks to
continually develop and maintain its strong community orientation by, among
other things, considering the interest of its existing and potential customers
in the Greeley and Fort Collins communities.
Loans Secured by Commercial Real Estate
1st Choice Bank generally restricts its commercial real estate lending
activity to owner-occupied properties or to investor properties that are owned
by customers with which 1st Choice Bank has a banking relationship. Therefore,
many loans classified as commercial real estate loans can be characterized as
ordinary commercial loans which are secured by real estate. Loans to acquire
investor properties undergo strict underwriting guidelines.
Commercial real estate loans are made with a maximum maturity of 20 years.
However, 1st Choice Bank reserves the right to adjust the interest rate on the
loan at various intervals during the term of the loan. 1st Choice Bank's
underwriting standards generally require that the loan-to-value ratio of newly
acquired or constructed real estate not exceed 75 percent for commercial loans
and 80 percent for residential loans of appraised value or cost, whichever is
lower. Management does not believe that 1st Choice Bank's existing commercial
real estate loan portfolio represents a material risk of loan losses.
Loans secured by commercial real estate are generally larger and involve a
greater degree of credit risk than residential mortgage loans. Commercial real
estate loans typically involve large balances to single borrowers or groups of
related borrowers. Because payments on loans secured by commercial real estate
properties are often dependent on the successful operation or management of
properties, repayment of such loans may be subject to adverse conditions in the
real estate market or the economy. If the cash flow from the project is reduced
(for example, if leases are not obtained or renewed), the borrower's ability to
repay the loan may become impaired.
Commercial Loans
1st Choice Bank's area of emphasis includes, but is not limited to, loans to
businesses. 1st Choice Bank provides a wide range of commercial business loans,
including lines of credit for working capital purposes and term loans for the
acquisition of equipment and other purposes. The majority of 1st Choice Bank's
commercial loans are extended to small and medium business owners. The primary
risk is the failure of the business due to economic or financial factors. In
most cases, 1st Choice Bank has taken security and personal guarantees to
provide an alternative source of repayment.
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Unlike residential loans, which are generally made on the basis of the
borrower's ability to make repayments from his or her employment and other
income and which are secured by real property whose value tends to be more
easily ascertainable, commercial loans typically are made on the basis of the
borrower's ability to make repayment from the cash flow of the borrower's
business. As a result, the availability of funds for the repayment of
commercial loans may be substantially dependent on the success of the business
itself (which, in turn, is likely to be dependent upon the general economic
environment). 1st Choice Bank's commercial loans are sometimes, but not always,
secured by business assets. However, the collateral securing the loans may
depreciate over time, may be difficult to appraise and may fluctuate in value
based on the success of the business.
1st Choice Bank recognizes the generally increased risks associated with
commercial lending. 1st Choice Bank's commercial lending policy emphasizes
credit file documentation and analysis of the borrower's character, capacity to
repay the loan, and the adequacy of the industry conditions affecting the
borrower. Analysis of the borrower's past, present and future cash flows is
also an important aspect of 1st Choice Bank's credit analysis.
Consumer Lending
1st Choice Bank provides a full range of consumer loans. The underwriting
standards employed by 1st Choice Bank for consumer loans include an
application, a determination of the applicant's payment history on other debts,
net worth, length of current employment and an assessment of ability to meet
existing obligations and payments on the proposed loan.
Consumer loans may entail greater credit risk than do secured residential
loans and even secured commercial loans, particularly in the case of consumer
loans which are unsecured or are secured by rapidly depreciable assets, such as
automobiles. In such cases, any repossessed collateral for a defaulted consumer
loan may not provide an adequate source of repayment of the outstanding loan
balance as a result of the greater likelihood of damage, loss or depreciation.
In addition, consumer loan collections are dependent on the borrower's
continuing financial stability, and thus are more likely to be affected by
adverse personal circumstances. Furthermore, the application of various federal
and state laws, including bankruptcy and insolvency laws, may limit the amount
which can be recovered on such loans.
Investment Activities
1st Choice Bank maintains an investment portfolio comprised primarily of U.S.
Government securities, municipal securities and other investment securities.
1st Choice Bank manages its investment portfolio to (a) maximize safety and
soundness, (b) provide adequate requirements (with liquidity taking precedence
over return), and (c) complement asset/liability management policies.
Source of Funds
General
1st Choice Bank's primary source of funds has historically been customer
deposits. Scheduled loan repayments are a relatively stable source of funds,
while deposit inflows and unscheduled loan prepayments, which are influenced by
general interest rate levels, interest rates available on other investments,
competition, economic conditions and other factors, are not. Although 1st
Choice Bank's deposit balances have shown historical growth, such balances may
be influenced by changes in the banking industry.
Borrowings may be used on a short-term basis to compensate for reductions in
other sources of funds (such as deposit inflows at less than projected levels).
Borrowings may also be used on a longer term basis to support expanded lending
activities and to match the maturity or repricing intervals of assets.
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Deposit Activities
1st Choice Bank offers a variety of accounts for depositors designed to
attract both short-term and long-term deposits. These accounts include
certificates of deposit ("CDs"), savings accounts, money market accounts,
checking and negotiable order of withdrawal accounts and individual retirement
accounts. These accounts generally earn interest at rates established by
management based on competitive market factors and management's desire to
increase or decrease certain types or maturities of deposits.
Competition
The banking business in the cities of Greeley and Fort Collins and counties
of Weld and Larimer is highly competitive. 1st Choice Bank is in direct
competition with Bank One, Colorado, N.A. (Greeley facility), Community First
Bank, Firstier, New Frontier Bank of Greeley, Weld County Bank, Cache Bank of
Greeley, Union Colony Bank (of Greeley), First National Bank (of Fort Collins),
First State Bank of Fort Collins, FirstBank of Northern Colorado, Key Bank of
Colorado, Norwest Bank, Vectra Bank, and various branches of other banks and
several credit unions. The cities of Greeley and Fort Collins are the sixth and
fourth largest cities in the state of Colorado, respectively, and to a degree
1st Choice Bank competes with many different financial institutions in
surrounding counties for business in those cities. 1st Choice Bank also
competes with finance companies, insurance companies, brokerage houses, mutual
funds, credit unions and large retailers.
Employees
1st Choice Bank, including the Fort Collins facility, employed 127 people as
of March 31, 2000. There are 102 full-time and 25 part-time employees.
Management enjoys an excellent relationship with the employees, and 1st Choice
Bank is not a party to any collective bargaining agreement.
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WELLS FARGO CAPITAL STOCK
As a result of the merger, you will become a Wells Fargo stockholder. Your
rights as a Wells Fargo stockholder will be governed by Delaware law, Wells
Fargo's restated certificate of incorporation and Wells Fargo's bylaws. This
description of Wells Fargo's capital stock, including the Wells Fargo common
stock to be issued in the merger, reflects the anticipated state of affairs at
the effective time of the merger.
The following summarizes the material terms of Wells Fargo's capital stock
but does not purport to be complete, and is qualified in its entirety by
reference to the applicable provisions of federal law governing bank holding
companies, Delaware law and Wells Fargo's restated certificate of incorporation
and bylaws and the rights agreement, dated as of October 21, 1998, between
Wells Fargo and ChaseMellon Shareholder Services, L.L.C., as rights agent,
relating to rights to purchase shares of Wells Fargo Series C Junior
Participating Preferred Stock.
A copy of Wells Fargo's restated certificate of incorporation as in effect as
of the date of this document is attached as an exhibit to Wells Fargo's current
report on Form 8-K dated June 28, 1993, and amendments to its certificate of
incorporation are attached as exhibits to its current report on Form 8-K dated
July 3, 1995 and quarterly report on Form 10-Q for the quarter ended September
30, 1998. A copy of Wells Fargo's bylaws as in effect as of the date of this
document is attached as an exhibit to Wells Fargo's annual report on Form 10-K
for the year ended December 31, 1999. A copy of the rights agreement is
attached as an exhibit to Wells Fargo's registration statement on Form 8-A
dated as of October 21, 1998. Wells Fargo's restated certificate of
incorporation and bylaws and the rights agreement are incorporated by reference
into this document.
Wells Fargo Common Stock
Wells Fargo is authorized to issue 4,000,000,000 shares of common stock, par
value $1 2/3 per share. At March 31, 2000, there were shares of
Wells Fargo common stock outstanding. All of the issued and outstanding shares
of Wells Fargo common stock are, and upon the issuance of Wells Fargo common
stock in connection with the merger will be, validly issued, fully paid and
nonassessable. Holders of Wells Fargo common stock are not entitled to any
preemptive rights.
Voting and Other Rights. The holders of Wells Fargo common stock are entitled
to one vote per
share, and, in general, a plurality of votes cast with respect to a matter will
be sufficient to authorize action upon routine matters. However:
. Wells Fargo's restated certificate of incorporation may be amended only
if the proposed amendment is approved by Wells Fargo's board of
directors and thereafter approved by a majority of the outstanding stock
entitled to vote on the amendment and by a majority of the outstanding
stock of each class entitled to vote on the amendment as a class.
. Wells Fargo's stockholders may amend its bylaws by the affirmative vote
of a majority of the outstanding stock entitled to vote thereon.
. With some exceptions, under Delaware law the affirmative vote of a
majority of the outstanding shares of Wells Fargo common stock entitled
to vote is required to approve a merger or consolidation involving Wells
Fargo or the sale, lease or exchange of all or substantially all of
Wells Fargo's corporate assets. See "Comparison of Stockholder Rights--
Stockholder Vote Required for Mergers" for a description of the
exceptions to this rule.
Directors are to be elected by a plurality of the votes cast, and Wells Fargo
stockholders do not have the right to cumulate their votes in the election of
directors. For that reason, holders of a majority of the shares of Wells Fargo
common stock entitled to vote in any election of directors of Wells Fargo may
elect all of the directors standing for election. The Wells Fargo board is not
classified.
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Assets Upon Dissolution. In the event of liquidation, holders of Wells Fargo
common stock would be entitled to receive proportionately any assets legally
available for distribution to stockholders of Wells Fargo with respect to
shares held by them, subject to any prior rights of any Wells Fargo preferred
stock then outstanding.
Distributions. As a Delaware corporation, Wells Fargo may pay dividends out
of surplus or, if there is no surplus, out of net profits for the fiscal year
in which declared and for the preceding fiscal year. Section 170 of the DGCL
also provides that dividends may not be paid out of net profits if, after the
payment of the dividend, capital is less than the capital represented by the
outstanding stock of all classes having a preference upon the distribution of
assets.
As a bank holding company, the ability of Wells Fargo to pay distributions
will be affected by the ability of its banking subsidiaries to pay dividends.
The ability of these banking subsidiaries, as well as of Wells Fargo, to pay
dividends in the future currently is, and could be further, influenced by bank
regulatory requirements and capital guidelines. See "Regulation and Supervision
of Wells Fargo--Dividend Restrictions" for a more detailed description.
Restrictions on Ownership. The Bank Holding Company Act requires any "bank
holding company" (as defined in the Bank Holding Company Act) to obtain the
approval of the Federal Reserve Board prior to acquiring 5% or more of Wells
Fargo's outstanding common stock. Any person other than a bank holding company
is required to obtain prior approval of the Federal Reserve Board to acquire
10% or more of Wells Fargo's outstanding common stock under the Change in Bank
Control Act. Any holder of 25% or more of Wells Fargo's outstanding common
stock (or a holder of 5% or more if that holder otherwise exercises a
"controlling influence" over Wells Fargo), other than an individual, is subject
to regulation as a bank holding company under the Bank Holding Company Act.
Preferred Share Purchase Rights. Each issued share of Wells Fargo common
stock includes a Series C Junior Participating Preferred Stock purchase right.
See "--Wells Fargo Rights Plan" below.
Wells Fargo Preferred Stock
Wells Fargo's restated certificate of incorporation currently authorizes the
issuance of 20,000,000 shares of preferred stock without par value and
4,000,000 shares of preference stock without par value. At March 31, 2000,
there were shares of Wells Fargo preferred stock outstanding and no
shares of Wells Fargo preference stock outstanding.
The Wells Fargo board is authorized to issue preferred stock and preference
stock in one or more series, to fix the number of shares in each such series,
and to determine the designations and voting powers, preferences, and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions of each series. The preferred stock and preference
stock may be issued at any time in any amount, provided that not more than
20,000,000 shares of preferred stock and 4,000,000 shares of preference stock
are outstanding at any one time.
The Wells Fargo board may determine the designation and number of shares
constituting a series, dividend rates, whether the series is redeemable and the
terms of redemption, liquidation preferences, sinking fund requirements,
conversion privileges, voting rights, as well as other preferences and
relative, participating, optional or other special rights and qualifications,
limitations and restrictions of these special rights, all without any vote or
other action on the part of stockholders.
The Wells Fargo board has designated 4,000,000 shares of Wells Fargo
preferred stock for issuance as Series C Junior Participating Preferred Stock
under the rights agreement. No shares of Wells Fargo Series C Junior
Participating Preferred Stock are outstanding as of the date of this document.
See "--Wells Fargo Rights Plan" below.
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Wells Fargo Rights Plan
On October 21, 1998, Wells Fargo's board of directors declared a dividend of
one Series C Junior Participating Preferred Stock purchase right for each
outstanding share of Wells Fargo common stock. The dividend was paid on
November 23, 1998 to Wells Fargo stockholders of record on that date. Each
right entitles the registered holder to purchase from Wells Fargo one one-
thousandth of a share of Wells Fargo Series C Junior Participating Preferred
Stock, subject to adjustment, at a price of $160 per one one-thousandth of a
share of Wells Fargo Series C Junior Participating Preferred Stock. The
description and terms of the rights are set forth in the rights agreement.
Until the earlier to occur of (1) ten days following a public announcement
that a person or group of affiliated or associated persons (an "acquiring
person") have acquired beneficial ownership of 15% or more of the outstanding
shares of Wells Fargo common stock or (2) ten business days (or a later date as
may be determined by action of Wells Fargo's board of directors prior to the
time that any person becomes an acquiring person) following the commencement
of, or announcement of an intention to make, a tender offer or exchange offer
the consummation of which would result in the beneficial ownership by a person
or group of 15% or more of the outstanding shares of Wells Fargo common stock
(the earlier of these dates being called the "rights distribution date"), the
rights will be evidenced, with respect to any of the Wells Fargo common stock
certificates outstanding as of November 23, 1998, by a Wells Fargo common stock
certificate with a copy of the summary of rights, attached to the rights
agreement as Exhibit C, attached to the certificate.
The rights agreement provides that, until the distribution date, the rights
can only be transferred with the shares of Wells Fargo common stock to which
they are attached. Until the distribution date (or earlier redemption or
expiration of the rights), new Wells Fargo common stock certificates issued
after November 23, 1998, upon transfer or new issuance of Wells Fargo common
stock, will contain a notation incorporating the rights agreement by reference.
Until the distribution date (or earlier redemption or expiration of the
rights), the surrender for transfer of any certificates for shares of Wells
Fargo common stock, outstanding as of November 23, 1998, even without this
notation or a copy of the summary of rights being attached to the certificates,
will also constitute the transfer of the rights associated with the shares of
Wells Fargo common stock represented by the certificate. As soon as practicable
following the distribution date, separate certificates evidencing the rights
will be mailed to holders of record of the shares of Wells Fargo common stock
as of the close of business on the distribution date and these separate rights
certificates alone will evidence the rights.
The rights are not exercisable until the distribution date. The rights will
expire on November 23, 2008, unless that date is extended or unless the rights
are earlier redeemed by Wells Fargo, in each case, as described below.
The purchase price payable, and the number of shares of Wells Fargo Series C
Junior Participating Preferred Stock or other securities or property issuable,
upon exercise of the rights are subject to adjustment from time to time to
prevent dilution:
. in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Wells Fargo Series C Junior Participating
Preferred Stock;
. upon the grant to holders of the Wells Fargo Series C Junior
Participating Preferred Stock of certain rights or warrants to subscribe
for or purchase Wells Fargo Series C Junior Participating Preferred
Stock at a price, or securities convertible into Wells Fargo Series C
Junior Participating Preferred Stock with a conversion price, less than
the then-current market price of the Wells Fargo Series C Junior
Participating Preferred Stock; or
. upon the distribution to holders of the Wells Fargo Series C Junior
Participating Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends or dividends payable in
Wells Fargo Series C Junior Participating Preferred Stock) or of
subscription rights or warrants (other than those referred to above).
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The number of outstanding rights and the number of one one-thousandths of a
share of Wells Fargo Series C Junior Participating Preferred Stock issuable
upon exercise of each right are also subject to adjustment in the event of a
stock split of the shares of Wells Fargo common stock or a stock dividend on
the shares of Wells Fargo common stock payable in shares of Wells Fargo common
stock or subdivisions, consolidations or combinations of the shares of Wells
Fargo common stock occurring, in any such case, prior to the distribution date.
Wells Fargo Series C Junior Participating Preferred Stock purchasable upon
exercise of the rights will not be redeemable. Each share of Wells Fargo Series
C Junior Participating Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $10 per share but will be entitled
to an aggregate dividend of 1000 times the dividend declared per share of Wells
Fargo common stock. In the event of liquidation, the holders of the Wells Fargo
Series C Junior Participating Preferred Stock will be entitled to a minimum
preferential liquidation payment of $1000 per share but will be entitled to an
aggregate payment of 1000 times the payment made per share of Wells Fargo
common stock. Each share of Wells Fargo Series C Junior Participating Preferred
Stock will have 1000 votes, voting together with the shares of Wells Fargo
common stock. Finally, in the event of any merger, consolidation or other
transaction in which shares of Wells Fargo common stock are exchanged, each
share of Wells Fargo Series C Junior Participating Preferred Stock will be
entitled to receive 1000 times the amount received per share of Wells Fargo
common stock. These rights are protected by customary antidilution provisions.
Because of the nature of the Wells Fargo Series C Junior Participating
Preferred Stock's dividend, liquidation and voting rights, the value of the one
one-thousandth interest in a share of Wells Fargo Series C Junior Participating
Preferred Stock purchasable upon exercise of each right should approximate the
value of one share of Wells Fargo common stock.
In the event that Wells Fargo is acquired in a merger or other business
combination transaction, or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a right
will then have the right to receive, upon the exercise of the right at its
then-current exercise price, that number of shares of common stock of the
acquiring company that at the time of such transaction will have a market value
of two times the exercise price of the right. In the event that any person or
group of affiliated or associated persons becomes the beneficial owner of 15%
or more of the outstanding shares of Wells Fargo common stock, proper provision
will be made so that each holder of a right, other than rights beneficially
owned by the acquiring person (which will be void after that time), will then
have the right to receive upon exercise that number of shares of Wells Fargo
common stock having a market value of two times the exercise price of the
right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
shares of Wells Fargo common stock, and prior to their acquisition of 50% or
more of the outstanding shares of Wells Fargo common stock, the Wells Fargo
board may exchange the rights (other than rights owned by such person or group
which have become void), in whole or in part, at an exchange ratio of one share
of Wells Fargo common stock, or one one-thousandth of a share of Wells Fargo
Series C Junior Participating Preferred Stock (or of a share of a class or
series of Wells Fargo preferred stock having equivalent rights, preferences and
privileges), per right (subject to adjustment).
With some exceptions, no adjustment in the purchase price will be required
until cumulative adjustments require an adjustment of at least 1% in the
purchase price. No fractional shares of Wells Fargo Series C Junior
Participating Preferred Stock will be issued (other than fractions which are
integral multiples of one one-thousandth of a share of Wells Fargo Series C
Junior Participating Preferred Stock, which may, at the election of Wells
Fargo, be evidenced by scrip or depositary receipts), and, in lieu of
fractional shares, an adjustment in cash will be made based on the market price
of the Wells Fargo Series C Junior Participating Preferred Stock on the last
trading day prior to the date of exercise.
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At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
shares of Wells Fargo common stock, the Wells Fargo board may redeem the rights
in whole, but not in part, at a price of $.01 per right. The redemption of the
rights may be made effective at the time, on the basis, and with the conditions
that the Wells Fargo board, in its sole discretion, may establish. Immediately
upon any redemption of the rights, the right to exercise the rights will
terminate and the only right of the holders of the rights will be to receive
the redemption price.
The terms of the rights may be amended by the Wells Fargo board without the
consent of the holders, including an amendment to lower the 15% triggering
thresholds described above to not less than the greater of:
. 0.001% greater than the largest percentage of the outstanding shares of
Wells Fargo common stock then known to Wells Fargo to be beneficially
owned by any person or group of affiliated or associated persons, and
. 10%.
However, from and after the time that any person becomes an Acquiring Person,
no amendment may adversely affect the interests of the holders of the rights.
Until a right is exercised, the holder, as such, will have no rights as a
stockholder of Wells Fargo, including, without limitation, the right to vote or
to receive dividends.
The Rights Have Anti-Takeover Effects. The stockholder rights will cause
substantial dilution to a person or group that attempts to acquire Wells Fargo
on terms not approved by the Wells Fargo board, except by means of an offer
conditioned on a substantial number of rights being acquired. The rights should
not interfere with any merger or other business combination approved by the
Wells Fargo board, as the rights may be redeemed by Wells Fargo at the required
redemption price prior to the time that a person or group has acquired
beneficial ownership of 15% or more of the shares of Wells Fargo common stock.
The rights agreement, specifying the terms of the rights and including, as an
exhibit, the form of the certificate of designation setting forth the terms of
the Wells Fargo Series C Junior Participating Preferred Stock, is attached as
an exhibit to Wells Fargo's registration statement on Form 8-A, dated October
21, 1998, and is incorporated in this document by reference. The foregoing
description of the Wells Fargo Series C Junior Participating Preferred Stock
purchase rights is qualified in its entirety by reference to this exhibit. See
"Where You Can Find More Information" for information on how to obtain this
document.
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COMPARISON OF STOCKHOLDER RIGHTS
The rights of 1st Choice shareholders are currently governed by the Colorado
Business Corporation Act (CBCA), 1st Choice's articles of incorporation and 1st
Choice's bylaws. The rights of Wells Fargo stockholders are currently governed
by the Delaware General Corporation Law (DGCL), Wells Fargo's restated
certificate of incorporation and Wells Fargo's bylaws. The following is a
summary of material differences between the rights of 1st Choice shareholders
and the rights of Wells Fargo stockholders. It is not a complete statement of
the provisions affecting, and the differences between, the rights of 1st Choice
shareholders and Wells Fargo stockholders. The summary is qualified in its
entirety by reference to the CBCA, the DGCL, 1st Choice's articles of
incorporation and bylaws, and Wells Fargo's restated certificate of
incorporation and bylaws.
Authorized Capital Stock
1st Choice Wells Fargo
Authorized: Authorized:
. 10,000,000 shares of common stock. . 4,000,000,000 shares of common
stock.
Outstanding as of March 31, 2000: . 20,000,000 shares of preferred
stock.
. 3,267,094 shares of common stock . 4,000,000 shares of preference
stock.
Outstanding as of March 31, 2000:
. shares of common stock.
. shares of preferred stock.
. No shares of preference stock.
Size of Board of Directors
1st Choice Wells Fargo
The CBCA provides that the board of The DGCL provides that the board of
directors of a Colorado corporation directors of a Delaware corporation
shall consist of one or more shall consist of one or more
directors as fixed by the directors as fixed by the
corporation's bylaws. Under 1st corporation's certificate of
Choice's bylaws, the number incorporation or bylaws. Under Wells
directors shall be fixed by Fargo's restated certificate of
resolution of the board of directors incorporation, the number of
from time to time. The number of directors shall be as specified in
directors of 1st Choice is currently the bylaws but in no event less than
fixed at 13. 3. Wells Fargo's bylaws provide for
a board of directors consisting of
not less than 10 nor more than 28
persons, each serving a term of one
year or until his or her earlier
death, resignation or removal. The
number of directors of Wells Fargo
is currently fixed at 18.
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<PAGE>
Cumulative Voting
Cumulative voting entitles each stockholder to cast an aggregate number of
votes equal to the number of voting shares held, multiplied by the number of
directors to be elected. Each stockholder may cast all of his or her votes for
one nominee or distribute them among two or more nominees. The candidates (up
to the number of directors to be elected) receiving the highest number of votes
are elected.
1st Choice Wells Fargo
Under the CBCA, shareholders have Under the DGCL, stockholders do not
the right to cumulate their votes have the right to cumulate their
unless a statement to the effect votes in the election of directors
that cumulative voting is not unless such right is granted in the
allowed is in the corporation's certificate of incorporation. Wells
articles of incorporation. 1st Fargo's restated certificate of
Choice's articles of incorporation incorporation does not provide for
provide that cumulative voting shall cumulative voting.
not be allowed in the election of
directors or for any other purpose.
Classes of Directors
1st Choice Wells Fargo
The CBCA permits classification of a The DGCL permits classification of a
Colorado corporation's board of Delaware corporation's board of
directors, and for staggered terms. directors, and for staggered terms.
1st Choice's board is not Wells Fargo's board is not
classified. classified.
Qualifications of Directors
1st Choice Wells Fargo
Under the CBCA, a director shall be Under the DGCL, a director need not
a natural person who is 18 years of be a resident of the state of
age or older. A director need not be Delaware unless the certificate of
a resident of Colorado or a incorporation or bylaws so
shareholder unless the bylaws so prescribe. Otherwise, qualifications
prescribe. 1st Choice's bylaws do for directors may be set forth in
not require directors to be the certification of incorporation
residents of Colorado or a or bylaws. Wells Fargo's restated
shareholder. certificate of incorporation
requires directors to be
stockholders.
Filling Vacancies on the Board
1st Choice Wells Fargo
The CBCA and 1st Choice's articles The DGCL provides that, unless the
of incorporation provide that if a governing documents of a corporation
vacancy occurs on the board of provide otherwise, vacancies and
directors, the shareholders may fill newly created directorships
the vacancy, the board of directors resulting from a resignation or any
may fill the vacancy, or if the increase in the authorized number of
directors remaining in office directors elected by all of the
constitute fewer than a quorum of stockholders having the right to
the board, they may fill the vacancy vote as a single class may be filled
by the affirmative vote of a by a majority of the directors then
majority of all the directors in office. Under Wells Fargo's
remaining in office. restated certificate of
incorporation and bylaws, 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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<PAGE>
Removal of Directors
1st Choice Wells Fargo
The CBCA and 1st Choice's articles The DGCL provides that a director or
of incorporation provide that one or the entire board of directors may be
more directors may be removed, with removed, with or without cause, by
or without cause, unless the the holders of a majority of the
articles provide that directors may shares then entitled to vote at an
be removed only for cause. A election of directors. However, in
director may be removed by the the case of a corporation whose
shareholders only at a meeting board is classified, the directors
called for the purpose of removing a may be removed only for cause unless
director and only if the votes cast the certificate of incorporation
in favor of removal exceed the votes provides otherwise. Wells Fargo's
cast against removal. board is not classified.
Nomination of Directors for Election
1st Choice Wells Fargo
1st Choice's bylaws do not address Under Wells Fargo's bylaws,
the nomination of directors. nominations for Wells Fargo's board
may be made by the board or by any
stockholder who complies with the
notice procedures described in Wells
Fargo's bylaws. These procedures
require the notice to be received by
Wells Fargo not less than 30 nor
more than 60 days prior to the
meeting. However, if less than 40
days' prior public disclosure of the
date of the meeting is given to
stockholders, then the notice must
be received no later than 10 days
after the first public announcement
of the meeting date.
Anti-Takeover Provisions
1st Choice Wells Fargo
The CBCA does not have a business The DGCL contains a business
combination statute. combination statute that protects
domestic corporations from hostile
takeovers, and from actions
following such a takeover, by
prohibiting some transactions once
an acquiror has gained a significant
holding in the corporation.
Section 203 of the DGCL prohibits
"business combinations," including
mergers, sales and leases of assets,
issuances of securities and similar
transactions by a corporation or a
subsidiary with an "interested
stockholder" who beneficially owns
15 percent or more of a
corporation's voting stock, within
three years after the person or
entity becomes an interested
stockholder, unless:
. the transaction that will cause
the person to become an
interested stockholder is
approved by the board of
directors of the target prior
to the transaction,
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<PAGE>
. after the completion of the
transaction in which the person
becomes an interested
stockholder, the interested
stockholder holds at least 85%
of the voting stock of the
corporation not including (a)
shares held by officers and
directors of interested
stockholders and (b) shares
held by specified employee
benefit plans, or
. after the person becomes an
interested stockholder, the
business combination is
approved by the board of
directors and holders of at
least 66 2/3% of the
outstanding voting stock,
excluding shares held by the
interested stockholder.
A Delaware corporation may elect not
to be governed by Section 203 by a
provision contained in its original
certificate of incorporation or an
amendment thereto or to the bylaws,
which amendment must be approved by
a majority of the shares entitled to
vote and may not be further amended
by the board of directors. Such an
amendment is not effective until 12
months following its adoption. Wells
Fargo has not made such an election.
Stockholder Rights Plan
1st Choice Wells Fargo
1st Choice does not have a Wells Fargo has implemented a
shareholder 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."
Stockholder Action Without a Meeting
1st Choice Wells Fargo
In accordance with Section 7-107-104 In accordance with Section 228 of
of the CBCA, 1st Choice's bylaws the DGCL, Wells Fargo's bylaws
provide that any action required or provide that any action required or
permitted to be taken at a meeting permitted to be taken at a
of the shareholders may be taken stockholders' meeting may be taken
without a meeting if a consent in without a meeting pursuant to the
writing, setting forth the actions written consent of the holders of
taken, shall be signed by all the the number of shares that would have
shareholders. been required to effect the action
at an actual meeting of the
stockholders, and provide certain
procedures to be followed in
such cases.
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<PAGE>
Calling Special Meetings of Stockholders
1st Choice Wells Fargo
Under the CBCA, a special meeting of Under the DGCL, a special meeting of
the shareholders may be called by stockholders may be called by the
the board of directors or the person board of directors or by any other
or persons authorized by the bylaws person authorized to do so in the
or resolution of the board of certificate of incorporation or the
directors to call the meeting or if bylaws. Wells Fargo's bylaws provide
the corporation receives one or more that a special meeting of
written demands for the meeting stockholders may be called only by
stating the purpose or purposes for the chairman of the board, a vice
which it is to be held, signed by chairman, the president or a
the holders of shares representing majority of Wells Fargo's board of
at least ten percent of all the directors. Holders of Wells Fargo
votes entitled to be cast on any common stock do not have the ability
issue proposed to be considered at to call a special meeting of
the meeting. 1st Choice's bylaws stockholders.
provide that a special meeting may
be called by the president or the
board of directors or if it receives
one or more written demands for the
meeting from holders of ten percent
of all the votes entitled to be cast
on any issue proposed to be
considered at the meeting.
Submission of Stockholder Proposals
1st Choice Wells Fargo
1st Choice's bylaws do not address The Wells Fargo bylaws provide that
the submission of shareholder in order for a stockholder to bring
proposals. business before the annual meeting,
the stockholder must give timely
notice of the proposal to Wells
Fargo. To be timely, the notice must
be received not later than the 90th
day nor earlier than the 120th day
prior to the first anniversary of
the preceding year's annual meeting.
However, if the annual meeting is
more than 30 days before or more
than 60 days after the anniversary
of the prior year's annual meeting,
to be timely the notice must be
delivered no earlier than 120 days
prior to the annual meeting and no
later than the later of 90 days
prior to the annual meeting or 10
days after the first public
announcement of the meeting date.
Notice of Stockholder Meetings
1st Choice Wells Fargo
The CBCA and 1st Choice's bylaws The DGCL requires notice of
require notice of a shareholders' stockholders' meetings to be sent to
meeting to be given to each all stockholders of record entitled
shareholder of record entitled to to vote thereon not less than 10 nor
notice at such meeting not less than more than 60 days prior to the date
10 or more than 60 days before the of the meeting. Wells Fargo's bylaws
date of the meeting; except that if provide for written notice to
the authorized shares of the stockholders of record at least 10
corporation are to be increased, at days prior to an annual or special
least 30 days notice shall be given. meeting.
52
<PAGE>
Stockholder Vote Required for Mergers
1st Choice Wells Fargo
Under the CBCA, unless the articles Under the DGCL, a merger,
of incorporation, bylaws adopted by consolidation or sale of all or
the shareholders, or the board of substantially all of a corporation's
directors requires as a condition to assets must be approved by the board
the effectiveness of the merger, a of directors and by a majority of
greater vote, a merger must be the outstanding stock of the
approved by a majority of all votes corporation entitled to vote
entitled to be cast on the merger. thereon. However, under DGCL 251(f),
The CBCA provides that if a no vote of stockholders of a
corporation was formed prior to June constituent corporation surviving a
30, 1994, unless the articles of merger is required, unless the
incorporation provide otherwise, corporation provides otherwise in
two-thirds of the votes entitled to its certificate of incorporation, if
be cast on the merger shall vote in
favor of the merger. 1st Choice's . the merger agreement does not
articles of incorporation provide amend the certificate of
for a majority vote. However, under incorporation of the surviving
the CBCA no vote of the shareholders corporation,
of a constituent corporation is
required if . each share of stock of the
surviving corporation outstanding
. the merger does not amend the before the merger is an identical
existing articles of outstanding or treasury share
incorporation, after the merger, and
. each shareholder of the surviving . either no shares of common stock
corporation whose shares were of the surviving corporation are
outstanding immediately prior to to be issued or delivered pursuant
the merger will hold the same to the merger or, if such common
number of shares, with individual stock will be issued or delivered,
designations, preferences, it will not increase the number of
limitations and relative rights, shares of common stock outstanding
immediately after the merger, immediately prior to the merger by
more than 20%.
. the number of voting shares
outstanding immediately prior to
the merger, plus the number of
voting shares outstanding
immediately after the merger or by
the exercise of rights or warrants
issued pursuant to merger, will
not exceed by more than 20% the
total number of shares of the
surviving corporation outstanding
immediately before the merger, and
. the number of participating shares
outstanding immediately after the
merger, plus the number of
participating shares issuable as a
result of the merger, either by
the conversion of securities
issued pursuant to the merger or
by the exercise of rights and
warrants issued pursuant to the
merger, will not exceed by more
than 20% the total number of
participating shares outstanding
immediately before the merger.
53
<PAGE>
Dividends
1st Choice Wells Fargo
Colorado corporations may pay Delaware corporations may pay
dividends unless, after giving it dividends out of surplus or, if
effect, the corporation would not be there is no surplus, out of net
able to pay its debts as they become profits for the fiscal year in which
due in the usual course of business, declared and for the preceding
or if the corporation's total assets fiscal year. Section 170 of the DGCL
would be less than the sum of its also provides that dividends may not
total liabilities plus the amount be paid out of net profits if, after
that would be needed, if the the payment of the dividend, capital
corporation were to be dissolved at is less than the capital represented
the time of the distribution, to by the outstanding stock of all
satisfy the preferential rights upon classes having a preference upon the
dissolution of shareholders whose distribution of assets. Wells Fargo
preferential rights are superior to is also subject to Federal Reserve
those received in the distribution. Board policies regarding payment of
dividends, which generally limit
1st Choice is also subject to dividends to operating earnings. See
Federal Reserve Board policies "Regulation and Supervision of Wells
regarding payment of dividends, Fargo."
which generally limit dividends to
operating earnings. Wells Fargo's bylaws provide that
the stockholders have the right to
receive dividends if and when
declared by Wells Fargo's board.
Dividends may be paid in cash,
property or shares of capital stock.
54
<PAGE>
Dissenters' Appraisal Rights
1st Choice Wells Fargo
The CBCA provides shareholders of a Section 262 of the DGCL provides
corporation involved in a merger, stockholders of a corporation
share exchange, or the sale, lease involved in a merger the right to
or exchange or other disposition of demand and receive payment of the
all or substantially all of the fair value of their stock in certain
property of the corporation, the mergers. However, appraisal rights
right to demand and receive payment are not available to holders of
of the fair value of their stock. shares:
However, dissenter's rights are not
available: . listed on a national securities
exchange,
. with respect to the sale of all or
substantially all of the assets of . designated as a national market
the corporation or a merger if no system security on an interdealer
vote of the shareholders is quotation system operated by the
required to approve the National Association of Securities
transaction under Colorado law, or Dealers, Inc., or
. to shareholders of shares which . held of record by more than 2,000
either were listed on a national stockholders
securities exchange registered
under the Securities Exchange Act unless holders of stock are required
of 1934 or on the national market to accept in the merger anything
system of the National Association other than any combination of:
of Securities Dealers Automated
Quotation System or were held of . shares of stock or depository
record by more than 2,000 holders receipts of the surviving
and such shareholders receive only corporation in the merger
shares of the surviving
corporation or shares of any other . shares of stock or depository
corporation that are either listed receipts of another corporation
on a national securities exchange that, at the effective date of the
registered under the Securities merger, will be
Exchange Act of 1934 or on the
national market system of the . listed on a national securities
National Association of Securities exchange,
Dealers Automated Quotation System
or held of record by more than . designated as a national market
2,000 holders. system security on an
interdealer quotation system
Dissenter's rights are available to operated by the National
the shareholders of 1st Choice in Association of Securities
connection with the merger. Dealers, Inc., or
. held of record by more than
2,000 holders
. 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 New York and Chicago Stock
Exchanges 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.
55
<PAGE>
Stockholder Preemptive Rights
1st Choice Wells Fargo
Under Colorado law, shareholders of The DGCL provides that no
a corporation in existence in June stockholder shall have any
30, 1994 have a preemptive right to preemptive rights to purchase
acquire unused shares except to the additional securities of the
extent the articles of incorporation corporation unless the certificate
limit or deny preemptive rights, 1st of incorporation expressly grants
Choice's articles of incorporation these rights. Wells Fargo's restated
provide that no shareholder shall certificate of incorporation does
have preemptive rights. not provide for preemptive rights.
Stockholder Class Voting Rights
1st Choice Wells Fargo
The CBCA requires voting by separate The DGCL requires voting by separate
voting groups with respect to classes of shares only with respect
mergers and share exchanges, to amendments to a corporation's
dissolution, an amendment to the certificate of incorporation that
corporation's articles of adversely affect the holders of
incorporation and the sale of all or those classes or that increase or
substantially all of the assets of decrease the aggregate number of
the corporation. authorized shares or the par value
of the shares of any of those
classes.
Indemnification
1st Choice Wells Fargo
The CBCA provides that, subject to The DGCL provides that, subject to
certain limitations in the case of certain limitations in the case of
"derivative suits" brought by a "derivative" suits brought by a
corporation's stockholders in its corporation's stockholders in its
name or in a proceeding involving name, a corporation may indemnify
receipt of an improper personal any person who is made a party to
benefit, a corporation may indemnify any third-party suit or proceeding
any person who is made a party to a on account of being a director,
proceeding on account of being a officer, employee or agent of the
director, officer, employee corporation against expenses,
fiduciary or agent of the including attorney's fees,
corporation for reasonable expenses judgments, fines and amounts paid in
incurred in connection with the settlement reasonably incurred by
proceeding if the person: him or her in connection with the
action, through, among other things,
. conducted himself or herself in a majority vote of a quorum
good faith, and consisting of directors who were not
parties to the suit or proceeding,
. reasonably believed, in the case if the person:
of conduct in an official capacity
with the corporation, that his or . acted in good faith and in a
her conduct was in the manner he or she reasonably
corporation's best interest and in believed to be in or not opposed
the case of any criminal to the best interests of the
proceeding, the person had no corporation or, in some
reasonable cause to believe his or circumstances, at least not
her conduct was unlawful. opposed to its best interests; and
To the extent a director, officer, . in a criminal proceeding, had no
employee, fiduciary or agent is reasonable cause to believe his or
wholly successful, on the merits or her conduct was unlawful.
otherwise, in the defense of any
proceeding to which the person was a To the extent a director, officer,
party, the corporation is required employee or agent is successful in
to indemnify such person for the defense of such an action, suit
reasonable expenses incurred by him or proceeding, the corporation is
or her in connection with the required by the DGCL to indemnify
proceeding. such person for reasonable expenses
incurred thereby.
56
<PAGE>
1st Choice's articles of Wells Fargo's restated certificate
incorporation provide that the of incorporation provides that Wells
corporation shall indemnify its Fargo must indemnify, to the fullest
directors to the full extent extent authorized by the DGCL, each
provided by Colorado; provided, person who was or is made a party
however, that such indemnification to, is threatened to be made a party
shall not apply to expenses, to or is involved in any action,
penalties or other payments incurred suit or proceeding because he or she
in connection with an administrative is or was a director or officer of
proceeding or action instituted by a Wells Fargo (or was serving at the
regulatory agency, which proceeding request of Wells Fargo as a
or action results in a final order director, trustee, officer,
assessing civil money penalties or employee, or agent of another
requiring affirmative action by such entity) while serving in such
person in the form of payments to capacity against all expenses,
the corporation, and further liabilities, or loss incurred by
provided that the corporation shall such person in connection therewith,
in no event pay for or reimburse provided that indemnification in
expenses incurred by a director who connection with a proceeding brought
is a party to an administrative by such person will be permitted
proceeding or action instituted by a only if the proceeding was
regulatory agency in advance of the authorized by Wells Fargo's board of
final disposition of such directors.
proceeding.
Wells Fargo's restated certificate
of incorporation also provides that
Wells Fargo must pay expenses
incurred in defending the
proceedings specified above in
advance of their final disposition,
provided that, if so required by the
DGCL, such advance payments for
expenses incurred by a director or
officer may be made only if he or
she undertakes to repay all amounts
so advanced if it is ultimately
determined that the person receiving
such payments is not entitled to be
indemnified. Wells Fargo's restated
certificate of incorporation
authorizes Wells Fargo to provide
similar indemnification to employees
or agents of Wells Fargo.
Pursuant to Wells Fargo's restated
certificate of incorporation, Wells
Fargo may maintain insurance, at its
expense, to protect itself and any
directors, officers, employees or
agents of Wells Fargo or another
entity against any expense,
liability or loss, regardless of
whether Wells Fargo has the power or
obligation to indemnify that person
against such expense, liability or
loss under the DGCL.
The right to indemnification is not
exclusive of any other right which
any person may have or acquire under
any statute, provision of Wells
Fargo's restated certificate of
incorporation or bylaws, agreement,
vote of stockholders or
disinterested directors or
otherwise.
57
<PAGE>
Limitations on Directors' Liability
1st Choice Wells Fargo
1st Choice's articles of Wells Fargo's restated certificate
incorporation provide that a of incorporation provides that a
director shall not be liable to the director (including an officer who
corporation or its shareholders for is also a director) of Wells Fargo
monetary damages for breach of shall not be liable personally to
fiduciary duty as a director. Wells Fargo or its stockholders for
monetary damages for breach of
fiduciary duty as a director, except
for liability arising out of:
. any breach of the director's duty
of loyalty to Wells Fargo or its
stockholders,
. acts or omissions not in good
faith or which involve intentional
misconduct or a knowing violation
of law,
. payment of a dividend or approval
of a stock repurchase in violation
of Section 174 of the DGCL, or
. any transaction from which the
director derived an improper
personal benefit.
This provision protects Wells
Fargo's directors against personal
liability for monetary damages from
breaches of their duty of care. It
does not eliminate the director's
duty of care and has no effect on
the availability of equitable
remedies, such as an injunction or
rescission, based upon a director's
breach of his or her duty of care.
Amendment of Certificate of Incorporation
1st Choice Wells Fargo
Under the CBCA, unless the articles Under the DGCL, amendments to a
of incorporation, bylaws adopted by corporation's certificate of
the shareholders or the proposing incorporation require the approval
board of directors or the proposing of the board of directors and
shareholders require a greater vote, stockholders holding a majority of
amendments to a corporation's the outstanding stock of such class
articles of incorporation require entitled to vote on such amendment
the approval of the board of as a class, unless a different
directors and a majority of the proportion is specified in the
shareholders of each voting group certificate of incorporation or by
entitled to vote on such amendment. other provisions of the DGCL.
Wells Fargo's restated certificate
of incorporation may be amended only
if the proposed amendment is
approved by Wells Fargo's board of
directors and thereafter approved by
a majority of the outstanding stock
entitled to vote thereon and by a
majority of the outstanding stock of
each class entitled to vote thereon
as a class. Shares of Wells Fargo
preferred stock and Wells Fargo
preference stock currently
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authorized in Wells Fargo's restated
certificate of incorporation may be
issued by Wells Fargo's board of
directors without amending Wells
Fargo's restated certificate of
incorporation or otherwise obtaining
the approval of Wells Fargo's
stockholders.
Amendment of Bylaws
1st Choice Wells Fargo
Under the CBCA, the board of Under the DGCL, holders of a
directors may amend the bylaws at majority of the voting power of a
any time to add, change or delete a corporation, and, when provided in
provision unless the CBCA or the the certificate of incorporation,
articles of incorporation reserve the directors of the corporation,
such power to the shareholders or a have the power to adopt, amend and
particular bylaw expressly prohibits repeal the bylaws of a corporation.
the board of directors from doing
so. Wells Fargo's bylaws generally
provide for amendment by a majority
1st Choice's bylaws provide that the of Wells Fargo's board of directors
directors may amend or repeal the or by a majority of the outstanding
bylaws unless the articles of stock entitled to vote thereon.
incorporation or the CBCA reserve However, Wells Fargo's bylaws
such power exclusively to the require the affirmative vote or
shareholders, in whole or in part, consent of 80% of the common stock
or the shareholders, in amending or outstanding to amend a bylaw provision
repealing a particular bylaw related to maintaining local
provision, provide expressly that directorships at subsidiaries with
the directors may not amend or which Wells Fargo has an agreement
repeal such bylaw. to so maintain local directorships.
The shareholders may amend or repeal
the bylaws even though the bylaws
may also be amended or repealed by
the directors.
59
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Wells Fargo Share Prices And Dividends
Wells Fargo common stock is listed on the New York Stock Exchange (NYSE) and
the Chicago Stock Exchange under the symbol "WFC." Before November 3, 1998, the
common stock traded under the symbol "NOB." The following table shows, for the
periods indicated, the high and low sales prices of Wells Fargo common stock on
the NYSE composite transactions reporting system and the cash dividends paid
per share.
<TABLE>
<CAPTION>
Price Range
----------- Dividends
High Low Paid
----- ----- ---------
<S> <C> <C> <C>
1998
First Quarter...................................... 43.88 34.75 0.165
Second Quarter..................................... 43.75 34.00 0.165
Third Quarter...................................... 39.75 27.50 0.185
Fourth Quarter..................................... 40.88 30.19 0.185
1999
First Quarter...................................... 40.44 32.13 0.185
Second Quarter..................................... 44.88 34.38 0.200
Third Quarter...................................... 45.31 36.44 0.200
Fourth Quarter..................................... 49.94 38.38 0.200
2000
First Quarter...................................... 41.69 31.88 0.220
Second Quarter (through May )....................
</TABLE>
The timing and amount of future dividends will depend on earnings, cash
requirements, the financial condition of Wells Fargo and its subsidiaries,
applicable government regulations and other factors deemed relevant by Wells
Fargo's board of directors in its discretion. As described in "Regulation And
Supervision Of Wells Fargo--Dividend Restrictions," various federal and state
laws limit the ability of affiliate banks to pay dividends to Wells Fargo.
1st Choice Share Prices And Dividends
There is no public market for 1st Choice common stock. 1st Choice has never
paid dividends.
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<PAGE>
EXPERTS
The consolidated financial statements of Wells Fargo and subsidiaries as of
December 31, 1999 and 1998, and for each of the years in the three-year period
ended December 31, 1999, incorporated by reference herein, have been
incorporated herein in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
OPINIONS
Share Issuance
Stanley S. Stroup, Executive Vice President and General Counsel of Wells
Fargo, has rendered a legal opinion that the shares of Wells Fargo common stock
offered hereby, when issued in accordance with the merger agreement, will be
validly issued, fully paid and nonassessable. Mr. Stroup beneficially owns
shares of Wells Fargo common stock and options to purchase additional shares of
Wells Fargo common stock. As of the date of this proxy statement-prospectus,
the total number of shares Mr. Stroup owns or has the right to acquire upon
exercise of his options is less than 0.1% of the outstanding shares of Wells
Fargo common stock.
Tax Matters
Jones & Keller, P.C. has given an opinion regarding the material U.S. federal
income tax consequences of the merger. See "The Merger--U.S. Federal Income Tax
Consequences Of The Merger."
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WHERE YOU CAN FIND MORE INFORMATION
Registration Statement
Wells Fargo has filed a registration statement on Form S-4 to register with
the SEC the Wells Fargo common stock to be issued to 1st Choice shareholders in
the merger. This proxy statement-prospectus is part of that registration
statement. The registration statement, including the exhibits to the
registration statement, contains additional relevant information about Wells
Fargo and Wells Fargo common stock. As allowed by SEC rules, this proxy
statement-prospectus does not contain all of the information you can find in
the registration statement or the exhibits to the registration statement.
Other Wells Fargo SEC Filings
Wells Fargo files annual, quarterly and current reports, proxy statements and
other information with the SEC. Wells Fargo's SEC filings are available to the
public over the Internet at the SEC's web site at http://www.sec.gov. You can
also read and copy any document filed by Wells Fargo or 1st Choice with the SEC
at the following SEC locations:
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
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. You may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Wells Fargo's SEC filings are also available from commercial document
retrieval services and from the New York and Chicago Stock Exchanges. For
information on obtaining copies of Wells Fargo's SEC filings at the New York
Stock Exchange, call (212) 656-5060, and at the Chicago Stock Exchange, call
(312) 663-2423.
Documents Incorporated By Reference
Some of the information you may want to consider in deciding how to vote on
the merger is not physically included in this proxy statement-prospectus.
Instead, the information is "incorporated by reference" to documents that have
been filed by Wells Fargo with the SEC.
This proxy statement-prospectus incorporates by reference the Wells Fargo SEC
documents set forth below. All of the documents were filed under SEC File No.
001-2979. Documents filed before November 3, 1998 were filed under the name
Norwest Corporation.
. Annual Report on Form 10-K for the year ended December 31, 1999,
including information specifically incorporated by reference into the
Form 10-K from Wells Fargo's 1999 Annual Report to Stockholders and
Wells Fargo's definitive Notice and Proxy Statement for Wells Fargo's
2000 Annual Meeting of Stockholders;
. [Quarterly Report on Form 10-Q for the quarter ended March 31, 2000];
. Current Reports on Form 8-K filed January 18, 2000, January 26, 2000,
April 12, 2000 and April , 2000;
. The description of Wells Fargo common stock contained in the Current
Report on Form 8-K filed October 14, 1997, including any amendment or
report filed to update such description;
. The description of preferred stock purchase rights contained in the
Registration Statement on Form 8-A dated October 21, 1998, including any
amendment or report filed to update such description; and
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. All reports and definitive proxy or information statements filed by
Wells Fargo pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after the date of this proxy statement-
prospectus and before completion of the merger and the exchange of Wells
Fargo common stock for 1st Choice common stock.
Documents Available Without Charge
Wells Fargo will provide, without charge, copies of any report incorporated
by reference into this proxy statement-prospectus, excluding exhibits other
than those that are specifically incorporated by reference in this proxy
statement-prospectus. You may obtain a copy of any document incorporated by
reference by writing or calling Wells Fargo:
Corporate Secretary
Wells Fargo & Company
MAC N9305-173
Sixth and Marquette
Minneapolis, MN 55479
(612) 667-8655
To ensure delivery of the copies in time for the special meeting, your
request should be received by June 2, 2000.
In deciding how to vote on the merger, you should rely only on the
information contained or incorporated by reference in this proxy statement-
prospectus. Neither Wells Fargo nor 1st Choice has authorized any person to
provide you with any information that is different from what is contained in
this proxy statement-prospectus. This proxy statement-prospectus is dated May
8, 2000. You should not assume that the information contained in this proxy
statement-prospectus is accurate as of any date other than such date, and
neither the mailing to you of this proxy statement-prospectus nor the issuance
to you of shares of Wells Fargo common stock will create any implication to the
contrary.
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FORWARD-LOOKING STATEMENTS
This proxy statement-prospectus, including information incorporated by
reference into this document, may contain forward-looking statements about
Wells Fargo, including one or more of the following:
. projections of revenues, income, earnings per share, capital
expenditures, dividends, capital structure or other financial items;
. descriptions of plans or objectives of management for future operations,
products or services;
. forecasts of future economic performance;
. descriptions of assumptions underlying or relating to any of the
foregoing.
Forward-looking statements can be identified by the fact that they do not
relate strictly to historical or current facts. They often include words such
as "believe," "expect," "anticipate," "intend," "plan," "estimate," or words of
similar meaning, or future or conditional verbs such as "will," "would,"
"should," "could" or "may."
Forward-looking statements consist of expectations or predictions of future
conditions, events or results. They are not guarantees of future performance.
By their nature, forward-looking statements are subject to risks and
uncertainties. There are a number of factors--many of which are beyond the
control of Wells Fargo--that could cause actual conditions, events or results
to differ significantly from those described in the forward-looking statements.
Wells Fargo's reports filed with the SEC, including Wells Fargo's Form 10-K
for the year ended December 31, 1999, describe some of these factors. For
example, Wells Fargo's Form 10-K describes certain credit, market, operational,
liquidity, and interest rate risks associated with Wells Fargo's business and
operations. Other factors described in Wells Fargo's Form 10-K include changes
in business and economic conditions, competition, fiscal and monetary policies,
disintermediation, legislation (including financial modernization legislation),
the combination of the former Norwest Corporation and the former Wells Fargo &
Company, and other mergers and acquisitions.
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APPENDIX A
----------------
AGREEMENT AND PLAN OF REORGANIZATION
by and between
1ST CHOICE FINANCIAL CORP.
and
WELLS FARGO & COMPANY
dated as of February 3, 2000
<PAGE>
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as of the
3rd day of February, 2000, by and between 1ST CHOICE FINANCIAL CORP.
("Company"), a Colorado corporation, and WELLS FARGO & COMPANY ("Wells Fargo"),
a Delaware corporation.
WHEREAS, the parties hereto desire to effect a reorganization whereby a
wholly-owned subsidiary of Wells Fargo (the "Merger Co.") will merge with and
into Company (the "Merger") pursuant to an agreement and plan of merger (the
"Merger Agreement") in substantially the form attached hereto as Exhibit A,
which provides, among other things, for the exchange of the shares of common
stock of Company of the par value of $2.50 per share ("Company Common Stock")
outstanding immediately prior to the time the Merger becomes effective in
accordance with the provisions of the Merger Agreement into the right to
receive shares of voting common stock of Wells Fargo, par value $1 2/3 per
share ("Wells Fargo Common Stock").
NOW, THEREFORE, to effect such reorganization and in consideration of the
premises and the mutual covenants and agreements contained herein, the parties
hereto do hereby represent, warrant, covenant and agree as follows:
1. Basic Plan of Reorganization
(a) Merger. Subject to the terms and conditions contained herein, Merger Co.
will be merged by statutory merger with and into Company pursuant to the Merger
Agreement, with Company as the surviving corporation, in which Merger each
share of Company Common Stock outstanding immediately prior to the Effective
Time of the Merger (as defined in paragraph 1 (d) below) (other than shares as
to which statutory dissenters' appraisal rights have been exercised) will be
exchanged for the right to receive the number of shares of Wells Fargo Common
Stock determined by dividing the Adjusted Wells Fargo Shares by the number of
shares of Company Common Stock then outstanding. The "Adjusted Wells Fargo
Shares" shall be a number equal to $63,000,000 (reduced dollar for dollar by
the amount, if any, by which the tangible equity of the Company, determined in
accordance with paragraph 7(q) of this Agreement, is less than $30,700,000)
divided by the Wells Fargo Measurement Price. The "Wells Fargo Measurement
Price" is defined as the average of the closing prices of a share of Wells
Fargo Common Stock as reported on the consolidated tape of the New York Stock
Exchange during the period of 20 consecutive trading days ending on the day
immediately preceding the meeting of shareholders required by paragraph 4(c) of
this Agreement.
(b) Wells Fargo Common Stock Adjustments. If, between the date hereof and the
Effective Time of the Merger, shares of Wells Fargo Common Stock shall be
changed into a different number of shares or a different class of shares by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or if a stock dividend thereon shall be
declared with a record date within such period (a "Common Stock Adjustment"),
then the number of shares of Wells Fargo Common Stock for which a share of
Company Common Stock shall be exchanged pursuant to subparagraph (a) above,
will be appropriately and proportionately adjusted so that the number of such
shares of Wells Fargo Common Stock for which a share of Company Common Stock
shall be exchanged will equal the number of shares of Wells Fargo Common Stock
which holders of shares of Company Common Stock would have received pursuant to
such Common Stock Adjustment had the record date therefor been immediately
following the Effective Time of the Merger.
(c) Fractional Shares. No fractional shares of Wells Fargo Common Stock and
no certificates or scrip certificates therefor shall be issued to represent any
such fractional interest, and any holder thereof shall be paid an amount of
cash equal to the product obtained by multiplying the fractional share interest
to which such holder is entitled by the Wells Fargo Measurement Price.
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(d) Mechanics of Closing Merger. Subject to the terms and conditions set
forth herein, the Merger Agreement shall be executed and Articles of Merger
shall be filed with the Secretary of State of the State of Colorado within ten
(10) business days following the satisfaction or waiver of all conditions
precedent set forth in Sections 6 and 7 of this Agreement or on such other date
as may be agreed to by the parties (the "Closing Date"), provided that the
Closing Date shall not occur prior to March 16, 2000 and shall not occur on the
last business day of a calendar month. Each of the parties agrees to use its
best efforts to cause the Merger to be completed as soon as practicable after
the receipt of final regulatory approval of the Merger and the expiration of
all required waiting periods. The time that the filing referred to in the first
sentence of this paragraph is made is herein referred to as the "Time of
Filing." The day on which such filing is made and accepted is herein referred
to as the "Effective Date of the Merger." The "Effective Time of the Merger"
shall be 11:59 p.m. Denver, Colorado time on the Effective Date of the Merger.
At the Effective Time of the Merger on the Effective Date of the Merger, Merger
Co. will be merged with and into Company pursuant to the Merger Agreement and
the separate existence of Merger Co. shall cease.
The closing of the transactions contemplated by this Agreement and the Merger
Agreement (the "Closing") shall take place on the Closing Date at the offices
of Wells Fargo, Norwest Center, Sixth and Marquette, Minneapolis, Minnesota.
2. Representations and Warranties of Company. Company represents and warrants
to Wells Fargo as follows:
(a) Organization and Authority. Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado,
is duly qualified to do business and is in good standing in all jurisdictions
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and failure to be so qualified would have a
material adverse effect on Company and the Company Subsidiaries (as defined in
paragraph 2(b)) taken as a whole and has corporate power and authority to own
its properties and assets and to carry on its business as it is now being
conducted. Company is registered as a bank holding company with the Federal
Reserve Board under the Bank Holding Company Act of 1956, as amended (the "BHC
Act"). Company has furnished Wells Fargo true and correct copies of its
articles of incorporation and by-laws, as amended.
(b) Company's Subsidiaries. Schedule 2(b) sets forth a complete and correct
list of all of Company's subsidiaries as of the date hereof (individually a
"Company Subsidiary" and collectively the "Company Subsidiaries"), all shares
of the outstanding capital stock of each of which, except as set forth on
Schedule 2(b), are owned directly or indirectly by Company. No equity security
of any Company Subsidiary is or may be required to be issued by reason of any
option, warrant, scrip, preemptive right, right to subscribe to, call or
commitment of any character whatsoever relating to, or security or right
convertible into, shares of any capital stock of such subsidiary, and there are
no contracts, commitments, understandings or arrangements by which any Company
Subsidiary is bound to issue additional shares of its capital stock, or any
option, warrant or right to purchase or acquire any additional shares of its
capital stock. All of such shares so owned by Company are fully paid and
nonassessable and are owned by it free and clear of any lien, claim, charge,
option, encumbrance or agreement with respect thereto. Each Company Subsidiary
is a corporation or Colorado banking corporation duly organized, validly
existing, duly qualified to do business and in good standing under the laws of
its jurisdiction of incorporation, and has corporate power and authority to own
or lease its properties and assets and to carry on its business as it is now
being conducted. Except as set forth on Schedule 2(b), Company does not own
beneficially, directly or indirectly, more than 5% of any class of equity
securities or similar interests of any corporation, bank, business trust,
association or similar organization, and is not, directly or indirectly, a
partner in any partnership or party to any joint venture.
(c) Capitalization. The authorized capital stock of Company consists of
10,000,000 shares of common stock, $2.50 par value, of which, as of the close
of business on September 30, 1999, 3,276,094 shares were outstanding and no
shares were held in the treasury. The maximum number of shares of Company
Common
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Stock (assuming for this purpose that phantom shares and other share-
equivalents constitute Company Common Stock) that would be outstanding as of
the Effective Date of the Merger if all options, warrants, conversion rights
and other rights with respect thereto, were exercised is 3,496,094. All of the
outstanding shares of capital stock of Company have been duly and validly
authorized and issued and are fully paid and nonassessable. Except as set forth
in Schedule 2(c), there are no outstanding subscriptions, contracts, conversion
privileges, options, warrants, calls, preemptive rights or other rights
obligating Company or any Company Subsidiary to issue, sell or otherwise
dispose of, or to purchase, redeem or otherwise acquire, any shares of capital
stock of Company or any Company Subsidiary. As of the date hereof, the total
number of options ("Options") and the exercise prices thereof issued pursuant
to the Company's 1995 Stock Option Plan (the "Stock Option Plan") are as set
forth on Schedule 2(c). Except as set forth in Schedule 2(c), since September
30, 1999 no shares of Company capital stock have been purchased, redeemed or
otherwise acquired, directly or indirectly, by Company or any Company
Subsidiary and no dividends or other distributions have been declared, set
aside, made or paid to the shareholders of Company.
(d) Authorization. Company has the corporate power and authority to enter
into this Agreement and the Merger Agreement and, subject to any required
approvals of its shareholders, to carry out its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Merger Agreement by Company and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Company. Subject to such approvals of shareholders and of
government agencies and other governing boards having regulatory authority over
Company as may be required by statute or regulation, this Agreement is and the
Merger Agreement will be, when executed, valid and binding obligations of
Company enforceable against Company in accordance with their respective terms
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
and contracting parties generally and except as enforceability may be subject
to general principles of equity.
Except as set forth on Schedule 2(d), neither the execution, delivery and
performance by Company of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor
compliance by Company with any of the provisions hereof or thereof, will (i)
violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration of, or result in the creation of, any lien, security interest,
charge or encumbrance upon any of the properties or assets of Company or any
Company Subsidiary under any of the terms, conditions or provisions of (x) its
articles of incorporation or by-laws, or (y) any material note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Company or any Company Subsidiary is a party or by which it
may be bound, or to which Company or any Company Subsidiary or any of the
properties or assets of Company or any Company Subsidiary may be subject, or
(ii) subject to compliance with the statutes and regulations referred to in the
next paragraph, violate any statute, rule or regulation or, to the best
knowledge of Company, violate any judgment, ruling, order, writ, injunction or
decree applicable to Company or any Company Subsidiary or any of their
respective properties or assets.
Other than in connection or in compliance with the provisions of the
Securities Act of 1933 and the rules and regulations thereunder (the
"Securities Act"), the Securities Exchange Act of 1934 and the rules and
regulations thereunder (the "Exchange Act"), the securities or blue sky laws of
the various states or filings, consents, reviews, authorizations, approvals or
exemptions required under the BHC Act or the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 ("HSR Act"), and filings required to effect the Merger
under Colorado law, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or authority is
necessary for the consummation by Company of the transactions contemplated by
this Agreement and the Merger Agreement.
(e) Company Financial Statements. The consolidated balance sheets of Company
and Company Subsidiaries as of December 31, 1998 and 1997 and related
consolidated statements of income, shareholders'
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equity and cash flows for the years ended December 31, 1996, 1997 and 1998,
together with the notes thereto, certified by GRA, Thompson, White & Co., P.
C., and the unaudited consolidated balance sheets of Company and Company
Subsidiaries as of September 30, 1999 and the related unaudited consolidated
statements of income and shareholders' equity for the nine (9) months ended
September 30, 1999 (collectively, the "Company Financial Statements"), have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis and present fairly (subject, in the case of
financial statements for interim periods, to normal recurring adjustments) the
consolidated financial position of Company and Company Subsidiaries at the
dates and the consolidated results of operations and cash flows (excluding the
nine month period ending September 30, 1999) of Company and Company
Subsidiaries for the periods stated therein.
(f) Reports. Since December 31, 1994, Company and each Company Subsidiary has
filed all reports, registrations and statements, if any, together with any
required amendments thereto, that it was required to file with (i) the
Securities and Exchange Commission (the "SEC"), including, but not limited to,
Forms 10-K, Forms 10-Q and proxy statements, (ii) the Federal Reserve Board,
(iii) the Federal Deposit Insurance Corporation (the "FDIC"), (iv) the United
States Comptroller of the Currency (the "Comptroller") and (v) any applicable
state securities or banking authorities. All such reports and statements filed
with any such regulatory body or authority are collectively referred to herein
as the "Company Reports." As of their respective dates, the Company Reports
complied in all material respects with all the rules and regulations
promulgated by the SEC, the Federal Reserve Board, the FDIC, the Comptroller
and applicable state securities or banking authorities, as the case may be, and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Copies of all the Company Reports have been made available to
Wells Fargo by Company.
(g) Properties and Leases. Except as may be reflected in the Company
Financial Statements and on Schedule 2(g) and except for any lien for current
taxes not yet delinquent, Company and each Company Subsidiary have good title
free and clear of any material liens, claims, charges, options, encumbrances or
similar restrictions to all the real and personal property reflected in
Company's consolidated balance sheet as of September 30, 1999, and all real and
personal property acquired since such date, except such real and personal
property as has been disposed of in the ordinary course of business. All leases
of real property and all other leases material to Company or any Company
Subsidiary pursuant to which Company or such Company Subsidiary, as lessee,
leases real or personal property are valid and effective in accordance with
their respective terms, and there is not, under any such lease, any material
existing default by Company or such Company Subsidiary or any event which, with
notice or lapse of time or both, would constitute such a material default.
Substantially all Company's and each Company Subsidiary's buildings and
equipment in regular use have been well maintained and are in good and
serviceable condition, reasonable wear and tear excepted.
(h) Taxes. Except as set forth in Schedule 2(h), each of Company and the
Company Subsidiaries has filed all federal, state, county, local and foreign
tax returns, including information returns, required to be filed by it, and
paid all taxes owed by it, including those with respect to income, withholding,
social security, unemployment, workers compensation, franchise, ad valorem,
premium, excise and sales taxes, and no taxes shown on such returns to be owed
by it or assessments received by it are delinquent. The federal income tax
returns of Company and the Company Subsidiaries for the fiscal year ended
December 31, 1993, and for all fiscal years prior thereto, are for the purposes
of routine audit by the Internal Revenue Service closed because of the statute
of limitations, and no claims for additional taxes for such fiscal years are
pending. Except only as set forth on Schedule 2(h), (i) neither Company nor any
Company Subsidiary is a party to any pending action or proceeding, nor to
Company's knowledge is any such action or proceeding threatened by any
governmental authority, for the assessment or collection of taxes, interest,
penalties, assessments or deficiencies and (ii) no issue has been raised by any
federal, state, local or foreign taxing authority in connection with an audit
or examination of the tax returns, business or properties of Company or any
Company Subsidiary which has not been settled, resolved and fully satisfied.
Each of Company and the Company Subsidiaries has paid all taxes owed or which
it is required to withhold from amounts owing to employees, creditors or other
third parties.
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The consolidated balance sheet as of September 30, 1999, referred to in
paragraph 2(e) hereof, includes adequate provision for all accrued but unpaid
federal, state, county, local and foreign taxes, interest, penalties,
assessments or deficiencies of Company and the Company Subsidiaries with
respect to all periods through the date thereof.
(i) Absence of Certain Changes. Since December 31, 1998 there has been no
change in the business, financial condition or results of operations of Company
or any Company Subsidiary, which has had, or may reasonably be expected to
have, a material adverse effect on the business, financial condition or results
of operations of Company and the Company Subsidiaries taken as a whole.
(j) Commitments and Contracts. Except as set forth on Schedule 2(j), neither
Company nor any Company Subsidiary is a party or subject to any of the
following (whether written or oral, express or implied):
(i) any employment contract or understanding (including any
understandings or obligations with respect to severance or termination pay,
liabilities or fringe benefits) with any present or former officer,
director, employee or consultant (other than those that are terminable at
will by Company or such Company Subsidiary);
(ii) any plan, contract or understanding providing for any bonus,
pension, option, deferred compensation, retirement payment, profit sharing
or similar arrangement with respect to any present or former officer,
director, employee or consultant;
(iii) any labor contract or agreement with any labor union;
(iv) any contract containing covenants that limit the ability of Company
or any Company Subsidiary to compete in any line of business or with any
person or which involve any restriction of the geographical area in which,
or method by which, Company or any Company Subsidiary may carry on its
business (other than as may be required by law or applicable regulatory
authorities);
(v) any other contract or agreement which is a "material contract" within
the meaning of Item 601(b)(10) of Regulation S-K;
(vi) any real property lease and any other lease with annual rental
payments aggregating $10,000 or more;
(vii) any agreement or commitment with respect to the Community
Reinvestment Act with any state or federal bank regulatory authority or any
other party; or
(viii) any current or past agreement, contract or understanding with any
current or former director, officer, employee, consultant, financial
adviser, broker, dealer, or agent providing for any rights of
indemnification in favor of such person or entity.
(k) Litigation and Other Proceedings. Company has furnished Wells Fargo
copies of (i) all attorney responses to the request of the independent auditors
for Company with respect to loss contingencies as of December 31, 1998 in
connection with the Company Financial Statements, and (ii) a written list of
legal and regulatory proceedings filed against Company or any Company
Subsidiary since said date. There is no pending or, to the best knowledge of
Company, threatened, claim, action, suit, investigation or proceeding, against
Company or any Company Subsidiary, nor is Company or any Company Subsidiary
subject to any order, judgment or decree, except for matters which, in the
aggregate, will not have, or cannot reasonably be expected to have, a material
adverse effect on the business, financial condition or results of operations of
Company and the Company Subsidiaries taken as a whole.
(l) Insurance. Company and each Company Subsidiary are presently insured, and
during each of the past five calendar years (or during such lesser period of
time as Company has owned such Company Subsidiary) have been insured, for
reasonable amounts with financially sound and reputable insurance companies
against
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such risks as companies engaged in a similar business would, in accordance with
good business practice, customarily be insured and has maintained all insurance
required by applicable law and regulation.
(m) Compliance with Laws. Company and each Company Subsidiary have all
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to
own or lease its properties and assets and to carry on its business as
presently conducted and that are material to the business of Company or such
Company Subsidiary; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the best knowledge of
Company, no suspension or cancellation of any of them is threatened; and all
such filings, applications and registrations are current. The conduct by
Company and each Company Subsidiary of its business and the condition and use
of its properties does not violate or infringe, in any respect material to any
such business, any applicable domestic (federal, state or local) or foreign
law, statute, ordinance, license or regulation. Neither Company nor any Company
Subsidiary is in default under any order, license, regulation or demand of any
federal, state, municipal or other governmental agency or with respect to any
order, writ, injunction or decree of any court. Except for statutory or
regulatory restrictions of general application and except as set forth on
Schedule 2(m), no federal, state, municipal or other governmental authority has
placed any restriction on the business or properties of Company or any Company
Subsidiary which reasonably could be expected to have a material adverse effect
on the business or properties of Company and the Company Subsidiaries taken as
a whole.
(n) Labor. No work stoppage involving Company or any Company Subsidiary is
pending or, to the best knowledge of Company, threatened. Neither Company nor
any Company Subsidiary is involved in, or, to the knowledge of Company,
threatened with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding that could materially and adversely affect the
business of Company or such Company Subsidiary. Employees of Company and the
Company Subsidiaries are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees.
(o) Material Interests of Certain Persons. Except as set forth on Schedule
2(o), to the best knowledge of Company, no officer or director of Company or
any Company Subsidiary, or any "associate" (as such term is defined in Rule
l4a-1 under the Exchange Act) of any such officer or director, has any interest
in any material contract or property (real or personal), tangible or
intangible, used in or pertaining to the business of Company or any Company
Subsidiary.
Schedule 2(o) sets forth a correct and complete list of any loan from Company
or any Company Subsidiary to any present officer, director, employee or any
associate or related interest of any such person which was required under
Regulation O of the Federal Reserve Board to be approved by or reported to
Company's or such Company Subsidiary's Board of Directors.
(p) Company Benefit Plans.
(i) Schedule 2(p)(i) sets forth each employee benefit plan with respect
to which Company or any Company Subsidiary contributes, sponsors or
otherwise has any obligation (the "Plans"). For purposes of this Section
2(p) and Schedule 2(p)(i), "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and the term "Plan" or "Plans" means all
employee benefit plans as defined in Section 3(3) of ERISA, and all other
benefit arrangements including, without limitation, any plan, program,
agreement, policy or commitment providing for insurance coverage of
employees, workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, severance or
termination of employment benefits, life, health, death, disability or
accidental benefits.
(ii) Except as disclosed on Schedule 2(p)(ii), no Plan is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA.
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(iii) Except as disclosed on Schedule 2(p)(iii), no Plan promises or
provides health or life benefits to retirees or former employees except as
required by federal continuation of coverage laws or similar state laws.
(iv) Except as disclosed on Schedule 2(p)(iv), (a) each Plan is and has
been in all material respects operated and administered in accordance with
its provisions and applicable law including, if applicable, ERISA and the
Code; (b) all reports and filings with governmental agencies (including but
not limited to the Department of Labor, Internal Revenue Service, Pension
Benefit Guaranty Corporation and the Securities and Exchange Commission)
required in connection with each Plan have been timely made; (c) all
disclosures and notices required by law or Plan provisions to be given to
participants and beneficiaries in connection with each Plan have been
properly and timely made; (d) there are no actions, suits or claims
pending, other than routine uncontested claims for benefits with respect to
each Plan; and (e) each Plan intended to be qualified under Section 401(a)
of the Code has received a favorable determination letter from the Internal
Revenue Service stating that the Plan (including all amendments) is tax
qualified under Section 401(a) of the Code and Company knows of no reason
that any such Plan is not qualified within the meaning of Section 401(a) of
the Code and knows of no reason that each related Plan trust is not exempt
from taxation under Section 501(a) of the Code.
(v) Except as disclosed on Schedule 2(p)(v), (a) all contributions,
premium payments and other payments required to be made in connection with
the Plans as of the date of this Agreement have been made; (b) a proper
accrual has been made on the books of Company for all contributions,
premium payments and other payments due in the current fiscal year but not
made as of the date of this Agreement; (c) no contribution, premium payment
or other payment has been made in support of any Plan that is in excess of
the allowable deduction for federal income tax purposes for the year with
respect to which the contribution was made (whether under Sections 162,
280G, 404, 419, 419A of the Code or otherwise); and (d) with respect to
each Plan that is subject to Section 301 of ERISA or Section 412 of the
Code, Company is not liable for any accumulated funding deficiency as that
them is defined in Section 412 of the Code and the projected benefit
obligations determined as of the date of this Agreement do not exceed the
assets of the Plan.
(vi) Except as disclosed in Schedule 2(p)(vi) and to best knowledge of
Company, no Plan or any trust created thereunder, nor any trustee,
fiduciary or administrator thereof, has engaged in a "prohibited
transaction," as such term is defined in Section 4975 of the Code or
Section 406 of ERISA or violated any of the fiduciary standards under Part
4 of Title 1 of ERISA which could subject such Plan or trust, or any
trustee, fiduciary or administrator thereof, or any party dealing with any
such Plan or trust, to a tax penalty or prohibited transactions imposed by
Section 4975 of the Code or would result in material liability to Company
and the Company Subsidiaries as a whole.
(vii) No Plan subject to Title IV of ERISA or any trust created
thereunder has been terminated, nor have there been any "reportable events"
as that term is defined in Section 4043 of ERISA, with respect to any Plan,
other than those events which may result from the transactions contemplated
by this Agreement and the Merger Agreement.
(viii) Except as disclosed in Schedule 2(p)(viii), neither the execution
and delivery of this Agreement and the Merger Agreement nor the
consummation of the transactions contemplated hereby and thereby will (a)
result in any material payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to
any director or employee or former employee of Company under any Plan or
otherwise, (b) materially increase any benefits otherwise payable under any
Plan, or (c) result in the acceleration of the time of payment or vesting
of any such benefits to any material extent.
(q) Proxy Statement, etc. None of the information regarding Company and the
Company Subsidiaries supplied or to be supplied by Company in writing for
inclusion in (i) a Registration Statement on Form S-4 and
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the prospectus included therein to be filed with the SEC by Wells Fargo for the
purpose of registering the shares of Wells Fargo Common Stock to be exchanged
for shares of Company Common Stock pursuant to the provisions of the Merger
Agreement (the "Registration Statement"), (ii) the proxy statement included in
the Registration Statement to be mailed to Company's shareholders in connection
with the meeting to be called to consider the Merger (the "Proxy Statement"),
and (iii) any other documents to be filed with the SEC or any regulatory
authority in connection with the transactions contemplated hereby or by the
Merger Agreement will, at the respective times such Registration Statement,
Proxy Statement and other documents are filed with the SEC or any regulatory
authority and, in the case of the Registration Statement, when it becomes
effective and, with respect to the Proxy Statement, when mailed, and, in the
case of the Proxy Statement or any amendment thereof or supplement thereto, at
the time of the meeting of shareholders referred to in paragraph 4(c), and at
the Effective Time of the Merger, contain any untrue statement of a material
fact, or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. All documents which
Company and the Company Subsidiaries are responsible for filing with the SEC
and any other regulatory authority in connection with the Merger will comply as
to form in all material respects with the provisions of applicable law.
(r) Registration Obligations. Except as set forth on Schedule 2(r), neither
Company nor any Company Subsidiary is under any obligation, contingent or
otherwise, by reason of any agreement to register any of its securities under
the Securities Act.
(s) Brokers and Finders. Except for Alex Sheshunoff & Co., Company nor any
Company Subsidiary nor any of their respective officers, directors or employees
has employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and no broker or
finder has acted directly or indirectly for Company or any Company Subsidiary,
in connection with this Agreement and the Merger Agreement or the transactions
contemplated hereby and thereby.
(t) Fiduciary Activities. Company and each Company Subsidiary has properly
administered in all material respects and which could reasonably be expected to
be material, to the financial condition of Company and the Company Subsidiaries
taken as a whole, all accounts for which it acts as a fiduciary, including but
not limited to accounts for which it serves as a trustee, agent, custodian,
personal representative, guardian, conservator or investment advisor, in
accordance with the terms of the governing documents and applicable state and
federal law and regulation and common law. Neither Company, any Company
Subsidiary, nor any director, officer or employee of Company or any Company
Subsidiary has committed any breach of trust with respect to any such fiduciary
account which is material to, or could reasonably be expected to be material
to, the financial condition of Company and the Company Subsidiaries taken as a
whole, and the accountings for each such fiduciary account are true and correct
in all material respects and accurately reflect the assets of such fiduciary
account.
(u) No Defaults. Neither Company nor any Company Subsidiary is in default,
nor has any event occurred that, with the passage of time or the giving of
notice, or both, would constitute a default, under any material agreement,
indenture, loan agreement or other instrument to which it is a party or by
which it or any of its assets is bound or to which any of its assets is
subject, the result of which has had or could reasonably be expected to have a
material adverse effect upon Company and the Company Subsidiaries, taken as a
whole. To the best of Company's knowledge, all parties with whom Company or any
Company Subsidiary has material leases, agreements or contracts or who owe to
Company or any Company Subsidiary material obligations other than those arising
in the ordinary course of the banking business of the Company Subsidiaries are
in compliance therewith in all material respects.
(v) Environmental Liability. There is no legal, administrative, or other
proceeding, claim, or action of any nature seeking to impose, or that could
result in the imposition of, on Company or any Company Subsidiary, any
liability relating to the release of hazardous substances as defined under any
local, state or federal environmental statute, regulation or ordinance
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), pending or to
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the best of Company's knowledge, threatened against Company or any Company
Subsidiary the result of which has had or could reasonably be expected to have
a material adverse effect upon Company and Company Subsidiaries taken as a
whole; to the best of Company's knowledge, there is no reasonable basis for any
such proceeding, claim or action; and to the best of Company's knowledge
neither Company nor any Company Subsidiary is subject to any agreement, order,
judgment, or decree by or with any court, governmental authority or third party
imposing any such environmental liability. Company has provided Wells Fargo
with copies of all environmental assessments, reports, studies and other
related information in its possession with respect to each bank facility and
each non-residential OREO property.
(w) Compliance with Year 2000 Requirements. Except as set forth in Schedule
2(w), Company is in full compliance with its Year 2000 project management
process as set forth in the May 5, 1997 Federal Financial Institutions
Examination Council ("FFIEC") Interagency Statement on the Year 2000 and
subsequent guidance documents (the "FFIEC Requirements"). Company has made its
Year 2000 project assessment, remediation plan and testing results available to
Wells Fargo for review.
3. Representations and Warranties of Wells Fargo. Wells Fargo represents and
warrants to Company as follows:
(a) Organization and Authority. Wells Fargo is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
is duly qualified to do business and is in good standing in all jurisdictions
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and failure to be so qualified would have a
material adverse effect on Wells Fargo and its subsidiaries taken as a whole
and has corporate power and authority to own its properties and assets and to
carry on its business as it is now being conducted. Wells Fargo is registered
as a bank holding company with the Federal Reserve Board under the BHC Act.
(b) Wells Fargo Subsidiaries. Schedule 3(b) sets forth a complete and correct
list as of December 31, 1998, of Wells Fargo's Significant Subsidiaries (as
defined in Regulation S-X promulgated by the SEC) (individually a "Wells Fargo
Subsidiary" and collectively the "Wells Fargo Subsidiaries"), all shares of the
outstanding capital stock of each of which, except as set forth in Schedule
3(b), are owned directly or indirectly by Wells Fargo. No equity security of
any Wells Fargo Subsidiary is or may be required to be issued to any person or
entity other than Wells Fargo by reason of any option, warrant, scrip,
preemptive right, right to subscribe to, call or commitment of any character
whatsoever relating to, or security or right convertible into, shares of any
capital stock of such subsidiary, and there are no contracts, commitments,
understandings or arrangements by which any Wells Fargo Subsidiary is bound to
issue additional shares of its capital stock, or options, warrants or rights to
purchase or acquire any additional shares of its capital stock. Subject to 12
U.S.C. (S) 55 (1982), all of such shares so owned by Wells Fargo are fully paid
and nonassessable and are owned by it free and clear of any lien, claim,
charge, option, encumbrance or agreement with respect thereto. Each Wells Fargo
Subsidiary is a corporation or national banking association duly organized,
validly existing, duly qualified to do business and in good standing under the
laws of its jurisdiction of incorporation, and has corporate power and
authority to own or lease its properties and assets and to carry on its
business as it is now being conducted.
(c) Wells Fargo Capitalization. As of September 30, 1999, the authorized
capital stock of Wells Fargo consists of (i) 20,000,000 shares of Preferred
Stock, without par value, of which as of the close of business on September 30,
1999, 980,000 shares of Cumulative Tracking Preferred Stock, at $200 stated
value, 9,532 shares of ESOP Cumulative Convertible Preferred Stock, at $1,000
stated value, 19,790 shares of 1995 ESOP Cumulative Convertible Preferred
Stock, at $1,000 stated value, 21,111 shares of 1996 ESOP Cumulative
Convertible Preferred Stock, at $1,000 stated value, 13,639 shares of 1997 ESOP
Cumulative Convertible Preferred Stock, at $1,000 stated value, 8,472 shares of
1998 ESOP Cumulative Convertible Preferred Stock, $1,000 stated value, 22,653
shares of 1999 ESOP Cumulative Convertible Preferred Stock, $1,000 stated
value, 1,500,000 shares of Adjustable-Rate Cumulative Preferred Stock, Series
B, $50 stated value, and 4,000,000 shares of 6.59% Adjustable Rate
Noncumulative Preferred Stock, Series H, $50 stated value, were outstanding;
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(ii) 4,000,000 shares of Preference Stock, without par value, of which as of
the close of business on September 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 September 30, 1999, 1,649,763,637 shares were
outstanding and 16,331,628 shares were held in the treasury. All of the
outstanding shares of capital stock of Wells Fargo have been duly and validly
authorized and issued and are fully paid and nonassessable.
(d) Authorization. Wells Fargo has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance of this Agreement by Wells Fargo and the consummation
of the transactions contemplated hereby have been duly authorized by the Board
of Directors of Wells Fargo. No approval or consent by the stockholders of
Wells Fargo is necessary for the execution and delivery of this Agreement and
the Merger Agreement and the consummation of the transactions contemplated
hereby and thereby. Subject to such approvals of government agencies and other
governing boards having regulatory authority over Wells Fargo as may be
required by statute or regulation, this Agreement is a valid and binding
obligation of Wells Fargo enforceable against Wells Fargo in accordance with
its terms except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors and contracting parties generally and except as enforceability may be
subject to general principles of equity.
Neither the execution, delivery and performance by Wells Fargo of this
Agreement, nor the consummation of the transactions contemplated hereby, nor
compliance by Wells Fargo with any of the provisions hereof, will (i) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
of, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Wells Fargo or any Wells
Fargo Subsidiary under any of the terms, conditions or provisions of, (x) its
certificate of incorporation or by-laws, or (y) any material note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Wells Fargo or any Wells Fargo Subsidiary is
a party or by which it may be bound, or to which Wells Fargo or any Wells Fargo
Subsidiary or any of the properties or assets of Wells Fargo or any Wells Fargo
Subsidiary may be subject, or (ii) subject to compliance with the statutes and
regulations referred to in the next paragraph, violate any statute, rule or
regulation or, to the best knowledge of Wells Fargo, violate any judgment,
ruling, order, writ, injunction or decree applicable to Wells Fargo or any
Wells Fargo Subsidiary or any of their respective properties or assets.
Other than in connection with or in compliance with the provisions of the
Securities Act, the Exchange Act, the securities or blue sky laws of the
various states or filings, consents, reviews, authorizations, approvals or
exemptions required under the BHC Act or the HSR Act, and filings required to
effect the Merger under Colorado law, no notice to, filing with, exemption or
review by, or authorization, consent or approval of, any public body or
authority is necessary for the consummation by Wells Fargo of the transactions
contemplated by this Agreement and the Merger Agreement.
(e) Wells Fargo Financial Statements. The consolidated balance sheets of
Wells Fargo and Wells Fargo's subsidiaries as of December 31, 1998 and 1997 and
related consolidated statements of income, changes in stockholders' equity and
comprehensive income, and cash flows for the three years ended December 31,
1998, together with the notes thereto, certified by KPMG LLP and included in
Wells Fargo's Annual Report on Form 10-K for the fiscal year ended December 31,
1998 (the "Wells Fargo 10-K") as filed with the SEC, and the unaudited
consolidated balance sheets of Wells Fargo and its subsidiaries as of September
30, 1999 and the related unaudited consolidated statements of income, changes
in stockholders' equity and comprehensive income, and cash flows for the nine
(9) months then ended included in Wells Fargo's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1999, as filed with the SEC
(collectively, the "Wells Fargo Financial Statements"), have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis and present fairly (subject, in the case of financial
statements for interim periods, to normal recurring adjustments) the
consolidated financial position of Wells Fargo and its subsidiaries at the
dates and the consolidated results of operations, changes in financial position
and cash flows of Wells Fargo
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and its subsidiaries for the periods stated therein. The Year 2000 disclosure
contained in Wells Fargo's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, as filed with the SEC and designated as the Year 2000
Readiness Disclosures related to the Year 2000 Information and Readiness
Disclosure Act, is true and correct in all material respects as of the date
hereof.
(f) Reports. Since December 31, 1994, Wells Fargo and each Wells Fargo
Subsidiary has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with (i) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q and proxy statements,
(ii) the Federal Reserve Board, (iii) the FDIC, (iv) the Comptroller and (v)
any applicable state securities or banking authorities. All such reports and
statements filed with any such regulatory body or authority are collectively
referred to herein as the "Wells Fargo Reports." As of their respective dates,
the Wells Fargo Reports complied in all material respects with all the rules
and regulations promulgated by the SEC, the Federal Reserve Board, the FDIC,
the Comptroller and any applicable state securities or banking authorities, as
the case may be, and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(g) Properties and Leases. Except as may be reflected in the Wells Fargo
Financial Statements and except for any lien for current taxes not yet
delinquent, Wells Fargo and each Wells Fargo Subsidiary has good title free and
clear of any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Wells Fargo's
consolidated balance sheet as of September 30, 1999 included in Wells Fargo's
Quarterly Report on Form 10-Q, and all real and personal property acquired
since such date, except such real and personal property that has been disposed
of in the ordinary course of business. All leases of real property and all
other leases material to Wells Fargo or any Wells Fargo Subsidiary pursuant to
which Wells Fargo or such Wells Fargo Subsidiary, as lessee, leases real or
personal property, are valid and effective in accordance with their respective
terms, and there is not, under any such lease, any material existing default by
Wells Fargo or such Wells Fargo Subsidiary or any event which, with notice or
lapse of time or both, would constitute such a material default. Substantially
all Wells Fargo's and each Wells Fargo Subsidiary's buildings and equipment in
regular use have been well maintained and are in good and serviceable
condition, reasonable wear and tear excepted.
(h) Taxes. Each of Wells Fargo and the Wells Fargo Subsidiaries has filed all
material federal, state, county, local and foreign tax returns, including
information returns, required to be filed by it, and paid or made adequate
provision for the payment of all taxes owed by it, including those with respect
to income, withholding, social security, unemployment, workers compensation,
franchise, ad valorem, premium, excise and sales taxes, and no taxes shown on
such returns to be owed by it or assessments received by it are delinquent. The
federal income tax returns of Wells Fargo and the Wells Fargo Subsidiaries for
the fiscal year ended December 31, 1982, and for all fiscal years prior
thereto, are for the purposes of routine audit by the Internal Revenue Service
closed because of the statute of limitations, and no claims for additional
taxes for such fiscal years are pending. Except only as set forth on Schedule
3(h), (i) neither Wells Fargo nor any Wells Fargo Subsidiary is a party to any
pending action or proceeding, nor to Wells Fargo's knowledge is any such action
or proceeding threatened by any governmental authority, for the assessment or
collection of taxes, interest, penalties, assessments or deficiencies that
could reasonably be expected to have any material adverse effect on Wells Fargo
and its subsidiaries taken as a whole, and (ii) no issue has been raised by any
federal, state, local or foreign taxing authority in connection with an audit
or examination of the tax returns, business or properties of Wells Fargo or any
Wells Fargo Subsidiary that has not been settled, resolved and fully satisfied,
or adequately reserved for. Each of Wells Fargo and the Wells Fargo
Subsidiaries has paid all taxes owed or which it is required to withhold from
amounts owing to employees, creditors or other third parties.
(i) Absence of Certain Changes. Since December 31, 1998, there has been no
change in the business, financial condition or results of operations of Wells
Fargo or any Wells Fargo Subsidiary which has had, or may reasonably be
expected to have, a material adverse effect on the business, financial
condition or results of operations of Wells Fargo and its subsidiaries taken as
a whole.
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(j) Commitments and Contracts. Except as set forth on Schedule 3(j), as of
December 31, 1998 neither Wells Fargo nor any Wells Fargo Subsidiary is a party
or subject to any of the following (whether written or oral, express or
implied):
(i)any labor contract or agreement with any labor union;
(ii)any contract not made in the ordinary course of business containing
covenants which materially limit the ability of Wells Fargo or any Wells
Fargo Subsidiary to compete in any line of business or with any person or
which involve any material restriction of the geographical area in which,
or method by which, Wells Fargo or any Wells Fargo Subsidiary may carry on
its business (other than as may be required by law or applicable regulatory
authorities);
(iii)any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K.
(k) Litigation and Other Proceedings. There is no pending or, to the best
knowledge of Wells Fargo, threatened, claim, action, suit, investigation or
proceeding, against Wells Fargo or any Wells Fargo Subsidiary nor is Wells
Fargo or any Wells Fargo Subsidiary subject to any order, judgment or decree,
except for matters which, in the aggregate, will not have, or cannot reasonably
be expected to have, a material adverse effect on the business, financial
condition or results of operations of Wells Fargo and its subsidiaries taken as
a whole.
(l) Insurance. Wells Fargo and each Wells Fargo Subsidiary is presently
insured or self insured, and during each of the past five calendar years (or
during such lesser period of time as Wells Fargo has owned such Wells Fargo
Subsidiary) has been insured or self-insured, for reasonable amounts with
financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable law and regulation.
(m) Compliance with Laws. Wells Fargo and each Wells Fargo Subsidiary has all
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to
own or lease its properties or assets and to carry on its business as presently
conducted and that are material to the business of Wells Fargo or such Wells
Fargo Subsidiary; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect, and to the best knowledge of Wells
Fargo, no suspension or cancellation of any of them is threatened; and all such
filings, applications and registrations are current. The conduct by Wells Fargo
and each Wells Fargo Subsidiary of its business and the condition and use of
its properties does not violate or infringe, in any respect material to any
such business, any applicable domestic (federal, state or local) or foreign
law, statute, ordinance, license or regulation. Neither Wells Fargo nor any
Wells Fargo Subsidiary is in default under any order, license, regulation or
demand of any federal, state, municipal or other governmental agency or with
respect to any order, writ, injunction or decree of any court. Except for
statutory or regulatory restrictions of general application, no federal, state,
municipal or other governmental authority has placed any restrictions on the
business or properties of Wells Fargo or any Wells Fargo Subsidiary which
reasonably could be expected to have a material adverse effect on the business
or properties of Wells Fargo and its subsidiaries taken as a whole.
(n) Labor. No work stoppage involving Wells Fargo or any Wells Fargo
Subsidiary is pending or, to the best knowledge of Wells Fargo, threatened.
Neither Wells Fargo nor any Wells Fargo Subsidiary is involved in, or
threatened with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding that could materially and adversely affect the
business of Wells Fargo or such Wells Fargo Subsidiary. Except as set forth on
Schedule 3(j), employees of Wells Fargo and the Wells Fargo Subsidiaries are
not represented by any labor union nor are any collective bargaining agreements
otherwise in effect with respect to such employees.
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(o) Wells Fargo Benefit Plans.
(i)For purposes of this Section 3(o), the term "Wells Fargo Plan" or
"Wells Fargo Plans" means all employee benefit plans as defined in Section
3(3) of ERISA, to which Wells Fargo contributes, sponsors, or otherwise has
any obligations.
(ii)No Wells Fargo Plan is a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
(iii)Each Wells Fargo Plan is and has been in all material respects
operated and administered in accordance with its provisions and applicable
law, including, if applicable, ERISA and the Code.
(iv)Each Wells Fargo Plan intended to be qualified under Section 401(a)
of the Code has received a favorable determination letter from the Internal
Revenue Service stating that the Wells Fargo Plan (including all
amendments) is tax qualified under Section 401(a) of the Code and Wells
Fargo knows of no reason that any such Wells Fargo Plan is not qualified
within the meaning of Section 401(a) of the Code and knows of no reason
that each related Wells Fargo Plan trust is not exempt from taxation under
Section 501(a) of the Code.
(v)All contributions, premium payments, and other payments required to be
made in connection with the Wells Fargo Plans as of the date of this
Agreement have been made.
(vi)With respect to each Wells Fargo Plan that is subject to Section 301
of ERISA or Section 412 of the Code, neither Wells Fargo nor any Wells
Fargo Subsidiary is liable for any accumulated funding deficiency as that
term is defined in Section 412 of the Code.
(vii)The present value of all benefits vested and all benefits accrued
under each Wells Fargo Plan that is subject to Title IV of ERISA does not,
in each case, exceed the value of the assets of the Wells Fargo Plans
allocable to such vested or accrued benefits as of the end of the most
recent Plan Year.
(p) Registration Statement, etc. None of the information regarding Wells
Fargo and its subsidiaries supplied or to be supplied by Wells Fargo for
inclusion in (i) the Registration Statement, (ii) the Proxy Statement, or (iii)
any other documents to be filed with the SEC or any regulatory authority in
connection with the transactions contemplated hereby or by the Merger Agreement
will, at the respective times such Registration Statement, Proxy Statement and
other documents are filed with the SEC or any regulatory authority and, in the
case of the Registration Statement, when it becomes effective and, with respect
to the Proxy Statement, when mailed, and, in the case of the Proxy Statement or
any amendment thereof or supplement thereto, at the time of the meeting of
shareholders referred to in paragraph 4(c), and at the Effective Time of the
Merger contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which they were made,
not misleading. All documents which Wells Fargo and the Wells Fargo
Subsidiaries are responsible for filing with the SEC and any other regulatory
authority in connection with the Merger will comply as to form in all material
respects with the provisions of applicable law.
(q) Brokers and Finders. Neither Wells Fargo nor any Wells Fargo Subsidiary
nor any of their respective officers, directors or employees has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for Wells Fargo or any Wells Fargo Subsidiary in
connection with this Agreement and the Merger Agreement or the transactions
contemplated hereby and thereby.
(r) No Defaults. Neither Wells Fargo nor any Wells Fargo Subsidiary is in
default, nor has any event occurred that, with the passage of time or the
giving of notice, or both, would constitute a default under any material
agreement, indenture, loan agreement or other instrument to which it is a party
or by which it or any of its assets is bound or to which any of its assets is
subject, the result of which has had or could reasonably be expected to have a
material adverse effect upon Wells Fargo and its subsidiaries taken as a whole.
To the best of Wells Fargo's knowledge, all parties with whom Wells Fargo or
any Wells Fargo Subsidiary has material leases, agreements or contracts or who
owe to Wells Fargo or any Wells Fargo Subsidiary material obligations,
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other than those arising in the ordinary course of the banking business of the
Wells Fargo Subsidiaries are in compliance therewith in all material respects.
(s) Environmental Liability. There is no legal, administrative, or other
proceeding, claim, or action of any nature seeking to impose, or that could
result in the imposition, on Wells Fargo or any Wells Fargo Subsidiary of any
liability relating to the release of hazardous substances as defined under any
local, state or federal environmental statute, regulation or ordinance
including, without limitation, CERCLA, pending or to the best of Wells Fargo's
knowledge, threatened against Wells Fargo or any Wells Fargo Subsidiary, the
result of which has had or could reasonably be expected to have a material
adverse effect upon Wells Fargo and its subsidiaries taken as a whole; to the
best of Wells Fargo's knowledge, there is no reasonable basis for any such
proceeding, claim or action; and to the best of Wells Fargo's knowledge,
neither Wells Fargo nor any Wells Fargo Subsidiary is subject to any agreement,
order, judgment, or decree by or with any court, governmental authority or
third party imposing any such environmental liability.
(t) Merger Co. As of the Closing Date, Merger Co. will be a corporation duly
organized, validly existing, duly qualified to do business and in good standing
under the laws of its jurisdiction of incorporation, and will have corporate
power and authority to own or lease its properties and assets and to carry on
its business. As of the Closing Date, the execution, delivery and performance
by Merger Co. of the Merger Agreement will have been duly authorized by Merger
Co.'s Board of Directors and shareholders, and the Merger Agreement will be a
valid and binding obligation of Merger Co., enforceable against Merger Co. in
accordance with its terms.
4. Covenants of Company. Company covenants and agrees with Wells Fargo as
follows:
(a) Affirmative Covenants. Except as otherwise permitted or required by this
Agreement, from the date hereof until the Effective Time of the Merger,
Company, and each Company Subsidiary will: maintain its corporate existence in
good standing; maintain the general character of its business and conduct its
business in its ordinary and usual manner; extend credit in accordance with
existing lending policies, except that it shall not, without the prior written
consent of Wells Fargo (which consent requirement shall be deemed to be waived
as to any loan approval request to which Wells Fargo has made no response by
the end of the second complete business day following the receipt of the
request by a Wells Fargo representative designated in writing), make any new
loan or modify, restructure or renew any existing loan (except pursuant to
commitments made prior to the date of this Agreement) to any borrower if the
amount of the resulting loan, when aggregated with all other loans or
extensions of credit to such person, would be in excess of $150,000; maintain
proper business and accounting records in accordance with generally accepted
principles; maintain its properties in good repair and condition, ordinary wear
and tear excepted; maintain in all material respects presently existing
insurance coverage; use its best efforts to preserve its business organization
intact, to keep the services of its present principal employees and to preserve
its good will and the good will of its suppliers, customers and others having
business relationships with it; use its best efforts to obtain any approvals or
consents required to maintain existing leases and other contracts in effect
following the Merger; comply in all material respects with all laws,
regulations, ordinances, codes, orders, licenses and permits applicable to the
properties and operations of Company and each Company Subsidiary the non-
compliance with which reasonably could be expected to have a material adverse
effect on Company and the Company Subsidiaries taken as a whole; and permit
Wells Fargo and its representatives (including KPMG LLP) to examine its and its
subsidiaries books, records and properties and to interview officers, employees
and agents at all reasonable times when it is open for business. No such
examination by Wells Fargo or its representatives either before or after the
date of this Agreement shall in any way affect, diminish or terminate any of
the representations, warranties or covenants of Company herein expressed.
(b) Negative Covenants. Except as otherwise contemplated or required by this
Agreement, from the date hereof until the Effective Time of the Merger, Company
and each Company Subsidiary will not (without the prior written consent of
Wells Fargo): amend or otherwise change its articles of incorporation or
association or by-laws; issue or sell or authorize for issuance or sale, or
grant any options or make other agreements with
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respect to the issuance or sale or conversion of, any shares of its capital
stock, phantom shares or other share-equivalents, or any other of its
securities, except that Company may issue shares of Company Common Stock upon
the exercise of the Options described in Schedule 2(c); authorize or incur any
long-term debt (other than deposit liabilities); mortgage, pledge or subject to
lien or other encumbrance any of its properties, except in the ordinary course
of business; enter into any material agreement, contract or commitment in
excess of $25,000 except banking transactions in the ordinary course of
business and in accordance with policies and procedures in effect on the date
hereof; make any investments except investments made by bank subsidiaries in
the ordinary course of business for terms of up to one year and in amounts of
$100,000 or less; amend or terminate any Plan except as required by law or by
paragraph 4(j) hereof; make any contributions to any Plan except as required by
the terms of such Plan in effect as of the date hereof; declare, set aside,
make or pay any dividend or other distribution with respect to its capital
stock except any dividend declared by a Company Subsidiary's Board of Directors
in accordance with applicable law and regulation provided, however, that the
Company may declare and pay dividends, in accordance with applicable law and
regulation, in an amount not to exceed 50% of the amount by which the tangible
equity of the Company, as determined in accordance with generally accepted
accounting principles (but excluding FAS 115 adjustments and including
adjustments for the exercise of 220,000 outstanding options at an average
exercise price of $8.34), as of a date five days prior to the Effective Time of
the Merger exceeds $30,700,000 provided, however, that such tangible equity
shall be calculated without regard to the effect of the accruals and reserves
taken by the Company pursuant to paragraph 4(m) hereof; redeem, purchase or
otherwise acquire, directly or indirectly, any of the capital stock of Company;
increase the compensation of any officers, directors or executive employees,
except pursuant to existing compensation plans and practices and except, with
respect to bonuses, as set forth in Schedule 4(b); sell or otherwise dispose of
any shares of the capital stock of any Company Subsidiary; or sell or otherwise
dispose of any of its assets or properties other than in the ordinary course of
business.
(c) Shareholder Meeting. The Board of Directors of Company will duly call,
and will cause to be held not later than twenty-five (25) business days
following the effective date of the Registration Statement, a meeting of its
shareholders and will direct that this Agreement and the Merger Agreement be
submitted to a vote at such meeting. The Board of Directors of Company will (i)
cause proper notice of such meeting to be given to its shareholders in
compliance with the Colorado Business Corporation Act and other applicable law
and regulation, (ii) recommend by the affirmative vote of the Board of
Directors a vote in favor of approval of this Agreement and the Merger
Agreement, and (iii) use its best efforts to solicit from its shareholders
proxies in favor thereof.
(d) Information Furnished by Company. Company will furnish or cause to be
furnished to Wells Fargo all the information concerning Company and the Company
Subsidiaries required for inclusion in the Registration Statement, or any
statement or application made by Wells Fargo to any governmental body in
connection with the transactions contemplated by this Agreement. Any financial
statement for any fiscal year provided under this paragraph must include the
audit opinion and the consent of GRA, Thompson, White & Co., P. C. to use such
opinion in such Registration Statement.
(e) Approvals. Company will take all necessary corporate and other action and
use its best efforts to obtain all approvals of regulatory authorities,
consents and other approvals required of Company to carry out the transactions
contemplated by this Agreement and will cooperate with Wells Fargo to obtain
all such approvals and consents required of Wells Fargo.
(f) Delivery of Closing Documents. Company will use its best efforts to
deliver to Wells Fargo at the Closing all opinions, certificates and other
documents required to be delivered by it at the Closing.
(g) Confidential Information. Company will hold in confidence all documents
and information concerning Wells Fargo and its subsidiaries furnished to
Company and its representatives in connection with the transactions
contemplated by this Agreement and will not release or disclose such
information to any other person, except as required by law and except to
Company's outside professional advisers in connection with this Agreement, with
the same undertaking from such professional advisers. If the transactions
contemplated by
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this Agreement shall not be consummated, such confidence shall be maintained
and such information shall not be used in competition with Wells Fargo (except
to the extent that such information can be shown to be previously known to
Company, in the public domain, or later acquired by Company from other
legitimate sources) and, upon request, all such documents, any copies thereof
and extracts therefrom shall immediately thereafter be returned to Wells Fargo.
(h) Competing Transactions. Neither Company, nor any Company Subsidiary, nor
any director, officer, representative or agent thereof, will, directly or
indirectly, solicit, authorize the solicitation of or enter into any
discussions with any corporation, partnership, person or other entity or group
(other than Wells Fargo) concerning any offer or possible offer (i) to purchase
any shares of common stock, any option or warrant to purchase any shares of
common stock, any securities convertible into any shares of such common stock,
or any other equity security of Company or any Company Subsidiary, (ii) to make
a tender or exchange offer for any shares of such common stock or other equity
security, (iii) to purchase, lease or otherwise acquire the assets of Company
or any Company Subsidiary except in the ordinary course of business, or (iv) to
merge, consolidate or otherwise combine with Company or any Company Subsidiary.
If any corporation, partnership, person or other entity or group makes an offer
or inquiry to Company or any Company Subsidiary concerning any of the
foregoing, Company or such Company Subsidiary will promptly disclose such offer
or inquiry, including the terms thereof, to Wells Fargo.
(i) Public Disclosure. Company shall consult with Wells Fargo as to the form
and substance of any proposed press release or other proposed public disclosure
of matters related to this Agreement or any of the transactions contemplated
hereby.
(j) Benefit Plans. Company and each Company Subsidiary will take all action
necessary or required (i) to terminate or amend, if requested by Wells Fargo,
all qualified retirement and welfare benefit plans and all non-qualified
benefit plans and compensation arrangements as of the Effective Date of the
Merger, and (ii) to submit application to the Internal Revenue Service for a
favorable determination letter for each of the Plans that is subject to the
qualification requirements of Section 401(a) of the Code prior to the Effective
Date of the Merger.
(k) [Intentionally left blank]
(l) Affiliate Letters. Company shall use its best efforts to obtain and
deliver prior to the Effective Date of the Merger signed representations
substantially in the form attached hereto as Exhibit B to Wells Fargo by each
executive officer, director or shareholder of Company who may reasonably be
deemed an "affiliate" of Company within the meaning of such term as used in
Rule 145 under the Securities Act.
(m) Accruals and Reserves. Company shall establish, immediately prior to the
Effective Time of the Merger, such additional accruals and reserves as may be
necessary (i) to conform Company's accounting and credit loss reserve practices
and methods to those of Wells Fargo, consistent with Wells Fargo's plans with
respect to the conduct of Company's business following the Merger, and (ii) to
the extent permitted by generally accepted accounting principles, to provide
for the costs and expenses, including investment banking fees in an amount not
to exceed $475,000, relating to the consummation by Company of the Merger and
the other transactions contemplated by this Agreement.
(n) Environmental Assessments. Company shall obtain, at its sole expense,
Phase I environmental assessments for each owned bank facility and each non-
residential OREO property. Oral reports of such environmental assessments shall
be delivered to Wells Fargo no later than four (4) weeks and written reports
shall be delivered to Wells Fargo no later than eight (8) weeks from the date
of this Agreement. Company shall obtain, at its sole expense, Phase II
environmental assessments for properties identified by Wells Fargo on the basis
of the results of such Phase I environmental assessments. Company shall obtain
a survey and assessment of all potential asbestos containing material in owned
or leased real properties (other than OREO property) and
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a written report of the results shall be delivered to Wells Fargo within four
(4) weeks of execution of this Agreement.
(o) Title Commitments and Boundary Surveys. Company shall obtain, at its sole
expense, commitments for title insurance and boundary surveys for each owned
bank facility which shall be delivered to Wells Fargo no later than eight (8)
weeks from the date of this Agreement.
(p) Year 2000. Company will comply with the FFIEC Requirements and will not
rely on the consummation of the transactions contemplated by this Agreement to
satisfy its FFIEC requirements. Company will provide Wells Fargo with complete
access to its Year 2000 project and remediation plan documentation and permit
Wells Fargo to review and investigate Company's continuing Year 2000 compliance
efforts and the results thereof.
(q) Termination of Stock Option Plan. Company shall take such action as is
necessary to terminate the Stock Option Plan as of the Effective Date of the
Merger. Company shall collect in cash (and timely pay) all applicable
withholding and payroll taxes with respect to such options, awards and stock
appreciation rights, and shall comply with all payroll reporting requirements
with respect thereto. All Options which remain unexercised shall expire as of
the Effective Time of the Merger.
(r) Bank Stock Loan. On or before the Effective Date of the Merger, Company
shall take such action as is necessary to repay the loan from Bankers' Bank of
the West in the original principal amount of $3,000,000 (the "Bank Stock
Loan"), and to have the lien on shares of 1st Choice Bank which are held as
collateral for the Bank Stock Loan released.
(s) Actions Pursuant to Section 280G of the Code. Company shall use its best
efforts to take such action as is necessary to amend all employment agreements
between Company or the Company Subsidiaries and their respective officers and
employees, including all employment and/or non-competition agreements entered
into immediately before or contemporaneously with the execution of this
Agreement, to provide that amounts payable under each of such agreements
accelerated solely as a result of the Merger shall be capped at or adjusted to
an amount which, when aggregated with all other payments to such officer or
employee (whether pursuant to other employment agreements, non-qualified
compensation plans, salary continuation arrangements, options or stock
appreciation rights or otherwise), would not exceed the applicable "golden
parachute" limitations under Section 280(G) of the Code.
5. Covenants of Wells Fargo. Wells Fargo covenants and agrees with Company as
follows:
(a) Affirmative Covenants. From the date hereof until the Effective Time of
the Merger, Wells Fargo will maintain its corporate existence in good standing;
conduct, and cause the Wells Fargo Subsidiaries to conduct, their respective
businesses in compliance with all material obligations and duties imposed on
them by all laws, governmental regulations, rules and ordinances, and judicial
orders, judgments and decrees applicable to Wells Fargo or the Wells Fargo
Subsidiaries, their businesses or their properties; maintain all books and
records of it and the Wells Fargo Subsidiaries, including all financial
statements, in accordance with the accounting principles and practices
consistent with those used for the Wells Fargo Financial Statements, except for
changes in such principles and practices required under generally accepted
accounting principles.
(b) Information Provided by Wells Fargo. Wells Fargo will furnish to Company
all the information concerning Wells Fargo required for inclusion in the Proxy
Statement to be sent to the shareholders of Company, or in any statement or
application made by Company to any governmental body in connection with the
transactions contemplated by this Agreement.
(c) Registration Statement. As promptly as practicable after the execution of
this Agreement, Wells Fargo will file with the SEC the Registration Statement
and any other applicable documents, relating to the shares of Wells Fargo
Common Stock to be delivered to the shareholders of Company pursuant to the
Merger Agreement, and will use its best efforts to cause the Registration
Statement to become effective. At the time the
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<PAGE>
Registration Statement becomes effective, the Registration Statement will
comply in all material respects with the provisions of the Securities Act and
the published rules and regulations thereunder, and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not false or
misleading, and at the time of mailing thereof to the Company shareholders, at
the time of the Company shareholders' meeting referred to in paragraph 4(c)
hereof and at the Effective Time of the Merger the prospectus included as part
of the Registration Statement, as amended or supplemented by any amendment or
supplement filed by Wells Fargo (hereinafter the "Prospectus"), will not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not false or misleading;
provided, however, that none of the provisions of this subparagraph shall apply
to statements in or omissions from the Registration Statement or the Prospectus
made in reliance upon and in conformity with information furnished by Company
or any Company Subsidiary for use in the Registration Statement or the
Prospectus.
(d) Stock Exchange Listings. Wells Fargo will file all documents required to
be filed to list the Wells Fargo Common Stock to be issued pursuant to the
Merger Agreement on the New York Stock Exchange and the Chicago Stock Exchange
and use its best efforts to effect said listings.
(e) Wells Fargo Shares. The shares of Wells Fargo Common Stock to be issued
by Wells Fargo to the shareholders of Company pursuant to this Agreement and
the Merger Agreement will, upon such issuance and delivery to said shareholders
pursuant to the Merger Agreement, be duly authorized, validly issued, fully
paid and nonassessable. The shares of Wells Fargo Common Stock to be delivered
to the shareholders of Company pursuant to the Merger Agreement are and will be
free of any preemptive rights of the stockholders of Wells Fargo.
(f) Blue Sky Approvals. Wells Fargo will file all documents required to
obtain, prior to the Effective Time of the Merger, all necessary Blue Sky
permits and approvals, if any, required to carry out the transactions
contemplated by this Agreement, will pay all expenses incident thereto and will
use its best efforts to obtain such permits and approvals.
(g) Approvals. Wells Fargo will take all necessary corporate and other action
and file all documents required to obtain and will use its best efforts to
obtain all approvals of regulatory authorities, consents and approvals required
of it to carry out the transactions contemplated by this Agreement and will
cooperate with Company to obtain all such approvals and consents required by
Company.
(h) Confidential Information. Wells Fargo will hold in confidence all
documents and information concerning Company and Company's Subsidiaries
furnished to it and its representatives in connection with the transactions
contemplated by this Agreement and will not release or disclose such
information to any other person, except as required by law and except to its
outside professional advisers in connection with this Agreement, with the same
undertaking from such professional advisers. If the transactions contemplated
by this Agreement shall not be consummated, such confidence shall be maintained
and such information shall not be used in competition with Company (except to
the extent that such information can be shown to be previously known to Wells
Fargo, in the public domain, or later acquired by Wells Fargo from other
legitimate sources) and, upon request, all such documents, copies thereof or
extracts therefrom shall immediately thereafter be returned to Company.
(i) Merger Filings. Wells Fargo will file any documents or agreements
required to be filed in connection with the Merger under the Colorado Business
Corporation Act.
(j) Delivery of Closing Documents. Wells Fargo will use its best efforts to
deliver to the Company at Closing all opinions, certificates and other
documents required to be delivered by it at the Closing.
(k) Public Disclosure. Wells Fargo shall consult with Company as to the form
and substance of any proposed press release or other proposed public disclosure
of matters related to this Agreement or any of the transactions contemplated
hereby.
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<PAGE>
(l) Notice of Regulatory Approvals. Wells Fargo shall give Company notice of
receipt of the regulatory approvals referred to in paragraph 7(e).
(m) With respect to the indemnification of directors and officers and with
respect to directors' and officers' insurance, Wells Fargo agrees as follows:
(i) Wells Fargo shall ensure that all rights to indemnification and all
limitations of liability existing in favor of any person who is now, or has
been at any time prior to the date hereof, or who becomes prior to the
Effective Time of the Merger, a director or officer of Company or any
Company Subsidiary, (an "Indemnified Party" and, collectively, the
"Indemnified Parties") in Company's Articles of Incorporation or By-laws 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 5(m)(i) 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,
Wells Fargo shall guarantee, to the extent of the net asset value of
Company or any Company Subsidiary as of the Effective Date of the Merger,
the indemnification obligations of Company or any Company Subsidiary to the
extent of the indemnification obligations of Company and the Company
Subsidiaries described above. Notwithstanding anything to the contrary
contained in this paragraph 5(m)(i), nothing contained herein shall require
Wells Fargo 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;
(ii) any Indemnified Party wishing to claim indemnification under
paragraph 5(m)(i), upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Wells Fargo thereof, but
the failure to so notify shall not relieve Wells Fargo of any liability it
may have to such Indemnified Party. In the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the
Effective Time of the Merger), (A) Wells Fargo shall have the right to
assume the defense thereof and Wells Fargo shall not be liable to any
Indemnified Party for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Party in connection with
the defense thereof, except that if Wells Fargo elects not to assume such
defense or counsel for the Indemnified Party advises that there are issues
which raise conflicts of interest between Wells Fargo and the Indemnified
Party, the Indemnified Party may retain counsel satisfactory to them, and
Wells Fargo shall pay the reasonable fees and expenses of such counsel for
the Indemnified Party promptly as statements therefor are received;
provided, however, that Wells Fargo shall be obligated pursuant to this
subparagraph (ii) to pay for only one firm of counsel for all Indemnified
Parties in any jurisdiction unless the use of one counsel for such
Indemnified Parties would present such counsel with a conflict of interest
and (B) such Indemnified Party shall cooperate in the defense of any such
matter;
(iii) for a period of three years after the Effective Time of the Merger,
Wells Fargo shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by Company
(provided that Wells Fargo may substitute therefor policies of at least the
same coverage and amount containing terms and conditions which are
substantially no less advantageous) with respect to claims arising from
facts or events which occurred before the Effective Time of the Merger;
provided, however, that Wells Fargo shall not be required to maintain
coverage for employees (other than directors and officers) which may
currently be included in the directors' and officers' liability policies
maintained by Company; and provided, further, however, that in no event
shall Wells Fargo be obligated to expend, in order to maintain or provide
insurance coverage pursuant to this paragraph 5(m)(iii), any amount per
annum in excess of 125% of the amount of the annual premiums paid as of the
date hereof by Company
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<PAGE>
for such insurance (the "Maximum Amount") and provided further that, prior
to the Effective Time of the Merger, Company shall notify the appropriate
directors' and officers' liability insurers of the Merger and of all
pending or threatened claims, actions, suits, proceedings or investigations
asserted or claimed against any Indemnified Party, or circumstances known
to Company that are likely to give rise thereto, in accordance with terms
and conditions of the applicable policies. If the amount of the annual
premiums necessary to maintain or procure such insurance coverage exceeds
the Maximum Amount, Wells Fargo shall use reasonable efforts to maintain
the most advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to the Maximum Amount;
(iv) if Wells Fargo or any of its successors or assigns (A) shall
consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such
consolidation or merger or (B) shall transfer all or substantially all of
its properties and assets to any individual, corporation or other entity,
then and in each such case, proper provision shall be made so that the
successors and assigns of Wells Fargo shall assume the obligations set
forth in this paragraph 5(m); and
(v) the provisions of this paragraph 5(m) are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
6. Conditions Precedent to Obligation of Company. The obligation of Company
to effect the Merger shall be subject to the satisfaction at or before the Time
of Filing of the following further conditions, which may be waived in writing
by Company:
(a) Representations and Warranties. Except as they may be affected by
transactions contemplated hereby and except to the extent such representations
and warranties are by their express provisions made as of a specified date and
except for activities or transactions after the date of this Agreement made in
the ordinary course of business and not expressly prohibited by this Agreement,
the representations and warranties contained in paragraph 3 hereof shall be
true and correct in all respects material to Wells Fargo and its subsidiaries
taken as a whole as if made at the Time of Filing.
(b) Performance of Wells Fargo Obligations. Wells Fargo shall have, or shall
have caused to be, performed and observed in all material respects all
covenants, agreements and conditions hereof to be performed or observed by it
and Merger Co. at or before the Time of Filing.
(c) Wells Fargo Compliance Certificate. Company shall have received a
favorable certificate, dated as of the Effective Date of the Merger, signed by
the Chairman, the President or any Executive Vice President or Senior Vice
President and by the Secretary or Assistant Secretary of Wells Fargo, as to the
matters set forth in subparagraphs (a) and (b) of this paragraph 6.
(d) Shareholder Approvals. This Agreement and the Merger Agreement shall have
been approved by the affirmative vote of the holders of the percentage of the
outstanding shares of Company required for approval of a plan of merger in
accordance with the provisions of Company's Articles of Incorporation and the
Colorado Business Corporation Act.
(e) Governmental Approvals. Wells Fargo shall have received approval by the
Federal Reserve Board and by such other governmental agencies as may be
required by law of the transactions contemplated by this Agreement and the
Merger Agreement and all waiting and appeal periods prescribed by applicable
law or regulation shall have expired.
(f) No Restraining Order, Etc. No court or governmental authority of
competent jurisdiction shall have issued an order restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement.
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(g) Shares Authorized for Listing. The shares of Wells Fargo Common Stock to
be delivered to the stockholders of Company pursuant to this Agreement and the
Merger Agreement shall have been authorized for listing on the New York Stock
Exchange and the Chicago Stock Exchange.
(h) Tax Opinion. Company shall have received an opinion, dated the Closing
Date, of counsel to Company, substantially to the effect that, for federal
income tax purposes: (i) the Merger will constitute a reorganization within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code; (ii) no gain or
loss will be recognized by the holders of Company Common Stock upon receipt of
Wells Fargo Common Stock except for cash received in lieu of fractional shares;
(iii) the basis of the Wells Fargo Common Stock received by the shareholders of
Company will be the same as the basis of Company Common Stock exchanged
therefor; and (iv) the holding period of the shares of Wells Fargo Common Stock
received by the shareholders of Company will include the holding period of the
Company Common Stock, provided such shares of Company Common Stock were held as
a capital asset as of the Effective Time of the Merger.
(i) Registration Statement Effective; No Stop Order, Etc.; Blue Sky
Authorizations Received. The Registration Statement (as amended or
supplemented) shall have become effective under the Securities Act and shall
not be subject to any stop order, and no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness of the Registration
Statement shall have been initiated and be continuing, or have been threatened
and be unresolved. Wells Fargo shall have received all state securities law or
blue sky authorizations necessary to carry out the transactions contemplated by
this Agreement.
7. Conditions Precedent to Obligation of Wells Fargo. The obligation of Wells
Fargo to effect the Merger shall be subject to the satisfaction at or before
the Time of Filing of the following conditions, which may be waived in writing
by Wells Fargo:
(a) Representations and Warranties. Except as they may be affected by
transactions contemplated hereby and except to the extent such representations
and warranties are by their express provisions made as of a specified date and
except for activities or transactions or events occurring after the date of
this Agreement made in the ordinary course of business and not expressly
prohibited by this Agreement, the representations and warranties contained in
paragraph 2 hereof shall be true and correct in all respects material to
Company and the Company Subsidiaries taken as a whole as if made at the Time of
Filing.
(b) Performance of Company Obligations. Company shall have, or shall have
caused to be, performed and observed in all material respects all covenants,
agreements and conditions hereof to be performed or observed by it at or before
the Time of Filing.
(c) Shareholder Approvals. This Agreement and the Merger Agreement shall have
been approved by the affirmative vote of the holders of the percentage of the
outstanding shares of Company required for approval of a plan of merger in
accordance with the provisions of Company's Articles of Incorporation and the
Colorado Business Corporation Act.
(d) Company's Compliance Certificate. Wells Fargo shall have received a
favorable certificate dated as of the Effective Date of the Merger signed by
the Chairman or President and by the Secretary or Assistant Secretary of
Company, as to the matters set forth in subparagraphs (a) through (c) of this
paragraph 7.
(e) Governmental Approvals. Wells Fargo shall have received approval by all
governmental agencies as may be required by law of the transactions
contemplated by this Agreement and the Merger Agreement and all waiting and
appeal periods prescribed by applicable law or regulation shall have expired.
No approvals, licenses or consents granted by any regulatory authority shall
contain any condition or requirement relating to Company or any Company
Subsidiary that, in the good faith judgment of Wells Fargo, is unreasonably
burdensome to Wells Fargo.
(f) Consents, Authorizations, Etc. Obtained. Company and each Company
Subsidiary shall have obtained any and all material consents or waivers from
other parties to loan agreements, leases or other
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contracts material to Company's or such Company Subsidiary's business required
for the consummation of the Merger, and Company and each Company Subsidiary
shall have obtained any and all material permits, authorizations, consents,
waivers and approvals required for the lawful consummation by it of the Merger.
(g) No Restraining Order, etc. No court or governmental authority of
competent jurisdiction shall have issued an order restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement.
(h) [Intentionally left blank]
(i) Number of Outstanding Shares. At any time since the date hereof the total
number of shares of Company Common Stock outstanding and subject to issuance
upon exercise (assuming for this purpose that phantom shares and other share-
equivalents constitute Company Common Stock) of all warrants, options,
conversion rights, phantom shares or other share-equivalents, other than any
option held by Wells Fargo, shall not have exceeded 3,496,094.
(j) Registration Statement Effective; No Stop Order, etc.; Blue Sky
Authorizations Received. The Registration Statement (as amended or
supplemented) shall have become effective under the Securities Act and shall
not be subject to any stop order, and no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness of the Registration
Statement shall have been initiated and be continuing, or have been threatened
or be unresolved. Wells Fargo shall have received all state securities law or
blue sky authorizations necessary to carry out the transactions contemplated by
this Agreement.
(k) Comfort Certificate. Wells Fargo shall have received from the Chief
Executive Officer and Chief Financial Officer of Company a letter, dated as of
the effective date of the Registration Statement and updated through the
Closing Date, in form and substance satisfactory to Wells Fargo, to the effect
that:
(i) the interim quarterly consolidated financial statements of Company
included or incorporated by reference in the Registration Statement are
prepared in accordance with generally accepted accounting principles
applied on a basis consistent with the audited consolidated financial
statements of Company;
(ii) the amounts reported in the interim quarterly consolidated financial
statements of Company agree with the general ledger of Company;
(iii) the annual and quarterly consolidated financial statements of
Company and the Company Subsidiaries included in, or incorporated by
reference in, the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Securities Act
and the published rules and regulations thereunder;
(iv) from the date of the most recent unaudited consolidated financial
statements of Company and the Company Subsidiaries as may be included in
the Registration Statement to a date 5 days prior to the effective date of
the Registration Statement and to a date 5 days prior to the Closing, there
are no increases in long-term debt, changes in the capital stock or
decreases in stockholders' equity of Company and the Company Subsidiaries,
except in each case for changes, increases or decreases which the
Registration Statement discloses have occurred or may occur or which are
described in such letters. For the same period, there have been no
decreases (excluding any adjustments required by paragraph 4(m) and any
bonuses paid pursuant to Schedule 4(b)) in consolidated net interest
income, consolidated net interest income after provision for credit losses,
consolidated income before income taxes, consolidated net income and net
income per share amounts of Company and the Company Subsidiaries, or in
income before equity in undistributed income of subsidiaries, in each case
as compared with the comparable period of the preceding year, except in
each case for changes, increases or decreases which the Registration
Statement discloses have occurred or may occur or which are described in
such letters;
(v) they have reviewed certain amounts, percentages, numbers of shares
and financial information which are derived from the general accounting
records of Company and the Company Subsidiaries, which
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appear in the Registration Statement under the certain captions to be
specified by Wells Fargo, and have compared certain of such amounts,
percentages, numbers and financial information with the accounting records
of Company and the Company Subsidiaries and have found them to be in
agreement with financial records and analyses prepared by Company included
in the annual and quarterly consolidated financial statements, except as
disclosed in such letters.
(l) No Casualty Losses, Etc. Company and the Company Subsidiaries considered
as a whole shall not have sustained since December 31, 1998 any material loss
or interference with their business from any civil disturbance or any fire,
explosion, flood or other calamity, whether or not covered by insurance.
(m) No Environmental Liability. There shall be no reasonable basis for any
proceeding, claim or action of any nature seeking to impose, or that could
result in the imposition on Company or any Company Subsidiary of, any liability
relating to the release of hazardous substances as defined under any local,
state or federal environmental statute, regulation or ordinance including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended, which has had or could reasonably be expected
to have a material adverse effect upon Company and its subsidiaries taken as a
whole.
(n) No Material Adverse Change. Since September 30, 1999, no change shall
have occurred and no circumstances shall exist which has had or might
reasonably be expected to have a material adverse effect on the financial
condition, results of operations, business or prospects of Company and the
Company Subsidiaries taken as a whole (other than changes in banking laws or
regulations, or interpretations thereof, that affect the banking industry
generally or changes in the general level of interest rates).
(o) Year 2000. Company shall be in full compliance with current FFIEC
Requirements. There shall be no feature of Company's data processing, operating
or platform systems that would prevent those systems from continuing to run
independently after December 31, 1999 until such time as a subsequent
conversion to Wells Fargo systems is completed. Company's computer hardware and
software used in the receipt, transmission, processing, manipulation, storage,
retrieval, retransmission, or other utilization of data or in the operation of
mechanical or electrical systems of any kind will function at least as
effectively in all material respects after December 31, 1999 as in the case of
dates or time periods occurring prior to January 1, 2000.
(p) Resignations. Company shall have delivered the resignations of each
member of its Board of Directors as of the Effective Time, and such
resignations shall not have been withdrawn.
(q) Equity Floor. As of a date five days prior to the Effective Time of the
Merger, the tangible equity of the Company, as determined in accordance with
generally accepted accounting principles (but excluding FAS 115 adjustments and
including adjustments for the exercise of 220,000 outstanding options at an
average exercise price of $8.34 but excluding any tax benefits attributable to
exercise of the options), will be at least $30,700,000; provided, however, that
such tangible equity shall be calculated without regard to the effect of the
accruals and reserves taken by the Company pursuant to paragraph 4(m) hereof.
(r) Company shall have taken the actions required by paragraph 4(q) hereof.
8. Employee Benefit Plans. Each person who is an employee of Company or any
Company Subsidiary as of the Effective Date of the Merger ("Company Employees")
shall be eligible for participation in the employee welfare and retirement
plans of Wells Fargo, as in effect from time to time, as follows:
(a) Employee Welfare Benefit Plans. Each Company Employee shall be eligible
for participation in the employee welfare benefit plans of Wells Fargo listed
below subject to any eligibility requirements applicable to such plans (and not
subject to pre-existing condition exclusions, except with respect to the Wells
Fargo Long Term Care Plan and Wells Fargo Long Term Disability Plan) and shall
enter each plan not later than the first
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day of the calendar quarter which begins at least 32 days after the Effective
Date of the Merger (the "Benefits Conversion Date"):
Medical Plan
Dental Plan
Vision Plan
Short Term Disability Plan
Long Term Disability Plan
Long Term Care Plan
Flexible Benefits Plan
Basic Group Life Insurance Plan
Group Universal Life Insurance Plan
Dependent Group Life Insurance Plan
Business Travel Accident Insurance Plan
Accidental Death and Dismemberment Plan
Salary Continuation Pay Plan
Paid Time Off Program
It is intended that the transition from Company's Plans to the Wells Fargo
Plans will be facilitated without gaps in coverage to the participants and
without duplication of costs to Wells Fargo. Company Employees shall receive
credit for years of service to Company, the Company Subsidiaries and any
predecessors of Company or the Company Subsidiaries (to the extent credited
under the vacation and short-term disability programs of Company) for the
purpose of determining benefits under the Wells Fargo Paid Time Off Program,
Salary Continuation Pay Plan and Short Term Disability Plan. Company Employees
shall be eligible for participation in the Wells Fargo Salary Continuation Pay
Plan subject to any eligibility requirements applicable to such plans
immediately following the Effective Time of the Merger; provided, however, that
no Company Employee who is a participant in any Company severance or salary
continuation plan or who has an employment agreement with Company or any
Company Subsidiary at the Effective Time of the Merger shall be eligible to
participate in the Wells Fargo Salary Continuation Pay Plan.
(b) Employee Retirement Benefit Plans.
Each Company Employee shall be eligible to participate in the Wells Fargo
401(k) Plan (the "401(k) Plan"), subject to any eligibility requirements
applicable to the 401(k) Plan (with full credit for years of past service to
Company and the Company Subsidiaries for the purpose of satisfying any
eligibility and vesting periods applicable to the 401(k) Plan to the extent
credited under the Company's defined contribution Plan), and shall enter the
401(k) Plan as of the Benefits Conversion Date.
Each Company Employee shall be eligible for participation, as a new employee
subject to all applicable eligibility requirements, in the Wells Fargo Cash
Balance Plan pursuant to the terms thereof. Wells Fargo shall not recognize a
Company Employee's past service with Company or any Company Subsidiary for any
purpose under the Cash Balance Plan.
Each Company Employee shall be eligible for access to Wells Fargo's retiree
medical benefit, subject to any eligibility requirements applicable to such
benefit. Wells Fargo shall recognize years of past service with Company and the
Company Subsidiaries for the purpose of eligibility to access Wells Fargo's
retiree medical benefit.
9. Termination of Agreement.
(a) This Agreement may be terminated at any time prior to the Time of Filing:
(i) by mutual written consent of the parties hereto;
(ii) by either of the parties hereto upon written notice to the other
party if the Merger shall not have been consummated by July 31, 2000 unless
such failure of consummation shall be due to the failure of the
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<PAGE>
party seeking to terminate to perform or observe in all material respects
the covenants and agreements hereof to be performed or observed by such
party; or
(iii) by Company or Wells Fargo upon written notice to the other party if
any court or governmental authority of competent jurisdiction shall have
issued a final order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(b) Termination of this Agreement under this paragraph 9 shall not release,
or be construed as so releasing, either party hereto from any liability or
damage to the other party hereto arising out of the breaching party's willful
and material breach of the warranties and representations made by it, or
willful and material failure in performance of any of its covenants,
agreements, duties or obligations arising hereunder, and the obligations under
paragraphs 4(g), 5(h) and 10 shall survive such termination.
10. Expenses. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by Company and Company Subsidiaries shall be borne by
Company, and all such expenses incurred by Wells Fargo shall be borne by Wells
Fargo.
11. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
but shall not be assignable by either party hereto without the prior written
consent of the other party hereto.
12. Third Party Beneficiaries. Each party hereto intends that this Agreement
shall not benefit or create any right or cause of action in or on behalf of any
person other than the parties hereto.
13. Notices. Any notice or other communication provided for herein or given
hereunder to a party hereto shall be in writing and shall be (i) delivered in
person, or (ii) shall be mailed by first class registered or certified mail,
postage prepaid, or (iii) shall be sent by facsimile, or (iv) shall be sent by
reputable overnight courier service addressed as follows:
If to Wells Fargo:
Wells Fargo & Company
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Attention: Corporate Secretary
If to Company:
1st Choice Financial Corp.
5801 West 11th Street
Greeley, CO 80634
Attention: Darrell McAllister, Chairman & CEO
With a copy to:
Ernest J. Panasci
Jones & Keller, P. C.
1625 Broadway, Suite 1600
Denver, CO 80202
or to such other address with respect to a party as such party shall notify the
other in writing as above provided.
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<PAGE>
14. Complete Agreement. This Agreement, including the Exhibits and Schedules
hereto, the Merger Agreement and any other agreements or documents executed and
delivered with this Agreement contain the complete agreement between the
parties hereto with respect to the Merger and other transactions contemplated
hereby and supersede all prior agreements and understandings between the
parties hereto with respect thereto.
15. Captions. The captions contained in this Agreement and the Exhibits and
Schedules hereto are for convenience of reference only and do not form a part
of this Agreement or the Exhibits or Schedules.
16. Waiver and Other Action. Either party hereto may, by a signed writing,
give any consent, take any action pursuant to paragraph 9 hereof or otherwise,
or waive any inaccuracies in the representations and warranties by the other
party and compliance by the other party with any of the covenants and
conditions herein.
17. Amendment. At any time before the Time of Filing, the parties hereto, by
action taken by their respective Boards of Directors or pursuant to authority
delegated by their respective Boards of Directors, may amend this Agreement;
provided, however, that no amendment after approval by the shareholders of
Company shall be made which changes in a manner adverse to such shareholders
the consideration to be provided to said shareholders pursuant to this
Agreement and the Merger Agreement.
18. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Colorado without regard to the
conflict of laws provisions thereof.
19. Non-Survival of Representations and Warranties. No representation or
warranty contained in the Agreement or the Merger Agreement shall survive the
Merger or, except as set forth in paragraph 9(b), the termination of this
Agreement. Paragraphs 5(m) and 10 shall survive the Merger.
20. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute but
one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
Wells Fargo & Company 1st Choice Financial Corp.
/s/ John E. Ganoe /s/ Darrell McAllister
By: _________________________________ By: _________________________________
Its: Executive Vice President Its: Chief Executive Officer
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<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
Between
1st CHOICE FINANCIAL CORP.
a Colorado corporation
(the surviving corporation)
and
[MERGER CO.]
a Colorado corporation
(the merged corporation)
This Agreement and Plan of Merger (this "Agreement") dated as of ,
, between 1st CHOICE FINANCIAL CORP., a Colorado corporation (hereinafter
sometimes called "Company" and sometimes called the "surviving corporation")
and [MERGER CO.], a Colorado corporation ("Merger Co.")(said corporations being
hereinafter sometimes referred to as the "constituent corporations").
WHEREAS, Merger Co., a wholly-owned subsidiary of Wells Fargo & Company
("Wells Fargo"), was incorporated by Articles of Incorporation filed in the
office of the Colorado Secretary of State on , 19 , and said
corporation is now a corporation subject to and governed by the provisions of
the Colorado Business Corporation Act. Merger Co. has authorized capital stock
of shares of common stock having a par value of $ per share
("Merger Co. Common Stock"), of which shares were outstanding as of
the date hereof; and
WHEREAS, Company was incorporated by Articles of Incorporation filed in the
office of the Colorado Secretary of State on September 22, 1995 and said
corporation is now a corporation subject to and governed by the provisions of
the Colorado Business Corporation Act. Company has authorized capital stock of
10,000,000 shares of Common Stock, par value $2.50 per share ("Company Common
Stock") of which shares were outstanding and no shares were held in the
treasury as of , 19 ; and
WHEREAS, Wells Fargo and Company are parties to an Agreement and Plan of
Reorganization dated as of , 2000 (the "Reorganization Agreement"),
setting forth certain representations, warranties and covenants in connection
with the merger provided for herein; and
WHEREAS, the directors, or a majority of them, of each of the constituent
corporations respectively deem it advisable for the welfare and advantage of
said corporations and for the best interests of the respective shareholders of
said corporations that said corporations merge and that Merger Co. be merged
with and into Company, with Company continuing as the surviving corporation, on
the terms and conditions hereinafter set forth in accordance with the
provisions of the Colorado Business Corporation Act, which statute permits such
merger; and
WHEREAS, it is the intent of the parties to effect a merger which qualifies
as a tax-free reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(E)
of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, the parties hereto, subject to the approval of the
shareholders of Merger Co. and Company, in consideration of the premises and of
the mutual covenants and agreements contained herein and of the benefits to
accrue to the parties hereto, have agreed and do hereby agree that Merger Co.
shall be merged with and into Company pursuant to the laws of the State of
Colorado, and do hereby agree upon, prescribe and set forth the terms and
conditions of the merger of Merger Co. with and into Company, the mode of
carrying said merger into effect, the manner and basis of exchanging the shares
of Company Common Stock for shares of common stock of Wells Fargo of the par
value of $1 2/3 per share ("Wells Fargo Common Stock"), and such other
provisions with respect to said merger as are deemed necessary or desirable, as
follows:
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<PAGE>
FIRST: At the time of merger (as defined herein), Merger Co. shall be merged
with and into Company, one of the constituent corporations, which shall be the
surviving corporation, and the separate existence of Merger Co. shall cease and
the name of the surviving corporation shall be .
SECOND: The Articles of Incorporation of Company at the time of merger shall
be amended as set forth below and, as so amended, shall be the Articles of
Incorporation of the surviving corporation until further amended according to
law:
[Amend to change name, number of directors, etc.]
THIRD: The By-Laws of Company at the time of merger shall be and remain the
By-Laws of the surviving corporation until amended according to the provisions
of the Articles of Incorporation of the surviving corporation or of said By-
Laws.
FOURTH: The directors of Merger Co. at the time of merger shall be and remain
the directors of the surviving corporation and shall hold office from the time
of merger until their respective successors are elected and qualify.
FIFTH: The officers of Merger Co. at the time of merger shall be and remain
the officers of the surviving corporation and shall hold office from the time
of merger until their respective successors are elected or appointed and
qualify.
SIXTH: The manner and basis of converting the shares of Company Common Stock
into whole shares of Wells Fargo Common Stock (and cash in lieu of fractional
share interests) shall be as follows:
1. Each of the shares of Company Common Stock outstanding immediately
prior to the time of merger (other than shares as to which statutory
dissenters' appraisal rights have been exercised) shall at the time of
merger, by virtue of the merger and without any action on the part of the
holder or holders thereof, be converted into the right to receive the
number of shares of Wells Fargo Common Stock determined by dividing the
Adjusted Wells Fargo Shares by the number of shares of Company Common Stock
then outstanding. The "Adjusted Wells Fargo Shares" shall be a number equal
to $63,000,000 (reduced dollar for dollar by the amount, if any, by which
the tangible equity of the Company, determined in accordance with paragraph
7(q) of the Reorganization Agreement, is less than $30,700,000) divided by
the Wells Fargo Measurement Price. The "Wells Fargo Measurement Price" is
defined as the average of the closing prices of a share of Wells Fargo
Common Stock as reported on the consolidated tape of the New York Stock
Exchange during the period of 20 consecutive trading days ending on the day
immediately preceding the meeting of shareholders required by paragraph
4(c) of the Reorganization Agreement.
2. As soon as practicable after the merger becomes effective, each holder
of a certificate which, prior to the effective time of the merger,
represented shares of Company Common Stock outstanding immediately prior to
the time of merger shall be entitled, upon surrender of such certificate
for cancellation to the surviving corporation or to Norwest Bank Minnesota,
National Association, as the designated agent of the surviving corporation
(the "Agent"), to receive a new certificate representing the number of
whole shares of Wells Fargo Common Stock to which such holder shall be
entitled on the basis set forth in paragraph 1 above. Until so surrendered
each certificate which, immediately prior to the time of merger,
represented shares of Company Common Stock shall not be transferable on the
books of the surviving corporation but shall be deemed to evidence only the
right to receive (except for the payment of dividends as provided below)
the number of whole shares of Wells Fargo Common Stock issuable on the
basis above set forth; provided, however, until the holder of such
certificate for Company Common Stock shall have surrendered the same as
above set forth, no dividend payable to holders of record of Wells Fargo
Common Stock as of any date subsequent to the effective date of merger
shall be paid to such holder with respect to the shares of Wells Fargo
Common Stock issuable in connection with the merger, but, upon surrender
and exchange thereof as herein provided, there shall be paid by the
surviving
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<PAGE>
corporation or the Agent to the record holder of such certificate
representing Wells Fargo Common Stock issued in exchange therefor an amount
with respect to such shares of Wells Fargo Common Stock equal to all
dividends that shall have been paid or become payable to holders of record
of Wells Fargo Common Stock between the effective date of merger and the
date of such exchange.
3. If between the date of the Reorganization Agreement and the time of
merger, shares of Wells Fargo Common Stock shall be changed into a
different number of shares or a different class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or if a stock dividend thereon shall be declared
with a record date within such period, then the number of shares of Wells
Fargo Common Stock, if any, into which a share of Company Common Stock
shall be converted on the basis above set forth, will be appropriately and
proportionately adjusted so that the number of such shares of Wells Fargo
Common Stock into which a share of Company Common Stock shall be converted
will equal the number of shares of Wells Fargo Common Stock which the
holders of shares of Company Common Stock would have received pursuant to
such reclassification, recapitalization, split-up, combination, exchange of
shares or readjustment, or stock dividend had the record date therefor been
immediately following the time of merger.
4. No fractional shares of Wells Fargo Common Stock and no certificates
or scrip certificates therefor shall be issued to represent any such
fractional interest, and any holder of a fractional interest shall be paid
an amount of cash equal to the product obtained by multiplying the
fractional share interest to which such holder is entitled by the average
of the closing prices of a share of Wells Fargo Common Stock as reported by
the consolidated tape of the New York Stock Exchange for each of the five
(5) trading days immediately preceding the meeting of shareholders of
Company held to vote on the plan of merger.
5. Each share of Merger Co. Common Stock issued and outstanding at the
time of merger shall be converted into and exchanged for one (1) share of
the surviving corporation after the time of merger.
SEVENTH: The merger provided for by this Agreement shall be effective as
follows:
1. The effective date of merger shall be the date on which Articles of
Merger (as described in subparagraph 1(b) of this Article Seventh) shall be
delivered to and filed by the Colorado Secretary of State; provided,
however, that all of the following actions shall have been taken in the
following order:
a. This Agreement shall be approved and adopted on behalf of Merger
Co. and Company in accordance with the Colorado Business Corporation
Act; and
b. Articles of merger (with this Agreement attached as part thereof)
with respect to the merger, setting forth the information required by
the Colorado Business Corporation Act, shall be executed by the
President or a Vice President of Merger Co. and by the Secretary or an
Assistant Secretary of Merger Co., and by the President or a Vice
President of Company and by the Secretary or an Assistant Secretary of
Company, and shall be filed in the office of the Colorado Secretary of
State in accordance with the Colorado Business Corporation Act.
2. The merger shall become effective as of 11:59 p.m. (the "time of
merger") on the effective date of merger.
EIGHTH: At the time of merger:
1. The separate existence of Merger Co. shall cease, and the corporate
existence and identity of Company shall continue as the surviving
corporation.
2. The merger shall have the other effects prescribed by Section 7-111-
106 of the Colorado Business Corporation Act.
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<PAGE>
NINTH: The following provisions shall apply with respect to the merger
provided for by this Agreement:
1. The registered office of the surviving corporation in the State of
Colorado shall be , and the name of the registered agent of
Company at such address is Corporation Service Company.
2. If at any time the surviving corporation shall consider or be advised
that any further assignment or assurance in law or other action is
necessary or desirable to vest, perfect or confirm in the surviving
corporation the title to any property or rights of Merger Co. acquired or
to be acquired as a result of the merger provided for herein, the proper
officers and directors of Company and Merger Co. may execute and deliver
such deeds, assignments and assurances in law and take such other action as
may be necessary or proper to vest, perfect or confirm title to such
property or right in the surviving corporation and otherwise carry out the
purposes of this Agreement.
3. For the convenience of the parties and to facilitate the filing of
this Agreement, any number of counterparts hereof may be executed and each
such counterpart shall be deemed to be an original instrument.
4. This Agreement and the legal relations among the parties hereto shall
be governed by and construed in accordance with the laws of the State of
Colorado.
5. This Agreement cannot be altered or amended except pursuant to an
instrument in writing signed by both of the parties hereto.
6. At any time prior to the filing of Articles of Merger with the
Colorado Secretary of State, subject to the provisions of the
Reorganization Agreement this Agreement may be terminated upon approval by
the Boards of Directors of either of the constituent corporations
notwithstanding the approval of the shareholders of either constituent
corporation.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of
Merger to be signed in their respective corporate names by the undersigned
officers and their respective corporate seals to be affixed hereto, pursuant to
authority duly given by their respective Boards of Directors, all as of the day
and year first above written.
1st CHOICE FINANCIAL CORP.
By: ____________________________________
Its: ___________________________________
(Corporate Seal)
Attest:
- -------------------------------------
Secretary
[MERGER CO.]
By: _________________________________
Its: ________________________________
(Corporate Seal)
Attest:
- -------------------------------------
Secretary
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<PAGE>
EXHIBIT B
Wells Fargo & Company
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-1026
Attn: Secretary
Gentlemen:
I have been advised that I might be considered to be an "affiliate," as that
term is defined for purposes of paragraphs (c) and (d) of Rule 145 ("Rule 145")
promulgated by the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act"), of 1st Choice
Financial Corp., a Colorado corporation ("Company").
Pursuant to an Agreement and Plan of Reorganization, dated as of February ,
2000, (the "Reorganization Agreement"), between Company and Wells Fargo &
Company, a Delaware corporation ("Wells Fargo"), it is contemplated that a
wholly-owned subsidiary of Wells Fargo will merge with and into Company (the
"Merger") and, as a result of such Merger, I will receive in exchange for each
share of Common Stock, par value $2.50 per share, of Company ("Company Common
Stock") owned by me immediately prior to the Effective Time of the Merger (as
defined in the Reorganization Agreement) a number of shares of Common Stock,
par value $1 2/3 per share, of Wells Fargo ("Wells Fargo Common Stock"), as
more specifically set forth in the Reorganization Agreement.
I hereby agree as follows:
I will not offer to sell, transfer or otherwise dispose of any of the shares
of Wells Fargo Common Stock issued to me pursuant to the Merger (the "Stock")
except (a) in compliance with the applicable provisions of Rule 145, (b) in a
transaction that is otherwise exempt from the registration requirements of the
Securities Act, or (c) in an offering registered under the Securities Act.
I consent to the endorsement of the certificates representing the Stock
issued to me pursuant to the Merger with a restrictive legend which will read
substantially as follows:
"The shares represented by this certificate were issued in a transaction
to which Rule 145 promulgated under the Securities Act of 1933, as amended
(the "Act"), applies, and may be sold or otherwise transferred only in
compliance with the limitations of such Rule 145, or upon receipt by Wells
Fargo & Company of an opinion of counsel reasonably satisfactory to it that
some other exemption from registration under the Act is available, or
pursuant to a registration statement under the Act."
Wells Fargo's transfer agent shall be given an appropriate stop transfer
order and shall not be required to register any attempted transfer of the
shares of the Stock unless the transfer has been effected in compliance with
the terms of this letter agreement.
It is understood and agreed that this letter agreement shall terminate and be
of no further force and effect and the restrictive legend set forth above shall
be removed by delivery of substitute certificates without such legend, and the
related stop transfer order shall be lifted forthwith, if (i) any such shares
of Stock shall have been registered under the Securities Act for sale, transfer
or other disposition by me or on my behalf and are sold, transferred or
otherwise disposed of, or (ii) any such shares of Stock are sold in accordance
with the provisions of paragraphs (c), (e), (f) and (g) of Rule 144 promulgated
under the Securities Act, or (iii) I am not at the time of such disposition an
affiliate of Wells Fargo and have been the beneficial owner of the Stock for at
least one year (or such other period as may be prescribed by the Securities
Act, and the rules and regulations promulgated thereunder) and Wells Fargo has
filed with the Commission all of the reports it is required to file
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under the Securities Exchange Act of 1934, as amended, during the preceding
twelve months, or (iv) I am not and have not been for at least three months an
affiliate of Wells Fargo and have been the beneficial owner of the Stock for at
least two years (or such other period as may be prescribed by the Securities
Act, and the rules and regulations promulgated thereunder), or (v) Wells Fargo
shall have received an opinion of counsel acceptable to Wells Fargo to the
effect that the stock transfer restrictions and the legend are not required.
I have carefully read this letter agreement and the Reorganization Agreement
and have discussed their requirements and other applicable limitations upon my
ability to offer to sell, transfer or otherwise dispose of shares of Company
Common Stock, Wells Fargo Common Stock or the Stock, to the extent I felt
necessary, with my counsel or counsel for Company.
Sincerely,
-------------------------------------
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<PAGE>
APPENDIX B
----------------
FAIRNESS OPINION OF ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
<PAGE>
May , 2000
Board of Directors
1st Choice Financial Corporation
59th Avenue & W. 10th Street
Greeley, Colorado 80633
Members of the Board:
You have requested an update of our opinion dated February 3, 2000, as to the
fairness, from a financial point of view, to the holders of the outstanding
shares of common stock of 1st Choice Financial Corp. ("1st Choice") of the
Merger Consideration to be received in the proposed merger between 1st Choice
and a wholly-owned subsidiary of Wells Fargo & Company, (the "Company"). In
consideration of the Merger, the Company has offered to exchange $63,000,000 of
shares of common stock (the "Merger Consideration") for the outstanding shares
of 1st Choice common stock, subject to the terms and conditions contained in
the Merger Agreement. The shares will be exchanged pursuant to the Agreement
and Plan of Merger dated effective as of February 3, 2000 (the "Merger
Agreement"). Pursuant to the Merger Agreement, the Company shall cause 1st
Choice to be merged with and into a wholly-owned subsidiary of the Company (the
"Merger").
Alex Sheshunoff & Co. Investment Banking ("Sheshunoff") is regularly engaged
in the valuation of securities in connection with mergers and acquisitions,
private placements, and valuations for estate, corporate and other purposes.
In connection with our opinion, we have, among other things:
1. Evaluated 1st Choice's consolidated results based upon a review of its
annual financial statements for the four-year period ending December 31,
1998 and the unaudited consolidated results for the period ending
December 31, 1999;
2. Reviewed Call Report information as of December 31, 1999 for 1st Choice;
3. Conducted conversations with executive management regarding recent and
projected financial performance of 1st Choice;
4. Compared 1st Choice's recent operating results with those of certain
other banks in the Southwestern and Western Regions of the United States
which have recently been acquired;
5. Compared 1st Choice's recent operating results with those of certain
other banks in the United States which have recently been acquired;
6. Compared the pricing multiples for 1st Choice in the Merger to those of
certain other banks in the Southwestern and Western Regions of the
United States which have recently been acquired;
7. Compared the pricing multiples for 1st Choice in the Merger to those of
certain other banks in the United States which have recently been
acquired;
8. Analyzed the net present value of the after-tax cash flows 1st Choice
could produce through the year 2004, based on assumptions provided by
management;
9. Performed an affordability analysis based on the projections of earnings
for the combined entity subsequent to the Merger;
10. Reviewed the historical stock price data and trading volume of the
Company common stock and the lack of any active market for the common
stock of 1st Choice; and
11. Performed such other analyses as we deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information provided to us by 1st Choice for
the purposes of this opinion. In addition, where appropriate, we
B-1
<PAGE>
have relied upon publicly available information that we believe to be reliable,
accurate, and complete; however, we cannot guarantee the reliability, accuracy,
or completeness of any such publicly available information.
We have not made an independent evaluation of the assets or liabilities of
1st Choice or the Company, nor have we been furnished with any such appraisals.
We are not experts in the evaluation of loan portfolios for the purposes of
assessing the adequacy of the allowance for loan and lease losses and have
assumed that such allowances for each of the companies are, in the aggregate,
adequate to cover such losses.
We have assumed that all required regulatory approvals will be received in a
timely fashion and without any conditions or requirements that could adversely
affect the Merger or the Company's operations following the Merger.
Our opinion is necessarily based on economic, market, and other conditions as
in effect on, and the information made available to us as of, the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion.
Our opinion is limited to the fairness of the Merger Consideration, from a
financial point of view, to the holders of 1st Choice common stock. Moreover,
this letter and the opinion expressed herein do not constitute a recommendation
to any stockholder as to any approval of the Merger or the Merger Agreement. It
is understood that this letter is for the information of the Board of Directors
of 1st Choice and may not be used for any other purpose without our prior
written consent.
Based on the foregoing and such other matters we have deemed relevant, it is
our opinion, as of the date hereof, that the Merger Consideration to be
received by the 1st Choice stockholders pursuant to the Merger is fair, from a
financial point of view.
Very truly yours,
-------------------------------------
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
B-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law authorizes
indemnification of directors and officers of a Delaware corporation under
certain circumstances against expenses, judgments and the like in connection
with an action, suit or proceeding. Article Fourteenth of the Registrant's
Restated Certificate of Incorporation provides for broad indemnification of
directors and officers.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. See Exhibit Index.
(b) Financial Statement Schedules. Not Applicable.
(c) Report, Opinion or Appraisal. See Exhibits 5.1 and 8.1
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
posteffective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) ((S)230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such posteffective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a posteffective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered
II-1
<PAGE>
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of San Francisco, state of
California, on April 19, 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 April 19, 2000 by the following persons in the
capacities indicated:
<TABLE>
<S> <C>
/s/ Richard M. Kovacevich President and Chief Executive
______________________________________ Officer (Principal Executive
Richard M. Kovacevich Officer)
/s/ Ross J. Kari Executive Vice President and
______________________________________ Chief Financial Officer
Ross J. Kari (Principal Financial Officer)
/s/ Les L. Quock Senior Vice President and
______________________________________ Controller (Principal Accounting
Les L. Quock Officer)
</TABLE>
LES S. BILLER BENJAMIN F. MONTOYA
MICHAEL R. BOWLIN CYNTHIA H. MILLIGAN
EDWARD M. CARSON PHILIP J. QUIGLEY
DAVID A. CHRISTENSEN DONALD B. RICE
WILLIAM S. DAVILA IAN M. ROLLAND
A majority of
SUSAN E. ENGEL SUSAN G. SWENSON the 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 D. McCORMICK
- --------
* Richard M. Kovacevich, by signing his name hereto, does hereby sign this
document on behalf of each of the directors named above pursuant to powers
of attorney duly executed by such persons.
/s/ Richard M. Kovacevich
_____________________________________
Richard M. Kovacevich
Attorney-in-Fact
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
2.1 Agreement and Plan of Reorganization, dated as of February 3, 2000, by
and between 1st Choice Financial Corp. and Wells Fargo & Company,
included as Appendix A to the accompanying proxy statement-prospectus.
3.1 Restated Certificate of Incorporation, incorporated by reference to
Exhibit 3(b) to the Registrant's Current Report on Form 8-K dated June
28, 1993. Certificates of Amendment of Certificate of Incorporation,
incorporated by reference to Exhibit 3 to the Registrant's Current
Report on Form 8-K dated July 3, 1995 (authorizing preference stock),
and Exhibits 3(b) and 3(c) to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 (changing the
Registrant's name and increasing authorized common and preferred
stock, respectively).
3.2 Certificate of Change of Location of Registered Office and Change of
Registered Agent, incorporated by reference to Exhibit 3(b) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1999.
3.3 Certificate of Designations for the Registrant's ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 4 to
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1994.
3.4 Certificate of Designations for the Registrant's 1995 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 4 to
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
3.5 Certificate Eliminating the Certificate of Designations for the
Registrant's Cumulative Convertible Preferred Stock, Series B,
incorporated by reference to Exhibit 3(a) to the Registrant's Current
Report on Form 8-K dated November 1, 1995.
3.6 Certificate Eliminating the Certificate of Designations for the
Registrant's 10.24% Cumulative Preferred Stock, incorporated by
reference to Exhibit 3 to the Registrant's Current Report on Form 8-K
dated February 20, 1996.
3.7 Certificate of Designations for the Registrant's 1996 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 3 to
the Registrant's Current Report on Form 8-K dated February 26, 1996.
3.8 Certificate of Designations for the Registrant's 1997 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 3 to
the Registrant's Current Report on Form 8-K dated April 14, 1997.
3.9 Certificate of Designations for the Registrant's 1998 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 3 to
the Registrant's Current Report on Form 8-K dated April 20, 1998.
3.10 Certificate of Designations for the Registrant's Adjustable Cumulative
Preferred Stock, Series B, incorporated by reference to Exhibit 3(j)
to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998.
3.11 Certificate of Designations for the Registrant's Fixed/Adjustable Rate
Noncumulative Preferred Stock, Series H, incorporated by reference to
Exhibit 3(k) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
3.12 Certificate of Designations for the Registrant's Series C Junior
Participating Preferred Stock, incorporated by reference to Exhibit
3(l) to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
3.13 Certificate Eliminating the Certificate of Designations for the
Registrant's Series A Junior Participating Preferred Stock,
incorporated by reference to Exhibit 3(a) to the Registrant's Current
Report on Form 8-K dated April 21, 1999.
3.14 Certificate of Designations for the Registrant's 1999 ESOP Cumulative
Convertible Preferred Stock, incorporated by reference to Exhibit 3(b)
to the Registrant's Current Report on Form 8-K dated April 21, 1999.
3.15 By-Laws, incorporated by reference to Exhibit 3(m) to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1998.
4.1 See Exhibits 3.1 through 3.15.
4.2 Rights Agreement, dated as of October 21, 1998, between the Registrant
and ChaseMellon Shareholder Services, L.L.C., as Rights Agent,
incorporated by reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form 8-A dated October 21, 1998.
5.1 Opinion of Stanley S. Stroup as to the legality of the shares to be
issued (including consent).
8.1 Opinion of Jones and Keller, a Professional Corporation regarding the
U.S. federal income tax consequences of the merger (including
consent).*
23.1 Consent of Stanley S. Stroup (included in Exhibit 5.1).
23.2 Consent of KPMG LLP relating to the audited financial statements of
Wells Fargo & Company.
23.3 Consent of Jones and Keller, a Professional Corporation regarding its
tax opinion (included in Exhibit 8.1).
24.1 Powers of Attorney.
99.1 Form of proxy for special meeting of shareholders of 1st Choice
Financial Corp.
99.2 Consent of Alex Sheshunoff & Co. Investment Banking.
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
Exhibit 5.1
[LETTERHEAD OF STANLEY S. STROUP
EXECUTIVE VICE PRESIDENT AND GENERAL
COUNSEL OF WELLS FARGO & COMPANY]
April 19, 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 2,100,000 shares of common stock, par value
$1 2/3 per share, of Wells Fargo & Company, a Delaware corporation (the
"Company"), and associated preferred stock purchase rights (such shares and
rights collectively referred to as the "Shares"), which are proposed to be
issued by the Company in connection with the merger (the "Merger") of a wholly-
owned subsidiary of the Company with 1st Choice Financial Corp., 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 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of
Wells Fargo & Company
We consent to the incorporation by reference in the proxy statement-
prospectus included in this Registration Statement on Form S-4 of Wells Fargo &
Company related to the acquisition of 1st Choice Financial Corp. of our report
dated January 18, 2000, with respect to the consolidated balance sheet of Wells
Fargo & Company and Subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, changes in stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 1999, and to the reference to our firm under the
heading "Experts" in the proxy statement-prospectus.
/s/ KPMG LLP
San Francisco, California
April 19, 2000
<PAGE>
Exhibit 24.1
WELLS FARGO & COMPANY
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or officer
of WELLS FARGO & COMPANY, a Delaware corporation, does hereby make, constitute
and appoint RICHARD M. KOVACEVICH, LES S. BILLER, ROSS J. KARI, STANLEY S.
STROUP, and LAUREL A. HOLSCHUH, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign and affix
the undersigned's name as such director and/or officer of said Company to a
Registration Statement on Form S-4 or other applicable form, and all
amendments, including post-effective amendments, thereto, to be filed by said
Company with the Securities and Exchange Commission, Washington, D.C., in
connection with the registration under the Securities Act of 1933, as amended,
of up to 2,100,000 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 1st Choice
Financial Corp and its subsidiary, 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
22nd day of February, 2000.
/s/ LES S. BILLER /s/ CYNTHIA H. MILLIGAN
/s/ MICHAEL R. BOWLIN /s/ BENJAMIN F. MONTOYA
/s/ EDWARD M. CARSON /s/ PHILIP J. QUIGLEY
/s/ DAVID A. CHRISTENSEN /s/ DONALD B. RICE
/s/ WILLIAM S. DAVILA /s/ IAN M. ROLLAND
/s/ SUSAN E. ENGEL /s/ SUSAN G. SWENSON
/s/ PAUL HAZEN /s/ DANIEL M. TELLEP
/s/ WILLIAM A. HODDER /s/ CHANG-LIN TIEN
/s/ REATHA CLARK KING /s/ MICHAEL W. WRIGHT
/s/ RICHARD M. KOVACEVICH /s/ JOHN A. YOUNG
/s/ RICHARD D. McCORMICK
<PAGE>
Exhibit 99.1
FORM OF PROXY FOR SPECIAL MEETING OF
SHAREHOLDERS OF 1ST CHOICE FINANCIAL CORP.
The undersigned hereby appoints and , or either
of them, as proxies to vote all shares of common stock the undersigned is
entitled to vote at the special meeting of shareholders of 1st Choice Financial
Corp. ("1st Choice") to be held on Friday, June 9, 2000, and at any adjournment
or postponement thereof, as follows, hereby revoking any proxy previously
given:
1. To approve the Agreement and Plan of Reorganization, dated as of
February 3, 2000 (the "Merger Agreement"), by and between 1st Choice and
Wells Fargo & Company ("Wells Fargo") pursuant to which, among other
things, a wholly-owned subsidiary of Wells Fargo will merge with and
into 1st Choice (the "Merger") upon the terms and subject to the
conditions set forth in the Merger Agreement, a copy of which is
included as Appendix A in the accompanying Proxy Statement-Prospectus;
and to authorize such further action by the Board of Directors and
officers of 1st Choice as may be necessary or appropriate to carry out
the intent and purposes of the Merger.
FOR AGAINST ABSTAIN
2. In the discretion of the persons appointed proxies hereby to vote on
such other matters as may properly come before the special meeting.
Shares represented by this proxy will be voted as directed by the
shareholder. The Board of Directors recommends a vote "FOR" proposal 1. If no
direction is supplied, the proxy will be voted "FOR" proposal 1.
Dated: ______________________ .
-------------------------------------
(Please sign exactly as name appears
at left.)
(If stock is owned by more than one
person, all owners should sign.
Persons signing as executors
administrators, trustees, or in
similar capacities should so
indicate.)
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF 1ST CHOICE FINANCIAL CORP.
<PAGE>
Exhibit 99.2
[LETTERHEAD OF ALEX SHESHUNOFF &
CO. INVESTMENT BANKING]
CONSENT OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of 1st Choice Financial Corp. to be included as Appendix B to the
proxy statement-prospectus that forms part of the Registration Statement on
Form S-4 of Wells Fargo & Company with respect to the merger of 1st Choice
Financial Corp. and Wells Fargo & Company, and to the references to such
opinion in such proxy statement-prospectus. By giving such consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission thereunder.
/s/ Alex Sheshunoff & Co. Investment
Banking
AUSTIN, TX
April 19, 2000
