SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
FIRST INTERSTATE BANCORP
(Name of Subject Company)
FIRST INTERSTATE BANCORP
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $2.00 PER SHARE
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
320548100
(CUSIP Number of Class of Securities)
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WILLIAM J. BOGAARD, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
FIRST INTERSTATE BANCORP
633 WEST FIFTH STREET
LOS ANGELES, CA 90071
(213) 614-3001
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)
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COPY TO:
FRED B. WHITE III, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 735-3000
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is First Interstate Bancorp, a Delaware
corporation ("First Interstate"). The address of the principal executive
offices of First Interstate is 633 West Fifth Street, Los Angeles, California
90071. The title of the class of equity securities to which this Statement
relates is First Interstate's common stock, par value $2.00 per share (the
"First Interstate Common Stock"), including the associated Common Stock
Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated
as of November 21, 1988, as amended on November 5, 1995, between First
Interstate and First Interstate Bank, Ltd., as Rights Agent (as so amended,
the "Rights Agreement"). Except where the context otherwise requires, all
references herein to the First Interstate Common Stock shall include the
Rights.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to a proposed exchange offer (the "Wells Offer") to
be disclosed in a Registration Statement on Form S-4 (the "Wells S-4") which
Wells Fargo & Co. ("Wells"), a Delaware corporation, has publicly announced
that it will file with the Securities and Exchange Commission (the "SEC") on
November 20, 1995, to exchange shares of the common stock, par value $5.00
per share, of Wells (the "Wells Common Stock") for all of the outstanding
shares of First Interstate Common Stock. According to a press release (the
"Wells Press Release") issued by Wells on November 13, 1995, in the Wells
Offer, Wells will offer to exchange each share of First Interstate Common
Stock held by First Interstate shareholders for two-thirds of a share of
Wells Common Stock. A copy of the Wells Press Release has been filed as
Exhibit 1 hereto and is incorporated herein by reference, and all
descriptions of the Wells Press Release contained herein are qualified in
their entirety by such reference.
According to the most recent Quarterly Report on Form 10-Q filed by Wells
with the SEC, the principal executive offices of Wells are located at 420
Montgomery Street, San Francisco, California 94163.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of First Interstate, which is the person
filing this Statement, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements or understandings between
First Interstate or its affiliates and certain of First Interstate's
directors and executive officers are described on pages 7-37 of the proxy
statement (the "1995 Proxy Statement"), dated March 20, 1995, sent by First
Interstate to its shareholders in connection with First Interstate's Annual
Meeting of Stockholders held on April 28, 1995. A copy of these pages of the
1995 Proxy Statement is filed as Exhibit 2 hereto and is incorporated herein
by reference. Except as described herein or in Exhibit 2 hereto, to the
knowledge of First Interstate, as of the date of this Schedule 14D-9, there
are no material contracts, agreements, arrangements or understandings, or any
actual or potential conflicts of interest, between First Interstate or its
affiliates and (i) First Interstate, its executive officers, directors or
affiliates or (ii) Wells or its executive officers, directors or affiliates.
On November 5, 1995, First Interstate entered into an Agreement and Plan
of Merger (the "Merger Agreement") with First Bank System, Inc., a Delaware
corporation ("FBS"), and Eleven Acquisition Corp. ("Merger Sub"), a Delaware
corporation and a wholly owned subsidiary of FBS, pursuant to which Merger
Sub will merge (the "Merger") with and into First Interstate, with First
Interstate surviving the Merger as a wholly owned subsidiary of FBS. Upon
consummation of the Merger, (i) subject to certain limited exceptions, each
share of First Interstate Common Stock then outstanding will automatically be
converted into 2.6 shares (the "Exchange Ratio") of the common stock, par
value $1.25 per share, of FBS ("FBS Common Stock") and (ii) FBS will change
its name to First Interstate Bancorp (sometimes referred to herein as "New
First Interstate"). Under the terms of the Merger Agreement, ten persons
serving as directors of First Interstate immediately prior to the effective
time of the Merger (the "Effective Time") and selected solely by and at the
absolute discretion of the Board of Directors of First Interstate (the "First
Interstate Board") will serve as directors of New First Interstate. The
remainder of
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the Board of Directors of New First Interstate will consist of 10 persons
selected solely by and at the absolute discretion of the Board of Directors
of FBS from amongst those persons serving as directors of FBS immediately
prior to the Merger. In addition, the Merger Agreement provides that Mr.
William E. B. Siart, Chairman of the Board of Directors and Chief Executive
Officer of First Interstate, will be President and Chief Operating Officer of
New First Interstate.
A copy of the Merger Agreement has been filed as Exhibit 3 hereto and is
incorporated herein by reference, and any descriptions of the terms of the
Merger Agreement contained herein are qualified in their entirety by
reference thereto.
In addition, although not specifically required by the Merger Agreement,
First Interstate and FBS have publicly announced that Ms. Linnet F. Deily,
the Chief Executive Officer, Texas region, of First Interstate, and Mr. Bruce
G. Willison, the Vice Chairman and Chief Executive Officer, California
region, of First Interstate, will serve as the Vice Chairman, Retail Banking,
and the Vice Chairman, Corporate Banking, respectively, of New First
Interstate.
As of the date of this Schedule 14D-9, First Interstate is not aware of
Wells' intentions with respect to the possible retention of any or all of
First Interstate's executive officers following consummation of the Wells
Offer. As more fully described in Item 4 below, according to the Wells Press
Release, Wells intends to seek to cause the removal of all of the members of
the First Interstate Board.
Pursuant to the Merger Agreement, at the Effective Time, each option to
purchase shares of First Interstate Common Stock (each a "First Interstate
Option") issued by First Interstate pursuant to any of its stock option
programs (each a "First Interstate Stock Plan") which is outstanding and
unexercised immediately prior thereto will be converted automatically into an
option to purchase shares of FBS Common Stock with (a) the number of shares
of FBS Common Stock subject to the new FBS option (each a "New First
Interstate Option") equal to the product of the number of shares of First
Interstate Common Stock subject to the First Interstate Option and 2.6,
rounded down to the nearest share, and (b) the exercise price per share of
FBS Common Stock subject to the New First Interstate Option equal to the
exercise price per share of First Interstate Common Stock under the First
Interstate Option divided by 2.6, rounded up to the nearest cent. The
conversion is intended to be effected in a manner such that any First
Interstate Options which are "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
shall remain so. Other than with respect to the acceleration of the
exercisability of such First Interstate Options in connection with the
Merger, the duration and other terms of the New First Interstate Options
shall be the same as the predecessor First Interstate Options.
Pursuant to the terms of the First Interstate Stock Plans, upon a change
in control of First Interstate (a "Change in Control"), each First Interstate
Option and related stock appreciation right held by active employees will
become immediately exercisable, all restrictions with respect to restricted
stock will automatically lapse and, unless otherwise provided in an agreement
evidencing a performance unit, all performance units shall be immediately
payable in FBS Common Stock, provided in any case that such awards (other
than restricted stock awards) may not be accelerated to a date less than six
months after the date of grant.
First Interstate Options which are currently outstanding and unexercisable
were granted under the First Interstate 1991 Performance Stock Plan and the
First Interstate 1991 Director Option Plan. First Interstate Options which
are currently outstanding and fully exercisable were granted under the First
Interstate 1991 Performance Stock Plan, the First Interstate 1988 Performance
Stock Plan and the First Interstate 1983 Performance Stock Plan. Restricted
shares of First Interstate Common Stock which are currently outstanding were
granted under the First Interstate 1991 Performance Stock Plan and the First
Interstate 1988 Performance Stock Plan. The grants of all such First
Interstate Options were made under terms substantially similar to the terms
contained in the First Interstate 1995 Performance Stock Plan. The grants of
all such restricted shares of First Interstate Common Stock were made under
terms substantially similar to the terms contained in the First Interstate
1995 Performance Stock Plan, except that the restricted period with respect
to such shares expires automatically upon a Change in Control. A description
of the First Interstate 1991 Director Option Plan was included on page 10 of
the 1995 Proxy
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Statement. A description of the First Interstate 1995 Performance Stock Plan
was included on pages 31-37 of the 1995 Proxy Statement. In addition, copies
of the First Interstate 1991 Performance Stock Plan, the First Interstate
1988 Performance Stock Plan and the First Interstate 1983 Performance Stock
Plan are filed as Exhibits 4, 5 and 6 hereto and incorporated herein by
reference.
A description of First Interstate's 1995 Corporate Executive Incentive
Plan (the "Corporate Incentive Plan") was included on page 29 of the 1995
Proxy Statement. The Corporate Incentive Plan provides that within ten days
of a Change in Control, each participant therein shall receive 100% of his or
her target award. In addition, First Interstate maintains for the benefit of
certain of the executive officers of First Interstate and its affiliates the
1995 Management Incentive Plan and the 1995 Regional Executive Incentive
Plan, each of which are substantially similar to the Corporate Incentive
Plan. Copies of each of the 1995 Management Incentive Plan and the 1995
Regional Executive Incentive Plan are attached hereto as Exhibits 7 and 8,
respectively, and are incorporated herein by reference.
A description of the agreements for nine of First Interstate's executive
officers (including Messrs. Siart, Randall, Willison and Curran, each of whom
is one of the executive officers named in the 1995 Proxy Statement) (the
"Tier I Agreements") was included on pages 26 and 27 of the 1995 Proxy
Statement. The terms of the employment agreements with respect to certain
other executive officers (which total approximately thirty agreements) (the
"Tier II Agreements") are substantially similar to the Tier I Agreements,
except that the severance payments under the Tier II Agreements have a
multiplier of two, and include a $20,000 cash payment to cover two years'
health and welfare benefit plan coverage. The Tier I Agreements and the Tier
II Agreements provide for the payment of severance benefits if the employment
of the affected executive officer is terminated under certain circumstances
following a Change in Control. A copy of a form of Tier II Agreement is filed
as Exhibit 9 hereto and is incorporated herein by reference.
Approval of the Merger Agreement by the requisite vote of First
Interstate's shareholders will constitute a Change in Control for purposes of
First Interstate's benefit plans (including without limitation the First
Interstate Stock Plans, the Corporate Incentive Plan, the 1995 Management
Incentive Plan, the 1995 Regional Incentive Plan, the Tier I Agreements and
the Tier II Agreements) and accordingly, certain provisions of First
Interstate's benefit plans which relate to a Change in Control, including,
but not limited to, the accelerated vesting and/or payment of equity-based
awards under the First Interstate Stock Plans, will be triggered if such
approval is obtained.
The consummation of the Wells Offer would constitute a Change in Control
for purposes of First Interstate's benefit plans described above. In
addition, as more fully described in Item 4 below, Wells Fargo has publicly
stated that it intends to commence a solicitation of written consents from
First Interstate's shareholders in order to remove all of the members of the
First Interstate Board and replace them with a slate of directors chosen by
Wells. Such action, if successful, would also constitute a Change in Control
for purposes of First Interstate's benefit plans.
The Merger Agreement provides that FBS will maintain all rights of
indemnification existing in favor of the directors, officers and employees of
First Interstate to the fullest extent permitted under Delaware law and First
Interstate's Certificate of Incorporation and By-laws and will use its best
efforts to provide to the present and former officers and directors of First
Interstate for six years after the Effective Time directors' and officers'
liability insurance with respect to claims against such officers and
directors arising from facts or events which occurred before the Effective
Time on terms no less advantageous than those contained in policies currently
maintained by FBS; provided, however, that the annual premium payments for
such insurance shall not exceed 200% of the annual premiums paid as of the
date of the Merger Agreement by First Interstate; and provided, further,
however, that such coverage will have a single aggregate for such six-year
period in an amount not less than the aggregate annual of such coverage
currently provided by First Interstate.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) AND (B). AS MORE FULLY DESCRIBED BELOW, THE FIRST INTERSTATE BOARD HAS
RECOMMENDED THAT FIRST INTERSTATE SHAREHOLDERS REJECT THE WELLS
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OFFER AND, WHEN AND IF SUCH OFFER IS COMMENCED, NOT TENDER THEIR SHARES OF
FIRST INTERSTATE COMMON STOCK PURSUANT TO THE WELLS OFFER. THE FIRST
INTERSTATE BOARD HAS ALSO REAFFIRMED ITS DETERMINATION THAT THE TERMS OF THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, FIRST INTERSTATE AND ITS
SHAREHOLDERS.
Background. On February 11, 1994, Wells delivered an unsolicited letter to
First Interstate proposing a merger of the two companies in which each share
of First Interstate Common Stock would be converted into Wells Fargo Common
Stock with a then-current trading value of $90. After carefully considering
that proposal, the First Interstate Board determined to decline to pursue a
merger with Wells and instead to implement strategies aimed at enhancing
shareholder value as an independent company.
During the remainder of 1994 and throughout the first three quarters of
1995, First Interstate took a number of actions aimed at achieving this goal.
These actions included implementing a corporate restructuring program
designed to rationalize First Interstate's corporate structure and achieve
greater operating efficiencies; announcing on March 22, 1994 a repurchase
program for eight million shares of First Interstate Common Stock which was
completed in November 1994; and completing a series of acquisitions designed
to enhance First Interstate's competitive position in certain key markets.
As these various strategies were implemented, First Interstate's business,
financial condition and results of operations all continued to improve. This
improvement was reflected in the market price of the First Interstate Common
Stock, which rose from $63 1/4 on January 3, 1994 to $100 3/4 on September
29, 1995.
Throughout this period, the First Interstate Board considered possible
alternative strategies for enhancing shareholder value. These included the
alternative of remaining independent, as well as the alternative of seeking a
strategic partnership with either a larger or similar-sized bank holding
company with a similar strategic focus and business strengths complementary
to and compatible with those of First Interstate. With respect to potential
strategic partnerships, the First Interstate Board continued to consider the
possibility of a transaction with Wells, as well as the possibility of a
strategic partnership with one of several other companies (including FBS)
which, unlike a strategic partnership with Wells, would serve to further the
First Interstate Board's goal of reducing the risk profile of First
Interstate by achieving even greater geographic diversification.
As part of First Interstate's assessment of which strategy would best
enhance shareholder value, Mr. William E. B. Siart, the Chairman and Chief
Executive Officer of First Interstate, from time to time engaged in
exploratory conversations with his counterparts at various other large
regional bank holding companies, including FBS, concerning the respective
strategic directions of First Interstate and such other company, the degree
to which such strategic directions were compatible, and the level of interest
which such other company might have in a potential strategic partnership with
First Interstate. During the first quarter of 1995, general discussions were
held with Mr. John F. Grundhofer, the Chairman and Chief Executive Officer of
FBS, concerning the strategic advantages of a possible combination. However,
none of the discussions described in this paragraph were conducted with the
aim of generating, and none resulted in, a firm merger proposal being
submitted to First Interstate or any merger proposal being considered by the
First Interstate Board.
As the pace of consolidation in the banking industry reached unprecedented
levels during the first half of 1995, Mr. Siart initiated a series of
discussions at which the First Interstate Board would continue its ongoing
review of the appropriate strategic direction for First Interstate in light
of the significant changes affecting the industry. At the April 28, 1995
meeting of the First Interstate Board, Mr. Siart announced that at future
Board meetings, management would discuss its views concerning the strategic
alternatives available to First Interstate and the critical elements that
would affect the Board's selection of the strategic alternative which would
be in the best interests of First Interstate and its shareholders. The first
such discussion was held at the July 17, 1995 meeting of the First Interstate
Board.
In August 1995, Messrs. Siart and Grundhofer met at Mr. Grundhofer's
request and discussed corporate strategic compatibility and management
philosophy. On September 7, 1995, Mr. Siart met with
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Mr. Paul Hazen, the Chief Executive Officer and Chairman of the Board of
Wells, at Mr. Hazen's request. At this meeting, Mr. Hazen stated his belief
that a merger of First Interstate and Wells was very compelling. He also
stated that after evaluating Wells' strategic alternatives, Wells had
concluded that such a merger was a strategic imperative to Wells and that no
alternative would provide values to Wells' shareholders which were comparable
to the values which could be achieved in such a merger. Mr. Hazen then
suggested that Mr. Siart could serve as the President and Chief Operating
Officer of the combined company, and that the merger would significantly
enhance shareholder value for each company's shareholders. In this regard, he
noted that Wells had performed extensive analyses of the cost savings and
operating efficiencies which could be achieved by consolidating the two
companies' respective California branch systems.
At the conclusion of the meeting, Mr. Hazen suggested a second meeting for
purposes of reviewing Wells' analyses in detail. Mr. Siart responded by
explaining the process for reviewing strategic alternatives previously
commenced by the First Interstate Board. In particular, he summarized the
presentations made at the July Board meeting, his expectations regarding the
subject matter of the presentation which would be made to the First
Interstate Board in October (which presentation was to include an assessment
of potential strategic partners, including Wells), and the additional future
presentations which were expected to be made to the First Interstate Board
concerning, among other matters, developments in technology and non-bank
financial providers. Mr. Hazen then inquired as to Mr. Siart's expectations
concerning how long the Board's process for reviewing strategic alternatives
would take. Mr. Siart responded that although he was not sure, his best guess
was that the process would be complete in approximately six months (although
it could take as few as four and as many as nine months). Mr. Hazen again
suggested a second meeting to discuss Wells' analyses in detail, and Mr.
Siart responded that he believed that it was more important for Mr. Hazen and
him to determine if the two companies' management philosophies and strategic
outlooks were compatible. On the same day as the meeting, Mr. Siart called
Mr. Hazen and scheduled a second meeting for October 30, 1995.
On October 17, 1995, the First Interstate Board met and reviewed possible
strategic partnerships with five large bank holding companies, including
Wells and FBS. The advantages and disadvantages of a transaction with each
company were reviewed.
In a telephone conversation initiated by Mr. Hazen later that day, Mr.
Hazen told Mr. Siart that he intended to deliver and make public the
following morning a letter proposing a merger of the two companies in which
each share of First Interstate Common Stock would be converted into .625
shares of Wells Common Stock (the "Initial Wells Proposal"). In a subsequent
call a short time later, Messrs. Siart and Hazen discussed under what
circumstances Mr. Hazen would agree not to make his letter public. Mr. Hazen
stated that Mr. Siart would have to begin merger negotiations the next day,
which Mr. Siart rejected as inappropriate and inconsistent with both the
strategic process the First Interstate Board had already undertaken and the
interests of the shareholders of First Interstate being served by that
process. Mr. Siart suggested that inasmuch as the Board's process was already
underway, and that Wells was included, it seemed prudent for Wells to wait
for the process to conclude.
On October 18, 1995, Wells publicly announced that it had delivered an
unsolicited letter to Mr. Siart the previous evening proposing a merger of
the two companies. A copy of Wells' October 17 letter is filed as Exhibit 10
hereto and incorporated herein by reference. Later that day, three large
regional bank holding companies, including FBS (each of which had been
considered as a potential strategic partner at the previous day's Board
meeting), contacted First Interstate to express an interest in initiating
discussions to assess the merits of a strategic partnership. Mr. Siart
contacted all of the members of the First Interstate Board to discuss the
Initial Wells Proposal, the need to accelerate the Board's process for
reviewing strategic alternatives and the inquiries received from these three
regional bank holding companies.
First Interstate's senior management, together with First Interstate's
financial advisors, Goldman, Sachs & Co. ("Goldman Sachs") and Morgan Stanley
& Co. Incorporated ("Morgan Stanley," and together with Goldman Sachs, the
"Financial Advisors"), at the direction of the First Interstate Board, then
engaged in preliminary discussions concerning potential strategic
partnerships with the three large regional bank holding companies that had
contacted Mr. Siart on October 18. First Interstate's
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management and the Financial Advisors also continued to explore the values to
shareholders which could be achieved (i) if First Interstate chose to remain
independent rather than pursuing a strategic partnership at the present time
and (ii) if a transaction with Wells were pursued.
The First Interstate Board met to consider the Initial Wells Proposal on
October 25, 1995. At this meeting, First Interstate's management and the
Financial Advisors reviewed with the Board the status of the preliminary
discussions with the three large regional bank holding companies as well as
the Initial Wells Proposal.
On October 26, 1995, Mr. Siart met with Mr. Hazen to discuss the
possibility of pursuing a merger of First Interstate and Wells. Mr. Siart
stated his desire to learn more about the Initial Wells Proposal. At this
meeting, Mr. Hazen discussed Wells' reasons for publicly announcing its
unsolicited proposal. Messrs. Siart and Hazen also discussed the possible
advantages of a combination of First Interstate and Wells, with particular
attention being paid to the cost savings and operating efficiencies which
could be achieved in a merger.
Messrs. Siart and Hazen were joined later that day by William J. Bogaard,
First Interstate's General Counsel, George Roberts of Kohlberg Kravis Roberts
& Co. ("KKR"), First Interstate's largest shareholder, Mr. Rodney L. Jacobs,
the Vice Chairman and Chief Financial Officer of Wells, and Mr. Warren
Buffett, Chairman and Chief Executive Officer of Berkshire Hathaway Inc., the
largest shareholder of Wells. Extensive dialogue ensued concerning the two
companies and their respective strategies, potential cost savings, operating
efficiencies and reductions in revenue, and the consolidation of a
substantial number of First Interstate's and Wells' respective California
branch offices and the revenue loss associated therewith. Mr. Siart asserted
that the reductions in revenue which would result from the transaction would
significantly exceed those estimated by Wells (see paragraph (v) in this Item
4 below).
Mr. Siart stated that he nevertheless believed that a merger of First
Interstate and Wells could enhance shareholder value. Mr. Buffett stated that
he had studied both companies in some detail. He also stated that one could
come up with positives and negatives of one company compared to the other,
but in the end, when evaluating each company, one would conclude that they
were about equal and that accordingly the exchange ratio of .625 made sense
to him.
Mr. Roberts also stated his view, speaking as a major shareholder of First
Interstate and not on behalf of First Interstate's management or the First
Interstate Board, that given the other attractive strategic alternatives
available to First Interstate, the substantial risk created by a merger of
the two companies due to the increased concentration of assets in California,
and the tremendous value of the First Interstate franchise, a minimum
exchange ratio of .70 shares of Wells Common Stock for each share of First
Interstate Common Stock was required in order to make the transaction
equitable. During these discussions, Mr. Hazen stated that although Wells
might consider increasing the exchange ratio offered to First Interstate's
shareholders, the maximum exchange ratio it might be prepared to offer was
.65. However, he emphasized that he and Mr. Buffett viewed an exchange ratio
of .625 as fair to each company's shareholders. Mr. Roberts indicated that
the possible increase of the exchange ratio to .65 seemed inadequate to him.
Mr. Hazen told Mr. Siart that in no way should their conversation be
construed as meaning Wells had raised its offer.
On October 30, 1995, the First Interstate Board met to review the
discussions that had been held with Wells and the three other potential
strategic partners. Mr. Siart reported that FBS had indicated that it would
consider increasing its exchange ratio from the previously stated range of
2.3 to 2.4 shares of FBS Common Stock for each First Interstate share to 2.5.
Management and the Financial Advisors also discussed their views as to the
values which could be achieved if First Interstate remained independent, and
the risks associated with this strategy. At the conclusion of this meeting,
the First Interstate Board determined to continue to explore a merger with
each of Wells and FBS. With respect to Wells, it was the sense of the Board
that Mr. Siart should determine if Wells would consider increasing the
exchange ratio significantly above .65.
Messrs. Siart and Hazen again met on the morning of October 31, 1995. At
this meeting, Mr. Siart informed Mr. Hazen that the First Interstate Board
had been fully informed of all of the matters discussed
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at their October 26 meeting and was considering carefully all of the
advantages and disadvantages of a potential merger with Wells, as well as the
advantages and disadvantages associated with the other strategic alternatives
available to First Interstate. Extensive discussions concerning potential
cost savings, operating efficiencies and revenue losses also took place, with
Mr. Siart voicing the various concerns of the First Interstate Board in this
regard. Mr. Hazen stated that he believed that the $100 million in revenue
losses estimated by Wells were on the high side. Mr. Siart stated that First
Interstate might consider further exploratory discussions concerning the
value to First Interstate's shareholders of a potential merger with Wells if
Wells would offer an exchange ratio of approximately .68. Mr. Hazen then
excused himself from the meeting. Upon his return, Mr. Hazen stated that he
had consulted with Mr. Buffett, reiterated that the maximum exchange ratio
that Wells and its major shareholder would consider was .65 shares of Wells
Common Stock for each share of First Interstate Common Stock, and stated that
Mr. Buffett fully concurred with this decision. In closing the meeting, Mr.
Siart again stated that Mr. Hazen should bear in mind that First Interstate
had available a number of attractive strategic alternatives.
On November 1, 1995, Mr. Siart contacted Mr. Grundhofer and they agreed to
meet the next day. Messrs. Siart and Hazen also talked by phone that day. Mr.
Siart asked Mr. Hazen if he had reconsidered his position. Mr. Hazen stated
that his position remained unchanged and that .65 was the maximum exchange
ratio that Wells would consider.
On November 2, 1995, Mr. Siart met with Mr. Grundhofer and Mr. Richard A.
Zona, the Chief Financial Officer of FBS. At this meeting, FBS increased the
exchange ratio it was prepared (subject to the approval of the FBS Board) to
offer to First Interstate's shareholders to 2.6 from the previous indication
of 2.5 and First Interstate and FBS continued their discussions concerning a
potential merger. A number of the significant business terms relating to a
merger transaction were discussed. Mr. Siart reported these developments to
the members of the First Interstate Board later that day. On November 3,
1995, the First Interstate Board met to consider the potential merger with
FBS and the results of Mr. Siart's conversations with Mr. Hazen. This meeting
included an executive session of all of First Interstate's outside directors
(other than Mr. Edward M. Carson, the former Chairman and Chief Executive
Officer of First Interstate), who discussed the matters under consideration
with their special outside counsel. During this period, negotiations between
the legal and financial advisors of First Interstate and FBS began concerning
the terms of definitive transaction agreements.
On November 5, 1995, the First Interstate Board met to again consider both
the potential merger with FBS and Wells' merger proposal. At this meeting,
the management of First Interstate, as well as First Interstate's legal and
financial advisors, made presentations regarding their due diligence findings
concerning FBS, the strategic alternatives other than the potential FBS
merger available to First Interstate (including a merger with Wells assuming
for purposes of such presentations that Wells would actually increase its
proposed exchange ratio to .65), the terms of the definitive agreements
negotiated between First Interstate and FBS, the fairness opinions of each of
Goldman Sachs and Morgan Stanley concerning the exchange ratio for the
potential merger, the fairness opinion of Morgan Stanley concerning the .65
exchange ratio which might be proposed by Wells and the judgments of the
Financial Advisors that the First Interstate Stock Option Agreement and the
First Interstate Fee Letter (each as defined in Item 7 below) were within the
normal range and consistent with comparable transactions. Another executive
session of all of First Interstate's outside directors (other than Mr.
Carson) was also held, with the outside directors consulting with both their
special counsel and the Financial Advisors. Based upon its consideration of
those presentations and other factors more fully described below, the First
Interstate Board unanimously approved and authorized (with two directors
absent) the execution and delivery of the Merger Agreement, the Reciprocal
Stock Option Agreements and the Reciprocal Fee Letters (each as defined
below).
The Merger was publicly announced on November 6, 1995.
On November 13, 1995, Wells issued the Wells Press Release, which stated
that Wells intended to file a registration statement with the SEC with
respect to an exchange offer pursuant to which Wells would offer to exchange
two-thirds of a share of Wells Common Stock for each share of First
Interstate Common Stock. The Wells Press Release also stated that Wells
anticipated (i) filing proxy materials with the SEC
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(a) to solicit written consents from shareholders of First Interstate to
remove the members of the First Interstate Board and to replace them with
nominees of Wells who are committed to removing any impediments to the
consummation of the acquisition of First Interstate by Wells and (b) to
solicit proxies from the shareholders of First Interstate against the
approval of the Merger Agreement and (ii) filing an application with the
Federal Reserve Board seeking its approval of Wells' acquisition of First
Interstate and Wells' election of its board nominees. Finally, the Wells
Press Release stated that Wells had commenced litigation against First
Interstate, the members of the First Interstate Board and FBS in the Chancery
Court of the Commonwealth of Delaware which is described in Item 8 below. A
copy of the Wells Press Release, including a letter from Mr. Hazen to Mr.
Siart included therein, is filed as Exhibit 1 hereto and is incorporated
herein by reference and the foregoing description thereof is qualified in its
entirety by such reference.
On November 19, 1995, the First Interstate Board met to consider both the
Wells Offer and the Merger. At this meeting, following an executive session
of all of First Interstate's outside directors (other than Mr. Carson) with
their special counsel, the management of First Interstate, as well as First
Interstate's legal and financial advisors and the outside directors' special
counsel, reviewed, among other things, the analyses which had been presented
to the First Interstate Board at its November 5, 1995 meeting, with these
analyses updated where appropriate to reflect the increase in Wells'
indicated maximum exchange ratio from .65 to two-thirds of a share of Wells
Common Stock for each First Interstate share. At its November 19 meeting, the
First Interstate Board determined by a unanimous vote (with two directors
absent) that the Wells Offer is not in the best interests of First Interstate
and its shareholders. Accordingly, the First Interstate Board determined to
recommend that First Interstate shareholders reject the Wells Offer and not
tender their shares of First Interstate Common Stock pursuant to the Wells
Offer.
The First Interstate Board also reaffirmed its determination that the
terms of the Merger are fair to, and in the best interests of, First
Interstate and its shareholders. The factors considered by the First
Interstate Board in making its determinations with respect to the Merger and
the Wells Offer are described below.
THE FIRST INTERSTATE BOARD RECOMMENDS THAT SHAREHOLDERS REJECT THE WELLS
OFFER AND, WHEN AND IF SUCH OFFER IS COMMENCED, NOT TENDER ANY OF THEIR
SHARES OF FIRST INTERSTATE COMMON STOCK OR RIGHTS PURSUANT THERETO. THE FIRST
INTERSTATE BOARD BELIEVES THAT THE MERGER SHOULD PROVIDE LONG-TERM VALUE TO
FIRST INTERSTATE'S SHAREHOLDERS SUPERIOR TO THAT PROVIDED BY A TRANSACTION
WITH WELLS PURSUANT TO THE TERMS OF THE WELLS OFFER.
A copy of the letter to First Interstate's shareholders communicating the
Board's recommendation and the press release relating thereto are filed as
Exhibits 11 and 12 hereto and incorporated herein by reference. A copy of
such letter is also attached hereto.
In reaching its determination to approve and adopt the Merger Agreement
and in determining to recommend rejection of the Wells Offer, the First
Interstate Board considered the following factors, which, together,
constitute all material factors considered by the First Interstate Board:
(i) the First Interstate Board's familiarity with and review of First
Interstate's business, operations, financial condition and earnings on
both an historical and a prospective basis;
(ii) the First Interstate Board's review, based in part on
presentations by the Financial Advisors and First Interstate management,
of (a) the strategy, business, operations, earnings and financial
condition of FBS on both an historical and a prospective basis and (b) the
historical market price of FBS Common Stock. In this regard, the First
Interstate Board noted that (I) given the geographic continuity of the
regions currently served by each company, the Merger would serve to (x)
further diversify the assets (and thereby reduce the attendant credit
risks), liabilities and operations of First Interstate into eight
additional contiguous states, with the combined institution obtaining a
top three ranking (in terms of deposit market share) in ten states (as
opposed to a top three ranking in only four states in a First
Interstate/Wells merger) and (y) reduce to less than 30% (from in excess
of 40%)
8
the total assets of First Interstate located in California, (II) First
Interstate and FBS possess compatible and complementary corporate
philosophies with respect to strategies for enhancing profitability,
business line diversification, asset quality and risk management and (III)
FBS has multiple product lines which are complementary to First
Interstate's product offerings;
(iii) the First Interstate Board's review, based in part on
presentations by the Financial Advisors and First Interstate management,
of (a) the strategy, business, operations, earnings and financial
condition of Wells on both a historical and a prospective basis and (b)
the historical market price of Wells Common Stock. In this regard, the
First Interstate Board noted that although Wells was a highly regarded
institution, its strategies were very different from those of First
Interstate and a merger with Wells would create a company with
significantly different characteristics than both First Interstate
currently and the company to be created in the Merger with FBS. These
differences include (I) substantially greater concentration in the
California market (with 70% of the combined company's total assets and 78%
of its real estate loans being located in California), which concentration
is inconsistent with the First Interstate Board's longstanding desire to
achieve greater geographic diversification, (II) a materially increased
exposure to real estate lending, which exposure is inconsistent with First
Interstate's credit philosophy, (III) the financial impact of a purchase
accounting transaction (see paragraph (xiii) below) and (IV) a narrower
business strategy with fewer product lines and revenue growth
opportunities which, in the view of the First Interstate Board, would
emphasize stock repurchases and other financial strategies rather than
core business growth as a key means of increasing earnings per share;
(iv) the anticipated cost savings and operating efficiencies available
to First Interstate and FBS as a combined institution following the
Merger, the potential for revenue enhancements at the combined institution
and the likelihood of achieving these cost savings, operating efficiencies
and revenue enhancements relative to the likelihood that they could be
achieved in a merger with Wells (see also paragraphs (vi) -- (viii)
below);
(v) the anticipated cost savings and operating efficiencies available
to First Interstate and Wells as a combined institution following an
affiliation of the two institutions and the potential for revenue
enhancements at the combined institution. In this regard, the First
Interstate Board noted its belief that although the cost savings which
might be achieved in connection with a First Interstate/Wells merger could
be as high as the $800 million announced by Wells, it was likely that the
decreases in revenue at the combined institution would significantly
exceed the $100 million level publicly projected by Wells due to (a) the
divestitures which were anticipated to be required in order to obtain
regulatory approval for the transaction, (b) the decreases in the levels
of service and ability to generate revenue (both through branch
consolidations and substantial cuts in employment in the corporate banking
and trust area) which would be required to achieve such cost savings and
(c) the likelihood, based upon First Interstate's experience in acquiring
other California financial institutions, that the branch consolidations
required to achieve such cost savings would result in significant deposit
attrition;
(vi) the fact that the cost savings and operating efficiencies
expected to result from the Merger primarily involve the consolidation of
back office and operating systems, which cost savings and operating
efficiencies are expected to be achieved without corresponding significant
reductions in revenues. In comparison, the cost savings and operating
efficiencies expected to result from a merger of First Interstate and
Wells would, as explained in paragraph (v) above, be accomplished, in
large measure, by reductions in line operations and therefore result in
significant revenue reductions;
(vii) the fact that First Interstate and FBS share common information
systems which should greatly facilitate the integration of the two
companies' operations and the achievement of cost savings and operating
efficiencies at a minimal cost. In contrast, Wells utilizes a system which
is incompatible with First Interstate's, which in turn could greatly
impair the combined company's ability to implement the technology
conversion required in the merger on a timely basis and which would
require significant expenditures before any cost savings and operating
efficiencies could be achieved at a later date;
9
(viii) the significant experience of the senior managements of each of
First Interstate and FBS in managing the operations of a multi-bank,
multi-state network and their proven record of achieving cost savings,
operating efficiencies and revenue enhancements in connection with the
integration of acquired companies. In particular, the First Interstate
Board noted that FBS had successfully integrated 22 acquisitions in the
preceding four years. In contrast, although Wells' senior management has a
good reputation for efficient, low-cost management, their experience has
been limited to the operation of a single bank in the State of California,
and they have not managed the process of consummating a significant bank
acquisition since 1988;
(ix) a comparison, based upon publicly available earnings estimates
for each of First Interstate, FBS and Wells for the fiscal years
1996-1998, of the reported earnings per share and cash earnings per share
attributable to a share of First Interstate Common Stock (a) if First
Interstate remained as a stand-alone entity and (b) on a pro-forma per
share equivalent basis giving effect to each of the Merger and a merger
with Wells, which demonstrates the higher per share values which could be
realized by First Interstate shareholders in the Merger compared to those
which could be realized either in the stand-alone case or a First
Interstate-Wells combination;
(x) the First Interstate Board's assessment, with the assistance of
counsel, concerning the relative likelihood that each of FBS and Wells
would obtain all required regulatory approvals for a transaction with
First Interstate. In this regard, the First Interstate Board determined
that although it was likely that each of FBS and Wells would ultimately
receive all such approvals, because of significant antitrust concerns
raised only in a transaction with Wells, (a) it was possible that Wells
would require a significantly longer period of time than FBS to obtain all
required regulatory approvals and (b) there was significant risk that the
divestitures which the appropriate governmental entities would require as
a condition to granting the required regulatory approvals to Wells would
significantly exceed Wells' estimates of such divestitures, which would in
turn contribute to reductions in revenue at the combined institution in
excess of those estimated by Wells;
(xi) the financial presentations of the Financial Advisors (including
presentations of pro forma financial information with respect to both the
Merger and a merger of First Interstate and Wells) and (a) the oral
opinion of Goldman Sachs rendered on November 5, 1995 (which opinion was
confirmed in writing the following day) that, as of the date of such
opinion, the Exchange Ratio was fair to the shareholders of First
Interstate (which opinion was not amended or withdrawn on November 19,
1995) and (b) the November 5, 1995 opinion of Morgan Stanley that, as of
the date of such opinion, each of the Exchange Ratio, the exchange ratio
of .625 proposed by Wells and the exchange ratio of .65 which might be
proposed by Wells was fair from a financial point of view to the
shareholders of First Interstate (which opinion with respect to the
Exchange Ratio was reaffirmed on November 19, 1995). Copies of such
opinions, setting forth the assumptions made, matters considered and
review undertaken, are filed as Exhibits 13, 14, 15 and 16, respectively,
to this Schedule 14D-9 and are also attached hereto. The full text of each
such opinion is incorporated herein by reference and the foregoing
descriptions thereof are qualified in their entirety by such reference.
First Interstate shareholders are urged to read these opinions carefully
in their entirety;
(xii) the First Interstate Board's concerns, based upon presentations
by the Financial Advisors and First Interstate management, that because
the Wells Common Stock currently is trading at ratios of price to
earnings, price to estimated 1996 earnings, price to book value and price
to tangible book value which are among the highest in the banking
industry, a risk exists that the value of the Wells Common Stock which
would be received by First Interstate's shareholders in the Wells Offer
could decline if these ratios are not sustained;
(xiii) the First Interstate Board's concerns that because the
transaction contemplated by the Wells Offer would be accounted for as a
purchase rather than as a pooling of interests, (a) the combined
institution would have limited flexibility to participate in the
continuing unprecedented consolidation of the banking industry (whether
such participation would consist of seeking to acquire additional
financial institutions or seeking to sell itself and receive a control
premium) due to (x) its inability, absent massive stock reissuances, to
engage in a transaction accounted for as a pooling-of-
10
interests until the two years following the termination of Wells' stock
repurchases and (y) the fact that no other significant United States bank
holding company currently carries on its books the amount of goodwill
which would be carried by the combined institution (most of which would
result from the combination of First Interstate and Wells) and (b) a risk
existed that the value of the Wells Common Stock received by First
Interstate's shareholders in the Wells Offer would decline if the market
was to reject the view of Wells that, contrary to common practice in the
banking industry, the combined company should be valued with an emphasis
on cash-flows rather than reported earnings. In contrast, neither of these
concerns were raised by the Merger, which will be accounted for as a
pooling of interests;
(xiv) the favorable response of First Interstate's non-shareholder
constituencies (including its customers, communities served and employees)
to the Merger relative to their response to a transaction with Wells, and
the positive effect such response could have on the business, financial
condition and results of operations of the combined company following the
Merger;
(xv) the current and prospective economic, regulatory and competitive
environment facing financial institutions, including First Interstate, FBS
and Wells, including without limitation the unprecedented consolidation
currently underway in the banking industry; and
(xvi) the following additional factors which contributed to the First
Interstate Board's conclusion that the Merger is in the best interests of
First Interstate and its shareholders:
(A) the fact that the combined entity resulting from the Merger
would be the ninth largest banking institution in the United States in
terms of total assets and the fifth largest in terms of market value
(based on total assets and market prices as of September 30, 1995).
The First Interstate Board recognized that such an institution would
be likely to possess the financial resources necessary to compete more
effectively in the rapidly changing marketplace for banking and
financial services and would be effective in fulfilling First
Interstate's long-term objectives of increasing its overall size,
continuing to increase geographic diversification and enhancing its
market presence while maintaining its asset quality and credit
standards;
(B) the expectation that the Merger will generally be a tax-free
transaction to First Interstate and its shareholders; and
(C) the terms of the Merger Agreement, the Reciprocal Option
Agreements and the Reciprocal Fee Letters, which were generally
reciprocal in nature, and certain other information regarding the
Merger, including the terms and structure of the Merger, the proposed
arrangements with respect to the board of the combined institution and
the management structure of the combined institution following the
Merger.
The foregoing discussion of the information and factors considered by the
First Interstate Board is not intended to be exhaustive but includes all
material factors considered by the First Interstate Board. In reaching its
determination to approve and recommend the Merger and to recommend rejection
of the Wells Offer, the First Interstate Board did not assign any relative or
specific weights to the foregoing factors, and individual directors may have
given differing weights to different factors. Throughout its deliberations,
the First Interstate Board received the advice of the Financial Advisors and
representatives of Skadden, Arps, Slate, Meagher & Flom, the firm retained to
serve as special counsel to First Interstate, and Irell & Manella, the firm
retained by the outside directors of First Interstate to serve as their
special counsel.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
First Interstate has entered into letter agreements with Goldman Sachs and
Morgan Stanley dated October 24, 1995 and October 18, 1995, respectively
(collectively, the "Engagement Letters"). Pursuant to the Engagement Letters,
each of the Financial Advisors received an initial advisory fee of $5,000,000
(collectively, the "Advisory Fees") upon the execution of the Engagement
Letters.
The Engagement Letters further provide that if First Interstate executes a
definitive agreement with respect to certain designated transactions (each a
"Transaction"), First Interstate will pay each Financial
11
Advisor a fee (collectively, the "Initial Transaction Fees") of $5,000,000.
Such amounts were paid upon execution of the Merger Agreement. If any such
Transaction (including without limitation the Merger or the Wells Offer) is
consummated, First Interstate will pay each Financial Advisor an additional
transaction fee (collectively, the "Secondary Transaction Fees") equal to
.655% of the positive difference between the value of the aggregate
consideration paid or received by First Interstate or its shareholders (the
"Aggregate Value"), as the case may be, and approximately $10,411,186,000.
However, in no event will the sum of the Advisory Fee, the Initial
Transaction Fee and the Secondary Transaction Fee for each Financial Advisor
exceed 0.175% of the Aggregate Value. For purposes of calculating the amount
due to the Financial Advisors, securities are valued on the basis of the
average of the last sales prices for such securities on the twenty trading
days ending five days prior to the consummation of the relevant transactions.
In addition, First Interstate has agreed to reimburse the Financial Advisors
for their reasonable expenses and agreed to indemnify them against certain
liabilities arising out of or in connection with their respective
engagements.
First Interstate has retained Georgeson & Co., Inc. ("Georgeson") to
assist First Interstate in connection with its communications with its
shareholders with respect to, and to provide other services to First
Interstate in connection with, the Merger and the Wells Offer. Georgeson will
receive reasonable and customary compensation for its services and
reimbursement of out-of-pocket expenses in connection therewith. First
Interstate has agreed to indemnify Georgeson against certain liabilities
arising out of or in connection with its engagement.
First Interstate has retained Kekst & Co. ("Kekst") as its public
relations advisor in connection with the Merger and the Wells Offer. Kekst
will receive reasonable and customary compensation for its services and
reimbursement of out-of-pocket expenses in connection therewith. First
Interstate has agreed to indemnify Kekst against certain liabilities arising
out of or in connection with its engagement.
Except as set forth above, neither First Interstate nor any person acting
on its behalf has employed, retained or compensated any other person to make
any solicitations or recommendations to shareholders on its behalf concerning
the Merger or the Wells Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best knowledge of First Interstate, no transactions in First
Interstate Common Stock have been effected during the past 60 days by First
Interstate or any executive officer, director, affiliate or subsidiary of
First Interstate except (i) the gift of 1000 shares by the Carson Family
Trust (which shares were deemed to be indirectly beneficially owned by Edward
M. Carson, a director of First Interstate) to a charitable organization, (ii)
the gift of 30 shares on November 3, 1995 by Don C. Frisbee, a director of
First Interstate, to a charitable organization and (iii) the repurchases of
shares by First Interstate set forth below:
AVERAGE TOTAL
NUMBER OF PRICE PER PURCHASE
DATE SHARES SHARE PRICE
- - ---------- ----------- ----------- -----------
09/20/95 4,000 $100.53 $ 402,125
09/21/95 47,000 99.66 4,693,525
09/22/95 25,300 99.24 2,510,863
09/25/95 50,000 99.47 4,973,513
09/26/95 40,000 99.98 3,999,175
09/27/95 35,000 99.15 3,470,413
09/28/95 40,000 99.35 3,974,000
09/29/95 7,300 99.86 729,013
10/02/95 37,400 100.88 3,772,813
10/03/95 31,300 100.70 3,152,038
10/04/95 4,000 100.44 401,750
10/05/95 20,000 103.21 2,064,250
10/06/95 500 103.50 51,750
10/09/95 31,500 106.64 3,359,200
12
(b) To the best knowledge of First Interstate, its executive officers,
directors, affiliates and subsidiaries do not presently intend to tender,
pursuant to the Wells Offer, any shares of First Interstate Common Stock
which are held of record or are beneficially owned by such persons or to
otherwise sell any such shares.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Item 4 above contains a description of the various meetings of the
First Interstate Board held between the date the Initial Wells Proposal was
received and November 19, 1995 at which the Initial Wells Proposal, the
Merger and/or the Wells Offer were reviewed and considered by the First
Interstate Board with the assistance of First Interstate's management and its
legal and financial advisors. As more fully described in such Item 4, at its
November 19, 1995 meeting, the First Interstate Board unanimously (with two
directors absent) (i) reaffirmed its determination that the terms of the
Merger are fair to, and in the best interests of, First Interstate and its
shareholders and accordingly ratified its prior adoption of the Merger
Agreement and (ii) determined to recommend that First Interstate's
shareholders reject the Wells Offer and not tender their shares of First
Interstate Common Stock pursuant to the Wells Offer. The factors considered
by the First Interstate Board in making its determinations with respect to
the Merger and the Wells Offer are described in Item 4 above.
At its November 19 meeting, the First Interstate Board determined to
postpone the occurrence of a Distribution Date (as defined in the Rights
Agreement) as a result of the public announcement of the Wells Offer until
such later date as determined by the First Interstate Board.
Except as described in this Item 7 and under Item 4 above, First
Interstate is not engaged in any negotiation in response to the Wells Offer
which relates to or would result in (i) an extraordinary transaction, such as
a merger or reorganization, involving First Interstate or any of its
subsidiaries, (ii) a purchase, sale or transfer of a material amount of
assets of First Interstate or any of its subsidiaries, (iii) a tender offer
for or other acquisition of securities by or of First Interstate or (iv) a
material change in the present capitalization or dividend policy of First
Interstate.
(b) THE MERGER.
The full text of the Merger Agreement is included as Exhibit 3 hereto and
is incorporated herein by reference, and the descriptions of the Merger
Agreement contained herein are qualified in their entirety by such reference.
THIS SCHEDULE 14D-9 DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY
MEETING OF FIRST INTERSTATE'S SHAREHOLDERS. SUCH SOLICITATION BY FIRST
INTERSTATE WILL BE MADE ONLY PURSUANT TO SEPARATE PROXY MATERIALS COMPLYING
WITH THE REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED (THE "EXCHANGE ACT"). IN ADDITION, THIS SCHEDULE 14D-9 IS
NEITHER AN OFFER TO SELL NOR A SOLICITATION OF OFFERS TO BUY ANY SECURITIES
WHICH MAY BE ISSUED IN THE MERGER. THE ISSUANCE OF SUCH SECURITIES WILL HAVE
TO BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND SUCH SECURITIES WILL BE OFFERED ONLY BY MEANS OF A
PROSPECTUS COMPLYING WITH THE REQUIREMENTS OF THE SECURITIES ACT.
The date of the special meeting of First Interstate's shareholders called
to consider the Merger has not been scheduled. A Joint Proxy
Statement/Prospectus of First Interstate and FBS will be filed shortly with
the SEC and, upon its effectiveness, will be mailed to the respective
shareholders of First Interstate and FBS in connection with the special
meeting of each company's shareholders which will be held to vote upon the
matters to be presented to them pursuant to the Merger Agreement.
Consideration. The Merger Agreement provides, subject to the satisfaction
or waiver of certain conditions contained therein, for the merger of Merger
Sub with and into First Interstate, with First Interstate to be the surviving
corporation of the Merger. Upon consummation of the Merger, subject to
certain limited exceptions, each share of First Interstate Common Stock then
outstanding will automatically be converted into 2.6 shares of FBS Common
Stock. No fractional shares of FBS Common Stock will be issued in the Merger.
In lieu thereof, each First Interstate shareholder who would otherwise be
entitled to receive a fraction of a share of FBS Common Stock will receive an
amount of cash equal to the per share market value of FBS Common Stock (based
on the average of the closing sale prices of FBS
13
Common Stock as quoted on the New York Stock Exchange (the "NYSE") during the
five day trading period immediately preceding the closing date of the Merger)
multiplied by the fraction of a share of FBS Common Stock to which the
shareholder would otherwise be entitled.
In addition, at the Effective Time, (i) each share of First Interstate's
9.875% Preferred Stock issued and outstanding immediately prior to the
Effective Time will be converted into the right to receive one share of FBS
9.875% Preferred Stock and (ii) each share of First Interstate's 9.0%
Preferred Stock issued and outstanding immediately prior to the Effective
Time will be converted into the right to receive one share of FBS 9.0%
Preferred Stock. The terms of the FBS 9.875% Preferred Stock and the FBS 9.0%
Preferred Stock will be substantially the same as the terms of the
corresponding series of First Interstate Preferred Stock from which such
shares were converted, except that the FBS preferred shares will have such
voting rights as shall be necessary to ensure that the Merger qualifies as a
tax-free reorganization.
Representations and Covenants. Under the Merger Agreement, FBS and First
Interstate make a number of representations and warranties, including without
limitation representations and warranties regarding their respective capital
structures, operations, financial condition and their authority to enter into
the Merger Agreement and to consummate the Merger.
In the Merger Agreement, each of First Interstate and FBS covenants that
prior to the consummation of the Merger, it will conduct its business in the
ordinary course and it will not take certain material actions outside the
ordinary course without the other's consent. In addition, each party has
agreed not to, and not to authorize or permit any of its officers, directors,
employees or agents to, directly or indirectly solicit, initiate or encourage
any inquiries relating to, or the making of any proposal which constitutes, a
Takeover Proposal (as defined below), or recommend or endorse any Takeover
Proposal, or participate in any discussions or negotiations, or provide third
parties with any nonpublic information, relating to any such inquiry or
proposal or otherwise facilitate any effort or attempt to make or implement a
Takeover Proposal, provided, however, that each party may, and may authorize
and permit its officers, directors, employees or agents to, provide third
parties with nonpublic information, otherwise facilitate any effort or
attempt by any third party to make or implement a Takeover Proposal,
recommend or endorse any Takeover Proposal with or by any third party, and
participate in discussions and negotiations with any third party relating to
any Takeover Proposal, if such party's Board of Directors, after having
consulted with and considered the advice of outside counsel, reasonably
determines in good faith that the failure to do so would cause the members of
such Board of Directors to breach their fiduciary duties under applicable
law. Each party is obligated to advise the other party immediately following
receipt of a Takeover Proposal, and to further advise the other party
immediately of any developments relating thereto. As used in the Merger
Agreement, "Takeover Proposal" means any tender or exchange offer, proposal
for a merger, consolidation or other business combination involving First
Interstate or FBS or any of their respective subsidiaries or any proposal or
offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of, First Interstate or FBS or any of their
respective subsidiaries other than the transactions contemplated or permitted
by the Merger Agreement. The Wells Offer constitutes a Takeover Proposal for
purposes of this provision.
Each of First Interstate and FBS has also agreed to hold a meeting of its
shareholders for the purpose of obtaining the approvals of such shareholders
required in connection with the Merger Agreement and to cause its Board of
Directors to recommend that its shareholders approve the matters to be voted
on by such shareholders in connection with the Merger, except that the Board
of Directors of either party may fail to make such recommendation (or
withdraw, modify or change such recommendation in a manner adverse to the
other party) if such Board of Directors, after having consulted with and
considered the advice of outside counsel, reasonably determines in good faith
that the making of such recommendation (or the failure to so withdraw, modify
or change such recommendation) would constitute a breach of the fiduciary
duties of the members of such Board of Directors under applicable law.
Conditions to the Consummation of the Merger. Each party's obligation to
effect the Merger is subject to, among other things, satisfaction, at or
prior to the Effective Time, of the following conditions: (i) the Merger
Agreement and the transactions contemplated thereby shall have been approved
and adopted by the requisite affirmative votes of the holders of First
Interstate Common Stock entitled to vote thereon
14
and the issuance of the FBS Common Stock in the Merger and the amendments to
the FBS Certificate of Incorporation required in connection with the Merger
(collectively, the "FBS Vote Matters") shall have been approved by the
requisite votes of the holders of FBS Common Stock entitled to vote thereon;
(ii) the shares of FBS capital stock to be issued in the Merger shall have
been authorized for listing on the NYSE, subject to official notice of
issuance; (iii) all regulatory approvals required to consummate the Merger
shall have been obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired, and no such
approval shall contain any conditions or restrictions which the Board of
Directors of either party reasonably determines in good faith will have or
reasonably be expected to have a Material Adverse Effect (as defined in the
Merger Agreement) on New First Interstate and its subsidiaries taken as a
whole; (iv) the registration statement relating to the FBS capital stock to
be issued in the Merger (the "S-4") shall have become effective under the
Securities Act, and no stop order suspending the effectiveness of the S-4
shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC; and (v) no order, injunction or decree
issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger or any of
the other transactions contemplated by the Merger Agreement shall be in
effect and no statute, rule, regulation, order, injunction or decree shall
have been enacted, entered or promulgated which prohibits, restricts or makes
illegal consummation of the Merger.
Each party's obligation to effect the Merger is also conditioned upon the
accuracy of the representations and warranties made by the other party except
(other than with respect to certain specified representations and warranties)
where the failure of such representations and warranties to be so accurate,
individually or in the aggregate, results or would reasonably be expected to
result in a Material Adverse Effect on such other party; the performance in
all material respects by the other party of its obligations under the Merger
Agreement; the receipt by such party of a letter dated as of the effective
date of the Merger from Ernst & Young LLP, the independent public accountants
for FBS and First Interstate, to the effect that the Merger will qualify for
pooling-of-interests accounting treatment; the receipt by such party of an
opinion of its tax counsel, dated as of the Effective Time, confirming the
tax treatment of the Merger under the Code; and the failure of the rights
issued pursuant to the shareholder rights plan of the other party to become
non-redeemable, exercisable, distributed or triggered.
Waiver; Amendment. At any time prior to the Effective Time, to the extent
legally allowed, FBS or First Interstate, without approval of their
respective shareholders, may waive compliance with any of the agreements
contained in the Merger Agreement. Subject to compliance with applicable law,
the Merger Agreement may be amended by FBS and First Interstate at any time
before or after approval of the matters presented in connection with the
Merger to the shareholders of FBS and First Interstate, except that, after
any approval of the Merger by the shareholders of First Interstate, no
amendment may be made without the further approval of such shareholders which
amendment reduces the amount or changes the form of the consideration to be
delivered to the shareholders of First Interstate in the Merger.
Termination. The Merger Agreement may be terminated by mutual agreement of
both parties, or by either party (i) as a result of a breach by the other
party of a covenant or agreement or any representation or warranty set forth
in the Merger Agreement, in either case which the other party fails to cure
within 30 days following written notice thereof (except that no cure period
is provided for a breach which by its nature cannot be cured prior to the
closing of the Merger) and which would entitle the non-breaching party not to
consummate the transactions contemplated by the Merger Agreement; (ii) if the
required approvals of the shareholders of FBS or First Interstate are not
obtained by reason of the failure to obtain the required vote; (iii) if the
Merger is not consummated on or before December 31, 1996 (subject to
extension under certain circumstances) other than as a result of a breach of
the Merger Agreement by the party seeking termination; (iv) if a permanent
injunction or other order by a governmental entity prohibiting the
consummation of the transactions contemplated by the Merger Agreement is
issued and has become final and nonappealable or any denial by a governmental
entity whose approval of the Merger is required shall have become final and
nonappealable; (v) if, prior to the requisite approval of the shareholders of
FBS (if First Interstate is the terminating party) or First Interstate (if
FBS is the terminating party), there exists a Takeover Proposal for the party
seeking termination and the Board of Directors of such party, after having
consulted with and considered the advice of outside legal counsel,
15
reasonably determines in good faith that termination is necessary in the
exercise of its fiduciary duties under applicable law; or (vi) if the Board
of Directors of the other party withdraws, modifies or changes in a manner
adverse to the terminating party its approval or recommendation of the Merger
Agreement and the transactions contemplated thereby (in the case of First
Interstate) or the FBS Vote Matters (in the case of FBS).
Stock Option Agreements. As a condition to the execution and delivery of
the Merger Agreement, on November 5, 1995, (i) First Interstate and FBS
entered into a Stock Option Agreement (the "FBS Stock Option Agreement"),
pursuant to which FBS granted First Interstate an option (the "FBS Option")
to purchase up to 25,829,983 authorized but unissued shares of FBS Common
Stock (representing 19.9% of the number of outstanding shares of FBS Common
Stock on October 31, 1995), subject to adjustment, for $50.875 per share (the
closing sales price of the FBS Common Stock on the last NYSE trading day
prior to the grant of the FBS Option), subject to adjustment, and (ii) First
Interstate and FBS entered into a Stock Option Agreement (the "First
Interstate Stock Option Agreement," and together with the FBS Stock Option
Agreement, the "Reciprocal Stock Option Agreements"), pursuant to which First
Interstate granted FBS an option (the "First Interstate Option," and together
with the FBS Option, the "Reciprocal Options") to purchase up to 15,073,106
authorized but unissued shares of First Interstate Common Stock (representing
19.9% of the number of outstanding shares of First Interstate Common Stock on
October 31, 1995), subject to adjustment, for $127.75 per share (the closing
sales price of First Interstate Common Stock on the last NYSE trading day
prior to the grant of the First Interstate Option), subject to adjustment.
Each of the Reciprocal Options will become exercisable in whole or in part at
any time prior to its expiration, if, but only if, both an Initial Triggering
Event (as defined below) and a Subsequent Triggering Event (as defined below)
has occurred prior to the occurrence of an Exercise Termination Event (as
defined below). The purchase of any shares of First Interstate Common Stock
or FBS Common Stock pursuant to the Reciprocal Options is subject to
compliance with applicable law, including the receipt of necessary approvals
under the Bank Holding Company Act (the "BHCA"). For purposes of the
following summary of the Reciprocal Stock Option Agreements, (i) "Issuer"
means First Interstate with respect to the First Interstate Stock Option
Agreement and FBS with respect to the FBS Stock Option Agreement and (ii)
"Grantee" means FBS with respect to the First Interstate Stock Option
Agreement and First Interstate with respect to the FBS Stock Option
Agreement.
For purposes of the Reciprocal Stock Option Agreements, the term "Initial
Triggering Event" means: (i) Issuer or any of its subsidiaries, without
Grantee's prior written consent, shall have entered into an agreement with
any person (other than Grantee or any of its subsidiaries) to engage in, or
the Board of Directors of Issuer shall have recommended that its shareholders
approve any of the following (each an "Acquisition Transaction"): (x) a
merger, consolidation or similar transaction involving Issuer or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated
by the SEC) of Issuer (other than mergers, consolidations or similar
transactions involving solely Issuer and/or one or more of its subsidiaries
and other than a merger or consolidation as to which the common shareholders
of Issuer immediately prior thereto in the aggregate own at least 70% of the
common stock of the publicly held surviving or successor corporation
immediately following consummation thereof), (y) a purchase, lease or other
acquisition of all or substantially all of the assets or deposits of Issuer
or any of its Significant Subsidiaries, or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power of
Issuer or any of its Significant Subsidiaries; (ii) any person (other than
Grantee or any of its subsidiaries) shall have acquired beneficial ownership
or the right to acquire beneficial ownership of 10% or more of the
outstanding shares of Issuer common stock; (iii) the shareholders of Issuer
shall have voted and failed to approve the matters required to be approved by
such shareholders in connection with the Merger at a meeting held for that
purpose, or such meeting shall not have been held in violation of the Merger
Agreement or shall have been cancelled prior to termination of the Merger
Agreement and, prior to (x) such meeting or (y) if such meeting has not been
held or has been cancelled, such termination, it shall have been publicly
announced that any person (other than Grantee or any of its subsidiaries)
shall have made a proposal to engage in any Acquisition Transaction; (iv)
Issuer's Board of Directors shall have withdrawn or modified (or publicly
announced its intention to withdraw or modify) its recommendation that the
shareholders of Issuer approve the matters required to be approved by them in
connection with the Merger, or Issuer or
16
any of its subsidiaries, without Grantee's prior written consent, shall have
authorized, recommended or proposed (or publicly announced its intention to
authorize, recommend or propose) an agreement to engage in an Acquisition
Transaction with any person other than Grantee or any of its subsidiaries;
(v) any person other than Grantee or any of its subsidiaries shall have made
a proposal to Issuer or its shareholders to engage in any Acquisition
Transaction and such proposal has been publicly announced; (vi) any person
(other than Grantee or any of its subsidiaries) shall have filed with the SEC
a registration statement with respect to a potential exchange offer that
would constitute an Acquisition Transaction (or filed a preliminary proxy
statement with the SEC with respect to a potential vote by its shareholders
to approve the issuance of shares to be offered in such an exchange offer);
(vii) Issuer shall have willfully breached any covenant or obligation
contained in the Merger Agreement in anticipation of engaging in any
Acquisition Transaction, and following such breach Grantee would be entitled
to terminate the Merger Agreement (whether immediately or after the giving of
notice or passage of time or both); or (viii) any person (other than Grantee
or any of its subsidiaries), other than in connection with a transaction to
which Grantee shall have given its prior written consent, shall have filed an
application or notice with the Federal Reserve Board or other federal or
state bank regulatory authority, which application or notice has been
accepted for processing, for approval to engage in any Acquisition
Transaction.
The term "Subsequent Triggering Event" means (i) the acquisition by any
person (other than Grantee or any of its subsidiaries) of beneficial
ownership of 20% or more of the then outstanding Issuer common stock; or (ii)
the occurrence of an Initial Triggering Event described in clause (i) of the
immediately preceding paragraph above, except that the percentage referred to
in clause (z) thereof is 20%.
The term "Exercise Termination Event" means any of the following: (i) the
Effective Time of the Merger; (ii) termination of the Merger Agreement in
accordance with the provisions thereof if such termination occurs prior to
the occurrence of an Initial Triggering Event; (iii) the passage of 18 months
(subject to extension as provided in the Reciprocal Stock Option Agreements)
after termination of the Merger Agreement if such termination is concurrent
with or follows the occurrence of an Initial Triggering Event; (iv) the date
on which the shareholders of Grantee shall have voted and failed to adopt and
approve the matters required to be approved by them pursuant to the Merger
Agreement (unless (A) Issuer is then in material breach of its covenants or
agreements contained in the Merger Agreement or (B) on or prior to such date,
the shareholders of Issuer shall have also voted and failed to approve the
matters required to be approved by them pursuant to the Merger Agreement); or
(v) the date on which the Reciprocal Option granted by Grantee shall have
become exercisable in accordance with its terms. Notwithstanding anything to
the contrary contained in the Reciprocal Stock Option Agreements, neither of
the Reciprocal Options may be exercised at any time when the Grantee
thereunder is in breach of any of its covenants or agreements contained in
the Merger Agreement such that the Issuer thereof shall be entitled (without
regard to any grace period provided therein) to terminate the Merger
Agreement pursuant to the terms thereof, and each of the Reciprocal Stock
Option Agreements shall automatically terminate upon the termination of the
Merger Agreement by the Issuer pursuant to the terms thereof as a result of
the breach by the Grantee of its covenants or agreements contained therein.
Notwithstanding any other provisions of the Reciprocal Stock Option
Agreements, the Total Profit (as hereinafter defined) which Grantee may
realize from the Reciprocal Option granted to it may not exceed $100 million
and, if the Total Profit otherwise would exceed such amount, Grantee, at its
sole election, shall either (a) reduce the number of shares of common stock
of the Issuer subject to such option, (b) deliver to Issuer for cancellation
shares of common stock of the Issuer previously purchased by Grantee through
exercise of such option ("Option Shares"), (c) pay cash to Issuer or (d)
elect to do any combination thereof, such that Grantee's actually realized
Total Profit will not exceed $100 million after taking into account such
actions. For these purposes, the term "Total Profit" means the aggregate
amount (before taxes) of (i) the amount received by Grantee pursuant to
Issuer's repurchase of such option (or any portion thereof) in accordance
with the terms of the applicable Reciprocal Stock Option Agreement; (ii) (x)
the amount received by Grantee pursuant to Issuer's repurchase of Option
Shares in accordance with the terms of the applicable Reciprocal Stock Option
Agreement, less (y) Grantee's purchase price for such Option Shares; (iii)
(x) the net cash amounts received by Grantee pursuant to the
17
sale of Option Shares (or any other securities into which such Option Shares
are converted or exchanged) to any unaffiliated party, less (y) Grantee's
purchase price for such Option Shares; and (iv) any amounts received by
Grantee on the transfer of such option (or any portion thereof) to any
unaffiliated party.
The preceding description of the Reciprocal Stock Option Agreements is
qualified in its entirety by reference to the First Interstate Stock Option
Agreement and the FBS Stock Option Agreement, copies of which are set forth
as Exhibits 17 and 18 hereto, respectively, and which are incorporated herein
by reference.
For purposes of the First Interstate Stock Option Agreement, various
actions taken by Wells in connection with the Wells Offer have resulted in
the occurrence of an Initial Triggering Event. In addition, if Wells acquires
more than 20% of the outstanding First Interstate Common Stock pursuant to
the Wells Offer or otherwise, or if the First Interstate Board recommends
that First Interstate shareholders accept the Wells Offer, a Subsequent
Triggering Event will occur for purposes of the First Interstate Stock Option
Agreement.
Termination Fees. As a further condition to the execution and delivery of
the Merger Agreement, First Interstate and FBS executed reciprocal
transaction termination fee letter agreements, each dated as of November 5,
1995 (collectively, the "Reciprocal Fee Letters"). Pursuant to the Reciprocal
Fee Letters, First Interstate (pursuant to the "First Interstate Fee Letter")
and FBS (pursuant to the "FBS Fee Letter") each agreed to pay (as a "Payer")
the other party (as the "Recipient") a cash fee of $25 million in the event
certain First Trigger Events (as defined below) occur prior to or
concurrently with the termination of the Merger Agreement, except where a
Nullifying Event (as defined below) has occurred and is continuing at such
time. Pursuant to the Reciprocal Fee Letters, First Interstate and FBS each
also agreed, subject to certain conditions, to pay the other party an
additional $75 million cash fee if (i) the Merger Agreement is terminated,
(ii) prior to or concurrently with such termination a First Trigger Event
shall have occurred and (iii) prior to, concurrently with or within 18 months
following such termination an Acquisition Event (as defined below) occurs,
unless a Nullifying Event has occurred and is continuing at the time the
Merger Agreement is terminated.
For purposes of the following summary of the Reciprocal Fee Letters, the
term (i) "Payer" means First Interstate with respect to the First Interstate
Fee Letter and FBS with respect to the FBS Fee Letter and (ii) "Recipient"
means FBS with respect to the First Interstate Fee Letter and First
Interstate with respect to the FBS Fee Letter.
Any of the following events constitutes a First Trigger Event:
(i) Payer's Board of Directors shall have failed to approve or
recommend that its shareholders vote in favor of the requisite matters to
be approved by such shareholders in connection with the Merger, or shall
have withdrawn or modified in a manner adverse to the Recipient its
approval or recommendation of such matters, or shall have resolved or
publicly announced an intention to do either of the foregoing;
(ii) Payer or its Board of Directors shall have recommended that the
shareholders of Payer approve any Acquisition Proposal (as defined below)
or shall have entered into an agreement with respect to, authorized,
approved, proposed or publicly announced its intention to enter into, any
Acquisition Proposal;
(iii) the matters to be voted on by Payer's shareholders in connection
with the Merger shall not have been approved at a meeting of Payer's
shareholders which has been held for that purpose prior to termination of
the Merger Agreement in accordance with its terms, if prior thereto it
shall have been publicly announced that any third party shall have made,
or disclosed an intention to make, an Acquisition Proposal;
(iv) a third party shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 50% or more of the then
outstanding shares of the stock then entitled to vote generally in the
election of directors of Payer; or
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(v) following the making of an Acquisition Proposal with respect to
Payer, Payer shall have breached any covenant or agreement contained in
the Merger Agreement such that Recipient would be entitled to terminate
the Merger Agreement pursuant to the terms thereof (without regard to any
grace period provided for therein), unless such breach is promptly cured
without jeopardizing consummation of the Merger.
The Reciprocal Fee Letters define the term "Acquisition Proposal" to mean
the occurrence of any (i) publicly announced proposal, (ii) regulatory
application or notice (whether in draft or final form), (iii) agreement or
understanding, (iv) disclosure of an intention to make a proposal; or (v)
amendment to any of the foregoing, made or filed on or after November 5,
1995, in each case with respect to any of the following transactions with a
third party: (A) a merger or consolidation, or any similar transaction,
involving Payer or any of its subsidiaries (other than mergers,
consolidations or similar transactions involving solely Payer and/or one or
more of its subsidiaries and other than a merger or consolidation as to which
the common shareholders of Payer immediately prior thereto in the aggregate
own at least 70% of the common stock of the publicly held surviving or
successor corporation (or any publicly held or ultimate parent company
thereof) immediately following consummation thereof); (B) a purchase, lease
or other acquisition of all or substantially all of the assets or deposits of
Payer or any of its subsidiaries; or (C) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 20% or more of the voting power of Payer. The
Reciprocal Fee Letters define "Acquisition Event" to mean the consummation of
any Acquisition Proposal, except that for such purposes the percentage
contained in clause (C) above shall be 50% instead of 20%.
The Reciprocal Fee Letters define the term "Nullifying Event" to mean any
of the following events occurring and continuing at a time when Payer is not
in material breach of any of its covenants or agreements contained in the
Merger Agreement: (i) Recipient is in breach of any of its covenants or
agreements contained in the Merger Agreement such that Payer is entitled to
terminate the Merger Agreement (without regard to any grace period provided
for therein), (ii) the shareholders of Recipient shall have voted and failed
to approve the matters required to be approved by such shareholders pursuant
to the Merger Agreement (unless the matters to be voted on by the Payer's
shareholders pursuant to the Merger Agreement shall not have been approved at
a meeting of Payer's shareholders which was held on or prior to such date for
the purpose of voting with respect thereto) or (iii) the Board of Directors
of Recipient shall have failed to approve or recommend the matters required
to be approved by Recipient's shareholders pursuant to the Merger Agreement
or shall have withdrawn, modified or changed in any manner adverse to Payer
its approval or recommendation of such matters or shall have resolved or
publicly announced its intention to do any of the foregoing.
For purposes of the First Interstate Termination Fee Letter, various
actions taken by Wells in connection with the Wells Offer constitute the
public announcement of an Acquisition Proposal. In addition, if Wells
acquires more than 50% of the outstanding First Interstate Common Stock
pursuant to the Wells Offer or otherwise, an Acquisition Event shall have
occurred for purposes of the First Interstate Fee Letter.
The description of the Reciprocal Fee Letters is qualified in its entirety
by reference to the First Interstate Fee Letter and the FBS Fee Letter,
copies of which are set forth as Exhibits 19 and 20 hereto, respectively, and
which are incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Litigation. Certain present and former members of the First Interstate
Board have been named as defendants in several purported shareholder class
actions in California, and certain present members of the First Interstate
Board and First Interstate have been named as defendants in several purported
shareholder class actions in Delaware, alleging that the First Interstate
Board will breach or has breached its fiduciary duties to the shareholders of
First Interstate in responding to the Initial Wells Proposal. In Delaware,
the following five actions were filed on October 18 and 19, 1995: Williamson
v. Bryson, et al., Del. Ch., C.A. No. 14623; Shaev v. First Interstate
Bancorp, et al., Del. Ch., C.A. No. 14629; Bernstein v. Carson, et al., Del.
ch., C.A. No. 14630; Katz v. First Interstate Bancorp, et al., Del. Ch., C.A.
No. 14632 and Sachs and Felder v. First Interstate Bancorp, et al., Del. Ch.,
C.A. No. 14633. On October 25, 1995, an
19
amended purported class action complaint to consolidate these actions was
filed. On October 27, 1995, these actions were consolidated in an action
captioned In re First Interstate Bancorp Shareholder Litig., Del. Ch.,
Consol. C.A. No. 14623 (the "Delaware Consolidated Action"). The Defendants
in the Delaware Consolidated Action have filed an answer denying the claims.
The parties in the Delaware Consolidated Action have agreed to a schedule of
discovery in an order that was entered on November 8, 1995. On November 13,
1995, the Delaware shareholder plaintiffs sought leave to file a Second
Amended and Supplemental Class Action Complaint (the "Second Amended
Complaint"). Among other things, the proposed Second Amended Complaint seeks
to add FBS and Merger Sub as parties and to assert aiding and abetting claims
against them. Among other claims, the proposed Second Amended Complaint
alleges that the First Interstate defendants breached their fiduciary duties
by failing to conduct a fair bidding contest for the company. In addition, it
alleges that the defendants have implemented certain measures which may
impede any proxy solicitation or consent solicitation that Wells may
undertake. The plaintiffs seek a variety of injunctive and other relief
including an order enjoining the Merger and a declaration that the Reciprocal
Fee Letters and the Reciprocal Stock Option Agreements are null and void. The
defendants intend to defend these claims vigorously.
Six purported class actions have been filed in the Superior Court of the
State of California, County of Los Angeles. Those purported class actions
(the "California Actions") are entitled: Mesko v. Bryson, et al., Case No.
BC137379, Eaves v. Bryson, et al., Case No. BC137380, Grill v. Bryson, et
al., Case No. BC137508, Mondshein v. Bryson, et al., Case No. BC137509,
Kaplan v. Bryson, et al, Case No. BC 138630 and Kaplan v. Bryson, et al.,
Case No. 138369. Defendants in these six actions have moved the Court to stay
the actions pending the resolution of the Delaware Consolidated Action.
The complaints filed in the six California actions are similar and allege
that the directors of First Interstate will breach their fiduciary duty in
responding to the Initial Wells Proposal. In addition, these complaints
allege negligent breach of fiduciary duty, abuse of control and tortious
interference with prospective economic advantage. Plaintiffs in the
California Actions seek declaratory relief as well as permanent and
preliminary injunctive relief enjoining the defendants from taking steps to
prevent or frustrate the sale of First Interstate to Wells. In addition,
Plaintiffs seek monetary damages of an unspecified amount together with
prejudgment interest and attorneys' and experts' fees. The defendants intend
to defend the California Actions vigorously.
In addition, on November 13, 1995, Wells filed in the Delaware Chancery
Court a Verified Complaint for Preliminary and Permanent Injunctive Relief
and Declaratory Judgment (the "Wells Action") against First Interstate, and
the members of the First Interstate Board, FBS and Merger Sub. The Wells
Action alleges, among other things, that First Interstate and its directors
have breached their fiduciary duties by entering into the Merger Agreement
and by agreeing to the First Interstate Fee Letter and the First Interstate
Stock Option Agreement. In addition, it alleges that the defendants have
implemented or may implement certain measures which may impede any proxy
solicitation or consent solicitation that Wells may undertake. For example,
Wells has alleged that the First Interstate defendants could amend the Rights
Agreement to provide that the power to redeem the Rights is exercisable only
by the current members of the First Interstate Board if Wells succeeds in
replacing them with directors nominated by Wells. Wells has also alleged that
if certain provisions of First Interstate's bylaws regarding the nomination
of directors were to apply in the context of a consent solicitation, such
application of these provisions of the bylaws would be inconsistent with the
provisions of the Delaware General Corporation Law. ("DGCL"). The Wells
Action alleges that FBS has aided and abetted First Interstate and its
directors' alleged breaches of fiduciary duty. Among other relief, Wells
seeks to invalidate the First Interstate Fee Letter and First Interstate
Stock Option Agreement and to enjoin First Interstate from consummating the
Merger. Wells also seeks to enjoin the First Interstate defendants from
including any provisions similar to the First Interstate Fee Letter of the
First Interstate Stock Option Agreement in any modified or future agreement
with FBS. In addition, Wells seeks to enjoin any action by defendants which
could interfere with any proxy solicitation or consent solicitation that
Wells may undertake. Wells seeks declaratory relief in the form of an order
declaring, among other things, that its exchange offer, proxy solicitation
and consent solicitation will not constitute tortious interference with the
Merger Agreement or any other business-related tort; that Section 203 of the
DGCL would not apply to any second-step merger with
20
Wells; that the Merger Agreement, the First Interstate Fee Letter and the
First Interstate Stock Option Agreement are void and unenforceable; and that
the Wells Offer would be a Qualified Offer (as defined below) within the
meaning of the Rights Agreement. With respect to the Rights Agreement, Wells
seeks an order requiring First Interstate to redeem the Rights, or an order
requiring First Interstate to amend the Rights Agreement so as to make it
inapplicable to the Wells Offer or to any second-step merger which follows
the Wells Offer. The defendants intend to defend vigorously against the
claims asserted by Wells.
A copy of each of the complaints described above and certain materials
filed by First Interstate in response thereto are filed as Exhibits hereto
and incorporated herein by reference. All of the descriptions of such matters
contained herein are qualified in their entirety by reference thereto.
The Rights Agreement. On November 21, 1988, the First Interstate Board
declared a dividend of one Right for each outstanding share of First
Interstate Common Stock. The dividend was payable on December 30, 1988 (the
"Record Date") to shareholders of record on that date. Each Right entitles
the registered holder to purchase from First Interstate one share of First
Interstate Common Stock at a price of $170.00 per share (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are
set forth in the Rights Agreement.
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 20% or more of the outstanding
shares of First Interstate Common Stock other than pursuant to a Qualified
Offer (as defined below), or (ii) 10 business days (or such later date as may
be determined by action of the First Interstate Board prior to such time as
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 20% or more of such outstanding First Interstate Common Stock (the
earlier of such dates being called the "Distribution Date"), the Rights will
be evidenced, with respect to the First Interstate Common Stock certificates
outstanding as of the record date, by such First Interstate Common Stock
certificate.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the shares of First Interstate
Common Stock. Until the Distribution Date (or earlier redemption or
expiration of the Rights) new First Interstate Common Stock certificates
issued after the Record Date upon transfer or new issuance of the First
Interstate 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
First Interstate Common Stock, outstanding as of the Record Date, even
without such notation, will also constitute the transfer of the Rights
associated with the shares of First Interstate Common Stock represented by
such certificate. As soon as practicable following the Distribution Date,
separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the shares of First Interstate Common Stock as
of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on December 31, 1998 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed
by First Interstate, as described below.
A Qualified Offer is a tender offer or exchange offer for all outstanding
shares of First Interstate Common Stock which is determined by the
non-management directors to be fair to and otherwise in the best interests of
First Interstate and its shareholders.
In the event that First Interstate is acquired in a merger or other
business combination transaction (other than a merger which follows a
Qualified Offer at the same or a higher price) or 50% or more of its
consolidated assets or earning power are sold (any such event, a "Flip-Over
Event"), proper provision will be made so that each holder of a Right will
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which 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 becomes an Acquiring Person (unless such person
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first acquires 20% or more of the outstanding shares of First Interstate
Common Stock by a purchase pursuant to a Qualified Offer) (a "Flip-in
Event"), proper provision shall be made so that each holder of a Right, other
than Rights beneficially owned by the Acquiring Person (which will thereafter
be void), will thereafter have the right to receive upon exercise that number
of shares of First Interstate 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 20% or more of the outstanding
shares of First Interstate Common Stock and prior to the acquisition by such
person or group of 50% or more of such shares, the First Interstate 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
First Interstate Common Stock per Right (subject to adjustment).
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 20% or more of the outstanding
shares of First Interstate Common Stock, the First Interstate Board may
redeem the Rights in whole, but not in part, at a price of $.001 per Right,
rounded upward for each holder to the nearest $.01 (the "Redemption Price").
The redemption of the Rights may be made effective at such time on such basis
and with such conditions as the First Interstate 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
Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the First Interstate Board
without the consent of the holders of the Rights, including an amendment to
lower the threshold for exercisability of the Rights from 20% to not less
than the greater of (i) any percentage greater than the largest percentage of
the outstanding shares of First Interstate Common Stock then known to First
Interstate to be beneficially owned by any person or group of affiliated or
associated persons and (ii) 10%, except that from and after such time as any
person becomes an Acquiring Person no such amendment may adversely affect the
interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of First Interstate, including, without limitation,
the right to vote or to receive dividends.
The Rights have certain antitakeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire First
Interstate in a manner which causes a Triggering Event to occur unless the
offer is conditioned on a substantial number of Rights being acquired. The
Rights should not affect any prospective offeror willing to make an offer for
all outstanding shares of First Interstate Common Stock at a fair price and
otherwise in the best interests of First Interstate and its shareholders as
determined by the First Interstate Board or affect any prospective offeror
willing to negotiate with the First Interstate Board. The Rights should not
interfere with any merger or other business combination approved by the First
Interstate Board since, pursuant to the Rights Agreement, the Rights are not
exercisable in such an event.
In connection with the execution of the Merger Agreement, First Interstate
executed an amendment (the "Amendment") to the Rights Agreement in order to
(x) amend the definition of "Acquiring Person" set forth in the Rights
Agreement to provide that so long as FBS is in compliance with all material
terms, conditions and obligations imposed upon it by the Merger Agreement and
the First Interstate Stock Option Agreement, neither FBS nor any affiliated
or associated party (collectively with FBS, the "FBS Parties") will be deemed
to be an Acquiring Person by virtue of the fact that FBS is the beneficial
owner solely of First Interstate Common Stock (i) of which any FBS Party is
or becomes the Beneficial Owner by reason of the approval, execution or
delivery of the Merger Agreement or the First Interstate Stock Option
Agreement, or by reason of the consummation of any transaction contemplated
in the Merger Agreement and/or the First Interstate Stock Option Agreement,
(ii) of which any FBS Party is the Beneficial Owner on November 5, 1995,
(iii) of which any FBS Party becomes the Beneficial Owner after November 5,
1995, provided, however, that the aggregate number of shares of First
Interstate Common Stock which may be beneficially owned by the FBS Parties
pursuant to this clause (iii) shall not exceed 5% of the Common Shares
outstanding, (iv) acquired in satisfaction of a debt contracted prior to
November 5, 1995, in good faith, (v) held by any FBS Party in a bona fide
fiduciary or depository capacity
22
or (vi) owned in the ordinary course of business by either (A) an investment
company registered under the Investment Company Act of 1940, as amended, or
(B) an investment account, for either of which any FBS Party acts as
investment advisor and (y) to exclude the transactions contemplated by the
Merger Agreement from constituting a Flip-Over Event.
As more fully described above (see Item 7(a)), the First Interstate Board
has taken action to postpone the Distribution Date.
Based upon public announcements made by Wells, it is anticipated that
consummation of the Wells Offer will be conditioned upon (i) (x) the Rights
having been invalidated or otherwise rendered inapplicable to the Wells Offer
and the second-step merger of First Interstate with Wells, (y) no
Distribution Date having occurred under the Rights Agreement and (z) Wells
not having become an Acquiring Person under the Rights Agreement, or (ii) the
Rights having been validly redeemed by the First Interstate Board prior to
the time a Flip-in Event or a Flip-over Event shall have occurred (which
redemption would be effected by the Board if Wells was successful in removing
all of the members of the First Interstate Board and replacing them with a
slate of directors chosen by Wells).
Delaware Takeover Statute. First Interstate is incorporated under the laws
of the State of Delaware. Section 203 of the DGCL (the "Delaware Takeover
Statute"), in general, prevents an "Interested Stockholder" (defined
generally as a person that is the "owner" (as defined in the Delaware
Takeover Statute) of 15% or more of a corporations's outstanding voting
stock) from engaging in a "Business Combination" (defined as a variety of
transactions, including mergers) with a Delaware corporation for three years
following the date such person became an Interested Stockholder unless: (i)
before such person became an Interested Stockholder, the Board of Directors
of the corporation approved the transaction in which the Interested
Stockholder became an Interested Stockholder or approved the Business
Combination; (ii) upon consummation of the transaction which resulted in the
Interested Stockholder becoming an Interested Stockholder, the Interested
Stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers and employee stock ownership plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer), or (iii) following the transaction in which such person
became an Interested Stockholder, the Business Combination is (x) approved by
the Board of Directors of the corporation and (y) authorized at a meeting of
shareholders by an affirmative vote of the holders of two-thirds of the
outstanding voting stock of the corporation not owned by the Interested
Stockholder.
The Delaware Takeover Statute provides that during the three-year period
following the date a person becomes an Interested Stockholder, the
corporation may not merge or consolidate with an Interested Stockholder or
any affiliate or associate thereof, and also may not engage in certain other
transactions with an Interested Stockholder or any affiliate or associate
thereof, including, without limitation, (i) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of assets (except
proportionately as a stockholder of the corporation) having an aggregate
market value equal to 10% or more of the aggregate market value of either the
aggregate market value of all of the assets of the corporation or the
aggregate market value of all of the outstanding stock of the corporation,
(ii) any transaction which results in the issuance or transfer by the
corporation or by certain subsidiaries thereof of any stock of the
corporation to the Interested Stockholder, subject to certain exceptions,
(iii) any transaction involving the corporation or any majority owned
subsidiary thereof which has the effect of increasing the proportionate share
of the stock of any class or series, or securities convertible into the stock
of any class or series of the corporation or any such subsidiary which is
owned by the Interested Stockholder (except as a result of immaterial changes
due to fractional share adjustments or as result of any purchase or
redemption of any share of stock not caused, directly or indirectly, by the
Interested Stockholder), or (iv) any receipt by the Interested Stockholder of
the benefit (except proportionately as a shareholder of such corporation) of
any loans, advances, guarantees, pledges or other financial benefits provided
by or through the corporation.
In connection with its approval of the Merger Agreement, the First
Interstate Board took action to ensure that the Delaware Takeover Statute
would not apply to the Merger Agreement, the First Interstate Stock Option
Agreement or the consummation of the transactions contemplated thereby.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
Exhibit 1: Press Release of Wells, dated November 13, 1995
(including the letter from Wells to First Interstate
contained therein).
Exhibit 2: Pages 7 through 37 of First Interstate's 1995 Annual
Meeting Proxy Statement, dated March 20, 1995.
Exhibit 3: Agreement and Plan of Merger, dated as of November 5,
1995, by and among FBS, FBS Merger Sub and First
Interstate.
Exhibit 4: First Interstate 1991 Performance Stock Plan.
Exhibit 5: First Interstate 1988 Performance Stock Plan.
Exhibit 6: First Interstate 1983 Performance Stock Plan.
Exhibit 7: First Interstate 1995 Management Incentive Plan.
Exhibit 8: First Interstate 1995 Regional Executive Incentive
Plan.
Exhibit 9: First Interstate Tier II Employment Agreement.
Exhibit 10: Letter, dated October 17, 1995, from Wells to First
Interstate regarding the Initial Wells Proposal.
Exhibit 11: Letter to Shareholders of First Interstate, dated
November 20, 1995. *
Exhibit 12: Press Release issued by First Interstate dated
November 20, 1995.
Exhibit 13: Opinion of Goldman, Sachs & Co., dated November 6,
1995.*
Exhibit 14: Opinion of Goldman, Sachs & Co., dated November 19,
1995.*
Exhibit 15: Opinion of Morgan Stanley & Co. Incorporated, dated
November 5, 1995.*
Exhibit 16: Opinion of Morgan Stanley & Co. Incorporated, dated
November 19, 1995.*
Exhibit 17: Stock Option Agreement, dated November 5, 1995,
between FBS (as "Grantee") and First Interstate (as
"Issuer").
Exhibit 18: Stock Option Agreement, dated November 5, 1995,
between First Interstate (as "Grantee") and FBS (as
"Issuer").
Exhibit 19: Letter Agreement, dated November 5, 1995, between
First Interstate (as "Payer") and FBS (as
"Recipient") in regard to termination fees.
Exhibit 20: Letter Agreement, dated November 5, 1995, between FBS
(as "Payer") and First Interstate (as "Recipient") in
regard to termination fees.
Exhibit 21: Complaint in Williamson v. Bryson, et al. (Delaware
Chancery Court).
Exhibit 22: Complaint in Shaev v. First Interstate Bancorp, et
al. (Delaware Chancery Court).
Exhibit 23: Complaint in Bernstein v. Carson, et al. (Delaware
Chancery Court).
Exhibit 24: Complaint in Katz v. First Interstate Bancorp, et al.
(Delaware Chancery Court).
Exhibit 25: Complaint in Sachs and Felder v. First Interstate
Bancorp, et al. (Delaware Chancery Court).
Exhibit 26: Amended Class Action Complaint in Williamson, et al.
v. First Interstate Bancorp, et al. (In re First
Interstate Bancorp Shareholder Litig.) (Delaware
Chancery Court).
- - ------------
* Included in copies mailed to shareholders.
24
Exhibit 27: Answer in In re First Interstate Bancorp Shareholder
Litig. (Delaware Chancery Court).
Exhibit 28: Second Amended and Supplemental Class Action
Complaint in In re First Interstate Bancorp
Shareholder Litig. (Delaware Chancery Court).
Exhibit 29: Complaint in Mesko v. Bryson, et al. (California
Superior Court).
Exhibit 30: Complaint in Eaves v. Bryson, et al. (California
Superior Court).
Exhibit 31: Complaint in Grill v. Bryson, et al. (California
Superior Court).
Exhibit 32: Complaint in Mondshein v. Bryson, et al. (California
Superior Court).
Exhibit 33: Complaint in Deborah Kaplan v. Bryson, et al.
(California Superior Court).
Exhibit 34: Complaint in Theodore N. Kaplan v. Bryson, et al.
(California Superior Court).
Exhibit 35: Complaint in Wells Fargo & Company v. First
Interstate Bancorp, et al. (Delaware Chancery Court).
25
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
FIRST INTERSTATE BANCORP
By: /s/ William J. Bogaard
-----------------------------------
William J. Bogaard
Executive Vice President
and General Counsel
Dated: November 20, 1995
26